-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L89siYaRLS1stmtiCt8UefeJjjZLsdWFuzE11wm+b0jvWq8yUN5EZ5UERNHHn7y4 +5DPEPQa9QB158qhDWz+fA== 0000912057-97-010250.txt : 19970327 0000912057-97-010250.hdr.sgml : 19970327 ACCESSION NUMBER: 0000912057-97-010250 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 40 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970326 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OGLETHORPE POWER CORP CENTRAL INDEX KEY: 0000788816 STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991] IRS NUMBER: 581211925 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-07591 FILM NUMBER: 97563921 BUSINESS ADDRESS: STREET 1: 2100 EAST EXCHANGE PL STREET 2: P O BOX 1349 CITY: TUCKER STATE: GA ZIP: 30085-1349 BUSINESS PHONE: 4042707600 10-K 1 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ------------- FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From ___________ to _____________ Commission File No. 33-7591 ------------- Oglethorpe Power Corporation (An Electric Membership Corporation) (Exact name of registrant as specified in its charter) Georgia 58-1211925 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Post Office Box 1349 2100 East Exchange Place Tucker, Georgia 30085-1349 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (770) 270-7600 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] State the aggregate market value of the voting stock held by nonaffiliates of the registrant. None Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. The Registrant is a membership corporation and has no authorized or outstanding equity securities. Documents Incorporated by Reference: None ================================================================================ OGLETHORPE POWER CORPORATION 1996 FORM 10-K ANNUAL REPORT Table of Contents Item Page - ---- ---- PART I 1 Business ............................................................ 1 Oglethorpe Power Corporation....................................... 1 The Members of Oglethorpe.......................................... 8 Member Requirements and Power Supply Resources..................... 12 Other Information.................................................. 16 2 Properties........................................................... 17 Generating Facilities.............................................. 17 Co-Owners of the Plants and the Plant Agreements................... 20 Environmental and Other Regulations................................ 24 3 Legal Proceedings.................................................... 29 4 Submission of Matters to a Vote of Security Holders.................. 29 PART II 5 Market for Registrant's Common Equity and Related Stockholder Matters.............................................................. 30 6 Selected Financial Data.............................................. 30 7 Management's Discussion and Analysis of Financial Condition and Results of Operations................................................ 31 8 Financial Statements and Supplementary Data.......................... 42 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................................................. 62 PART III 10 Directors and Executive Officers of the Registrant................... 62 11 Executive Compensation............................................... 65 12 Security Ownership of Certain Beneficial Owners and Management....... 68 13 Certain Relationships and Related Transactions....................... 68 PART IV 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K..... 69 i SELECTED DEFINITIONS When used herein the following terms will have the meanings indicated below: Term Meaning - ---- ------- ADSCR Annual Debt Service Coverage Ratio BPSA Block Power Sale Agreement CFC National Rural Utilities Cooperative Finance Corporation CoBank CoBank, ACB, formerly known as the National Bank for Cooperatives Commission Securities and Exchange Commission CSA Coordination Services Agreement Dalton City of Dalton, Georgia DSC Debt Service Coverage Ratio EPI Entergy Power, Inc. FERC Federal Energy Regulatory Commission FFB Federal Financing Bank GPC Georgia Power Company GPSC Georgia Public Service Commission GSOC Georgia System Operations Corporation GTC Georgia Transmission Corporation ITS Integrated Transmission System ITSA Revised and Restated Integrated Transmission System Agreement kWh Kilowatt-hours LPM LG&E Power Marketing Inc. Members The 39 retail distribution cooperatives that are members of Oglethorpe MEAG Municipal Electric Authority of Georgia MFI Margins for Interest Morgan Stanley Morgan Stanley Capital Group MW Megawatts MWh Megawatt-hours NRC Nuclear Regulatory Commission Oglethorpe Oglethorpe Power Corporation (An Electric Membership Corporation) PCBs Pollution Control Revenue Bonds PCR Percentage Capacity Responsibility PURPA Public Utility Regulatory Policies Act RUS Rural Utilities Service SEPA Southeastern Power Administration SONOPCO Southern Nuclear Operating Company TIER Times Interest Earned Ratio ii PART I Item 1. BUSINESS OGLETHORPE POWER CORPORATION General Oglethorpe Power Corporation (An Electric Membership Corporation) ("Oglethorpe") is a Georgia electric membership corporation incorporated in 1974 and headquartered in metropolitan Atlanta. Oglethorpe is entirely owned by its 39 retail electric distribution cooperative members (the "Members"), who, in turn, are entirely owned by their retail consumers. Oglethorpe is the largest electric cooperative in the United States in terms of operating revenues, assets, kilowatt-hour ("kWh") sales and, through the Members, consumers served. It is one of the ten largest electric utilities in the United States in terms of land area served. Oglethorpe has 146 full-time and 18 part-time employees, after reflecting the effect of a corporate restructuring and a business alliance transaction. (See "Corporate Restructuring" and "Relationship with Intellisource" herein.) As with cooperatives generally, Oglethorpe operates on a not-for-profit basis. Oglethorpe's principal business is providing wholesale electric power to the Members. The Members are local consumer-owned distribution cooperatives providing retail electric service on a not-for-profit basis. In general, the membership of the distribution cooperative Members consists of residential, commercial and industrial consumers within specific geographic areas. The Members serve approximately 1.2 million electric consumers (meters) representing a total population of approximately 2.6 million people. Corporate Restructuring Oglethorpe and the Members completed a corporate restructuring (the "Corporate Restructuring") on March 11, 1997 (the "Closing") pursuant to terms and conditions set forth in the Second Amended and Restated Restructuring Agreement, dated February 24, 1997, by and among Oglethorpe, Georgia Transmission Corporation (An Electric Membership Corporation) ("GTC") and Georgia System Operations Corporation ("GSOC"). Pursuant to the Corporate Restructuring, Oglethorpe divided itself into three specialized operating companies to respond to increasing competition and regulatory changes in the electric industry. As part of the Corporate Restructuring, the transmission business is now owned and operated by GTC, a newly formed Georgia electric membership corporation, and the system operations business is now owned and operated by GSOC, a newly formed Georgia nonprofit corporation. Oglethorpe continues to own and operate its power supply business. On October 1, 1996, Oglethorpe transferred to GSOC its system operations assets, consisting of its system control center and related energy control and revenue metering systems equipment. The purchase price totaled approximately $9.4 million and was paid by GSOC's assumption of Oglethorpe's obligations under an existing note held by the Rural Utilities Service ("RUS"), by delivery of a purchase money note payable to Oglethorpe and by the assumption of certain other liabilities of Oglethorpe. Since October 1, 1996, Oglethorpe had been the sole member of GSOC. The Members and GTC became members of GSOC at the Closing. GSOC now operates the system control center and provides system operations services to the Members, Oglethorpe and GTC. At the Closing, Oglethorpe transferred to GTC its transmission business and assets. The purchase price for the transmission business was based on an appraisal of the fair market value of such business, as determined by an independent appraiser, and was approximately $708 million. The purchase price was paid primarily by GTC's assumption of a portion (approximately 16.86%) of Oglethorpe's long-term secured debt in an amount equal to approximately $686 million. Approximately $541 million of this debt (payable to RUS, the Federal Financing Bank ("FFB") and CoBank, ACB ("CoBank")) became the sole obligation of GTC, and Oglethorpe was released from all liability with regard to this debt. The remaining debt assumed by GTC in connection with the Corporate 1 Restructuring, approximately $145 million, relates to Oglethorpe's pollution control revenue bonds ("PCBs"). While GTC assumed and agreed to pay this $145 million of debt, Oglethorpe is not legally released from its obligation to pay for this debt. The remainder of the purchase price was paid by GTC from cash obtained through a borrowing from National Rural Utilities Cooperative Finance Corporation ("CFC") and the assumption of approximately $1 million of other Oglethorpe liabilities. Oglethorpe also made a special patronage capital distribution of approximately $49 million to the Members which was used by the Members to establish equity in and to provide initial working capital to GTC. Oglethorpe and the 39 Members are members of GTC. GTC now provides transmission services to the Members and Oglethorpe. GTC has succeeded to all of Oglethorpe's rights and obligations with respect to the Integrated Transmission System ("ITS"). (See "Relationship with GTC" herein for further discussion of the ITS.) Oglethorpe continues to operate its power supply business. Oglethorpe retained all of its owned and leased generation assets and has total assets of approximately $4.7 billion and total long-term debt of approximately $3.9 billion. Oglethorpe also continues to administer its power purchase contracts and provide marketing support functions to the Members. Effective with the Corporate Restructuring, Oglethorpe amended its Bylaws to implement a new governance structure with an 11-member board of directors consisting of six directors elected from the Members, four independent outside directors and Oglethorpe's President and Chief Executive Officer. This smaller board replaced Oglethorpe's former 39-member board comprised of directors nominated from and by each Member. (See "DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT" in Item 10 for further information.) Contemporaneously with the Corporate Restructuring, Oglethorpe replaced its Consolidated Mortgage and Security Agreement, dated as of September 1, 1994 (the "RUS Mortgage"), by and among Oglethorpe, as mortgagor, the United States of America, acting through the Administrator of the RUS, CoBank, Credit Suisse First Boston, acting by and through its New York Branch ("Credit Suisse"), and SunTrust Bank, Atlanta ("SunTrust"), as trustee under certain pollution control bond indentures identified in the RUS Mortgage, with an Indenture, dated as of March 1, 1997, from Oglethorpe to SunTrust, as trustee (the "Master Indenture"). As did the RUS Mortgage, the Master Indenture provides for a lien on substantially all of the owned tangible and certain intangible property of Oglethorpe. (See "Electric Rates" herein and "General--Rates and Financial Coverage Requirements" in Item 7 for further discussion of the revenue requirements of the Master Indenture.) New Wholesale Power Contracts In connection with the Closing, Oglethorpe and each of the Members entered into an Amended and Restated Wholesale Power Contract, dated August 1, 1996 (collectively, the "New Wholesale Power Contracts") which extends through December 31, 2025. The New Wholesale Power Contracts permit each Member to take future incremental power requirements either from Oglethorpe or other sources. Under the New Wholesale Power Contracts, a Member is unconditionally obligated on an express "take-or-pay" basis for a fixed allocation of Oglethorpe's costs for its existing resources, as well as the costs with respect to any future resources in which such Member elects to participate. The New Wholesale Power Contracts specifically provide that the Member must make payments whether or not power is delivered and whether or not a plant has been sold or is otherwise unavailable. Oglethorpe is obligated to use its reasonable best efforts to operate, maintain and manage its resources in accordance with prudent utility practices. The New Wholesale Power Contracts provide that Oglethorpe will be responsible for power supply planning, resource procurement and sales of capacity and energy for a Member unless the Member notifies Oglethorpe that it does not want Oglethorpe to provide these services. Each Member's cost responsibility is allocated in the New Wholesale Power Contracts by assigning each Member an agreed-upon fixed percentage capacity responsibility ("PCR"). PCRs have been assigned for all of Oglethorpe's existing resources. PCRs for any future resource will be assigned only to Members choosing to participate in that resource. The New Wholesale Power Contracts provide that each Member will be jointly and 2 severally responsible for all costs and expenses of all existing resources, as well as for any future resources (whether or not such Member has elected to participate in such future resource) that are approved by 75% of Oglethorpe's Board of Directors and 75% of the Members. For resources so approved in which less than all Members participate, costs of a defaulting Member are shared first among the participating Members, and if all participating Members default, each non-participating Member is expressly obligated to pay a proportionate share of such default. The New Wholesale Power Contracts contain covenants by the Member (i) to establish, maintain and collect rates and charges for the service of its electric system, and (ii) to conduct its business in a manner that will produce revenues and receipts at least sufficient to enable the Member to pay to Oglethorpe, when due, all amounts payable by the Member under the New Wholesale Power Contracts and to pay any and all other amounts payable from, or which might constitute a charge or a lien upon, the revenues and receipts derived from its electric system, including all operation and maintenance expenses and the principal and interest on all indebtedness related to the Member's electric system. In connection with the implementation of long-term power marketer arrangements with LG&E Power Marketing Inc. ("LPM"), Oglethorpe and each Member entered into supplemental agreements to the New Wholesale Power Contracts which relate to certain provisions of the New Wholesale Power Contracts and apply during the term of the power marketer arrangements. The supplemental agreements clarify the application of the New Wholesale Power Contract rate schedule to the power marketer agreements. The 75% requirement described above has been met with respect to the LPM agreements. The supplemental agreements assure that all costs incurred by Oglethorpe under the LPM agreement are recoverable under the New Wholesale Power Contracts. As the expected additional power marketer arrangements are finalized, additional supplemental agreements to the New Wholesale Power Contracts will be entered into by Oglethorpe and the Members. See "MEMBER REQUIREMENTS AND POWER SUPPLY RESOURCES" for a description of the Members' demand and energy requirements and the related power supply resources. Electric Rates Each Member is required to pay Oglethorpe for capacity and energy furnished under its New Wholesale Power Contract in accordance with rates established by Oglethorpe. Oglethorpe reviews its rates at such intervals as it deems appropriate but is required to do so at least once every year. Oglethorpe is required to revise its rates as necessary so that the revenues derived from such rates will be sufficient, but only sufficient, with its revenues from all other sources to pay operating and maintenance costs, the cost of purchased power, the cost of transmission services, and principal and interest on all indebtedness (including capital lease obligations) of Oglethorpe, all costs associated with decommissioning or otherwise retiring any generating facility, and to provide for the establishment and maintenance of reasonable reserves. Rates are also required to be established so as to enable Oglethorpe to comply with all financial requirements under the Master Indenture. (See "General--Rates and Financial Coverage Requirements" in Item 7.) Oglethorpe had been required under the prior RUS Mortgage to implement rates designed to maintain a Times Interest Earned Ratio ("TIER") of not less than 1.05, a Debt Service Coverage Ratio ("DSC") of not less than 1.0 and an Annual Debt Service Coverage Ratio ("ADSCR") of not less than 1.25. Oglethorpe has always met or exceeded the TIER, DSC and ADSCR requirements of the RUS Mortgage. Oglethorpe's policy for 1996 was to set rates to meet a TIER of 1.07. Under the Master Indenture, Oglethorpe is required to establish and collect rates which are reasonably expected, together with other revenues of Oglethorpe, to yield a Margins for Interest ("MFI") for each fiscal year equal to at least 1.10 times total interest charges during such fiscal year on all indebtedness secured under the Master Indenture (or by a lien equal or prior to the lien of the Master Indenture), excluding indebtedness assumed by GTC. MFI is determined by adding (i) Oglethorpe's net margins (after certain defined adjustments), (ii) interest charges on indebtedness secured under the Master Indenture (or by lien equal to 3 or prior to the lien of the Master Indenture), excluding indebtedness assumed by GTC, and (iii) any amount included in net margins for accruals for federal or state income taxes. The definition of MFI takes into account any item of net margin, loss, gain or expenditure of any affiliate or subsidiary of Oglethorpe only if Oglethorpe has received such net margins or gains as a dividend or other distribution or if Oglethorpe has made a payment with respect to such losses or expenditures. (See "General--Rates and Financial Coverage Requirements" in Item 7.) Under the formulary rate established by Oglethorpe in the new rate schedule to the New Wholesale Power Contracts, the rates charged by Oglethorpe are developed using a rate methodology under which all categories of costs are specifically separated as components of the formula to determine Oglethorpe's revenue requirements. The rate schedule formula implements the assignment of responsibility for fixed costs (i.e., the PCR). The monthly charges for capacity and other non-energy charges are based on a rate formula using Oglethorpe's annual budget. Such capacity and other non-energy charges may be adjusted by the Board of Directors, if necessary, during the year through an adjustment to the annual budget. Energy charges reflect the passthrough of actual energy costs. However, under the supplemental agreements for the LPM agreements, each Member pays a fixed rate for energy, plus certain adjustments, while LPM pays all energy costs, within an agreed upon range of costs. The new rate schedule formula also includes a prior period adjustment ("PPA") mechanism. The PPA serves to facilitate the achievement of the minimum 1.10 MFI ratio, and it provides for the retention of margins within a range from a 1.10 MFI ratio to a 1.20 MFI ratio. Amounts, if any, by which Oglethorpe fails to achieve a minimum 1.10 MFI ratio would be accrued as of December 31 of the applicable year and collected during the period April through December of the following year. Amounts, if any, earned by Oglethorpe in excess of a 1.20 MFI ratio would be charged against revenues as of December 31 of the applicable year and refunded during the period April through December of the following year. The new rate schedule formula is intended to permit collection of revenues which, together with revenues from all other sources, are equal to all costs and expenses recorded by Oglethorpe, plus amounts necessary to achieve at least the minimum 1.10 MFI ratio. Under the terms of Oglethorpe's prior RUS Mortgage, all rate revisions by Oglethorpe were subject to the approval of RUS. Under the Master Indenture and related loan contract with RUS, however, adjustments to Oglethorpe's rates to reflect changes in Oglethorpe's budgets are not subject to RUS approval, except for reductions in rates in a fiscal year following a fiscal year in which Oglethorpe has failed to meet the minimum 1.10 MFI ratio set forth in the Master Indenture. Any change to the underlying rate formula would be subject to RUS approval. Rate revisions are not subject to the approval of any other federal or state agency or authority, including the Georgia Public Service Commission (the "GPSC"). For information regarding future rates, see "General--Rates and Financial Coverage Requirements" and "Results of Operations--Factors Affecting Future Financial Performance" in Item 7. Relationship with GTC GTC purchased and is operating the transmission system as described in "Corporate Restructuring" herein. Oglethorpe and all 39 Members are members of GTC. GTC is providing transmission services to the Members for delivery of the Members' power purchases from Oglethorpe, Southeastern Power Administration ("SEPA") and any other power suppliers. GTC also provides transmission services to Oglethorpe and third parties. Oglethorpe has entered into a transmission agreement with GTC to provide transmission services for third party transactions and for service to Oglethorpe's headquarters and the administration building at the Rocky Mountain Project, a pumped storage hydroelectric facility ("Rocky Mountain"). In connection with the Corporate Restructuring, GTC and the Members entered into transmission agreements (the "Transmission Agreements") under which GTC provides transmission service to the Members pursuant to a transmission tariff. The Transmission Agreements have a minimum term of network service for current load until December 31, 2025. After an initial ten-year term, load growth above 1995 requirements may, with notice to GTC, be served by others. The Transmission Agreements provide that if a Member elects to 4 purchase a part of its network service elsewhere, it must pay appropriate stranded costs to protect the other Members from any rate increase that could otherwise occur. Under the Transmission Agreements, Members have the right to design, construct and own new distribution substations. The Transmission Agreements provide that the Members are responsible, on a joint and several basis, for all of GTC's obligations relating to its transmission business. The Transmission Agreements contain an express covenant of the Members to set and collect retail rates sufficient to allow the Members to meet their respective obligations under the Transmission Agreements. The rate formula set forth in the transmission tariff is intended to recover all costs and expenses paid or incurred by GTC. The rate expressly includes in the description of costs to be recovered all principal and interest on indebtedness of GTC (including any indebtedness of Oglethorpe assumed by GTC). The rate further expressly provides for GTC to earn sufficient margins to satisfy the requirements of its new indenture, which is substantially similar to Oglethorpe's Master Indenture. The GTC transmission tariff and associated Transmission Agreements have been developed to implement the Corporate Restructuring and to be consistent with federal transmission policy as expressed in Order 888 of the Federal Energy Regulatory Commission ("FERC"). FERC's Order 888 mandates open access of essentially all transmission systems in order to promote competition in the bulk power markets and provides that non-regulated utilities (such as GTC) must provide access to their transmission systems on reciprocal terms and conditions in order to obtain transmission from FERC-regulated utilities. The transmission tariff and Transmission Agreements have been designed to facilitate the operation of GTC in the new regulatory environment and provide for GTC to serve on a nondiscriminatory basis both member and non-member customers on terms intended to meet FERC's reciprocity requirement. Prior to the Closing, Oglethorpe, together with Georgia Power Company ("GPC"), the Municipal Electric Authority of Georgia ("MEAG") and the City of Dalton ("Dalton"), owned transmission facilities which together form the ITS. GTC succeeded to Oglethorpe's rights in the ITS at the Closing, and GTC now owns approximately 2,267 miles of transmission line and 426 substations of various voltages. Through agreements, common access to the combined facilities that compose the ITS enables the owners to use their combined resources to make deliveries to or for their respective consumers, to provide transmission service to third parties and to make off-system purchases and sales. GTC's rights and obligations with respect to the ITS are governed by the Revised and Restated Integrated Transmission System Agreement (the "ITSA"), which was assigned to GTC in connection with the Corporate Restructuring. The ITSA provides for the transmission and distribution of electric energy in the State of Georgia, other than in certain counties, and for bulk power transactions, through use of the ITS. The ITS was established in order to obtain the benefits of a coordinated development of the parties' transmission facilities and to make it unnecessary for any party to construct duplicative facilities. The ITS consists of all transmission facilities, including land, owned by the parties on the date the ITSA became effective and those thereafter acquired, which are located in the State of Georgia other than in the excluded counties and which are used or usable to transmit power of a certain minimum voltage and to transform power of a certain minimum voltage and a certain minimum capacity (the "Transmission Facilities"). GPC has entered into agreements with MEAG and Dalton that are substantially similar to the ITSA, and GPC may enter into such agreements with other entities. The ITSA will remain in effect through December 31, 2012 and, if not then terminated by five years' prior written notice by either party, will continue until so terminated. The ITSA is administered by a committee (the "Joint Committee") composed of GTC, GPC, MEAG and Dalton. Each year, the Joint Committee determines a four-year plan of additions to the Transmission Facilities that will reflect the current and anticipated future transmission requirements of the parties. Each ITS participant is generally required to maintain an original cost investment in the Transmission Facilities in proportion to their respective Peak Loads (as defined in the ITSA). GTC and GPC are parties to a Transmission Facilities Operation and Maintenance Contract (the "Transmission Operation Contract"), under which GPC provides System Operator Services (as defined in the 5 Transmission Operation Contract) for GTC. In addition, GPC is required to provide such supervision, operation and maintenance supplies, spare parts, equipment and labor for the operation, maintenance and construction as may be specified by GTC. GPC is also required to perform certain emergency work under the Transmission Operation Contract. GTC is permitted, upon notice to GPC, to perform, or contract with others for the performance of, certain services performed by GPC. Absent termination or amendment of the Transmission Operation Contract, however, GPC will continue to perform System Operator Services for GTC. The term of the Transmission Operation Contract will continue from year to year unless terminated by either party upon four years' notice. GTC is required to pay its proportionate share of the cost for the services provided by GPC. Relationship with GSOC From October 1, 1996 until the Closing, Oglethorpe was the sole member of GSOC. The Members and GTC became members of GSOC upon the Closing. GSOC now operates the system control center and provides system operations services to the Members, Oglethorpe and GTC. GTC has contracted with GSOC to provide certain transmission system operation services including reliability monitoring, switching operations, and the real-time management of the transmission system. Relationship with GPC Oglethorpe's relationship with GPC is a significant factor in several aspects of Oglethorpe's business. GPC is one of Oglethorpe's principal suppliers of purchased power, and Oglethorpe is one of GPC's largest customers. All of Oglethorpe's co-owned generating facilities, except Rocky Mountain, are operated by GPC on behalf of itself as a co-owner and as agent for the other co-owners. GPC and Oglethorpe, through the Members, are competitors in the State of Georgia for electric service to new customers that have a choice of supplier under the Georgia Territorial Electric Service Act (the "Territorial Act"). For further information regarding the various relationships and agreements with GPC, see "THE MEMBERS OF OGLETHORPE--Service Area and Competition", "MEMBER REQUIREMENTS AND POWER SUPPLY RESOURCES--Power Purchase and Sale Arrangements--Power Purchases from GPC", "--Other Power System Arrangements" herein, and "GENERATING FACILITIES--Fuel Supply", "CO-OWNERS OF THE PLANTS AND THE PLANT AGREEMENTS--Co-Owners of the Plants--Georgia Power Company", and "--The Plant Agreements" in Item 2. Relationship with RUS Historically, federal loan programs administered by RUS have provided the principal source of financing for electric cooperatives. Loans guaranteed by RUS and made by FFB have been a major source of funding for Oglethorpe. In recent years, there have been legislative, administrative and budgetary initiatives intended to reduce or, in some cases, eliminate federal funding for electric cooperatives. However, Oglethorpe does not have any new generation facilities under construction, and management does not anticipate the need for construction of any new capacity well into the future. (See "MEMBER REQUIREMENTS AND POWER SUPPLY RESOURCES--Power Purchase and Sale Arrangements--Power Marketer Arrangements" for a discussion of the long-term power marketer arrangements.) In addition, the Master Indenture improves Oglethorpe's ability to borrow funds in the public capital markets. See "THE MEMBERS OF OGLETHORPE--Members' Relationship with RUS" for a discussion of the impact of changes in the RUS lending program on the Members. Through provisions of the prior RUS Mortgage, RUS exercised substantial control and supervision over Oglethorpe in such areas as accounting, the issuance of secured indebtedness, rates and charges for the sale of power, construction and acquisition of facilities, and the purchase and sale of power. Under the Master Indenture 6 and the new loan contact entered into with RUS in connection therewith, RUS has significantly reduced these controls. Relationship with Intellisource In conjunction with the Corporate Restructuring and as a part of its continuing efforts to reduce costs, effective February 1, 1997, Oglethorpe implemented a business alliance with Intellisource, Inc., a national provider of outsourcing services. Pursuant to an agreement with Intellisource, approximately 150 support services division employees in the areas of accounting, auditing, communications, human resources, facility management, purchasing, telecommunications and information technology became employees of the Intellisource organization. Oglethorpe, GTC and GSOC are key customers of Intellisource and are being served on-site by the managers and employees of Oglethorpe's former support services division. Certain Factors Affecting the Utility Industry in General The electric utility industry in the United States is undergoing fundamental change and is becoming increasingly competitive. This change is promoted by the Energy Policy Act of 1992 (the "Energy Policy Act"), recently adopted and proposed policies from FERC regarding transmission access and pricing, increased consolidation and mergers of electric utilities, the proliferation of self-generators and independent power producers, surplus generation in certain regional markets and other factors. The Energy Policy Act and FERC policies allow for increased competition among wholesale electric suppliers and increased access to transmission services by such suppliers. The new competitive environment is subject to rapidly evolving regulatory policy at both the federal and state levels, which is based on a shift to a market-driven environment from a regulated one. Significant legislative developments at the federal level and in various state legislative bodies, and regulatory developments at FERC and in state commissions are expected to continue to clarify the policy and regulatory framework for increased competition. The GPSC staff has scheduled a series of workshops, the stated purpose of which is to solicit views from the various parties impacted by electric industry restructuring and to discuss potential resolutions to these issues. At the conclusion of the workshops, the GPSC staff anticipates presenting a report to the GPSC that will identify electric industry restructuring issues, potential resolutions and the views of the parties who participated in the workshop. (See "THE MEMBERS OF OGLETHORPE--Service Area and Competition".) A number of other significant factors have affected the operations of electric utilities. They include the cost of fuel for the generation of electric energy, recovery of the cost of existing facilities, fluctuating rates of load growth, the effects of conservation and energy management on the use of electric energy and compliance with environmental and other governmental regulations. All of the factors mentioned above present an increasing challenge to companies in the electric utility industry, including Oglethorpe and the Members, to reduce costs, improve the management of resources and respond to the changing environment. (See "Corporate Restructuring" herein and "MEMBER REQUIREMENTS AND POWER SUPPLY RESOURCES--General", "--Power Purchase and Sale Arrangements--Other Power Purchases", and "ENVIRONMENTAL AND OTHER REGULATIONS" in Item 2.) 7 THE MEMBERS OF OGLETHORPE Service Area and Competition The Members are listed below and include 39 of the 42 electric distribution cooperatives in the State of Georgia. Altamaha EMC Habersham EMC Planters EMC Amicalola EMC Hart EMC Rayle EMC Canoochee EMC Irwin EMC Satilla Rural EMC Carroll EMC Jackson EMC Sawnee EMC Central Georgia EMC Jefferson EMC Slash Pine EMC Coastal EMC Lamar EMC Snapping Shoals EMC Cobb EMC Little Ocmulgee EMC Sumter EMC Colquitt EMC Middle Georgia EMC Three Notch EMC Coweta-Fayette EMC Mitchell EMC Tri-County EMC Excelsior EMC Ocmulgee EMC Troup EMC Flint EMC Oconee EMC Upson County EMC Grady EMC Okefenoke Rural EMC Walton EMC GreyStone Power Corporation Pataula EMC Washington EMC The Members serve approximately 1.2 million electric consumers (meters) representing a total population of approximately 2.6 million people. The Members serve a region covering approximately 40,000 square miles, which is approximately 70% of the land area of Georgia served by the owners of the ITS, encompassing 150 of the State's 159 counties. Sales by the Members in 1996 amounted to approximately 19.6 million megawatt-hours ("MWh"), with 72% to residential consumers, 26% to commercial and industrial consumers and 2% to other consumers. The Members are the principal suppliers for the power needs of rural Georgia. While the Members do not serve any major cities, portions of their service territories are in close proximity to urban areas and are experiencing substantial growth due to the expansion of urban areas, including metropolitan Atlanta, into suburban areas and the growth of suburban areas into neighboring rural areas. The Members have experienced average annual compound growth rates from 1994 through 1996 of 5% in number of consumers, 9% in MWh sales and 7% in electric revenues. The Territorial Act regulates the service rights of all retail electric suppliers in the State of Georgia. Pursuant to the Territorial Act, the GPSC assigned substantially all areas in the State to specified retail suppliers. With limited exceptions, the Members have the exclusive right to provide retail electric service in their respective territories, which are predominately outside of the municipal limits existing at the time the Territorial Act was enacted in 1973. The chief exception to this rule of exclusivity is that electric suppliers may compete for most new retail loads of 900 kilowatts or greater. The GPSC may not reassign territory or transfer service except in limited circumstances provided by the Territorial Act. The GPSC may reassign territory only if it determines that an electric supplier has breached the tenets of public convenience and necessity. The GPSC may transfer service for specific premises only: (i) upon a determination by the GPSC, after joint application of electric suppliers and proper notice and hearing, that the public convenience and necessity require a transfer of service from one electric supplier to another; or (ii) upon a finding by GPSC, after proper notice and hearing, that an electric supplier's service to a premise is not adequate or dependable or that its rates, charges, service rules and regulations unreasonably discriminate in favor of or against the consumer utilizing such premises and the electric utility is unwilling or unable to comply with an order from GPSC regarding such service. As discussed above, the Territorial Act allows the owner of any new facility located outside of municipal limits and having a connected demand upon initial full operation of 900 kilowatts or greater to receive electric service from the retail supplier of its choice. The Members, with Oglethorpe's support, are actively engaged in competition with other retail electric suppliers for these new commercial and industrial loads. The number of 8 commercial and industrial loads served by the Members continues to increase annually. Retail competition in the electric utility industry has historically been rare. While the competition for 900-kilowatt loads represents only limited competition in Georgia, this competition has given Oglethorpe and the Members the opportunity to develop resources and strategies to operate in an increasingly competitive market. From time to time, utilities are approached by other parties interested in purchasing their systems. Some of the Members have been approached in the past by third parties indicating an interest in purchasing their systems. The New Wholesale Power Contracts provide that a Member may not dissolve, liquidate or otherwise wind up its affairs without Oglethorpe's approval. The Member may not consolidate or merge with any person or reorganize or change the form of its business organization from an electric membership corporation or sell, transfer, lease or otherwise dispose of all of its assets to any person, whether in a single transaction or series of transactions, unless either (i) the transaction is approved by Oglethorpe or (ii) other specified conditions are satisfied including, but not limited to, an assumption agreement by the transferee, satisfactory to Oglethorpe, containing an assumption by the transferee of the performance and observance of every covenant and condition of the Member under the New Wholesale Power Contract, and certifications of accountants as to certain specified financial requirements of the transferee (taking into account the transfer). Cooperative Structure The Members operate their systems on a not-for-profit basis. Accumulated margins derived after payment of operating expenses and provision for depreciation constitute patronage capital of the consumers of the Members. Refunds of accumulated patronage capital to the individual consumers may be made from time to time subject to limitations contained in mortgages between the Members and RUS or loan documents with other lenders. The RUS mortgages generally prohibit such distributions unless, after any such distribution, the Member's total equity will equal at least 40% of its total assets, except that distributions may be made of up to 25% of the margins and patronage capital received by the Member in the preceding year. As a general matter, the Members that borrow from RUS distribute accumulated patronage capital from time to time subject to their respective financial policies and in conformity with their respective RUS mortgages. (See "Members' Relationship with RUS" herein.) Oglethorpe is a membership corporation, and the Members are not subsidiaries of Oglethorpe. Except with respect to the obligations of the Members under each Member's New Wholesale Power Contract with Oglethorpe and Oglethorpe's rights under such contracts to receive payment for power and energy supplied, Oglethorpe has no legal interest in, or obligations in respect of, any of the assets, liabilities, equity, revenues or margins of the Members. (See "OGLETHORPE POWER CORPORATION--New Wholesale Power Contracts".) The revenues of the Members are not pledged as security to Oglethorpe but are the source from which moneys are derived by the Members to pay for power supplied by Oglethorpe under the New Wholesale Power Contracts. Revenues of the Members that borrow from RUS are, however, pledged under their respective RUS mortgages. Rate Regulation of Members Through provisions in the loan documents securing loans to the Members, RUS exercises control and supervision over the Members that borrow from it in such areas as: (i) accounting; (ii) borrowings; (iii) rates and charges for the sale of power; (iv) construction and acquisition of facilities; and (v) the purchase and sale of power. The individual RUS mortgages of the Members require them to design rates with a view to maintaining an average TIER of not less than 1.50 and an average DSC of not less than 1.25 for the two highest out of every three successive years. Although the setting of the rates of the Members is not subject to approval by any Federal or state agency or authority other than RUS, the Territorial Act prohibits the Members from unreasonable discrimination in the 9 setting of rates, charges, service rules or regulations and requires the Members to obtain GPSC approval of long-term borrowings. Snapping Shoals EMC, Mitchell EMC, Troup EMC, Walton EMC and Cobb EMC have prepaid their RUS indebtedness and are no longer RUS borrowers. Each of these Members now have financial and other requirements under loan documents with their new lenders. Other Members may also pursue this option. To the extent that these five Members and others that in the future prepay their RUS indebtedness engage in wholesale sales or transmission in interstate commerce, they will be subject to regulation by FERC under the Federal Power Act. Members' Relationship with RUS Historically, federal loan programs providing direct loans from RUS to electric cooperatives have been a major source of funding for the Members. In recent years, there have been legislative, administrative and budgetary initiatives intended to reduce or, in some cases, eliminate federal funding for electric cooperatives. In addition, the RUS loan and guarantee programs have been characterized by the imposition of increasingly problematic terms and conditions and extended delays in access to necessary funding. RUS has adopted a new standard form of mortgage and has published a proposed rule describing a new standard form of loan contract for distribution borrowers. Recent changes and proposals for further changes have made the direct loan program administered by RUS more costly. The Rural Electrification Loan Restructuring Act of 1993 eliminated the long-standing 2% loan program and substituted a new program, the interest rates for which are based on rates being paid on municipal bonds with comparable maturities. Certain borrowers with either low consumer density or higher-than-average rates and lower-than-average consumer income are eligible for a 5% loan program. The future cost, availability and amount of RUS direct and guaranteed loans which may be available to the Members cannot be predicted. Five Members have prepaid their RUS indebtedness and are no longer RUS borrowers. Other Members may also pursue this option. (See "Rate Regulation of Members" herein.) Members' Relationship with GTC and GSOC For information about the Members' relationship with GTC and GSOC, see "OGLETHORPE POWER Corporation--Relationship with GTC" and "--Relationship with GSOC". Contracts with SEPA In addition to energy received from Oglethorpe under the New Wholesale Power Contracts, the Members purchase hydroelectric power under contracts with SEPA. In 1996, the aggregate SEPA allocation to the Members was 542 megawatts ("MW") plus associated energy, representing approximately 11% of total Member peak demand and approximately 5% of total Member energy requirements. New 20-year contracts between each of the Members and SEPA have recently been executed. The provisions of the new contracts are essentially the same as the existing contracts with a few exceptions. The Members must schedule their energy allocation, and each has designated Oglethorpe to perform this function. In a separate agreement, Oglethorpe will schedule, through GSOC, the Members' SEPA power deliveries. Further, the Members may be required, if certain conditions are met, to contribute funds for capital improvements for Corps of Engineers projects from which its allocation is derived in order to retain the allocation. SEPA and Oglethorpe have entered into new transmission arrangements under which Oglethorpe would deliver the Members' SEPA purchases. GTC, as assignee of this agreement, will 10 deliver the SEPA power under its network tariff and contract with each Member. The new contracts are subject to RUS approval. The amount of capacity and energy available from SEPA is not expected to increase in an amount sufficient to serve a material portion of the projected growth in the Members' requirements. (See "OGLETHORPE POWER Corporation--New Wholesale Power Contracts" and "MEMBER REQUIREMENTS AND POWER SUPPLY RESOURCES--Member Demand and Energy Requirements" and the table thereunder.) During 1996, legislative proposals were made that would have resulted in the privatization of several of the federal power marketing administrations, in particular SEPA. Ultimately, no proposal for the privatization of the power marketing administrations was passed by Congress. The President's Budget for fiscal year 1998 does not include any proposals to privatize the federal power marketing administrations. The ultimate outcome of this issue in Congress cannot be predicted with certainty. 11 MEMBER REQUIREMENTS AND POWER SUPPLY RESOURCES General Oglethorpe supplies the current capacity and energy requirements of the Members from a combination of owned and leased generating plants and from power purchased under long-term contracts with other power suppliers and power marketers. Oglethorpe owns or leases 3,335.0 MW of nameplate capacity, consisting of 1,500.6 MW of coal-fired capacity, 1,185 MW of nuclear-fueled capacity, 632.5 MW of pumped storage hydroelectric capacity, 14.8 MW of oil-fired combustion turbine capacity and 2.1 MW of conventional hydroelectric capacity. (SEE "GENERATING FACILITIES--General" and "--Plant Performance" in Item 2 for a description of Oglethorpe's generating facilities.) These resources are generally scheduled and dispatched so as to minimize the operating cost of Oglethorpe's system. However, Oglethorpe has entered into long-term arrangements with power marketers to better utilize its resources to reduce the cost of capacity and energy delivered to the Members, in part by giving certain dispatch rights to the power marketers. (See "Power Purchase and Sale Arrangements--Power Marketer Arrangements" herein.) Member Demand and Energy Requirements The following table shows the aggregate peak demand and energy requirements of the Members for the years 1994 through 1996 and also shows the amounts of such requirements supplied by Oglethorpe and SEPA. For the years 1994 through 1996, demand and energy requirements increased at an average annual compound growth rate of 13.2% and 9.7%, respectively.
Demand (MW) Energy Requirements (MWh) --------------------------------------- -------------------------------------------- Total Total Require- Supplied by Supplied by Require- Supplied by Supplied by ments(1) Oglethorpe(2) SEPA(3) ments Oglethorpe(2) SEPA(3) -------- ------------- ------- ----- ------------- ------- 1994 3,938 3,396 542 17,278,812 16,285,127 993,685 1995 4,850 4,308 542 19,403,703 18,442,153 961,550 1996 5,045 4,503 542 20,793,864 19,807,101 986,763
- ---------- (1) System peak demand of the Members measured at the Members' delivery points (net of system losses). The significant increase in peak demand in 1995 was due in large part to a milder than normal summer in 1994. (2) Includes purchased power. (See "Power Purchase and Sale Arrangements--Power Purchases from GPC" and "--Other Power Purchases" herein.) (3) Supplied by SEPA through existing contracts with the Members. (See "THE MEMBERS OF OGLETHORPE--Contracts with SEPA".) In 1996, Cobb EMC and Jackson EMC accounted for approximately 12.5% and 11.2% of Oglethorpe's total revenues, respectively. Seasonal Variations The demand for energy by the Members is influenced by seasonal weather conditions. Historically, Oglethorpe's peak demand occurs during the months of June through September. (See "OGLETHORPE POWER Corporation--Electric Rates".) Energy revenues track energy costs as they are incurred and also fluctuate month to month. Capacity revenues reflect the recovery of Oglethorpe's fixed costs which do not vary significantly from month to month; therefore, the capacity revenues are billed and recognized in equal monthly amounts. 12 Demand Management Oglethorpe and the Members have implemented various demand management programs. The program goal, developed in conjunction with Oglethorpe's integrated resource planning process, has been to modify demand patterns so that current resources are used efficiently and the need for additional generating resources is delayed. The programs that have been implemented include an energy efficient home program (the "Good Cents Home" program), remote-controlled switching of air conditioners, water heaters and irrigation pumps, residential energy audits and public appeals to encourage consumers to use less energy during periods of peak demand. The demand management programs have reduced the growth of peak demand and have also resulted in an increase in off-peak sales. (See "Power Purchase and Sale Arrangements--Other Power Purchases" herein.) Power Purchase and Sale Arrangements Power Marketer Arrangements As a means of reducing the cost of power provided to the Members, Oglethorpe utilized short-term power marketer arrangements during 1996 with two different power marketers. Under both of the arrangements, the power marketer was required to provide to Oglethorpe at a favorable fixed rate all of the energy needed to meet the Members' requirements, and Oglethorpe was required to provide upon request to the power marketers at cost (subject to certain limitations) all energy available from Oglethorpe's total power resources. Under these arrangements, Oglethorpe continued to operate the power supply system and continued to dispatch the generating resources to ensure system reliability. Oglethorpe is now utilizing power marketer arrangements on a long-term basis to reduce the cost of power. It has entered into power marketer agreements with LPM for 50% of the load requirements of the Members, and is working to finalize an agreement with Morgan Stanley Capital Group ("Morgan Stanley") for the remaining 50% of the Members' load requirements. Effective January 1, 1997, Oglethorpe entered into power marketer agreements with LPM for 50% of the load requirements of the Members. Under the agreements, LPM is obligated to deliver, and Oglethorpe is obligated to take, 50% of the load requirements of the participating Members less the load requirements for certain customer choice loads (900 kilowatt or greater), plus 50% of the delivery obligations under Oglethorpe's existing firm power off-system sale contracts. For customer choice loads of three megawatts or less, LPM is obligated to deliver, if Oglethorpe requests, 50% of the associated load requirements. Oglethorpe has the option of purchasing the energy requirements for customer choice loads from another supplier. Oglethorpe is obligated to sell and LPM is obligated to buy 50% of the output of each participating Member's PCR share of the "must run" units (primarily nuclear units). Oglethorpe is also obligated to make available the same share of all other resources, which LPM may schedule. LPM does not have the right to the output of upgrades to these resources. LPM must pay Oglethorpe the cost of fuel associated with the energy taken. There is a price adjustment if the plant performance does not meet specified levels of availability and output. Oglethorpe must pay LPM a contractually specified price for each MWh purchased. Oglethorpe has contracted with GTC to provide available transmission services to deliver to the border of the ITS any energy sold to LPM. Each Member will use its Transmission Agreement for delivery of energy purchased from LPM and others. Effective with the Corporate Restructuring and the execution of supplemental agreements to the New Wholesale Power Contracts, the LPM agreement relating to 37 of the 39 Members has a term extending to 2011. With one years' notice, Oglethorpe has the right to terminate the LPM agreement for any year beginning with 2002. With one years' notice, LPM has the right to terminate the LPM agreement for any year beginning with 2005. The LPM agreement relating to the other two Members has a term extending through the end of 1999. The 13 supplemental agreements are the vehicle through which Oglethorpe and the Members assure that the Members receive the benefits of and support the obligations for the new power marketer arrangements under the New Wholesale Power Contracts. LPM is an indirect wholly owned subsidiary of LG&E Energy Corp., a Kentucky corporation, which is a diversified energy services holding company. LG&E Energy Corp. is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and, in accordance therewith, files reports and other information with the Securities and Exchange Commission (the "Commission"). Copies of this material can be obtained at prescribed rates from the Commission's Public Reference Section at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Certain securities of LG&E Energy Corp. are listed on the New York Stock Exchange, and reports and other information concerning LG&E Energy Corp. can be inspected at the office of such Exchange. Oglethorpe is now working to finalize power marketer arrangements with Morgan Stanley that would supply the remaining 50% of the Members' load requirements. The agreement is expected to allow each Member to have Oglethorpe elect a term from three to eight years. Each Member is currently deciding whether to have Oglethorpe obtain its remaining load requirements from Morgan Stanley. The proposed agreement would obligate Oglethorpe to purchase fixed quantities of energy, averaging 50% of the Members' forecasted requirements during the term of the agreement. Initially, Oglethorpe would manage the system through purchases or sales to balance this fixed requirement against the actual requirements. Oglethorpe would have considerably more discretion in the management of the power supply system under the proposed Morgan Stanley contract than under the LPM contract. In order to complete the implementation of the Morgan Stanley power marketer arrangements, Oglethorpe and each participating Member will enter into supplemental agreements to the New Wholesale Power Contract to conform the provisions of the New Wholesale Power Contracts to the terms of the power marketing arrangements. Any Member that elects not to participate in the Morgan Stanley agreement would have other options available, including having Oglethorpe manage this portion of the Member's load requirements and, beginning as early as January 1, 1998, contract with other power marketers. In the interim, Oglethorpe is supplying this portion of the Members' requirements from its own resources and by off-system purchase and sales. In the event Oglethorpe does not enter into power marketer agreements for the remainder of its load, it can continue to operate effectively in this manner Oglethorpe will continue to plan for each Member's requirements beyond the term of the respective power marketer agreements, including decisions regarding early termination. Power Purchases from GPC Oglethorpe currently purchases 1,000 MW of capacity and associated energy from GPC on a take-or-pay basis under the Block Power Sale Agreement ("BPSA"), which extends through December 31, 2003. The capacity purchases under the BPSA are from five Component Blocks (as defined in the BPSA), composed of three Component Blocks of 250 MW each (coal-fired units) and two Component Blocks of 125 MW each (combustion turbine units). The capacity in one or more Component Blocks may, however, be less than the MW stated above, as the result of scheduled retirement of units or retirements due to force majeure events. All units in the combustion turbine Component Blocks are scheduled to be retired by 2003. Although Oglethorpe may not increase its capacity purchases under the BPSA, it may reduce or extend its purchases of one or more Component Blocks upon proper notice to GPC. Oglethorpe has given notice of its intent to reduce its purchases by two 250 MW Component Blocks (coal-fired units) effective September 1, 1997 and September 1, 1998. Also, pursuant to its long-term power marketer agreements with LPM, Oglethorpe has committed to continue reducing its purchases from GPC as permitted under the BPSA and thus will no longer purchase any energy under the BPSA effective September 1, 2001. (See "Power Marketer Arrangements" herein for a discussion of the LPM agreement.) 14 Other Power Purchases Oglethorpe purchases 100 MW of capacity from each of Entergy Power, Inc. ("EPI") and Big Rivers Electric Corporation ("Big Rivers"), under agreements extending through June and July 2002, respectively. The availability of capacity under the EPI contract is dependent on the availability of two specific generating units available to EPI. The Tennessee Valley Authority ("TVA") provides the transmission service to deliver the power from the Big Rivers electric system to the ITS. TVA and Southern Company Services, as agent for Alabama Power Company and Mississippi Power Company, provide the transmission service necessary to deliver the power from EPI to the ITS. (See Note 9 of Notes to Financial Statements in Item 8.) Oglethorpe also has a contract through 2019 to purchase approximately 300 MW of capacity with Hartwell Energy Limited Partnership ("Hartwell"), a partnership owned 50% by Destec Energy, Inc. and 50% by American National Power, Inc., a subsidiary of National Power, PLC. Oglethorpe intends to use the units for peaking capacity but has the right to dispatch the units fully. In addition to the purchases from GPC, Big Rivers and EPI, Oglethorpe also purchases small amounts of capacity and energy from "qualifying facilities" under the Public Utility Regulatory Policies Act of 1978 ("PURPA"). Under a waiver order from FERC, Oglethorpe has historically made all purchases the Members would have otherwise been required to make under PURPA and Oglethorpe was relieved of its obligation to sell certain services to "qualifying facilities" so long as the Members make those sales. Oglethorpe has historically provided the Members with the necessary services to fulfill these sale obligations. Purchases by Oglethorpe from such qualifying facilities provided 0.2% of Oglethorpe's energy requirements for the Members in 1996. As a result of the Corporate Restructuring, the Member may make such purchases in the future. Oglethorpe has contracted with Florida Power Corporation to purchase 50 MW of peaking capacity during the summer of 1997 and 275 MW of peaking capacity during the summer of 1998. Under the New Wholesale Power Contracts, Oglethorpe will provide joint planning services for all participating Members. A Member may elect not to have Oglethorpe provide joint planning, procurement or bulk power marketing. Although the long-term power marketer arrangements may provide substantially all of the Members' requirements for the contract term, Oglethorpe will continue to supply these planning services for requirements beyond the contract term as well as for evaluation of contract options. Long-Term Power Sales Oglethorpe has an agreement to sell 100 MW of base capacity to Alabama Electric Cooperative beginning June 1, 1998, and extending through December 31, 2005. Other Power System Arrangements Oglethorpe has interchange, transmission and/or short-term capacity and energy purchase or sale agreements with over 20 utilities and other power suppliers. The agreements provide variously for the purchase and/or sale of capacity and energy and/or for the purchase of transmission service. The development of and access to a statewide transmission network and the interconnections with other utilities are key elements in Oglethorpe's ability to make off-system sales and purchases through its contract with GTC and to compete in an increasingly competitive market. 15 OTHER INFORMATION Information with respect to fuel supply for Oglethorpe's plants is set forth under the caption "GENERATING FACILITIES--Fuel Supply" included in Item 2 and is incorporated herein by reference. Information with respect to environmental and other regulations affecting Oglethorpe and its plants is set forth under the caption "ENVIRONMENTAL AND OTHER REGULATIONS" included in Item 2 and is incorporated herein by reference. 16 Item 2. PROPERTIES GENERATING FACILITIES General The following table sets forth certain information with respect to the generating facilities in which Oglethorpe currently has ownership or leasehold interests, all of which are in commercial operation. The Edwin I. Hatch Plant ("Plant Hatch"), the Hal B. Wansley Plant ("Plant Wansley"), the Alvin W. Vogtle Plant ("Plant Vogtle") and the Robert W. Scherer Units No. 1 and No. 2 ("Scherer Units No. 1 and No. 2") are co-owned by Oglethorpe, GPC, MEAG and Dalton. GPC is the operating agent for each of these co-owned plants. Rocky Mountain is co-owned by Oglethorpe and GPC, and Oglethorpe is the operating agent. Oglethorpe is the sole owner of the Tallassee Project at the Walter W. Harrison Dam ("Tallassee"). (See "CO-OWNERS OF THE PLANTS AND THE PLANT AGREEMENTS--The Plant Agreements".)
Oglethorpe's Share of Name- Commercial License Percentage Plate Capacity Operation Expiration Type of Fuel Interest(1) (MW) Date Date ------------ ----------- ---- ---- ---- FACILITIES IN SERVICE: Plant Hatch (near Baxley) Unit No. 1 Nuclear 30 243.0 1975 2014 Unit No. 2 Nuclear 30 246.0 1979 2018 Plant Vogtle (near Waynesboro) Unit No. 1 Nuclear 30 348.0 1987 2027 Unit No. 2 Nuclear 30 348.0 1989 2029 Plant Wansley (near Carrollton) Unit No. 1 Coal 30 259.5 1976 N/A(2) Unit No. 2 Coal 30 259.5 1978 N/A(2) Combustion Turbine Oil 30 14.8 1980 N/A(2) Plant Scherer (near Forsyth) Unit No. 1 Coal 60 490.8 1982 N/A(2) Unit No. 2 Coal 60 490.8 1984 N/A(2) Tallassee (near Athens) Hydro 100 2.1 1986 2023 Rocky Mountain Pumped Storage (near Rome) Hydro 74.61 632.5 1995 2027 --------- Total Ownership 3,335.0 =========
- ---------- (1) Oglethorpe has an ownership interest in all of the facilities except Scherer Unit No. 2. The 60% interest in Scherer Unit No. 2 is leased under leases that expire in 2013, subject to options to renew for a total of 8.5 years. (2) Coal-fired units and combustion turbines do not operate under operating licenses similar to those granted to nuclear units by the Nuclear Regulatory Commission and to hydroelectric plants by FERC. 17 Plant Performance The following table sets forth certain operating performance information of each of the major generating facilities in which Oglethorpe currently has ownership or leasehold interests:
Equivalent Availability (1) Capacity Factor (2) ------------------------------ ------------------------- Unit 1996 1995 1994 1996 1995 1994 - ---- ---- ---- ---- ---- ---- ---- Plant Hatch Unit No. 1................... 83% 98% 84% 83% 100% 85% Unit No. 2................... 97 75 78 99 75 79 Plant Vogtle Unit No. 1................... 80 98 86 80 98 86 Unit No. 2................... 88 89 91 89 90 91 Plant Wansley Unit No. 1................... 88 90 92 58 56 62 Unit No. 2................... 91 89 88 62 56 58 Plant Scherer Unit No. 1................... 92 95 97 74 73 64 Unit No. 2................... 84 97 85 72 85 60 Rocky Mountain (3) Unit No. 1................... 94 83 N/A 15 16 N/A Unit No. 2................... 95 92 N/A 13 15 N/A Unit No. 3................... 95 92 N/A 10 16 N/A
- --------------------- (1) Equivalent Availability is a measure of the percentage of time that a unit was available to generate if called upon, adjusted for periods when the unit is partially derated from the "maximum dependable capacity" rating. (2) Capacity Factor is a measure of the output of a unit as a percentage of the maximum output, based on the "maximum dependable capacity" rating, over the period of measure. (3) Rocky Mountain Commercial Operation Dates: Unit 1 - July 24, 1995; Unit 2 - June 19, 1995; Unit 3 - June 1, 1995. This information was calculated beginning from the commercial operation date for each unit. As a pumped storage plant, Rocky Mountain primarily operates in peaking service. The nuclear refueling cycle for Plants Hatch and Vogtle exceeds twelve months. Therefore, in some calendar years the units at these plants are not taken out of service for refueling, resulting in higher levels of equivalent availability and capacity factor. Fuel Supply Coal for Plant Wansley is purchased under long-term contracts, which are estimated to be sufficient to provide the majority of the coal requirements of Plant Wansley through 1997, with the remainder being provided through spot market transactions. As of February 28, 1997, there was a 38-day coal supply at Plant Wansley based on nameplate rating. Low-sulfur "compliance" coal for Scherer Units No. 1 and No. 2 is purchased under long-term contracts and spot market transactions. As of February 28, 1997, the coal stockpile at Plant Scherer contained a 37-day 18 supply based on nameplate rating. During 1994, Plant Scherer was converted to burn both sub-bituminous and bituminous coals, and a separate stockpile of sub-bituminous coal was built in addition to the stockpile of bituminous coal. The Plant Scherer and Wansley ownership and operating agreements were amended in 1993 and 1996, respectively, to allow each co-owner (i) to dispatch separately its respective ownership interest in conjunction with contracting separately for long-term coal purchases procured by GPC and (ii) to procure separately long-term coal purchases. Pursuant to the amendments, Oglethorpe implemented separate dispatch of Plant Scherer in 1994. Oglethorpe expects to implement separate dispatch at Plant Wansley by early to mid-summer 1997. Oglethorpe continues to use GPC as its agent for fuel procurement. To take advantage of these changes at Plants Scherer and Wansley, Oglethorpe formed a wholly owned subsidiary to acquire rail cars designed for hauling coal from the western coal mining regions. The subsidiary, Black Diamond Energy, Inc., has purchased or leased 299 rail cars. Oglethorpe has entered into an initial 15-year lease with the subsidiary which obligates Oglethorpe to pay all of the ownership and operating expenses of the subsidiary relating to the rail cars during the lease term. For information relating to the impact that the Clean Air Act will have on Oglethorpe, see "ENVIRONMENTAL AND OTHER REGULATIONS--Clean Air Act". GPC, as operating agent, has the responsibility to procure nuclear fuel for Plants Hatch and Vogtle. GPC has contracted with Southern Nuclear Operating Company ("SONOPCO") to provide nuclear services, including nuclear fuel procurement. SONOPCO employs both spot purchases and long-term contracts to satisfy nuclear fuel requirements. The nuclear fuel supply and related services are expected to be adequate to satisfy current and future nuclear generation requirements. Plants Hatch and Vogtle currently have on-site spent fuel storage capacity. Based on normal operations and retention of all spent fuel in the reactor, it is anticipated that existing on-site pool capacity would not be sufficient in 2003 and 2008, respectively, to accept the number of spent fuel assemblies that would normally be removed from the reactor during a refueling. Contracts with the Department of Energy ("DOE") have been executed to provide for the permanent disposal of spent nuclear fuel produced at Plants Hatch and Vogtle. The services to be provided by DOE are scheduled to begin in 1998; however, the DOE has stated that permanent nuclear waste storage facilities will not be available by that date, and it is uncertain when they will be available. If DOE does not begin receiving the spent fuel from Plant Hatch in 2003 or from Plant Vogtle in 2008, alternative methods of spent fuel storage will be needed. Activities for adding dry cast storage capacity at Plant Hatch by as early as 1999 are in progress. (See "ENVIRONMENTAL AND OTHER REGULATIONS--Nuclear Regulation" for a discussion of the Nuclear Waste Policy Act and Note 1 of Notes to Financial Statements in Item 8 regarding nuclear fuel cost.) 19 CO-OWNERS OF THE PLANTS AND THE PLANT AGREEMENTS Co-owners of the Plants Plants Hatch, Vogtle, Wansley and Scherer Units No. 1 and No. 2 are co-owned by Oglethorpe, GPC, MEAG and Dalton, and Rocky Mountain is co-owned by Oglethorpe and GPC. Each such co-owner owns, and Oglethorpe owns or leases, undivided interests in the amounts shown in the following table (which excludes the Plant Wansley combustion turbine). GPC is the operating agent for each of these plants, except for Rocky Mountain for which Oglethorpe is the operating agent. (See "The Plant Agreements" herein.)
Nuclear Coal-Fired Pumped Storage ----------------------------- ---------------------------------- -------------- Plant Plant Plant Scherer Units Rocky Hatch Vogtle Wansley No. 1 & No. 2 Mountain Total ----------- -------------- -------------- ---------------- -------------- ----- % MW(1) % MW(1) % MW(1) % MW(1) % MW(1) MW(1) ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- Oglethorpe. 30.0 489 30.0 696 30.0 519 60.0(2) 982 74.61 633 3,319 GPC........ 50.1 817 45.7 1,060 53.5 926 8.4 137 25.39 215 3,155 MEAG....... 17.7 288 22.7 527 15.1 261 30.2 494 -- -- 1,570 Dalton..... 2.2 36 1.6 37 1.4 24 1.4 23 -- -- 120 --------------------- ------- ------- ------- ------- ------- ------ ------ ------ Total...... 100.0 1,630 100.0 2,320 100.0 1,730 100.0 1,636 100.00 848 8,164 ===== ===== ===== ===== ===== ===== ===== ===== ====== === =====
- ---------- (1) Based on nameplate ratings. (2) Oglethorpe leases its interest in Scherer Unit No. 2 pursuant to long-term net leases. Georgia Power Company GPC is a wholly owned subsidiary of The Southern Company, a registered holding company under the Public Utility Holding Company Act, and is engaged primarily in the generation and purchase of electric energy and the transmission, distribution and sale of such energy within the State of Georgia at retail in over 600 communities (including Athens, Atlanta, Augusta, Columbus, Macon, Rome and Valdosta), as well as in rural areas, and at wholesale to Oglethorpe, MEAG and three municipalities. GPC is the largest supplier of electric energy in the State of Georgia. (See "OGLETHORPE POWER CORPORATION--Relationship with GPC" in Item 1.) GPC is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and, in accordance therewith, files reports and other information with the Commission. Copies of this material can be obtained at prescribed rates from the Commission's Public Reference Section at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Certain securities of GPC are listed on the New York Stock Exchange, and reports and other information concerning GPC can be inspected at the office of such Exchange. Municipal Electric Authority of Georgia MEAG, an instrumentality of the State of Georgia, was created for the purpose of providing electric capacity and energy to those political subdivisions of the State of Georgia that owned and operated electric distribution systems at that time. MEAG (who also markets under the name of MEAG Power) has entered into power sales contracts with each of 48 cities and one county in the State of Georgia. Such political subdivisions, located in 39 of the State's 159 counties, collectively serve approximately 270,000 electric customers. 20 City of Dalton, Georgia The City of Dalton, located in northwest Georgia, supplies electric capacity and energy to consumers in Dalton, and presently serves more than 10,000 residential, commercial and industrial customers. The Plant Agreements Hatch, Wansley, Vogtle and Scherer Oglethorpe's rights and obligations with respect to Plants Hatch, Wansley, Vogtle and Scherer are contained in a number of contracts between Oglethorpe and GPC and, in some instances, MEAG and Dalton. Oglethorpe is a party to four Purchase and Ownership Participation Agreements ("Ownership Agreements") under which it acquired from GPC a 30% undivided interest in each of Plants Hatch, Wansley and Vogtle, a 60% undivided interest in Scherer Units No. 1 and No. 2 and a 30% undivided interest in those facilities at Plant Scherer intended to be used in common by Scherer Units No. 1, No. 2, No. 3 and No. 4 (the "Scherer Common Facilities"). Oglethorpe has also entered into four Operating Agreements ("Operating Agreements") relating to the operation and maintenance of Plants Hatch, Wansley, Vogtle and Scherer, respectively. The Operating Agreements and Ownership Agreements relating to Plants Hatch and Wansley are two-party agreements between Oglethorpe and GPC. The other Operating Agreements and Ownership Agreements are agreements among Oglethorpe, GPC, MEAG and Dalton. The parties to each Ownership Agreement and each Operating Agreement are referred to as "Participants" with respect to each such agreement. In 1985, in four separate transactions, Oglethorpe sold its entire 60% undivided ownership interest in Scherer Unit No. 2 to four separate owner trusts established by four different institutional investors. (See Note 4 of Notes to Financial Statements in Item 8.) Oglethorpe retained all of its rights and obligations as a Participant under the Ownership and Operating Agreements relating to Scherer Unit No. 2 for the term of the leases. (In the following discussion, references to Participants "owning" a specified percentage of interests include Oglethorpe's rights as a deemed owner with respect to its leased interests in Scherer Unit No. 2.) The Ownership Agreements appoint GPC as agent with sole authority and responsibility for, among other things, the planning, licensing, design, construction, renewal, addition, modification and disposal of Plants Hatch, Vogtle, Wansley and Scherer Units No. 1 and No. 2 and the Scherer Common Facilities. Under the Ownership Agreements, Oglethorpe is obligated to pay a percentage of capital costs of the respective plants, as incurred, equal to the percentage interest which it owns or leases at each plant. GPC has responsibility for budgeting capital expenditures subject to, in the case of Scherer Units No. 1 and No. 2, certain limited rights of the Participants to disapprove capital budgets proposed by GPC and to substitute alternative capital budgets and in the case of Plants Hatch and Vogtle, the right of any co-owner to disapprove large discretionary capital improvements. Each Operating Agreement gives GPC, as agent, sole authority and responsibility for the management, control, maintenance, operation, scheduling and dispatching of the plant to which it relates. However, as provided in the amendments to the Plant Scherer Ownership and Operating Agreements, Oglethorpe is separately dispatching its ownership share of Scherer Units No. 1 and No. 2. Similar amendments to the Plant Wansley Operating Agreement have recently been entered into and Oglethorpe expects to begin dispatching separately its ownership share in Plant Wansley in 1997. (See "GENERATING FACILITIES--Fuel Supply".) In 1990, the co-owners of Plants Hatch and Vogtle entered into the Nuclear Managing Board Agreement which amended the Plant Hatch and Plant Vogtle Ownership and Operating agreements, primarily with respect to GPC's reporting requirements, but did not alter GPC's role as agent with respect to the nuclear plants. In 1993, the co-owners entered into the Amended and Restated Nuclear Managing Board Agreement (the "Amended and Restated NMBA") which provides for a managing board (the "Nuclear Managing Board") to coordinate the implementation and administration of the Plant Hatch and Plant Vogtle Ownership and Operating Agreements and provides for increased rights for the co-owners regarding certain decisions and allowed GPC to contract with a 21 third party for the operation of the nuclear units. In connection with the recent amendments to the Plant Scherer Ownership and Operating Agreements, the co-owners of Plant Scherer entered into the Plant Scherer Managing Board Agreement which provides for a managing board (the "Plant Scherer Managing Board") to coordinate the implementation and administration of the Plant Scherer Ownership and Operating Agreements and provides for increased rights for the co-owners regarding certain decisions, but does not alter GPC's role as agent with respect to Plant Scherer. The Operating Agreements provide that Oglethorpe is entitled to a percentage of the net capacity and net energy output of each plant or unit equal to its percentage undivided interest owned or leased in such plant or unit, subject to its obligation to sell capacity and energy to GPC as described below. Except as otherwise provided, each party is responsible for a percentage of Operating Costs (as defined in the Operating Agreements) and fuel costs of each plant or unit equal to the percentage of its undivided interest which is owned or leased in such plant or unit. For Scherer Units No. 1 and No. 2 and for Plant Wansley, once Oglethorpe begins separate dispatch there, each party will be responsible for its fuel costs and for variable Operating Costs in proportion to the net energy output for its ownership interest, while responsibility for fixed Operating Costs will continue to be equal to the percentage undivided ownership interest which is owned or leased in such unit. GPC is required to furnish budgets for Operating Costs, fuel plans and scheduled maintenance plans subject to, in the case of Scherer Units No. 1 and No. 2, certain limited rights of the Participants to disapprove such budgets proposed by GPC and to substitute alternative budgets. The Ownership Agreements and Operating Agreements provide that, should a Participant fail to make any payment when due, among other things, such nonpaying Participant's rights to output of capacity and energy would be suspended. The Operating Agreement for Plant Hatch will remain in effect with respect to Hatch Units No. 1 and No. 2 until 2009 and 2012, respectively. The Operating Agreement for Plant Vogtle will remain in effect with respect to each unit at Plant Vogtle until 2018. The Operating Agreement for Plant Wansley will remain in effect with respect to Wansley Units No. 1 and No. 2 until 2016 and 2018, respectively. The Operating Agreement for Scherer Units No. 1 and No. 2 will remain in effect with respect to Scherer Units No. 1 and No. 2 until 2022 and 2024, respectively. Upon termination of each Operating Agreement, GPC will retain such powers as are necessary in connection with the disposition of the property of the applicable plant, and the rights and obligations of the parties shall continue with respect to actions and expenses taken or incurred in connection with such disposition. Proposed Changes to Nuclear Plant Operating Arrangements In September 1992, GPC filed applications with the Nuclear Regulatory Commission (the "NRC") to add SONOPCO to the operating license of each unit of Plants Hatch and Vogtle and designate SONOPCO as the operator. The application has been recently approved by the Atomic Safety and Licensing Board and became effective in late March. SONOPCO, a subsidiary of The Southern Company specializing in nuclear services, currently provides certain operating, maintenance, and other services to GPC in accordance with the Amended and Restated NMBA and the agreements referenced in the Amended and Restated NMBA. The co-owners had previously agreed to a Nuclear Operating Agreement between GPC and SONOPCO, which became operative on the effective date of the license amendment. Rocky Mountain Oglethorpe's rights and obligations with respect to Rocky Mountain are contained in several contracts between Oglethorpe and GPC, the co-owners of Rocky Mountain. Pursuant to Rocky Mountain Pumped Storage Hydroelectric Ownership Participation Agreement, by and between Oglethorpe and GPC (the "Ownership Participation Agreement"), Oglethorpe initially acquired a 3% undivided interest in Rocky Mountain which interest increased as Oglethorpe expended funds to complete construction of Rocky Mountain. The final ownership percentages for Rocky Mountain are Oglethorpe 74.61% and GPC 25.39%. In connection with this 22 acquisition, Oglethorpe and GPC also entered into the Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement (the "Rocky Mountain Operating Agreement"). The Ownership Participation Agreement appoints Oglethorpe as agent with sole authority and responsibility for, among other things, the planning, licensing, design, construction, operation, maintenance and disposal of Rocky Mountain. The Rocky Mountain Operating Agreement gives Oglethorpe, as agent, sole authority and responsibility for the management, control, maintenance and operation of Rocky Mountain. In general, each co-owner is responsible for payment of its respective ownership share of all Operating Costs and Pumping Energy Costs (as defined in the Rocky Mountain Operating Agreement) as well as costs incurred as the result of any separate schedule or independent dispatch. A co-owner's share of net available capacity and net energy is the same as its respective ownership interest under the Ownership Participation Agreement. Oglethorpe and GPC have each elected to schedule separately their respective ownership interests. The Rocky Mountain Operating Agreement will terminate in 2035. Oglethorpe completed, in two separate closings on December 31, 1996 and January 3, 1997, lease transactions for its 74.61% undivided ownership interest in Rocky Mountain. Under the terms of these transactions, Oglethorpe leased the facility to three institutional investors for a term of 71 years, who in turn leased it back to Oglethorpe for a term of 30 years. The transactions are characterized as a sale and lease-back for income tax purposes, but not for financial reporting purposes. Oglethorpe will continue to control and operate the plant during the lease-back term, and it fully intends to repurchase tax ownership and to retain all other rights of ownership with respect to the plant at the end of the lease-back period. As a result of these transactions, Oglethorpe received net proceeds of approximately $96 million which is being recorded as a deferred credit and will be recognized in income over the term of the lease-back. Approximately $91 million of the proceeds will be used for the early retirement of FFB debt, with the remaining $5 million being used to pay alternative minimum taxes on the transactions. The combination of the debt prepayment and the amortized gain will result in an estimated $11 million in annual savings. In connection with these transactions, Oglethorpe is obligated to maintain liquidity from various sources of approximately $50 million. 23 ENVIRONMENTAL AND OTHER REGULATIONS General As is typical in the utility industry, Oglethorpe is subject to Federal, State and local air and water quality requirements which, among other things, regulate emissions of pollutants, such as particulate matter ("PM"), sulfur oxides and nitrogen oxides ("NOx") into the air and discharges of other pollutants, including heat, into waters of the United States. Oglethorpe is also subject to Federal, State and local waste disposal requirements which regulate the manner of transportation, storage and disposal of solid and other waste. In general, environmental requirements are becoming increasingly stringent, and further or new requirements may substantially increase the cost of electric service by requiring changes in the design or operation of existing facilities as well as changes or delays in the location, design, construction or operation of new facilities. Failure to comply with these requirements could result in the imposition of civil and criminal penalties as well as the complete shutdown of individual generating units not in compliance. There is no assurance that the units in operation will always remain subject to the regulations currently in effect or will always be in compliance with future regulations. Compliance with environmental standards or deadlines will continue to be reflected in Oglethorpe's capital and operating costs. Oglethorpe's direct capital costs to achieve compliance with environmental requirements are expected to be an aggregate of approximately $250,000 for 1997, 1998 and 1999. Clean Air Act The Clean Air Act seeks to improve air quality throughout the United States. The acid rain provisions of the Clean Air Act require the reduction of sulfur dioxide ("SO2") and NOx emissions from affected units, including coal-fired electric power facilities. The SO2 reductions required by the Clean Air Act will be achieved in two phases. Phase I addresses specific generating units named in the Clean Air Act. Both units of Plant Wansley are "affected units" under Phase I. Scherer Units No. 1 and No. 2 are not "affected units" under Phase I but are "affected units" under Phase II. Beginning in 1995, Phase I affected units became subject to the SO2 emission allowance trading program. Emission allowances are issued by the U.S. Environmental Protection Agency ("EPA"), based on statutory allocations in Phase I and on fossil fuel consumption for affected units from 1985 through 1987 for Phase II. An allowance, which gives the holder the authority to emit one ton of SO2 during a calendar year, is transferable and can be bought, sold or banked for use in the years following its issuance. Oglethorpe expects to comply with Phase I requirements through the use of its allowances coupled with switching to lower sulfur coal, a compliance strategy that has required some equipment upgrades at Plant Wansley and may result in unused allowances that can be banked for future use or sold. For Phase II, which begins in the year 2000, when total U.S. emissions of SO2 will be capped at 8.9 million tons, Oglethorpe could use a variety of options for SO2 compliance, including use of emission allowances (allocated, banked or purchased, if needed), fuel-switching or installation of flue gas desulfurization equipment. Achieving compliance with Phase II has already resulted in some equipment upgrades at Scherer Units No. 1 and No. 2. Although some NOx regulations implementing the requirements of the Clean Air Act have been finalized for some time, others have recently been promulgated and there remains the possibility that further regulation of NOx emissions from utility sources could be imposed. EPA recently issued a final rule lowering the NOx emission standard for boiler types such as those found at Scherer Units No. 1 and No. 2. These rules have been challenged, however, and whether the new NOx emission standards will ultimately be imposed at Plant Scherer Units No. 1 and 24 No. 2 is not known. Depending on the form those NOx rules take after the associated litigation has ended, additional expenditures for pollution control equipment may be incurred. In general, compliance with the Clean Air Act will continue to require expenditures for monitoring and permitting, and in some instances may involve increased operating or maintenance expenses. Capital expenditures of Oglethorpe through 1996 for pollution control equipment needed to comply with the Clean Air Act at Plant Wansley have been approximately $7,200,000 and at Scherer Units No. 1 and No. 2 have been approximately $720,000. Although the estimated cost of any additional improvements at Plant Wansley and Scherer Units No. 1 and No. 2 remains dependent upon the chosen compliance plan and may be affected by future plan amendments and/or future regulation, Oglethorpe has budgeted approximately $250,000 in capital expenditures for Clean Air Act and related projects over the next three years. In addition, the final capital cost of improvements and any effect on operating costs will be determined by the compliance plan as finally implemented and any applicable regulatory changes. Metropolitan Atlanta is classified as a "serious nonattainment area" with regard to the ozone ambient air quality standards. The Clean Air Act, under which these standards are promulgated, requires the State of Georgia to conduct specific studies and establish new rules regulating sources of NOx and volatile organic compounds ("VOC"), to achieve attainment of the standards by 1999 and to maintain compliance thereafter. These studies could result in new rules for power plants in the State, including Plants Wansley and Scherer. Further, along with 36 other states in the eastern half of the U.S., Georgia, as a member of the Ozone Transport Assessment Group ("OTAG"), is performing extensive photochemical grid modeling in an effort to reach a consensus among its member states as to the strategies needed to reduce ozone and its precursors (including NOx). Large, stationary sources of NOx have been a focus for OTAG. Originally, each OTAG state was to have new emission reduction strategies in place by late spring or early summer of 1997. However, EPA has stated its intention to specify the overall amount of NOx and VOC emission reductions that must be achieved by each OTAG state. Plant Wansley is near the non-attainment area while Plant Scherer is located further away. The results of these studies and new rules could require NOx controls more stringent than those now required under the acid rain provisions of the Clean Air Act for compliance. Portions of Subchapter I of the Clean Air Act also require that several studies be conducted regarding the health effects of power plant emissions of certain hazardous air pollutants. The studies will be used in making decisions on whether additional controls of these pollutants are necessary. The effect of any of these potential regulatory changes under the Clean Air Act, including new rules under the amended provisions, can not now be predicted. The Clean Air Act also requires EPA to review all National Ambient Air Quality Standards ("NAAQS") periodically, revising such standards as necessary. Last year, EPA decided not to impose a new short-term standard for sulfur oxides (measured as SO2). That decision has been appealed, however, so that it is still possible that a new SO2 standard could be promulgated. If a new short-term NAAQS for SO2 were imposed, it might require new emission controls at Plants Wansley and Scherer, which could result in substantial costs to Oglethorpe. EPA has also proposed to revise the NAAQS for both ozone and PM. Either of these proposals, if finalized, could have a substantial effect on the types of controls that might be needed at Plants Wansley or Scherer for compliance. However, the final impacts (and any associated expenditures) at either plant can not now be predicted with any certainty. In fact, the impact of any change in these NAAQS can not now be determined, because the effect of any change would depend in part on the final ambient standards developed. Although Oglethorpe's management is currently unable to determine the overall effect that compliance with requirements under the Clean Air Act will have on its operations, it does not believe that any required increases in capital or operating expenses would have a material effect on its results of operations or its financial condition. Compliance with the requirements under the Clean Air Act may also require increased capital or operating expenses on the part of GPC. Any increases in GPC's capital or operating expenses may cause an 25 increase in the cost of power purchased from GPC. (See "MEMBER REQUIREMENTS AND POWER SUPPLY RESOURCES--Power Purchase and Sale Arrangements--Power Purchases from GPC" in Item 1.) Clean Water Act For some time now, Congress has been considering reauthorization of the Clean Water Act. If that occurs, Oglethorpe's operations could be affected. However, the full impact of any reauthorization cannot now be determined and will depend on the specific changes to the statute, as well as to any implementing state or federal regulations that might be promulgated. At the state level, EPA is under Federal court order to begin development of Total Maximum Daily Loads ("TMDLs") for all of Georgia's stream segments that do not yet meet established water quality standards. The order calls for a strict schedule for the development of such TMDLs, beginning in the summer of 1997. Oglethorpe cannot now predict what impact, if any, such development will have on the operations of Plants Wansley, Scherer, Hatch or Vogtle, because the effect will depend on the final TMDLs to be developed and EPA's (and the state's) approach for revising National Pollutant Discharge Elimination System permits to achieve the desired TMDLs and ultimately achieve the required water quality standards. Georgia Hazardous Site Response Act ("GHSRA") GHSRA requires the compilation and listing of an inventory of all known or suspected sites where "regulated substances" have been disposed of or released in quantities deemed reportable by the state. In developing this list, which includes hundreds of sites, one site co-owned by Oglethorpe was listed. The site is located at Plant Wansley and consists of an ash pond. As the operating agent of the plant, GPC will conduct the required remedial investigation in late 1997 or early 1998, to determine if any clean-up activities are required. At this time, it is uncertain whether any remediation will be required and what the timing of any required remediation might be. If remediation is required, Oglethorpe could incur up to an estimated $800,000 in clean-up costs and $6 million in capital costs, associated with the redevelopment of the ash pond. Additional sites may require investigation and remediation expenses, a portion or all of which Oglethorpe may be liable for. At this time, Oglethorpe does not believe that any capital or operating costs associated with GHSRA clean-ups would have a material effect on its results of operations or its financial condition. Nuclear Regulation Oglethorpe is subject to the provisions of the Atomic Energy Act of 1954, as amended (the "Atomic Energy Act"), which vests jurisdiction in the NRC over the construction and operation of nuclear reactors, particularly with regard to certain public health, safety and antitrust matters. The National Environmental Policy Act has been construed to expand the jurisdiction of the NRC to consider the environmental impact of a facility licensed under the Atomic Energy Act. Plants Hatch and Vogtle are being operated under licenses issued by the NRC. All aspects of the operation and maintenance of nuclear power plants are regulated by the NRC. From time to time, new NRC regulations require changes in the design, operation and maintenance of existing nuclear reactors. Operating licenses issued by the NRC are subject to revocation, suspension or modification, and the operation of a nuclear unit may be suspended if the NRC determines that the public interest, health or safety so requires. (See "CO-OWNERS OF THE PLANTS AND THE PLANT AGREEMENTS--The Plant Agreements--Proposed Changes to Nuclear Plant Operating Arrangements".) Pursuant to the Nuclear Waste Policy Act of 1982, as amended, the Federal government has the regulatory responsibility for the final disposition of commercially produced high-level radioactive waste materials, including 26 spent nuclear fuel. Such Act requires the owner of nuclear facilities to enter into disposal contracts with DOE for such material. These contracts require each such owner to pay a fee which is currently one dollar per MWh for the net electricity generated and sold by each of its reactors. (See "GENERATING FACILITIES--Fuel Supply".) For information concerning nuclear insurance, see Note 8 of Notes to Financial Statements in Item 8. For information regarding NRC's regulation relating to decommissioning of nuclear facilities and regarding DOE's assessments pursuant to the Energy Policy Act for decontamination and decommissioning of nuclear fuel enrichment facilities, see Note 1 of Notes to Financial Statements in Item 8. Other Environmental Regulation In 1993, EPA issued a ruling confirming the non-hazardous status of coal ash. That ruling may apply, however, only to situations where those wastes are not co-managed, i.e. not mixed with other wastes. Pursuant to court order, EPA has until 1998 to classify co-managed utility wastes as either hazardous or non-hazardous. If the wastes are classified as hazardous, substantial additional costs for the management of such wastes might be required, although the full impact would depend on the subsequent development of requirements pertaining to these wastes. Oglethorpe is subject to other environmental statutes including, but not limited to, the Toxic Substances Control Act ("TSCA"), the Resource Conservation & Recovery Act ("RCRA"), the Endangered Species Act ("ESA"), the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), the Emergency Planning and Community Right to Know Act, and to the regulations implementing these statutes. Oglethorpe does not believe that compliance with these statutes and regulations will have a material impact on its operations. Changes to any of these laws, however, could affect many areas of Oglethorpe's operations. Congress is considering amending the ESA and reauthorizing CERCLA, TSCA and perhaps RCRA. Although compliance with new environmental legislation could have a significant impact on Oglethorpe, those impacts cannot be fully determined at this time and would depend in part on the final legislation and the development of implementing regulations. The scientific community, regulatory agencies and the electric utility industry are continuing to examine the issues of global warming and the possible health effects of electromagnetic fields. While no definitive scientific conclusions have been reached regarding these issues, it is possible that new laws or regulations pertaining to these matters could increase the capital and operating costs of electric utilities, including Oglethorpe or entities from which Oglethorpe purchases power. In addition, the potential for liability exists from lawsuits alleging damages from electromagnetic fields. Energy Policy Act The Energy Policy Act allows for increased competition among wholesale electric suppliers and increased access to transmission services by such suppliers. It created a new class of utilities called Exempt Wholesale Generators ("EWGs"), which are exempt from certain restrictions otherwise imposed by the Public Utility Holding Company Act. The effect of this exemption is to facilitate the development of independent third-party generators potentially available to satisfy utilities' needs for increased power supplies. Unlike purchases from qualifying facilities under PURPA (see "MEMBER REQUIREMENTS AND POWER SUPPLY RESOURCES--Power Purchase and Sales Arrangements--Other Power Purchases" in Item 1), utilities have no statutory obligation to purchase power from EWGs. Furthermore, EWGs are precluded from making direct sales to retail electricity customers. The Energy Policy Act also broadened the authority of FERC to require a utility to transmit power to or on behalf of other participants in the electric utility industry, including EWGs and qualifying facilities, but FERC is precluded from requiring a utility to transmit power from another entity directly to a retail customer. In 1996, 27 FERC issued two final rules (Orders 888 and 889) and a notice of proposed rulemaking regarding capacity reservation tariffs that would make significant changes in the form of transmission services performed by public utilities subject to FERC's jurisdiction. See "OGLETHORPE POWER CORPORATION--Relationship with GTC" in Item 1 for information regarding GTC's transmission tariff. 28 Item 3. LEGAL PROCEEDINGS Oglethorpe is a party to various actions and proceedings incident to its normal business. Liability in the event of final adverse determinations in any of these matters is either covered by insurance or, in the opinion of Oglethorpe's management, after consultation with counsel, should not in the aggregate have a material adverse effect on the financial position or results of operations of Oglethorpe. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 29 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Not applicable. ITEM 6. SELECTED FINANCIAL DATA
(dollars in thousands) 1996 1995 1994 1993 1992 Operating revenues: Sales to Members ..................... $ 1,023,094 $ 1,030,797 $ 930,875 $ 899,720 $ 816,000 Sales to non-Members ................. 78,343 118,764 125,207 200,940 268,763 ------------ ------------ ------------ ------------ ------------ Total operating revenues ............. 1,101,437 1,149,561 1,056,082 1,100,660 1,084,763 ------------ ------------ ------------ ------------ ------------ Operating expenses: Fuel ................................. 206,524 219,062 203,444 176,342 167,288 Production .............................. 129,178 133,858 132,723 129,972 115,915 Purchased power ......................... 229,089 264,844 227,477 271,970 230,510 Depreciation and amortization ............................ 163,130 139,024 131,056 128,060 126,047 Taxes ................................... 30,262 27,561 24,741 25,148 19,634 Other operating expenses ................ 60,505 56,535 49,234 44,876 50,578 ------------ ------------ ------------ ------------ ------------ Total operating expenses ................ 818,688 840,884 768,675 776,368 709,972 ------------ ------------ ------------ ------------ ------------ Operating margin ........................ 282,749 308,677 287,407 324,292 374,791 Other income, net ....................... 65,334 33,710 40,795 38,741 45,928 Net interest charges .................... (326,331) (320,129) (305,120) (350,652) (393,247) Margin before cumulative effect of change in accounting principle ............. 21,752 22,258 23,082 12,381 27,472 Cumulative effect of change in accounting for income taxes .................... -- -- -- 13,340 -- ------------ ------------ ------------ ------------ ------------ Net margin .............................. $ 21,752 $ 22,258 $ 23,082 $ 25,721 $ 27,472 ============ ============ ============ ============ ============ Electric plant, net: In service ........................... $ 4,345,200 $ 4,436,009 $ 3,980,439 $ 4,054,956 $ 4,122,411 Construction work in progress ........... 31,181 35,753 538,789 450,965 322,628 ------------ ------------ ------------ ------------ ------------ $ 4,376,381 $ 4,471,762 $ 4,519,228 $ 4,505,921 $ 4,445,039 ============ ============ ============ ============ ============ Total assets ............................ $ 5,362,175 $ 5,438,496 $ 5,346,330 $ 5,323,890 $ 5,359,597 ============ ============ ============ ============ ============ Capitalization: Long-term debt ....................... $ 4,052,470 $ 4,207,320 $ 4,128,080 $ 4,058,251 $ 4,095,796 Obligation under capital leases ......... 293,682 296,478 303,749 303,458 302,061 Other obligations .................... 41,685 -- -- -- -- Patronage capital and membership fees 356,229 338,891 309,496 289,982 264,261 ------------ ------------ ------------ ------------ ------------ $ 4,744,066 $ 4,842,689 $ 4,741,325 $ 4,651,691 $ 4,662,118 ============ ============ ============ ============ ============ Property additions ...................... $ 93,704 $ 138,921 $ 206,345 $ 235,285 $ 232,283 ============ ============ ============ ============ ============ Energy supply (megawatt-hours): Generated ............................ 17,866,143 18,402,839 16,924,038 14,575,920 13,805,683 Purchased ............................... 6,606,931 5,738,634 4,381,087 7,620,815 6,233,262 ------------ ------------ ------------ ------------ ------------ Available for sale ...................... 24,473,074 24,141,473 21,305,125 22,196,735 20,038,945 ============ ============ ============ ============ ============ Member revenue per kWh sold ............. 5.11(cent) 5.53(cent) 5.65(cent) 5.47(cent) 5.55(cent) ============ ============ ============ ============ ============
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Corporate Restructuring Oglethorpe and the Members completed a corporate restructuring (the Corporate Restructuring) on March 11, 1997 (the Closing) pursuant to terms and conditions set forth in the Second Amended and Restated Restructuring Agreement (the Restructuring Agreement). Pursuant to the Corporate Restructuring, Oglethorpe divided itself into three specialized operating companies to respond to increasing competition and regulatory changes in the electric industry. As part of the Corporate Restructuring, the transmission business is now owned and operated by a newly formed Georgia electric membership corporation, Georgia Transmission Corporation (An Electric Membership Corporation) (GTC), and the system operations business is now owned and operated by a newly formed Georgia nonprofit corporation, Georgia System Operations Corporation (GSOC). Oglethorpe continues to own and operate the power supply business. On October 1, 1996, Oglethorpe transferred to GSOC its system operations assets, consisting of its system control center and related energy control and revenue metering systems equipment. The purchase price of these assets totaled approximately $9.4 million and was funded by GSOC's assumption of Oglethorpe's obligations under an existing note held by the Rural Utilities Service (RUS), by delivery of a purchase money note payable to Oglethorpe and by the assumption of certain other liabilities of Oglethorpe. Since October 1, 1996, Oglethorpe has been the sole member of GSOC. The Members and GTC became members of GSOC on the Closing. GSOC will operate the system control center and provide system operations services to the Members, Oglethorpe and GTC. At the Closing, Oglethorpe transferred its transmission business and assets to GTC. The purchase price for the transmission business was based on an appraisal of the fair market value of such business, as determined by an independent appraiser, and was approximately $708 million. The purchase price was paid primarily by GTC's assumption of a portion (approximately 16.86%) of Oglethorpe's long-term secured debt in an amount equal to approximately $686 million. Approximately $541 million of this debt (payable to RUS, Federal Financing Bank (FFB) and CoBank, ACB (CoBank)) became the sole obligation of GTC, and Oglethorpe was released from all liability with regard to this indebtedness. The remaining debt assumed by GTC in connection with the Corporate Restructuring, approximately $145 million, relates to Oglethorpe's pollution control revenue bonds (PCBs). While GTC assumed and agreed to pay this $145 million of debt, Oglethorpe is not legally released from its liability for this debt. The remainder of the purchase price was paid by GTC from cash obtained through a borrowing from National Rural Utilities Cooperative Finance Corporation (CFC) and the assumption of approximately $1 million of other Oglethorpe liabilities. Oglethorpe also made a special patronage capital distribution of approximately $49 million to the Members which was used by the Members to establish equity in and to provide initial working capital to GTC. Oglethorpe and the 39 Members are members of GTC. GTC now owns and operates the transmission system and provides transmission services to the Members and Oglethorpe. GTC has succeeded to all of Oglethorpe's rights and obligations with respect to the Integrated Transmission System (ITS). Oglethorpe continues to operate the power supply business. Oglethorpe retained all of its owned and leased generation assets and has total assets of approximately $4.7 billion and total long-term debt of approximately $3.9 billion. Oglethorpe also continues to administer its power purchase contracts and provide marketing support functions to the Members. In connection with the Corporate Restructuring, Oglethorpe, GTC, GSOC and the Members entered into a Member Agreement (Member Agreement) which specifies the form of the new wholesale power contracts (New Wholesale Power Contracts), transmission agreements (Transmission Agreements) and system operations contracts to be signed by the Members. The New Wholesale Power Contracts provide that the Members are responsible, on a joint and several basis, for all of Oglethorpe's obligations relating to its existing generation business. The Transmission Agreements provide that the Members are responsible, on a joint and several basis, for all of GTC's obligations with respect to its transmission business. Pursuant to the Member Agreement, in connection with the Closing, Oglethorpe and each of the Members entered into New Wholesale Power Contracts which extend through December 31, 2025. Under the New Wholesale Power Contracts, each Member is assigned an agreed-upon fixed percentage capacity responsibility (PCR) for all of Oglethorpe's existing resources. PCR responsibility for any future resource will be assigned only to Members choosing to participate in that resource. The New Wholesale Power Contracts permit each Member to take future incremental power requirements either from Oglethorpe or other sources. Under the New Wholesale Power Contracts, a Member is unconditionally obligated on an express "take-or-pay" basis for a fixed allocation of Oglethorpe's costs for its 31 existing resources, as well as the costs with respect to any future resources in which such Member elects to participate. The New Wholesale Power Contracts specifically provide that the Member must make payments whether or not power is delivered and whether or not a plant has been sold. Oglethorpe is obligated to use its reasonable best efforts to operate, maintain and manage its resources in accordance with prudent utility practices. The New Wholesale Power Contracts provide that Oglethorpe will be responsible for power supply planning, resource procurement and sales of capacity and energy for a Member unless the Member notifies Oglethorpe that it does not want Oglethorpe to provide these services. The New Wholesale Power Contracts provide that each Member will be jointly and severally responsible for all costs and expenses of all existing resources and any future resources (whether or not such Member has elected to participate in such future resource) that have been approved by 75% of Oglethorpe's Board of Directors and 75% of the Members. For resources so approved in which less than all Members participate, costs of a defaulting Member are shared first among the participating Members, and if all participating Members default, each non-participating Member is expressly obligated to pay a proportionate share of such default. In connection with the implementation of new power marketer arrangements with LG&E Power Marketing Inc. ("LPM"), Oglethorpe and each Member have entered into supplemental agreements to the New Wholesale Power Contracts which relate to certain provisions of the New Wholesale Power Contracts and apply during the term of the power marketer arrangements. The supplemental agreements clarify the application of the New Wholesale Power Contract rate schedule to the power marketer agreements. The 75% requirement described above has been met with respect to the LPM agreements. The supplemental agreement assures that all costs incurred by Oglethorpe under the LPM agreement are recoverable under the New Wholesale Power Contracts. As the expected additional power marketer arrangements are finalized, additional supplemental agreements to the New Wholesale Power Contracts will be entered into by Oglethorpe and the Members. See "Results of Operations-Factors Affecting Future Financial Performance" for a description of the power supply arrangements. The rate set forth in the New Wholesale Power Contracts is intended to recover all costs and expenses paid or incurred by Oglethorpe. The rate expressly includes in the description of costs to be recovered all principal and interest on indebtedness of Oglethorpe and all costs associated with decommissioning or otherwise retiring any generating facility. The rate further expressly provides for Oglethorpe to earn sufficient margins to satisfy the requirements of the Master Indenture (defined below). The New Wholesale Power Contracts contain covenants by the Member (i) to establish, maintain and collect rates and charges for the service of its electric system and (ii) to conduct its business in a manner that will produce revenues and receipts at least sufficient to enable the Member to pay to Oglethorpe, when due, all amounts payable by the Member under the New Wholesale Power Contracts and to pay any and all other amounts payable from, or which might constitute a charge and a lien upon, the revenues and receipts derived from its electric system, including all operation and maintenance expenses and the principal of, premium (if any) and interest on all indebtedness related to the Member's electric system. The New Wholesale Power Contracts provide that a Member will not dissolve, liquidate or otherwise wind up its affairs without Oglethorpe's approval. The Member will not consolidate or merge with any person or reorganize or change the form of its business organization from an electric membership corporation or sell, transfer, lease or otherwise dispose of all of its assets to any person, whether in a single transaction or series of transactions, unless either (i) the transaction is approved by Oglethorpe or (ii) other specified conditions are satisfied including, but not limited to, an assumption agreement by the transferee, satisfactory to Oglethorpe, containing an assumption by the transferee of the performance and observance of every covenant and condition of the Member under the New Wholesale Power Contract, and certifications of accountants as to certain specified financial requirements of the transferee (taking into account the transfer). Effective with the Corporate Restructuring, Oglethorpe amended its Bylaws to implement a new governance structure with an 11-member board of directors consisting of six directors elected from the Members, four independent outside directors and Oglethorpe's President and Chief Executive Officer. This smaller board replaced Oglethorpe's former 39-member board comprised of directors nominated from and by each Member. The new directors will be nominated by representatives from each Member on a weighted-voting method, based on the number of retail customers served by such Member. However, each director will continue to be elected by a vote of the Member representatives on a one-Member, one-vote basis. Except for two of the four outside directors, all of Oglethorpe's new directors have been elected and began their terms at the Closing. The remaining two outside directors are expected to be elected on March 27, 1997. Contemporaneously with the Corporate Restructuring, Oglethorpe replaced its existing Consolidated Mortgage and Security Agreement, dated as of September 1, 1994, by and among Oglethorpe, as Mortgagor, the United States of 32 America, acting through the Administrator of the RUS and certain other mortgagees (the RUS Mortgage) with the Indenture, dated as of March 1, 1997, from Oglethorpe to SunTrust Bank, Atlanta, as trustee, (the Master Indenture) providing for a lien on substantially all of the owned tangible and certain intangible property of Oglethorpe. See "Rates and Financial Coverage Requirements" below for a further description of the Master Indenture. In conjunction with the Corporate Restructuring and as a part of its continuing efforts to reduce costs, effective February 1, 1997, Oglethorpe implemented a business alliance with Intellisource, Inc., a national provider of outsourcing services. Pursuant to an agreement with Intellisource, approximately 150 support services division employees in the areas of accounting, auditing, communications, human resources, facility management, purchasing, telecommunications and information technology became employees of the Intellisource organization. Oglethorpe, GTC and GSOC are key customers of Intellisource and are being served on-site by the managers and employees of Oglethorpe's former support services division. Margins and Patronage Capital Oglethorpe operates on a not-for-profit basis and, accordingly, seeks only to generate revenues sufficient to recover its cost of service and to generate margins sufficient to establish reasonable reserves and meet certain financial coverage requirements. Revenues in excess of current period costs in any year are designated in Oglethorpe's statements of revenues and expenses and patronage capital as net margin. Retained net margins are designated on Oglethorpe's balance sheets as patronage capital, which is allocated to each of the Members on the basis of its electricity purchases from Oglethorpe. Since its formation in 1974, Oglethorpe has generated a positive net margin in each year and had a balance of $356 million in patronage capital as of December 31, 1996. Oglethorpe's equity ratio (patronage capital and membership fees divided by total capitalization) increased from 7.0% at December 31, 1995 to 7.5% at December 31, 1996. Patronage capital constitutes the principal equity of Oglethorpe. Under Oglethorpe's patronage capital retirement policy, margins are to be returned to the Members 30 years after the year in which the margins are earned. Pursuant to such policy, no patronage capital would be retired until 2010, at which time the 1979 patronage capital would be returned. Any distributions of patronage capital are subject to the discretion of the Board of Directors. See "Corporate Restructuring" above regarding a special patronage capital distribution made in connection with the Corporate Restructuring. Now that the Master Indenture has been substituted for the prior RUS Mortgage, distributions of patronage capital are no longer subject to the approval of RUS, but are subject to certain restrictions set forth in the Master Indenture. Under the Master Indenture, Oglethorpe is prohibited from making any distribution of patronage capital to the Members if, at the time thereof or after giving effect thereto, (i) an event of default exists under the Master Indenture, (ii) Oglethorpe's equity as of the end of the immediately preceding fiscal quarter is less than 20% of Oglethorpe's total capitalization, or (iii) the aggregate amount expended for distributions on or after the date on which Oglethorpe's equity first reaches 20% of Oglethorpe's total capitalization exceeds 35% of Oglethorpe's aggregate net margins earned after such date. This last restriction, however, will not apply if, after giving effect of such distribution, Oglethorpe's equity as of the end of the immediately preceding fiscal quarter is not less than 30% of Oglethorpe's total capitalization. Rates and Financial Coverage Requirements Pursuant to the New Wholesale Power Contract, Oglethorpe is required to design capacity and energy rates that generate sufficient revenues to recover all costs as described in such contracts, to establish and maintain reasonable margins and to meet its financial coverage requirements. Oglethorpe reviews its capacity rates at least annually to ensure that its fixed costs are being adequately recovered and, if necessary, adjusts its rates to meet its net margin goals. Oglethorpe's energy rate is established to recover actual fuel and variable operations and maintenance costs. Under the terms of Oglethorpe's prior RUS Mortgage, rate revisions by Oglethorpe were subject to the approval of RUS. Under the Master Indenture, Oglethorpe's rates are not subject to RUS approval except in limited circumstances. The capacity rate applied by Oglethorpe in 1994 utilized a proportional allocation of fixed costs based on the previous year's billing demand for each Member. Consequently, the 1994 rate produced capacity revenues which were virtually unaffected by current year factors. In 1995, Oglethorpe implemented two additional capacity rate options in an effort to provide greater flexibility to the Members. These options allocated fixed costs using billing determinants of the current year. These rates produced differing monthly amounts of capacity revenues throughout the year and introduced some variability and uncertainty as to the level of revenues and margins to be received. Due to extreme weather conditions and other factors, the 1995 rates options produced $2.5 million of revenues in excess of budgeted amounts. Such excess amounts were returned to the Members in 1996. Under a capacity rate mechanism effective throughout 1996, each Member was responsible for 33 an assigned share of fixed costs based on an agreed-upon allocation. Under this approach, capacity costs were collected in equal monthly amounts. This interim rate mechanism has now been extended through March 31, 1997. A new rate schedule will become effective under the New Wholesale Power Contracts on April 1, 1997. This new rate schedule implements on a long-term basis the assignment of responsibility for fixed costs. The monthly charges for capacity and other non-energy charges are based on a rate formula using the Oglethorpe budget. Such capacity and other non-energy charges may be adjusted by the Board of Directors, if necessary, during the year through an adjustment to the annual budget. Energy charges are based on actual energy costs. However, under the supplemental agreements for the LPM agreements, each Member pays a fixed rate for energy, plus certain adjustments, while LPM pays all energy costs, within certain risk bands. The new rate schedule also includes a prior period adjustment (PPA) mechanism. The PPA serves to facilitate the achievement of the minimum 1.10 MFI ratio, and it provides for the retention of margins within a range from a 1.10 MFI ratio to a 1.20 MFI ratio. Amounts, if any, by which Oglethorpe fails to achieve a minimum 1.10 MFI ratio would be accrued as of December 31 of the applicable year and collected during the period April through December of the following year. Amounts, if any, earned by Oglethorpe in excess of a 1.20 MFI ratio would be charged against revenues as of December 31 of the applicable year and refunded during the period April through December of the following year. Under the prior RUS Mortgage, Oglethorpe utilized a Times Interest Earned Ratio (TIER) as the basis for establishing its annual net margin goal. TIER is determined by dividing the sum of Oglethorpe's net margin plus interest on long-term debt (including interest charged to construction) by Oglethorpe's interest on long-term debt (including interest charged to construction). The RUS Mortgage required Oglethorpe to implement rates that are designed to maintain an annual TIER of not less than 1.05. Oglethorpe's Board of Directors set an annual net margin goal to be the amount required to produce a TIER of 1.07 in 1994 through 1996. In addition to the TIER requirement under the RUS Mortgage, Oglethorpe was also required under the RUS Mortgage to implement rates designed to maintain a Debt Service Coverage Ratio (DSC) of not less than 1.0 and an Annual Debt Service Coverage Ratio (ADSCR) of not less than 1.25. DSC is determined by dividing the sum of Oglethorpe's net margin plus interest on long-term debt (including interest charged to construction) plus depreciation and amortization (excluding amortization of nuclear fuel and debt discount and expense) by Oglethorpe's interest and principal payable on long-term debt (including interest charged to construction). ADSCR is determined by dividing the sum of Oglethorpe's net margin plus interest on long-term debt (excluding interest charged to construction) plus depreciation and amortization (excluding amortization of nuclear fuel and debt discount and expense) by Oglethorpe's interest and principal payable on long-term debt secured under the RUS Mortgage (excluding interest charged to construction). Oglethorpe always met or exceeded the TIER, DSC and ADSCR requirements of the RUS Mortgage. TIER, DSC and ADSCR for the years 1994 through 1996 were as follows: - -------------------------------------------------------------------------------- 1996 1995 1994 - -------------------------------------------------------------------------------- TIER 1.07 1.07 1.07 DSC 1.25 1.21 1.19 ADSCR 1.32 1.27 1.25 - -------------------------------------------------------------------------------- Under the Master Indenture, Oglethorpe is required to establish and collect rates which are reasonably expected, together with other revenues of Oglethorpe, to yield a Margins for Interest (MFI) for each fiscal year equal to at least 1.10 times total interest charges during such fiscal year on all indebtedness secured under the Master Indenture (or by a lien equal or prior to the lien of the Master Indenture), excluding indebtedness assumed by GTC. MFI is determined by adding (i) Oglethorpe's net margins (after certain defined adjustments), (ii) interest charges on indebtedness secured under the Master Indenture (or by lien equal to or prior to the lien of the Master Indenture), and (iii) any amount included in net margins for accruals for federal or state income taxes. The definition of MFI takes into account any item of net margin, loss, gain or expenditure of any affiliate or subsidiary of Oglethorpe only if Oglethorpe has received such net margins or gains as a dividend or other distribution or if Oglethorpe has made a payment with respect to such losses or expenditures. The MFI ratio requirement went into effect upon the substitution of the Master Indenture for the prior RUS Mortgage. For comparative purposes only, the pro-forma MFI ratio for 1996 would have been 1.09. Miscellaneous Currently, Oglethorpe is subject to the provisions of Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation". Oglethorpe has recorded regulatory assets and liabilities related to its generation and transmission operations. In the event that Oglethorpe is no longer subject to the provisions of Statement No. 71, Oglethorpe would be required to write off related regulatory assets and liabilities. In addition, Oglethorpe would be required to determine any impairment of other assets, including utility plant, and 34 write down the plant assets, if impaired, to their fair value. See Note 1 of Notes to Financial Statements for additional information. The staff of the Securities and Exchange Commission has questioned certain of the current accounting practices of the electric utility industry regarding the recognition, measurement and classification of decommissioning costs for nuclear generating facilities in financial statements of electric utilities. In response to these questions, the Financial Accounting Standards Board has issued an Exposure Draft of a proposed Statement on "Accounting for Certain Liabilities Related to Closure or Removal of Long-Lived Assets". The proposed Statement would require the recognition of the entire obligation for decommissioning at its present value as a liability in the financial statements. Rate-regulated utilities would also recognize an offsetting asset for differences in the timing of recognition of the costs of decommissioning for financial reporting and rate-making purposes. Oglethorpe's management does not believe that this proposed Statement would have an adverse effect on results of operations due to its current and future ability to recover decommissioning costs through rates. Beginning in years 2014 through 2029, it is expected that Plant Hatch and Vogtle units will begin the decommissioning process. The expected timing of payments for decommissioning costs will extend for a period of 9 to 14 years. Oglethorpe's management does not expect such payments to have an adverse impact on liquidity or capital resources due to available amounts which have been set aside in reserves for this purpose. RESULTS OF OPERATIONS Historical Factors Affecting Financial Performance Over the past three years, Oglethorpe's Members have absorbed into rates additional responsibility for the cost of its ownership interests in Plant Vogtle Units No. 1 and No. 2. These generating units were placed in commercial operation in 1987 and 1989, respectively. Oglethorpe has utilized both long-term contractual arrangements with GPC and a rate mechanism to allow for a gradual absorption of costs over several years. In addition, Oglethorpe utilized this rate mechanism to mitigate the impact of absorbing the costs of the Rocky Mountain Pumped Storage Hydroelectric Project (Rocky Mountain) which was placed in service during June and July 1995. Contractual arrangements with GPC provided that Oglethorpe sell to GPC a declining percentage of Oglethorpe's entitlement to the capacity and energy of certain co-owned generating plants during the initial seven to ten years of operation of such units (GPC Sell-back). As of May 31, 1995, the GPC Sell-back has expired for all units. The historical ability of Oglethorpe to sell power from new units to GPC under the GPC Sell-back enabled Oglethorpe to moderate the effects of the higher costs associated with new generating units on Oglethorpe's cost of service and, therefore, on the rates charged to Members. Furthermore, the GPC Sell-back enabled Oglethorpe to obtain the generating capacity needed to serve anticipated increases in Member loads while minimizing the risks and costs of excess generating capacity. Prior to the completion of the first unit of Plant Vogtle in 1987, Oglethorpe's Board of Directors implemented policies that resulted in the gradual absorption of the costs of Plant Vogtle by the Members. In each of the years 1985 through 1995, Oglethorpe exceeded its net margin goal. The Board adopted resolutions in each of these years requiring that these excess margins be retained and used to mitigate rate increases associated with Plant Vogtle and, subsequently, with Rocky Mountain. In each year beginning with 1989, a portion of these margins was returned to the Members through billing credits. (See Note 1 of Notes to Financial Statements.) As of December 31, 1996, all amounts previously retained have been returned to the Members and this rate mechanism ended. Operating Revenues Oglethorpe's operating revenues are derived from sales of electric services to the Members and non-Members. Revenues from Members are collected pursuant to wholesale power contracts and are a function of the demand for power by the Members' consumers and Oglethorpe's cost of service. Historically, most of Oglethorpe's non-Member revenues resulted from various plant operating agreements with GPC as discussed below. However, in recent years, an increasing amount of non-Member revenues has been derived by off-system sales to other utilities and power marketers. For the period 1994 through 1996, although total revenues have varied slightly, the scheduled reduction of the GPC Sell-back has resulted in the planned decrease of non-Member revenues from GPC of about $45 million. As expected, the capacity and energy no longer being sold to GPC have been used by Oglethorpe to meet increased Member requirements. In addition to increasing sales to Members, Oglethorpe achieved reductions in fixed and operating costs in order to mitigate the need to recover from the Members costs which were previously recovered through sales to GPC. The refinancing transactions discussed under "Financial Condition-Refinancing Transactions" below have resulted in a reduction in gross interest charges from $330 million in 1994 to $308 million in 1996, or a 7% decrease in that fixed cost component of the capacity rates. As a means of further reducing the cost of power provided to the Members, Oglethorpe utilized short-term power supply arrangements during 1996. The 35 initial agreement was with Enron Power Marketing, Inc. (EPMI) and was in place January through August. From September through December 1996, another power supply arrangement was utilized with Duke/Louis Dreyfus L.L.C. (DLD). Under both of the agreements, the power marketer was required to provide to Oglethorpe at a favorable fixed rate all the energy needed to meet the Members' requirements and Oglethorpe was required to provide to the power marketer at cost, subject to certain limitations, upon request, all energy available from Oglethorpe's total power resources. Under both agreements, Oglethorpe continued to operate the power supply system and continued to dispatch the generating resources to ensure system reliability. Sales to Members. Revenues from sales to Members decreased by 0.7% in 1996 compared to 1995 and increased 10.7% in 1995 compared to 1994. These changes reflect both cost-related and volume-related factors. The 1996 revenues decreased compared to 1995 due to the fact that the pass-through of savings in energy costs (see the discussion of savings in purchased power under "Operating Expenses" herein) more than offset higher capacity revenue requirements and the effect of increased amounts of energy sold. The increase in revenues between 1995 and 1994 was due to the fact that higher capacity revenue requirements and additional amounts of energy sold more than offset savings in energy costs (see the discussion of savings in fuel and purchased power costs under "Operating Expenses" herein). As non-Member revenues from GPC have declined, Oglethorpe's Member capacity revenues have increased to reflect the recovery of the fixed costs which had previously been recovered from GPC through the GPC Sell-back. (See the discussion of this type of revenues under "Sales to non-Members" herein.) Member capacity revenues in 1996 and 1995 were also affected by additional fixed costs related to the commercial operation of Rocky Mountain beginning in June 1995. Member energy revenues per kilowatt-hour (kWh) declined 13.2% in 1996 compared to 1995 and declined 7.6% in 1995 compared to 1994. The decrease in 1996 resulted from savings of approximately $32 million in energy costs (compared to budget) achieved under the power supply arrangements. In 1995, the decrease reflected savings in fuel and production costs and lower average purchased power costs. Actual energy costs are passed through to the Members such that energy revenues equal energy costs. The following table summarizes the amounts of kWh sold to Members during each of the past three years: - -------------------------------------------------------------------------------- Kilowatt-hours (in thousands) - -------------------------------------------------------------------------------- 1996 19,807,101 1995 18,442,153 1994 16,285,127 - -------------------------------------------------------------------------------- Member sales have been significantly affected by abnormal weather conditions during two of the past three years. In 1995 prolonged hot weather boosted sales, while in 1994 record-breaking rainfall amounts statewide moderated Member sales. Member sales increased 7.4% in 1996 despite a summer in which temperatures were lower than 1995, due to continued growth in the Member systems' service territories. The net impact of the above capacity and energy rate factors, combined with the spreading of fixed capacity costs over an increasing number of kWh sold each year, have resulted in the following decreasing trend in average Member revenue requirements: - -------------------------------------------------------------------------------- Cents per Kilowatt-hour - -------------------------------------------------------------------------------- 1996 5.11(cent) 1995 5.53 1994 5.65 - -------------------------------------------------------------------------------- Sales to non-Members. Sales of electric services to non-Members are primarily made pursuant to three different types of contractual arrangements with GPC and from off-system sales to other non-Member utilities. The following table summarizes the amounts of non-Member revenues from these sources for the past three years: - -------------------------------------------------------------------------------- 1996 1995 1994 (dollars in thousands) - -------------------------------------------------------------------------------- GPC-plant operating agreements $ -- $ 10,096 $ 45,392 GPC-power supply arrangements 13,703 43,226 26,280 ITS transmission agreements 9,789 12,614 10,974 Sales to power marketers 15,895 -- -- Sales to other utilities 38,956 52,828 42,561 ------- -------- -------- Total $78,343 $118,764 $125,207 ======= ======== ======== - -------------------------------------------------------------------------------- Revenues from sales to non-Members declined in 1996 compared to 1995 and in 1995 compared to 1994. The first two types of non-Member revenues were derived from contractual agreements with GPC. First, the elimination of the revenues from the plant operating agreements was due to the scheduled conclusion, effective June 1, 1995, of the GPC Sell-back with respect to Plant Vogtle. The second source of non-Member revenues is 36 power supply arrangements with GPC. These revenues are derived, for the most part, from energy sales arising from dispatch situations whereby GPC causes co-owned coal-fired generating resources to be operated when Oglethorpe's system does not require all of its contractual entitlement to the generation. These revenues essentially represent reimbursement of costs to Oglethorpe because, under the operating agreements, Oglethorpe is responsible for its share of fuel costs any time a unit operates. Revenues from sales of this type to GPC were lower in 1996 compared to 1995 and were higher in 1995 compared to 1994. In 1996, the power marketers elected to retain more of the output from Plant Wansley, whereas, in 1995, Oglethorpe retained less of its share of the output from Plant Wansley units because the added cost associated with emission allowances made those units less attractive than certain purchased resources. The 1994 revenues reflect the fact that Oglethorpe retained much of its share of the output from the Plant Scherer and Plant Wansley units because the lower average fuel costs made those units more attractive than certain purchased resources. Emission allowances for Plant Wansley were not required in 1994. See the discussion under "Operating Expenses" herein of the lower average fuel costs of the coal-fired generating units in 1996 and 1995. Pursuant to the amendments to the Plant Scherer ownership and operating agreements, Oglethorpe elected to separately dispatch its ownership interest in Plant Scherer beginning May 1, 1994. Thereafter, Plant Scherer ceased to be a source of this type of sales transaction. Pursuant to similar amendments to the Plant Wansley operating agreement, Oglethorpe expects to begin separately dispatching its ownership interest in Plant Wansley this year. The third source of non-Member revenues is primarily payments from GPC for use of the ITS and related transmission interfaces. GPC compensates Oglethorpe to the extent that Oglethorpe's percentage of investment in the ITS exceeds its percentage use of the system. In such case, Oglethorpe is entitled to compensation for the use of its investment by the other ITS participants. The change in revenues for 1996 through 1994 resulted from normal variations of Oglethorpe's investment percentages and its use of the system. Under the EPMI and DLD power supply agreements, sales to the power marketers represented the net energy transmitted off-system on behalf of EPMI and DLD on a daily basis from Oglethorpe's total resources. Such energy was sold to EPMI and DLD at Oglethorpe's cost, subject to certain limitations. Sales to other non-Member utilities were initiated by EPMI and DLD in 1996 while in 1995 and 1994 these sales were made by Oglethorpe directly with the non-Member utilities. While Oglethorpe maintains the contractual relationship with these other utilities and administers the transactions, all profits in 1996 on these sales to other utilities from Oglethorpe's total resources accrued to EPMI and DLD. See "Factors Affecting Future Financial Performance" herein regarding Oglethorpe's new long-term power supply arrangements. Operating Expenses Oglethorpe's operating expenses decreased 2.6% in 1996 compared to 1995 and increased 9.4% in 1995 compared to 1994. The decrease in operating expenses in 1996 compared to 1995 was primarily attributable to energy cost savings achieved under the short-term power supply arrangements offset somewhat by an increase in depreciation and amortization. The increase in operating expenses in 1995 compared to 1994 was primarily attributable to a 13% increase in kWhs sold to Members and non-Members. In addition, depreciation and amortization, sales, and administrative and general expenses were also higher. The decrease in total fuel costs in 1996 as compared to 1995 resulted partly from unplanned outages at Plant Scherer and Plant Wansley Unit No. 1 and partly from the power marketer electing to dispatch the fossil units less. These factors resulted in 3.1% lower fossil generation in 1996 compared to 1995. The increase in total fuel costs in 1995 versus 1994 resulted from 23% higher generation at Plant Scherer. The continued use of lower-priced western coal combined with a greater reliance on a favorable spot market for coal resulted in a per unit fuel cost decrease for Plant Scherer of 5% in 1995 from 1994 levels. Because of the decline in fuel cost per kWh at Plant Scherer, the usage of the units increased significantly. Oglethorpe retained significantly less of its output from Plant Wansley in 1995 compared to 1994 primarily as a result of relatively higher costs compared to Plant Scherer due to its emission allowance requirement and due to cost reductions at Plant Scherer discussed above. Purchased power cost decreased by 14% in 1996 compared to 1995 and increased by 16% in 1995 compared to 1994. Lower purchased power costs were achieved in 1996 despite the fact that energy purchases increased 15% in 1996 from 1995 levels. The 1996 cost reduction was due to (1) energy cost savings of $32 million realized from the short-term power supply arrangements and (2) reductions in purchased power capacity costs due to (a) proceeds of $10.8 million from the settlement of a lawsuit with GPC and (b) savings resulting from the elimination of a 250 MW Component Block (coal-fired units) of the Block Power Sale Agreement (BPSA) effective September 1, 1996. In 1995, the 13% higher kWh sales, including the increased Member sales and sales to GPC pursuant to power supply arrangements (see the discussion under "Operating Revenues" herein) 37 resulted in higher utilization of purchased power resources. Energy purchases increased 31% in 1995 compared to 1994. Purchased power expense for 1994 through 1996 reflect the cost of capacity and energy purchases under various long-term power purchase agreements. These long-term agreements have, in some cases, take-or-pay minimum energy requirements. For 1994 through 1996, Oglethorpe utilized its energy from these purchase power agreements in excess of the take-or-pay requirements. Oglethorpe's power purchases from these agreements amounted to approximately $196 million in 1996, $207 million in 1995 and $183 million in 1994. For a discussion of the power purchase agreements, see Note 9 of Notes to Financial Statements. The increase in depreciation and amortization in 1996 is partly due to a full year of depreciation on Rocky Mountain which began commercial operation in June 1995 and due to $14 million of Board- approved accelerated amortization of deferred charges of the discontinued Pickens County pumped storage hydroelectric project. All remaining unamortized charges related to this project were expensed in 1996. Sales, administrative and general expenses increased in 1995 as compared to 1994 primarily resulting from increased marketing efforts in support of the Members. Other Income/Expense Interest income increased in 1996 compared to 1995 and 1995 compared to 1994. In 1996, interest income was higher due to higher average investment balances. In 1995, interest income increased partly due to higher short-term interest rates and due to higher investment returns in the decommissioning trust fund. In 1996, Oglethorpe utilized all remaining amounts available ($32 million) under its deferred margin rate mechanism, and, as scheduled, this mechanism ended. Likewise, deferred margins of $16 million and $18 million were amortized as credits against Member revenue requirements in 1995 and 1994, respectively, to mitigate the rate impact of increased capacity costs related to Plant Vogtle and Rocky Mountain. Also, in 1995 and 1994, Oglethorpe's Board of Directors authorized the retention of approximately $14 million and $9 million, respectively, in excess of the 1.07 TIER margin requirement as deferred margins under the mechanism. (See Note 1 of Notes to Financial Statements for a discussion of deferred margins and amortization of deferred margins.) The decrease in amortization of deferred gains in 1996 and 1995 as compared to 1994 resulted from the completion of amortization in September 1994 of a gain on the sale of Plant Scherer common facilities. (Also see Note 1 of Notes of Financial Statements for a discussion of the sale.) Interest Charges Net interest charges increased in 1996 compared to 1995 and in 1995 compared to 1994. The increases were due to the fact that the allowances for debt and equity funds used during construction (AFUDC) decreased in 1996 compared to 1995 and 1995 compared to 1994 as a result of the three units of Rocky Mountain becoming commercially operable in June and July 1995. The continued decrease in gross interest on long-term debt and capital leases in 1996 and 1995 was due to the refinancing efforts discussed under "Financial Condition(Refinancing Transactions" below. The change in other interest expense in 1995 compared to 1994 was due to higher investment returns in the decommissioning trust fund. (See Note 1 of Notes to Financial Statements for explanation of Oglethorpe's accounting for decommissioning gains and losses.) Factors Affecting Future Financial Performance Effective January 1, 1997, Oglethorpe entered into power supply agreements with LPM for 50% of the load requirements of the Members. Under the agreements, LPM is obligated to deliver, and Oglethorpe is obligated to take, 50% of the load requirements of the participating Members less the load requirements for certain customer choice loads (900 kilowatt or greater), plus 50% of the delivery obligations under Oglethorpe's existing firm power off-system sale contracts. For customer choice loads of three megawatts or less, LPM is obligated to deliver if Oglethorpe requests 50% of the associated load requirements. Oglethorpe is obligated to sell and LPM is obligated to buy, 50% of the output of each participating Member's PCR share of the "must run" units (primarily nuclear units). Oglethorpe is also obligated to make available the same share of all other resources, which LPM may schedule. LPM does not have the right to the output of upgrades to these resources. LPM must pay Oglethorpe the cost of fuel associated with the energy taken. There is a price adjustment if the plant performance does not meet specified levels of availability and output. Oglethorpe must pay LPM a contractually specified price for each MWh purchased. Oglethorpe has the option of purchasing the energy requirements for customer choice loads from another supplier. Oglethorpe will cause GTC to provide available transmission to deliver to the border of the ITS any energy sold to LPM. Each Member will use its Transmission Agreement for delivery of energy purchased from LPM and others. Effective with the Corporate Restructuring and the execution of supplemental agreements to the New Wholesale Power Contracts, the LPM agreement relating to 37 of the 39 Members has a term extending to 2011. With one years' notice, Oglethorpe has the right to terminate the contract for any year beginning with 38 2002. LPM has the right to terminate the contract for any year beginning with 2005. The LPM agreement relating to the other two Members has a term extending through the end of 1999. Oglethorpe is now working to finalize a power supply agreement with Morgan Stanley Capital Group (Morgan Stanley) that would supply the remaining 50% of the Members' load requirements. The contract is expected to have a term of up to eight years. Each Member is currently deciding individually whether to have Oglethorpe obtain its remaining load requirements from Morgan Stanley. Any Member that elects not to participate in the Morgan Stanley agreement would have other options available, including having Oglethorpe manage this portion of the Member's load requirements. In the interim, Oglethorpe is supplying this portion of its requirements from its own resources and by off-system purchase and sales. In the event Oglethorpe does not enter into power marketer agreements for the remainder of its load, it can continue to operate effectively in this manner. In order to complete the implementation of power marketer arrangements, Oglethorpe and each Member will enter into supplemental agreements to the New Wholesale Power Contracts to implement the terms of each power marketing arrangement under the New Wholesale Power Contracts. The electric utility industry in the United States is undergoing fundamental change and is becoming increasingly competitive. This change is promoted by the Energy Policy Act of 1992 (the "Energy Policy Act"), recently adopted and proposed policies from FERC regarding transmission access and pricing, increased consolidation and mergers of electric utilities, the proliferation of self-generators and independent power producers, surplus generation in certain regional markets and other factors. The Energy Policy Act and FERC policies allow for increased competition among wholesale electric suppliers and increased access to transmission services by such suppliers. The new competitive environment is subject to rapidly evolving regulatory policy at both the federal and state levels which is based on a shift to a market-driven environment from a regulated one. Significant legislative developments at the federal level and in various state legislative bodies, and regulatory developments at the Federal Energy Regulatory Commission (FERC) and in state commissions, are expected to continue to clarify policy and the regulatory framework for increased competition. All of these factors present an increasing challenge to Oglethorpe and the Members to reduce costs, manage resources and respond to the changing environment. Inflation As with utilities generally, inflation has the effect of increasing the cost of Oglethorpe's operations and construction program. Operating and construction costs have been less affected by inflation over the last few years because rates of inflation have been relatively low. FINANCIAL CONDITION General The principal changes in Oglethorpe's financial condition in 1996 were additions of $43 million to gross utility plant and a decrease in the cost of capital achieved through the refinancing of $106 million of long-term debt. The average interest rate on long-term debt decreased from 6.76% at December 31, 1995 to 6.56% at December 31, 1996. In addition, Oglethorpe completed a long-term lease transaction on its share of Rocky Mountain which produced approximately $96 million of net proceeds. (For a further discussion of this transaction, see "Rocky Mountain Transactions" below.) Capital Requirements As part of its ongoing capital planning, Oglethorpe forecasts expenditures required for generation facilities and other capital projects. The table below details these expenditures for 1997 through 1999. Actual construction costs may vary from the estimates listed below because of factors such as changes in business conditions, fluctuating rates of load growth, environmental requirements, design changes and rework required by regulatory bodies, delays in obtaining necessary federal and other regulatory approvals, construction delays, and cost of capital, equipment, material and labor. - -------------------------------------------------------------------------------- Capital Expenditures(1) (dollars in thousands) - -------------------------------------------------------------------------------- Generating Nuclear General Year Plant(2) Fuel Plant AFUDC(3) Total 1997 $14,753 $ 44,271 $ 3,715 $1,882 $ 64,621 1998 14,142 33,148 3,827 1,804 52,921 1999 11,250 35,549 3,941 1,435 52,175 ------- -------- ------- ------ -------- Total $40,145 $112,968 $11,483 $5,121 $169,717 ======= ======== ======= ====== ======== (1) Not included in the above amounts are capital expenditures which became the responsibility of GTC and GSOC as of the Closing of the Corporate Restructuring. For the period 1997 through 1999, these expenditures total $135 million for GTC and $1 million for GSOC. (2) Consists of capital expenditures required for replacements and additions to facilities in service and compliance with environmental regulations.. (3) Allowance for funds used during construction of generation and general plant facilities. - -------------------------------------------------------------------------------- Currently, Oglethorpe does not have any new generation facilities under construction, and management does not anticipate the need for construction of any new capacity well into the future. (See "Results of Operations-Factors Affecting Future Financial Performance" for a discussion of the long-term power supply arrangements.) Oglethorpe's investment in electric plant, net of depreciation, was approximately $4.4 billion as of December 31, 1996. Expenditures for property additions during 1996 amounted to $94 million, of which 39 $91 million was provided from operations. These expenditures were primarily for additions and replacements to generation and transmission facilities. In addition to the funds needed for capital expenditures, approximately $271 million will be required over the next three years for sinking fund requirements and maturities of long-term debt. Of this amount, $216 million, or 80%, relates to the repayment of RUS and FFB debt. Excluded from these amounts is the amount of debt assumed by GTC and GSOC as part of the Corporate Restructuring. (See "General-Corporate Restructuring" and Note 5 of Notes to Financial Statements for further discussion regarding long-term debt maturities.) Liquidity and Sources of Capital In the past, Oglethorpe, like most other G&Ts, has obtained the majority of its long-term financing from RUS-guaranteed loans funded by FFB. Oglethorpe has also obtained a substantial portion of its long-term financing requirements from tax-exempt PCBs. In addition, Oglethorpe's operations have consistently provided a sizable contribution to the funding of capital requirements, such that internally generated funds have provided interim funding or long-term capital for nuclear fuel reloads, new generation, transmission and general plant facilities, replacements and additions to existing facilities, and retirement of long-term debt. Oglethorpe anticipates that it will meet its future capital requirements through 1999 primarily with funds generated from operations and, if necessary, with short-term borrowings. To meet short term cash needs and liquidity requirements, Oglethorpe had, as of December 31, 1996, (i) approximately $133 million in cash and temporary cash investments, (ii) $91 million in other short term investments and (iii) available credit facilities as follows: - -------------------------------------------------------------------------------- Short-Term Credit Facilities Authorized Amount - -------------------------------------------------------------------------------- Commercial Paper ..............................................$250,000,000 Committed lines of credit: SunTrust Bank, Atlanta .......................................30,000,000 Uncommitted lines of credit: National Rural Utilities Cooperative Finance Corporation (CFC) ...............................50,000,000 - -------------------------------------------------------------------------------- Under its commercial paper program, Oglethorpe may issue commercial paper not to exceed $250 million outstanding at any one time. The commercial paper is backed 100% by committed lines of credit provided by a group of banks for which SunTrust Bank, Atlanta acts as agent. Proceeds from the issuance of commercial paper may be used for working capital requirements and for general corporate purposes. The maximum amount that can be outstanding at any one time under the commercial paper program and the lines of credit totals $250 million due to certain restrictions contained in the SunTrust Bank and CFC line of credit agreements. As of December 31, 1996, no commercial paper was outstanding and there was no outstanding balance on any line of credit. In March 1997, Oglethorpe issued approximately $92 million of commercial paper to fund the defeasance of certain PCBs in conjunction with the Corporate Restructuring. (See "Refinancing Transactions" below for a further discussion of this defeasance.) Refinancing Transactions Over the past few years, Oglethorpe has implemented a program to reduce its interest costs by refinancing or prepaying a sizable portion of its high-interest rate PCB and FFB debt. Since the first transaction was completed in June 1992, Oglethorpe has refinanced $1.1 billion in PCB debt and $1.2 billion in FFB debt and has prepaid another $105 million in FFB debt. Included in these amounts are a January 1996 refinancing of $89 million of FFB debt and an October 1996 refinancing of $16 million of PCB debt. (See Note 5 of Notes to Financial Statements.) The net result of the 1996 transactions was to reduce the average interest rate on total long-term debt from 6.76% at December 31, 1995 to 6.56% at December 31, 1996. The refinancings completed since the program began resulted in total annual savings in 1996 of more than $90 million in gross interest expense and $80 million in net interest expense (net of prepayment penalties and transaction costs). Oglethorpe's use of financial derivatives is for the purpose of mitigating business risks and is not used for speculative purposes. Derivatives have been used on a very limited basis, as discussed below, and at December 31, 1996, any credit risk for derivatives outstanding was not material. To refinance high-interest rate PCBs, Oglethorpe entered into two interest rate swap transactions with a swap counterparty, AIG Financial Products Corp. (AIG-FP), which were designed to create a contractual fixed rate of interest on $322 million of variable rate PCBs. These transactions were entered into in early 1993 on a forward basis, pursuant to which approximately $200 million of variable rate PCBs were issued on November 30, 1993 and approximately $122 million of variable rate PCBs were issued on December 1, 1994. Oglethorpe is obligated to pay the variable interest rate that accrues on these PCBs; however, the swap agreements provide a mechanism for Oglethorpe to achieve a contractual fixed rate which is lower than Oglethorpe would have obtained had it issued fixed rate bonds. Under the swap agreements, Oglethorpe is obligated to make periodic payments to AIG-FP based on a notional principal amount equal to the aggregate prin- 40 cipal amount of the bonds outstanding during the period and a contractual fixed rate (Fixed Rate), and AIG-FP is obligated to make periodic payments to Oglethorpe on a notional principal amount equal to the aggregate principal amount of the bonds outstanding during the period and a variable rate equal to the variable rate of interest accruing on the bonds during the period (Variable Rate). These payment obligations are netted, such that if the Variable Rate is less than the Fixed Rate, Oglethorpe makes a net payment to AIG-FP. Likewise, if the Variable Rate is higher than the Fixed Rate, Oglethorpe receives a net payment from AIG-FP. Thus, although changes in the Variable Rate affects whether Oglethorpe is obligated to make payments to AIG-FP or is entitled to receive payments from AIG-FP, the effective interest rate Oglethorpe pays with respect to the PCBs is not affected by changes in interest rates. The Fixed Rate for the $200 million of variable rate bonds issued in 1993 is 5.67% and the Fixed Rate for the $122 million of variable rate bonds issued in 1994 is 6.01%. For the three years ended December 31, 1994, 1995 and 1996, Oglethorpe has made in connection with both interest rate swap arrangements combined net swap payments to AIG-FP of $6.0 million, $6.4 million and $8.2 million, respectively. The swap arrangements extend for the life of these PCBs. If the swap arrangements were to be terminated while the PCBs are still outstanding, Oglethorpe or AIG-FP may owe the other party a termination payment depending on a number of factors, including whether the fixed rate then being offered under comparable swap arrangements is higher or lower than the Fixed Rate. Under the terms of the swap agreements, AIG-FP has limited rights to terminate the swaps only upon the occurrence of specified events of default or a reduction in ratings on Oglethorpe's PCBs, without credit enhancement, to a level that is below investment grade. Oglethorpe estimates that its maximum aggregate liability for termination payments under both swap arrangements had such payments been due on December 31, 1996 would have been approximately $34 million. (For additional information about the swap arrangements, see Note 2 of Notes to Financial Statements.) In connection with these interest rate swap agreements, Oglethorpe is obligated to maintain minimum liquidity in an amount equal to 25% of the principal amount of the variable rate refunding bonds outstanding. This minimum liquidity requirement currently equals $81 million and will decrease proportionately as such bonds are retired as a result of scheduled sinking fund payments. In connection with the Corporate Restructuring, Oglethorpe defeased approximately $92 million in principal amount of Series 1992 PCBs. Initially these bonds have been defeased through the issuance of commercial paper. Oglethorpe may refinance the commercial paper issuance with medium-term notes at some point in the future and expects to refinance the commercial paper or such medium-term notes in late 2002 with PCBs. Also, in connection with the Corporate Restructuring, Oglethorpe refinanced approximately $217 million in principal amount of Series 1992A PCBs through the issuance of refunding bonds having a nine-month maturity (the Series 1997A bonds). Payment of principal and interest on the Series 1997A bonds are insured by a municipal bond insurance policy issued by AMBAC Indemnity Corporation. In connection with the AMBAC insurance, Oglethorpe is obligated to maintain liquidity in an amount at least equal to the principal amount of the Series 1997A bonds outstanding plus interest accrued thereon. The maximum amount of this liquidity requirement during the nine-month period equals approximately $223 million. Oglethorpe currently expects to refinance the Series 1997A bonds in the second half of 1997 with another series of PCBs. Rocky Mountain Transactions Oglethorpe completed, in two separate closings on December 31, 1996 and January 3, 1997, lease transactions for its 74.61% undivided ownership interest in Rocky Mountain. Under the terms of these transactions, Oglethorpe leased the facility to three institutional investors for a term of 71 years, who in turn leased it back to Oglethorpe for a term of 30 years. The transactions are characterized as a sale and lease-back for income tax purposes, but not for financial reporting purposes. Rocky Mountain is subject to the lien of the Master Indenture. The leasehold interest transferred is subject and subordinate to such lien. Oglethorpe will continue to control and operate the plant during the lease-back term, and it fully intends to repurchase tax ownership and to retain all other rights of ownership with respect to the plant at the end of the lease-back period. As a result of these transactions, Oglethorpe received net proceeds of approximately $96 million which is being recorded as a deferred credit and will be recognized in income over the term of the lease-back. Approximately $91 million of the proceeds will be used for the early retirement of FFB debt, with the remaining $5 million being used to pay alternative minimum taxes on the transactions. The combination of the debt prepayment and the amortized gain will result in an estimated $11 million in annual savings. In connection with these transactions, Oglethorpe is obligated to maintain liquidity of approximately $50 million. 41 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index To Financial Statements Page ---- Statements of Revenues and Expenses, For the Years Ended December 31, 1996, 1995 and 1994...................................... 43 Statements of Patronage Capital, For the Years Ended December 31, 1996, 1995 and 1994...................................... 43 Balance Sheets, As of December 31, 1996 and 1995......................... 44 Statements of Capitalization, As of December 31, 1996 and 1995........... 46 Statements of Cash Flows, For the Years Ended December 31, 1996, 1995 and 1994......................................................... 47 Notes to Financial Statements, including pro-forma financial statements relating to the Corporate Restructuring.................... 48 Report of Management..................................................... 60 Reports of Independent Public Accountants................................ 60 42 STATEMENTS OF REVENUES AND EXPENSES For the years ended December 31, 1996, 1995 and 1994
- ------------------------------------------------------------------------------------------------------ (dollars in thousands) 1996 1995 1994 Operating revenues (Note 1): Sales to Members $ 1,023,094 $ 1,030,797 $ 930,875 Sales to non-Members 78,343 118,764 125,207 ----------- ----------- ----------- Total operating revenues 1,101,437 1,149,561 1,056,082 ----------- ----------- ----------- Operating expenses: Fuel 206,524 219,062 203,444 Production 129,178 133,858 132,723 Purchased power (Note 9) 229,089 264,844 227,477 Power delivery 18,216 17,520 16,965 Sales, administrative and general 42,289 39,015 32,269 Depreciation and amortization 163,130 139,024 131,056 Taxes other than income taxes 30,262 27,561 24,741 Income taxes (Note 3) -- -- -- ----------- ----------- ----------- Total operating expenses 818,688 840,884 768,675 ----------- ----------- ----------- Operating margin 282,749 308,677 287,407 ----------- ----------- ----------- Other income (expense): Interest income 23,485 18,031 10,518 Amortization of deferred gains (Notes 1 and 4) 2,341 2,341 9,985 Amortization of net benefit of sale of income tax benefits (Note 1) 8,054 8,043 8,102 Amortization of deferred margins (Note 1) 32,047 15,959 18,072 Deferred margins (Note 1) -- (14,282) (9,287) Allowance for equity funds used during construction (Note 1) 238 1,715 2,907 Other (831) 1,903 498 ----------- ----------- ----------- Total other income 65,334 33,710 40,795 ----------- ----------- ----------- Interest charges: Interest on long-term debt and capital leases 308,013 317,968 329,738 Other interest 10,006 12,979 3,856 Allowance for debt funds used during construction (Note 1) (2,576) (21,114) (36,113) Amortization of debt discount and expense 10,888 10,296 7,639 ----------- ----------- ----------- Net interest charges 326,331 320,129 305,120 ----------- ----------- ----------- Net margin $ 21,752 $ 22,258 $ 23,082 =========== =========== ===========
STATEMENTS OF PATRONAGE CAPITAL For the years ended December 31, 1996, 1995 and 1994
- ------------------------------------------------------------------------------------------------------ (dollars in thousands) 1996 1995 1994 Patronage capital and membership fees - beginning of year (Note 1) $ 338,891 $ 309,496 $ 289,982 Net margin 21,752 22,258 23,082 Change in unrealized gain (loss) on available-for-sale securities, net of income taxes (Note 2) (4,414) 7,137 (3,568) ----------- ----------- ----------- Patronage capital and membership fees-end of year $ 356,229 $ 338,891 $ 309,496 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 43 BALANCE SHEETS December 31, 1996 and 1995
- -------------------------------------------------------------------------------------------- (dollars in thousands) Assets 1996 1995 Electric plant (Notes 1, 4 and 6): In service $ 5,742,597 $ 5,699,213 Less: Accumulated provision for depreciation (1,488,272) (1,362,431) ----------- ----------- 4,254,325 4,336,782 Nuclear fuel, at amortized cost 86,722 94,013 Plant acquisition adjustments, at amortized cost 4,153 5,214 Construction work in progress 31,181 35,753 ----------- ----------- 4,376,381 4,471,762 ----------- ----------- Investments and funds (Notes 1 and 2): Bond, reserve and construction funds, at market 53,955 56,511 Decommissioning fund, at market 86,269 74,492 Investment in associated organizations, at cost 15,379 15,853 Deposit on Rocky Mountain transactions, at cost 41,685 -- ----------- ----------- 197,288 146,856 ----------- ----------- Current assets: Cash and temporary cash investments, at cost (Note 1) 132,783 201,151 Other short-term investments, at market 91,499 79,165 Receivables 113,289 99,559 Inventories, at average cost (Note 1) 89,825 82,949 Prepayments and other current assets 14,625 14,325 ----------- ----------- 442,021 477,149 ----------- ----------- Deferred charges: Premium and loss on reacquired debt, being amortized (Note 5) 201,007 200,794 Deferred amortization of Scherer leasehold (Note 4) 90,717 87,134 Deferred debt expense, being amortized 21,703 21,135 Other (Note 1) 33,058 33,666 ----------- ----------- 346,485 342,729 ----------- ----------- $ 5,362,175 $ 5,438,496 =========== ===========
The accompanying notes are an integral part of these balance sheets. 44
- ------------------------------------------------------------------------------------------------ (dollars in thousands) Equity and Liabilities 1996 1995 Capitalization (see accompanying statements): Patronage capital and membership fees (Note 1) $ 356,229 $ 338,891 Long-term debt 4,052,470 4,207,320 Obligation under capital leases (Note 4) 293,682 296,478 Obligation under Rocky Mountain transactions (Note 1) 41,685 -- ---------- ---------- 4,744,066 4,842,689 ---------- ---------- Current liabilities: Long-term debt and capital leases due within one year 159,622 89,675 Deferred margins to be refunded within one year (Note 1) -- 32,047 Accounts payable 42,891 48,855 Accrued interest 15,931 91,096 Accrued and withheld taxes 4,940 1,785 Other current liabilities 14,022 18,007 ---------- ---------- 237,406 281,465 ---------- ---------- Deferred credits and other liabilities: Gain on sale of plant, being amortized (Note 4) 58,527 60,868 Net benefit of sale of income tax benefits, being amortized (Note 1) 42,049 50,194 Net benefit of Rocky Mountain transactions, being amortized (Note 1) 70,701 -- Accumulated deferred income taxes (Note 3) 61,985 65,510 Decommissioning reserve (Note 1) 124,468 114,049 Other 22,973 23,721 ---------- ---------- 380,703 314,342 ---------- ---------- Commitments and Contingencies (Notes 4, 9 and 11) $5,362,175 $5,438,496 ========== ==========
45 STATEMENTS OF CAPITALIZATION December 31, 1996 and 1995
- ---------------------------------------------------------------------------------------------------------- (dollars in thousands) 1996 1995 Long-term debt (Note 5): Mortgage notes payable to the Federal Financing Bank (FFB) at interest rates varying from 5.27% to 9.51% (average rate of 6.95% at December 31, 1996) due in quarterly installments through 2023 ............................................................. $ 3,172,851 $ 3,253,636 Mortgage notes payable to the Rural Utilities Service (RUS) at an interest rate of 5% due in monthly installments through 2021 .......... 22,475 22,983 Mortgage notes issued in conjunction with the sale by public authorities of pollution control revenue bonds: o Series 1982 Serial bonds, 10.60%, due serially through 1997 .......................... 6,675 6,675 o Series 1992 Term bonds, 7.50% to 8.00%, due 2003 to 2022 ............................. 92,130 92,130 oSeries 1992A Adjustable tender bonds, 3.40% to 3.70%, due 2025 ........................ 216,925 216,925 Serial bonds, 5.35% to 6.80%, due serially from 1998 through 2012 ........ 124,690 129,760 o Series 1993 Serial bonds, 3.55% to 5.25%, due serially from 1997 through 2013 ........ 37,255 38,110 o Series 1993A Adjustable tender bonds, 4.00%, due 2016 ................................. 199,690 199,690 o Series 1993B Serial bonds, 3.75% to 5.05%, due serially from 1998 through 2008 ........ 126,935 136,745 o Series 1994 Serial bonds, 4.20% to 7.125%, due serially from 1997 through 2015 ....... 10,365 10,690 Term bonds, 7.15% due 2021 ............................................... 11,550 11,550 o Series 1994A Adjustable tender bonds, 4.00%, due 2019 ................................. 122,740 122,740 o Series 1994B Serial bonds, 5.45% to 6.45%, due serially from 1998 through 2005 ........ 11,140 12,475 Unsecured notes issued in conjunction with the sale by public authorities of pollution control revenue bonds: o Series 1995 Adjustable rate bonds, 3.70% to June 1996, due in 2015 ................... -- 21,670 o Series 1996 Adjustable rate bonds, 3.88% to April 1997, due in 2017 .................. 37,885 -- CoBank, ACB notes payable: o Headquarters note payable: fixed at 6.60% through April 1997, due in quarterly installments through January 1, 2009 ................... 4,672 5,159 o Transmission note payable: fixed at 6.50% through September 1997; due in bimonthly installments through November 1, 2018 ... 2,237 2,261 o Transmission note payable: fixed at 6.50% through October 1997; due in bimonthly installments through September 1, 2019 ...................... 8,556 8,637 ----------- ----------- 4,208,771 4,291,836 Less:Unamortized debt discount ............................................. (766) (832) ----------- ----------- Total long-term debt, net .................................................. 4,208,005 4,291,004 Less:Long-term debt due within one year .................................... (155,535) (83,684) ----------- ----------- Total long-term debt, excluding amount due within one year .................... 4,052,470 4,207,320 Obligation under capital leases, long-term (Note 4) ........................... 293,682 296,478 Obligation under Rocky Mountain transactions, long-term (Note 1) .............. 41,685 -- Patronage capital and membership fees (Note 1) ................................ 356,229 338,891 ----------- ----------- Total capitalization .......................................................... $ 4,744,066 $ 4,842,689 =========== ===========
The accompanying notes are an integral part of these financial statements. 46 STATEMENTS OF CASH FLOWS For the years ended December 31, 1996, 1995 and 1994 (dollars in thousands)
1996 1995 1994 Cash flows from operating activities: Net margin ................................................... $ 21,752 $ 22,258 $ 23,082 --------- --------- --------- Adjustments to reconcile net margin to net cash provided by operating activities: Depreciation and amortization ............................ 196,593 196,920 193,351 Net benefit of Rocky Mountain transactions ............... 70,701 -- -- Interest on decommissioning reserve ...................... 7,167 9,951 1,291 Amortization of deferred gains ........................... (2,341) (2,341) (9,985) Deferred margins and amortization of deferred margins .... (32,047) (1,677) (8,785) Amortization of net benefit of sale of income tax benefits (8,145) (8,043) (8,102) Allowance for equity funds used during construction ...... (238) (1,715) (2,907) Deferred income taxes .................................... (3,525) -- -- Option payment on power swap agreement ................... (3,750) -- -- Other .................................................... (13) (13) (13) Change in net current assets, excluding long-term debt due within one year and deferred margins and Vogtle surcharge to be refunded within one year: Receivables ............................................ (13,731) (10,686) (18,055) Inventories ............................................ (6,875) 12,127 (8,608) Prepayments and other current assets ................... (299) 532 (94) Accounts payable ....................................... (5,964) (4,066) (10,569) Accrued interest ....................................... (75,165) (8,914) (8,692) Accrued and withheld taxes ............................. 3,155 219 (7,835) Other current liabilities .............................. (3,985) (169) (24,124) --------- --------- --------- Total adjustments ............................................ 121,538 182,125 86,873 --------- --------- --------- Net cash provided by operating activities ....................... 143,290 204,383 109,955 --------- --------- --------- Cash flows from investing activities: Property additions ........................................... (93,704) (138,921) (206,345) Activity in decommissioning fund - Purchases ................. (327,233) (410,597) (297,492) - Proceeds ........................ 316,542 399,077 293,990 Activity in bond, reserve and construction funds - Purchases . (107,890) (27,762) (498,052) - Proceeds ........... 109,230 39,566 540,712 Activity in other short-term investments - Purchases ......... (15,532) (76,180) -- Decrease in investment in associated organizations ........... 474 1,518 1,752 --------- --------- --------- Net cash used in investing activities ........................... (118,113) (213,299) (165,435) --------- --------- --------- Cash flows from financing activities: Debt proceeds, net .......................................... 2,243 132,874 523,518 Debt payments ............................................... (95,367) (108,481) (517,530) Return of Vogtle surcharge .................................. -- (3,320) (2,031) Other ....................................................... (421) (1,648) (2,008) --------- --------- --------- Net cash provided by (used in) financing activities ............. (93,545) 19,425 1,949 --------- --------- --------- Net increase (decrease) in cash and temporary cash investments .. (68,368) 10,509 (53,531) Cash and temporary cash investments at beginning of year ........ 201,151 190,642 244,173 --------- --------- --------- Cash and temporary cash investments at end of year .............. $ 132,783 $ 201,151 $ 190,642 ========= ========= ========= Cash paid for: Interest (net of amounts capitalized) ....................... $ 383,440 $ 308,797 $ 304,882 Income taxes ................................................ -- -- --
The accompanying notes are an integral part of these financial statements. 47 NOTES TO FINANCIAL STATEMENTS For the years ended December 31, 1996, 1995 and 1994 1. Summary of significant accounting policies: a. Business description Oglethorpe Power Corporation (Oglethorpe) is an electric generation and transmission (G&T) cooperative incorporated in 1974 and headquartered in suburban Atlanta. Oglethorpe provides wholesale electric service, on a not-for-profit basis, to 39 of Georgia's 42 Electric Membership Corporations (EMCs). These 39 electric distribution cooperatives (Members) in turn distribute energy on a retail basis to more than 2.6 million people across two-thirds of the State. Oglethorpe is the nation's largest G&T in terms of operating revenues, assets, kilowatt-hour sales and, through its Members, consumers served. Oglethorpe supplies energy to the Members from 3,335 megawatts (MW) of owned or leased generating capacity and purchases the remainder from other power suppliers. Oglethorpe also has access to over 16,000 miles of transmission line through its ownership in the statewide Integrated Transmission System. Oglethorpe and the Members completed on March 11, 1997, a corporate restructuring. For a discussion of the corporate restructuring, see Note 11. b. Basis of accounting Oglethorpe follows generally accepted accounting principles and the practices prescribed in the Uniform System of Accounts of the Federal Energy Regulatory Commission (FERC) as modified and adopted by the Rural Utilities Service (RUS). The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of December 31, 1996 and 1995 and the reported amounts of revenues and expenses for each of the three years ending December 31, 1996. Actual results could differ from those estimates. c. Patronage capital and membership fees Oglethorpe is organized and operates as a cooperative. The Members paid a total of $195 in membership fees. Patronage capital is the retained net margin of Oglethorpe. As provided in the bylaws, any excess of revenue over expenditures from operations is treated as advances of capital by the Members and is allocated to each of them on the basis of their electricity purchases from Oglethorpe. Under Oglethorpe's patronage capital retirements policy, margins are to be returned to the Members 30 years after the year in which the margins are earned. Pursuant to such policy, no patronage capital would be returned to the Members until 2010, at which time the 1979 patronage capital would be returned. Since the RUS Mortgage was replaced with the Master Indenture in connection with Oglethorpe's corporate restructuring, patronage distributions also will be restricted by the terms of the Master Indenture. d. Margin policy Under Oglethorpe's prior RUS mortgage, Oglethorpe's margin policy was based on the provision of a Times Interest Earned Ratio (TIER) established annually by the Oglethorpe Board of Directors. Pursuant to this policy, the annual net margin goal for 1996, 1995 and 1994 was the amount required to produce a TIER of 1.07. The RUS Mortgage was replaced with the Master Indenture in connection with Oglethorpe's corporate restructuring. Under the Master Indenture, Oglethorpe is required to produce a Margins for Interest (MFI) Ratio of 1.10. The Oglethorpe Board of Directors adopted resolutions annually requiring that Oglethorpe's net margins for the years 1985 through 1995 in excess of its annual margin goals be deferred and used to mitigate rate increases associated with Plant Vogtle and Rocky Mountain. In addition, during 1986 and 1987, Oglethorpe's wholesale electric rate to its Members provided for a one mill per kilowatt-hour charge (Vogtle Surcharge), also to be used to mitigate the effect of Plant Vogtle on rates. Pursuant to rate actions by Oglethorpe's Board of Directors, specified amounts of deferred margins and Vogtle Surcharge were returned in 1989 through 1995 and all remaining amounts were returned in 1996. A summary of deferred margins and Vogtle Surcharge as of December 31, 1996 and 1995 is as follows: - -------------------------------------------------------------------------------- (dollars in thousands) 1996 1995 - -------------------------------------------------------------------------------- Deferred margins 1985-92 $ 165,552 $ 165,552 1993 5,083 5,083 1994 9,287 9,287 1995 14,282 14,282 --------- --------- 194,204 194,204 Vogtle Surcharge 1986-87 36,613 36,613 --------- --------- Subtotal 230,817 230,817 Less: Amounts returned in: 1989-93 (159,388) (159,388) 1994 (20,103) (20,103) 1995 (19,279) (19,279) 1996 (32,047) -- --------- --------- -- 32,047 Less: Current portion -- (32,047) --------- --------- Long-term balance $ -- $ -- ========= ========= - -------------------------------------------------------------------------------- 48 e. Operating revenues Operating revenues consist primarily of electricity sales pursuant to long-term wholesale power contracts which Oglethorpe maintains with each of its Members. These wholesale power contracts obligate each Member to pay Oglethorpe for capacity and energy furnished in accordance with rates established by Oglethorpe. Energy furnished is determined based on meter readings which are conducted at the end of each month. Actual energy costs are compared, on a monthly basis, to the billed energy costs, and an adjustment to revenues is made such that energy revenues are equal to actual energy costs. Revenues from Cobb EMC and Jackson EMC, two of Oglethorpe's Members, accounted for 12.5% and 11.2% in 1996, 11.3% and 10.4% in 1995, and 11.0% and 10.5% in 1994, respectively, of Oglethorpe's total operating revenues. f. Nuclear fuel cost The cost of nuclear fuel, including a provision for the disposal of spent fuel, is being amortized to fuel expense based on usage. The total nuclear fuel expense for 1996, 1995 and 1994 amounted to $49,298,000, $54,588,000 and $55,229,000, respectively. Contracts with the U.S. Department of Energy (DOE) have been executed to provide for the permanent disposal of spent nuclear fuel for the life of Plant Hatch and Plant Vogtle. The services to be provided by DOE were scheduled to begin in 1998. However, the actual year that these services will begin is uncertain. The Plant Hatch spent fuel storage is expected to be sufficient into 2003. The Plant Vogtle spent fuel storage is expected to be sufficient into 2008. Activities for adding dry cast storage capacity at Plant Hatch by as early as 1999 are in progress. The Energy Policy Act of 1992 required that utilities with nuclear plants be assessed over a 15-year period an amount which will be used by DOE for the decon-tamination and decommissioning of its nuclear fuel enrichment facilities. The amount of each utility's assessment was based on its past purchases of nuclear fuel enrichment services from DOE. Based on its ownership in Plants Hatch and Vogtle, Oglethorpe has a remaining nuclear fuel asset of approximately $14,900,000, which is being amortized to nuclear fuel expense over the next 11 years. Oglethorpe has also recorded an obligation to DOE which approximated $11,800,000 at December 31, 1996. g. Nuclear decommissioning Oglethorpe's portion of the costs of decommissioning co-owned nuclear facilities is estimated as follows: - -------------------------------------------------------------------------------- (dollars in thousands) Hatch Hatch Vogtle Vogtle Unit No. 1 Unit No. 2 Unit No. 1 Unit No. 2 - -------------------------------------------------------------------------------- Year of site study 1994 1994 1994 1994 Expected start date of decommissioning 2014 2018 2027 2029 Decommissioning cost: Discounted $ 92,000 $ 109,000 $ 82,000 $ 106,000 Undiscounted 157,000 207,000 198,000 271,000 - -------------------------------------------------------------------------------- The decommissioning cost estimates are based on prompt dismantlement and removal of the plant from service. The actual decommissioning costs may vary from the above estimates because of changes in the assumed date of decommissioning, changes in regulatory requirements, changes in technology, and changes in costs of labor, materials and equipment. The annual provision for decommissioning for 1996, 1995 and 1994 was $2,597,000, $4,156,000 and $5,948,000, respectively. In developing the amount of the annual provision for 1996 and 1997, the escalation rate was assumed to be 2.72% and return on trust assets was assumed to be 8%. Oglethorpe accounts for this provision for decommissioning as depreciation expense with an offsetting credit to a decommissioning reserve. Oglethorpe's management is of the opinion that any changes in cost estimates of decommissioning will be fully recovered in future rates. In compliance with a Nuclear Regulatory Commission (NRC) regulation, Oglethorpe maintains an external trust fund to provide for a portion of the cost of decommissioning its nuclear facilities. The NRC regulation requires funding levels based on average expected cost to decommission only the radioactive portions of a typical nuclear facility. Oglethorpe's decommissioning reserve reflects its obligation to decommission both the radioactive and most of the non-radioactive portions of its nuclear facilities. Realized investment earnings from the external trust fund, while increasing the fund and interest income, also are applied to the decommissioning reserve and charged to interest expense. Interest income earned from the external trust fund is offset by the recognition of interest expense such that there is no effect on Oglethorpe's net margin. 49 h. Depreciation Depreciation is computed on additions when they are placed in service using the composite straight-line method. Annual depreciation rates in effect in 1996, 1995 and 1994 were as follows: - -------------------------------------------------------------------------------- 1996 1995 1994 - -------------------------------------------------------------------------------- Steam production 2.13% 2.13% 2.47% Nuclear production 2.73% 2.78% 2.84% Hydro production 2.00% 2.00% 2.00% Other production 3.75% 3.75% 2.42% Transmission 2.75% 2.75% 2.75% Distribution 2.88% 2.88% 2.88% General 2.00-20.00% 2.00-20.00% 2.00-20.00% - -------------------------------------------------------------------------------- i. Electric plant Electric plant is stated at original cost, which is the cost of the plant when first dedicated to public service, plus the cost of any subsequent additions. Cost includes an allowance for the cost of equity and debt funds used during construction. The cost of equity and debt funds is calculated at the embedded cost of all such funds. The plant acquisition adjustments represent the excess of the cost of the plant to Oglethorpe over the original cost, less accumulated depreciation at the time of acquisition, and are being amortized over a ten-year period. Maintenance and repairs of property and replacements and renewals of items determined to be less than units of property are charged to expense. Replacements and renewals of items considered to be units of property are charged to the plant accounts. At the time properties are disposed of, the original cost, plus cost of removal, less salvage of such property, is charged to the accumulated provision for depreciation. j. Bond, reserve and construction funds: Bond, reserve and construction funds for pollution control bonds are maintained as required by Oglethorpe's bond agreements. Bond funds serve as payment clearing accounts, reserve funds maintain amounts equal to the maximum annual debt service of each bond issue and construction funds hold bond proceeds for which construction expenditures have not yet been made. As of December 31, 1996 and 1995, substantially all of the funds were invested in U.S. Government securities. k. Cash and temporary cash investments Oglethorpe considers all temporary cash investments purchased with a maturity of three months or less to be cash equivalents. Temporary cash investments with maturities of more than three months are classified as other short-term investments. Of the amount reported as cash and temporary cash investments at December 31, 1996, approximately $65,600,000 is restricted by RUS for the purpose of prepaying certain Federal Financing Bank (FFB) long-term debt on or before March 31, 1997. l. Inventories Oglethorpe maintains inventories of fossil fuels for its generation plant and spare parts for certain of its generation and transmission plant. These inventories are stated at weighted average cost on the accompanying balance sheets. At December 31, 1996 and 1995, fossil fuels inventories were $23,062,000 and $12,296,000, respectively. Inventories for spare parts at December 31, 1996 and 1995 were $66,763,000 and $70,653,000, respectively. m. Deferred charges Prior to 1996, Oglethorpe expensed nuclear refueling outage costs as incurred. In 1996, Oglethorpe began accounting for these costs on a normalized basis. Under this method of accounting, refueling outage costs are deferred and subsequently amortized to expense over the 18-month operating cycle of each unit. Deferred nuclear outage costs at December 31, 1996 were $12,961,000. As a result of the availability of long-term capacity purchases at similar costs but with reduced risks to Oglethorpe and its Members, Oglethorpe determined that the Smarr Combustion Turbine Project was not needed within the present planning horizon. Therefore, Oglethorpe is amortizing the accumulated project costs in excess of the current value of the land purchased. The remaining project costs of $6,445,000 are reflected as deferred charges on the accompanying balance sheets. In 1995, Oglethorpe's Board of Directors authorized that these project costs be amortized and fully recovered through future rates over a period of 15 years beginning in that year. n. Deferred credits In October 1989, Oglethorpe sold to Georgia Power Company (GPC) a 24.45% ownership interest in the Plant Scherer common facilities as required under the Plant Scherer Purchase and Ownership Agreement to adjust its ownership in the Scherer units. Oglethorpe realized a gain on the sale of $50,600,000. RUS and Oglethorpe's Board of Directors approved a plan whereby this gain was deferred and was amortized over 60 months ending in September 1994. In April 1982, Oglethorpe sold to three purchasers certain of the income tax benefits associated with Scherer Unit No.1 and related common facilities pursuant to the safe harbor lease provisions of the Economic Recovery Tax Act of 1981. Oglethorpe received a total of approximately $110,000,000 from the safe harbor lease transactions. Oglethorpe accounts for the net benefits as a deferred credit and 50 is amortizing the amount over the 20-year term of the leases. In December 1996, Oglethorpe entered into long-term lease transactions for a portion of its 74.6% undivided ownership interest in the Rocky Mountain Pumped Storage Hydroelectric Project (Rocky Mountain). The lease transactions are characterized as a sale and lease-back for income tax purposes, but not for financial reporting purposes. As a result of these leases, Oglethorpe recorded a net benefit of $70,701,000 which was deferred and will be amortized to income over the 30-year lease-back period. The lease transactions increased Oglethorpe's Capitalization and Investments and funds by $41,685,000, respectively (see Note 2 where discussed further). In January 1997, Oglethorpe completed long-term lease transactions for the remainder of its interest in Rocky Mountain resulting in a net benefit of $24,859,000. The net benefit will be deferred and amortized to income over the 30-year term of the leases. Oglethorpe will increase Capitalization and Investments and funds by $15,810,000, respectively. o. Regulatory assets and liabilities Oglethorpe is subject to the provisions of Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation." Regulatory assets represent probable future revenues to Oglethorpe associated with certain costs which will be recovered from Members through the rate-making process. Regulatory liabilities represent probable future reduction in revenues associated with amounts that are to be credited to Members through the rate-making process. The following regulatory assets and liabilities were reflected on the accompanying balance sheets as of December 31, 1996 and 1995: - -------------------------------------------------------------------------------- (dollars in thousands) 1996 1995 - -------------------------------------------------------------------------------- Premium and loss on reacquired debt $ 201,007 $ 200,794 Deferred amortization of Scherer leasehold 90,717 87,134 Other regulatory assets 29,308 33,666 Net benefit of sale of income tax benefits (42,049) (50,194) Net benefit of Rocky Mountain transactions (70,701) -- Deferred margins -- (32,047) Energy costs -- 4,237 --------- --------- $ 208,282 $ 243,590 ========= ========= - -------------------------------------------------------------------------------- In the event that Oglethorpe is no longer subject to the provisions of Statement No. 71, Oglethorpe would be required to write off related regulatory assets and liabilities. In addition, Oglethorpe would be required to determine any impairment to other assets, including plant, and write down the assets, if impaired, to their fair value. p. Presentation Certain prior year amounts have been reclassified to conform with current year presentation. 2. Fair value of financial instruments: A detail of the estimated fair values of Oglethorpe's financial instruments as of December 31, 1996 and 1995 is as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ (dollars in thousands) 1996 1995 Fair Fair Cost Value Cost Value - ------------------------------------------------------------------------------------------------------------------------------------ Cash and temporary cash investments: Commercial paper $ 52,700 $ 52,700 $ 179,055 $ 179,055 Certificates of deposit 10,000 10,000 20,000 20,000 Cash and money market securities 70,083 70,083 2,096 2,096 ---------- ---------- ---------- ---------- Total $ 132,783 $ 132,783 $ 201,151 $ 201,151 ========== ========== ========== ========== Other short term investments: Commingled investment fund $ 91,712 $ 91,499 $ 76,180 $ 79,165 ---------- ---------- ---------- ---------- Total $ 91,712 $ 91,499 $ 76,180 $ 79,165 ========== ========== ========== ========== Bond, reserve and construction funds: U. S. Government securities $ 36,505 $ 35,873 $ 49,348 $ 49,932 Repurchase agreements 18,082 18,082 6,579 6,579 ---------- ---------- ---------- ---------- Total $ 54,587 $ 53,955 $ 55,927 $ 56,511 ========== ========== ========== ========== Decommissioning fund: U. S. Government securities $ 24,034 $ 23,950 $ 23,087 $ 23,568 Foriegn government securities 1,228 1,278 -- -- Commercial paper -- -- 4,036 4,036 Corporate bonds 11,953 11,868 5,875 6,073 Equity securities 30,339 34,073 19,514 21,271 Asset-backed securities 3,103 3,125 12,484 12,614 Other bonds 5,445 5,453 -- -- Cash and money market securities 6,522 6,522 6,937 6,930 ---------- ---------- ---------- ---------- Total $ 82,624 $ 86,269 $ 71,933 $ 74,492 ========== ========== ========== ========== Long-term debt $4,118,117 $4,228,317 $4,207,320 $4,506,925 ========== ========== ========== ========== Interest rate swap $ -- $ 33,938 $ -- $ 52,089 ========== ========== ========== ========== - ------------------------------------------------------------------------------------------------------------------------------------
The contractual maturities of debt securities available for sale at December 31, 1996 and 1995, regardless of their balance sheet classification, are as follows: - -------------------------------------------------------------------------------- (dollars in thousands) 1996 1995 Fair Fair Cost Value Cost Value - -------------------------------------------------------------------------------- Due within one year $33,944 $33,819 $21,050 $21,300 Due after one year through five years 17,439 17,266 37,172 37,452 Due after five years through ten years 27,912 27,302 27,628 27,966 Due after ten years 15,610 15,789 11,523 12,049 ------- ------- ------- ------- $94,905 $94,176 $97,373 $98,767 ======= ======= ======= ======= - -------------------------------------------------------------------------------- Oglethorpe uses the methods and assumptions described below to estimate the fair value of each class of financial instruments. For cash and temporary cash investments, the carrying amount approximates fair value because of the short-term maturity of those 51 instruments. The fair value of Oglethorpe's long-term debt and the swap arrangements is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to Oglethorpe for debt of similar maturities. Under the interest rate swap arrangements, Oglethorpe makes payments to the counterparty based on the notional principal at a contractually fixed rate and the counterparty makes payments to Oglethorpe based on the notional principal at the existing variable rate of the refunding bonds. The differential to be paid or received is accrued as interest rates change and is recognized as an adjustment to interest expense. Oglethorpe entered into the swap arrangements for the purpose of securing a fixed rate lower than otherwise would have been available to Oglethorpe had it issued fixed rate bonds. For the Series 1993A notes, the notional principal was $199,690,000 and the fixed swap rate is 5.67% (the variable rate at December 31, 1996 and 1995 was 4.00% and 5.15% respectively). With respect to the Series 1994A notes, the notional principal was $122,740,000 and the fixed swap rate is 6.01% (the variable rate at December 31, 1996 and 1995 was 4.00% and 5.05%, respectively). The notional principal amount is used to measure the amount of the swap payments and does not represent additional principal due to the counterparty. The swap arrangements extend for the life of the refunding bonds, with reductions in the outstanding principal amounts of the refunding bonds causing corresponding reductions in the notional amounts of the swap payments. The estimated fair value of Oglethorpe's liability under the swap arrangements at December 31, 1996 and 1995 was $33,938,000 and $52,089,000, respectively. This amount represents payment Oglethorpe would pay if the swap arrangements were terminated. Oglethorpe may be exposed to losses in the event of nonperformance of the counterparty, but does not anticipate such nonperformance. Oglethorpe adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," as of January 1, 1994. Under this Statement, investment securities held by Oglethorpe are classified as either available-for-sale or held-to-maturity. Available-for-sale securities are carried at market value with unrealized gains and losses, net of any tax effect, added to or deducted from patronage capital. Unrealized gains and losses from investment securities held in the decommissioning fund, which are also classified as available-for-sale, are directly added to or deducted from the decommissioning reserve. Held-to-maturity securities are carried at cost. All realized and unrealized gains and losses are determined using the specific identification method. Gross unrealized gains and losses at December 31, 1996 were $7,785,000 and $4,985,000, respectively. Gross unrealized gains and losses at December 31, 1995 were $6,497,000 and $368,000, respectively. For 1996 and 1995, proceeds from sales of available-for-sale securities totaled $425,772,000 and $438,643,000, respectively. Gross realized gains and losses from the 1996 sales were $6,410,000 and $3,671,000,respectively. Gross realized gains and losses from the 1995 sales were $5,098,000 and $1,308,000, respectively. Investments in associated organizations were as follows at December 31, 1996 and 1995: - -------------------------------------------------------------------------------- (dollars in thousands) 1996 1995 - -------------------------------------------------------------------------------- National Rural Utilities Cooperative Finance Corp. (CFC) $13,476 $13,476 CoBank, ACB 1,664 2,132 Other 239 245 ------- ------- Total $15,379 $15,853 ======= ======= - -------------------------------------------------------------------------------- The investments in these associated organizations are similar to compensating bank balances in that they are required in order to maintain current financing arrangements. Accordingly, there is no market for these investments. The $41,685,000 deposit on the Rocky Mountain transactions (see Note 1 where discussed) as of December 31, 1996 is invested in a guaranteed investment contract which will be held to maturity (the end of the 30-year lease-back period). At maturity, Oglethorpe fully intends to use the deposit to repurchase tax ownership and to retain all other rights of ownership with respect to the plant. The deposit is carried at cost. In addition, from the proceeds of the Rocky Mountain transactions, Oglethorpe paid $460,769,000 to a financial institution. In return, this financial institution undertook to pay a portion of Oglethorpe's lease obligations. Both Oglethorpe's interest in this payment undertaking agreement and the corresponding lease obligations have been extinguished for financial reporting purposes. 3. Income taxes Oglethorpe is a not-for-profit membership corporation subject to Federal and state income taxes. As a taxable electric cooperative, Oglethorpe has annually allocated its income and deductions between Member and non-Member activities. Any Member taxable income has been offset with a patronage exclusion and member loss carryforwards. Oglethorpe accounts for its income taxes pursuant to Statement of Financial Accounting Standards (SFAS) No. 109. SFAS No. 109 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. 52 A detail of the provision for income taxes in 1996, 1995 and 1994 is shown as follows: - -------------------------------------------------------------------------------- (dollars in thousands) 1996 1995 1994 - -------------------------------------------------------------------------------- Current Federal $ 3,525 $ -- $ -- State -- -- -- ------- ------- ------- 3,525 -- -- ------- ------- ------- Deferred Federal (3,525) -- -- State -- -- -- ------- ------- ------- (3,525) -- -- ------- ------- ------- Income taxes charged to operations $ -- $ -- $ -- ======= ======= ======= - -------------------------------------------------------------------------------- The difference between the statutory federal income tax rate on income before income taxes and Oglethorpe's effective income tax rate is summarized as follows: - -------------------------------------------------------------------------------- 1996 1995 1994 - -------------------------------------------------------------------------------- Statutory federal income tax rate 35.0% 35.0% 35.0% Patronage exclusion (35.7%) (35.6%) (35.4%) Other 0.7% 0.6% 0.4% ------ ------ ------ Effective income tax rate 0.0% 0.0% 0.0% ====== ====== ====== - -------------------------------------------------------------------------------- The components of the net deferred tax liabilities as of December 31, 1996 and 1995 were as follows: - -------------------------------------------------------------------------------- (dollars in thousands) 1996 1995 - -------------------------------------------------------------------------------- Deferred tax assets Net operating losses $ 473,114 $ 538,067 Member loss carryforwards 328,912 342,370 Tax credits (alternative minimum tax and other) 256,205 252,680 Accounting for Rocky Mountain transactions 233,045 -- Accounting for sale of income tax benefits 77,429 86,599 Accrued nuclear decommissioning expense 49,127 45,042 Accounting for asset dispositions 32,545 33,496 Other 3,318 18,277 ----------- ----------- 1,453,695 1,316,531 Less: Valuation allowance (252,680) (252,680) ----------- ----------- 1,201,015 1,063,851 ----------- ----------- Deferred tax liabilities Depreciation (1,008,714) (1,034,153) Accounting for Rocky Mountain transactions (156,557) -- Accounting for debt extinguishment (64,841) (64,006) Other (32,888) (31,202) ----------- ----------- (1,263,000) (1,129,361) ----------- ----------- Net deferred tax liabilities $ (61,985) $ (65,510) =========== =========== - -------------------------------------------------------------------------------- As of December 31, 1996, Oglethorpe has federal tax net operating loss carryforwards (NOLs), alternative minimum tax credits (AMT) and unused general business credits (consisting primarily of investment tax credits) as follows: - -------------------------------------------------------------------------------- (dollars in thousands) - -------------------------------------------------------------------------------- Alternative Minimum Expiration Date Tax Credits Tax Credits NOLs 1997 $ -- $ 11,197 $ -- 1998 -- 6,934 -- 1999 -- 37,206 -- 2000 -- 3,198 -- 2001 -- 7,264 -- 2002 -- 130,377 -- 2003 -- 652 242,187 2004 -- 55,663 114,285 2005 -- 189 213,080 2006 -- -- 209,009 2007 -- -- 86,779 2008 -- -- 94,927 2009 -- -- 96,394 2010 -- -- 77,970 None 3,525 -- -- -------- ---------- ---------- $ 3,525 $ 252,680 $1,134,631 ======== ========== ========== - -------------------------------------------------------------------------------- Based on Oglethorpe's historical taxable transactions, the timing of the reversal of existing temporary differences, future income, and tax planning strategies, it is more likely than not that Oglethorpe's future taxable income will be sufficient to realize the benefit of NOLs before their respective expiration dates. The NOLs expiration dates start in the year 2003 and end in the year 2010. However, as reflected in the above valuation allowance, it is more likely than not that the tax credits will not be utilized before expiration. It is more likely than not that the AMT credit will be utilized. 53 4. Capital leases: In December 1985, Oglethorpe sold and subsequently leased back from four purchasers its 60% undivided ownership interest in Scherer Unit No. 2. The gain from the sale is being amortized over the 36-year term of the leases. The minimum lease payments under the capital leases together with the present value of net minimum lease payments as of December 31, 1996 are as follows: - -------------------------------------------------------------------------------- Year Ending December 31, (dollars in thousands) - -------------------------------------------------------------------------------- 1997 $ 36,531 1998 37,302 1999 37,890 2000 37,755 2001 37,629 2002-2021 569,179 --------- Total minimum lease payments 756,286 Less: Amount representing interest (458,517) --------- Present value of net minimum lease payments 297,769 Less: Current portion (4,087) --------- Long-term balance $ 293,682 ========= - -------------------------------------------------------------------------------- The capital leases provide that Oglethorpe's rental payments vary to the extent of interest rate changes associated with the debt used by the lessors to finance their purchase of undivided ownership shares in Scherer Unit No. 2. The debt of three of the lessors is financed at fixed interest rates averaging 9.70%. As of December 31, 1996, the variable interest rates of the debt of the remaining lessor ranged from 6.40% to 8.05% for an average rate of 6.83%. Oglethorpe's future rental payments under its leases will vary from amounts shown in the table above to the extent that the actual interest rates associated with the fixed and variable rate debt of the lessors vary from the 11.05% debt rate assumed in the table. The Scherer Unit No. 2 lease meets the definitional criteria to be reported on Oglethorpe's balance sheets as a capital lease. For rate-making purposes, however, Oglethorpe treats this lease as an operating lease; that is, Oglethorpe considers the actual rental payment on the leased asset in its cost of service. Oglethorpe's accounting treatment for this capital lease has been modified, therefore, to reflect its rate-making treatment. Interest expense is applied to the obligation under the capital lease; then, amortization of the leasehold is recognized, such that interest and amortization equal the actual rental payment. Through 1994, the level of actual rental payments was such that amortization of the Scherer Unit No. 2 leasehold calculated in this manner was less than zero. Thereafter, the scheduled cash rental payments increase such that positive amortization of the leasehold occurs and the entire cost of the leased asset is recovered through the rate-making process. The difference in the amortization recognized in this manner on the statements of revenues and expenses and the straight-line amortization of the leasehold is reflected on Oglethorpe's balance sheets as a deferred charge. In 1991 and 1992, all four of the lessors received Notices of Proposed Adjustments from the IRS proposing adjustments to the tax benefits claimed by these lessors in connection with their purchase and ownership of an undivided interest in Scherer Unit No 2. In 1994, the IRS issued a revised Notice of Proposed Adjustments to one of the lessors which reduced the proposed adjustments. During 1995, this lessor advised Oglethorpe that it had settled this issue on the basis of the revised Notice of Proposed Adjustments. Oglethorpe subsequently made a lump sum indemnity payment of $362,000 to the lessor in order to compensate for the reduction in the lessor's tax benefits resulting from the sale and leaseback transaction. The IRS has indicated that it will take consistent positions with the other three lessors. If the IRS's current positions regarding the sale and leaseback transactions were ultimately upheld, Oglethorpe would be required to indemnify the other three lessors. Oglethorpe's indemnification liability to the three lessors is estimated to be approximately $1,290,000 as of December 31, 1996. This liability has been reflected on the accompanying balance sheet. 5. Long-term debt: Long-term debt consists of mortgage notes payable to the United States of America acting through the FFB and the RUS, mortgage notes issued in conjunction with the sale by public authorities of pollution control revenue bonds, and notes payable to CoBank. Oglethorpe's headquarters facility is pledged as collateral for the CoBank headquarters note; substantially all of the owned tangible and certain of the intangible assets of Oglethorpe are pledged as collateral for the FFB and RUS notes, the remaining CoBank notes and the notes issued in conjunction with the sale of pollution control revenue bonds. The detail of the notes is included in the statements of capitalization. Oglethorpe currently has ten RUS-guaranteed FFB notes of which $3,172,851,000 and $3,253,636,000 were outstanding at December 31, 1996 and 1995, respectively, with rates ranging from 5.27% to 9.51%. In January 1996, Oglethorpe completed note modifications pursuant to which it repriced $89,447,000 of FFB advances. In connection with such modification, Oglethorpe paid a premium of $9,332,000. These amounts are reported as deferred charges on the balance sheet, and will be amortized over 22 years, the longest remaining life of the subject advances. 54 In October 1996, Oglethorpe completed a current refunding transaction whereby $37,885,000 of fixed rate pollution control revenue bonds were issued. The proceeds of this transaction were used to retire $37,885,000 of existing bonds. The unamortized transaction costs related to this transaction have been reported as a deferred charge on the balance sheet and are being amortized over the life of the related bonds. The annual interest requirement for 1997 is estimated to be $294,000,000. Maturities for the long-term debt through 2001 are as follows: - -------------------------------------------------------------------------------- (dollars in thousands) 1997 1998 1999 2000 2001 - -------------------------------------------------------------------------------- FFB and RUS $147,279 $ 86,894 $ 91,123 $ 98,867 $105,941 CoBank 376 502 516 532 550 PCB Bonds 7,880 17,970 19,730 23,995 26,260 Capital Leases 4,087 5,143 6,240 7,075 7,775 -------- -------- -------- -------- -------- Total $159,622 $110,509 $117,609 $130,469 $140,526 ======== ======== ======== ======== ======== - -------------------------------------------------------------------------------- The estimated annual interest expense and the long-term debt maturities described above do not take into account Oglethorpe's proposed corporate restructuring, discussed in Note 11. Oglethorpe has a commercial paper program under which it may issue commercial paper not to exceed a $250,000,000 balance outstanding at any time. The commercial paper may be used for working capital requirements and for general corporate purposes. Oglethorpe's commercial paper is backed 100% by committed lines of credit provided by a group of banks. As of December 31, 1996 and 1995, no commercial paper was outstanding. Oglethorpe has a $50,000,000 uncommitted short-term line of credit with CFC and a $30,000,000 committed line of credit with SunTrust Bank, Atlanta (SunTrust). The maximum combined amount that can be outstanding under these lines of credit and the commercial paper program at any one time totals $250,000,000 due to certain restrictions contained in the CFC and SunTrust line of credit agreements. No balance was outstanding on either of these two lines of credit at either December 31, 1996 or 1995. 6. Electric plant and related agreements: Oglethorpe and GPC have entered into agreements providing for the purchase and subsequent joint operation of certain of GPC's electric generating plants and transmission facilities. A summary of Oglethorpe's plant investments and related accumulated depreciation as of December 31, 1996 is as follows: - -------------------------------------------------------------------------------- (dollars in thousands) Accumulated Plant Investment Depreciation - -------------------------------------------------------------------------------- In-service Owned property Vogtle Units No. 1 & No. 2 (Nuclear - 30% ownership) $2,781,446 $ 665,953 Hatch Units No. 1 & No. 2 (Nuclear - 30% ownership) 523,163 208,687 Wansley Units No. 1 & No. 2 (Fossil - 30% ownership) 173,192 84,388 Scherer Unit No. 1 (Fossil - 60% ownership) 429,299 193,129 Rocky Mountain Units No. 1, No. 2 & No. 3 (Hydro - 74.6% ownership) 556,470 17,401 Tallassee (Harrison Dam) (Hydro - 100% ownership) 9,270 1,797 Wansley (Combustion Turbine - 30% ownership) 3,718 1,319 Generation step-up substations 55,877 19,173 Transmission and distribution plant 815,929 179,960 Other 94,002 25,060 Property under capital lease Scherer Unit No. 2 (Fossil - 60% leasehold) 300,231 91,405 ---------- ---------- Total in-service $5,742,597 $1,488,272 ========== ========== Construction work in progress Generation improvements $ 11,963 Transmission and distribution plant 18,715 Other 503 ---------- Total construction work in progress $ 31,181 ========== - -------------------------------------------------------------------------------- In 1988, Oglethorpe acquired from GPC an undivided ownership interest in Rocky Mountain. Under the Rocky Mountain agreements, Oglethorpe assumed responsibility for construction of the facility, which was commenced by GPC. Under the agreements, GPC retained its current investment in Rocky Mountain with the ultimate ownership interests of Oglethorpe and GPC in the facility based on the ratio of each party's direct construction costs to total project direct construction costs with certain adjustments. On June 1, 1995, Unit 3 and the completed Unit Common facilities were declared to be in commercial operation by Oglethorpe. Unit 2 and Unit 1 were declared to be in commercial operation on June 19, 1995 and July 24, 1995, respectively. In accordance with the Rocky Mountain agreements, the final ownership interests of Oglethorpe and GPC in Rocky Mountain is 74.6% and 25.4%, respectively. The final ownership interests in the project will be applied to all future capital costs. 55 Oglethorpe is engaged in a continuous construction program and, as of December 31, 1996, estimates property additions (including capitalized interest) to be approximately $108,000,000 in 1997, $98,000,000 in 1998 and $100,000,000 in 1999, primarily for replacements and additions to generation and transmission facilities. Oglethorpe's proportionate share of direct expenses of joint operation of the above plants is included in the corresponding operating expense captions (e.g., fuel, production or depreciation) on the accompanying statements of revenues and expenses. 7. Employee benefit plans: Oglethorpe has a noncontributory defined benefit pension plan covering substantially all employees. Oglethorpe's pension cost was approximately $1,388,000 in 1996, $1,954,000 in 1995 and $1,262,000 in 1994. For 1995, pension cost increased by $912,000 related to termination benefits. The termination benefits resulted from an early retirement program undertaken in the fourth quarter of 1995. Plan benefits are based on years of service and the employee's compensation during the last ten years of employment. Oglethorpe's funding policy is to contribute annually an amount not less than the minimum required by the Internal Revenue Code and not more than the maximum tax deductible amount. The plan's pension cost recognized in 1996, 1995 and 1994 was shown as follows: - -------------------------------------------------------------------------------- (dollars in thousands) 1996 1995 1994 - -------------------------------------------------------------------------------- Pension cost was comprised of the following Service cost - benefits earned during the year $ 1,149 $ 913 $ 1,084 Interest cost on projected benefit obligation 872 742 714 Actual return on plan assets (984) (1,889) 387 Net amortization and deferral 351 1,288 (911) Net gain from a plan curtailment -- (12) (12) ------- ------- ------- Net pension cost $ 1,388 $ 1,042 $ 1,262 ======= ======= ======= - -------------------------------------------------------------------------------- The plan's funded status in Oglethorpe's financial statements as of December 31, 1996 and 1995 were as follows: - -------------------------------------------------------------------------------- (dollars in thousands) 1996 1995 - -------------------------------------------------------------------------------- Actuarial present value of accumulated plan benefits Vested $ 7,554 $ 6,868 Nonvested 540 591 -------- -------- $ 8,094 $ 7,459 ======== ======== Projected benefit obligation $(13,211) $(12,326) Plan assets at fair value 9,218 7,760 -------- -------- Projected benefit obligation in excess of plan assets (3,993) (4,566) Unrecognized net loss (gain) from past experience different from that assumed and effects of changes in assumptions (880) 223 Prior service cost not yet recognized in net periodic pension cost 498 548 Unrecognized net asset at transition date being recognized over 19 years (109) (121) -------- -------- Pension accrual $ (4,484) $ (3,916) ======== ======== - -------------------------------------------------------------------------------- The discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligations shown above were 7.50% and 5.0% in 1996, and 7.25% and 5.0% in 1995, respectively. The expected long-term rate of return on plan assets was 8.5% in 1996 and 1995, and 8% in 1994, and the discount rate used in determining the pension expense was 7.25% in 1996, 8.5% in 1995 and 7.5% in 1994. Oglethorpe has a contributory employee retirement savings plan covering substantially all employees. Employee contributions to the plan may be invested in one or more of nine funds. The employee may contribute, subject to IRSlimitations, up to 16% of his annual compensation. Oglethorpe will match the employee's contribution up to one-half of the first 6% of the employee's annual compensation, as long as there is sufficient net margin to do so. Oglethorpe's contributions to the plan were approximately $561,000 in 1996, $589,000 in 1995 and $565,000 in 1994. 8. Nuclear insurance: GPC, on behalf of all the co-owners of Plants Hatch and Vogtle, is a member of Nuclear Mutual Limited (NML), a mutual insurer established to provide property damage insurance coverage in an amount up to $500,000,000 for members' nuclear generating facilities. In the event that losses exceed accumulated reserve funds, the members are subject to retroactive assessments (in proportion to their participation in the mutual insurer). The portion of the current maximum annual assessment for GPC that would be payable by Oglethorpe, based on ownership share, is limited to approximately $6,351,000 for each nuclear incident. 56 GPC, on behalf of all the co-owners of Plants Hatch and Vogtle, is also a member of Nuclear Electric Insurance Limited (NEIL), a mutual insurer, and Oglethorpe has coverage under NEIL II, which provides insurance to cover decontamination, debris removal and premature decommissioning as well as excess property damage to nuclear generating facilities for an additional $2,250,000,000 for losses in excess of the $500,000,000 NML coverage described above. Under the NEIL policies, members are subject to retroactive assessments in proportion to their participation if losses exceed the accumulated funds available to the insurer under the policy. The portion of the current maximum annual assessment for GPC that would be payable by Oglethorpe, based on ownership share, is limited to approximately $12,960,000. For all on-site property damage insurance policies for commercial nuclear power plants, the NRC requires that the proceeds of such policies issued or annually renewed on or after April 2, 1991 shall be dedicated first for the sole purpose of placing the reactor in a safe and stable condition after an accident. Any remaining proceeds are next to be applied toward the costs of decontamination and debris removal operations ordered by the NRC, and any further remaining proceeds are to be paid either to the company or to its bond trustees as may be appropriate under the policies and applicable trust indentures. The Price-Anderson Act, as amended in 1988, limits public liability claims that could arise from a single nuclear incident to $8,900,000,000, which amount is to be covered by private insurance and agreements of indemnity with the NRC. Such private insurance (in the amount of $200,000,000 for each plant, the maximum amount currently available) is carried by GPC for the benefit of all the co-owners of Plants Hatch and Vogtle. Agreements of indemnity have been entered into by and between each of the co-owners and the NRC. In the event of a nuclear incident involving any commercial nuclear facility in the country involving total public liability in excess of $200,000,000, a licensee of a nuclear power plant could be assessed a deferred premium of up to $79,275,000 per incident for each licensed reactor operated by it, but not more than $10,000,000 per reactor per incident to be paid in a calendar year. On the basis of its sell-back adjusted ownership interest in four nuclear reactors, Oglethorpe could be assessed a maximum of $95,130,000 per incident, but not more than $12,000,000 in any one year. Oglethorpe participates in an insurance program for nuclear workers that provides coverage for worker tort claims filed for bodily injury caused at commercial nuclear power plants. In the event that claims for this insurance exceed the accumulated reserve funds, Oglethorpe could be subject to a total maximum assessment of $3,365,000. All retrospective assessments, whether generated for liability or property, may be subject to applicable state premium taxes. 9. Power purchase and sale agreements: Oglethorpe has entered into long-term power purchase agreements with GPC, Big Rivers Electric Corporation (Big Rivers), and Entergy Power, Inc. (EPI). Under the agreement with GPC, Oglethorpe purchased on a take-or-pay basis 1,250 megawatts (MW) of capacity through the period ending August 31, 1996. Effective September 1, 1996, Oglethorpe will purchase 1,000 MW of capacity through the period ending August 31, 1997. Effective September 1, 1997, Oglethorpe will purchase 750 MW of capacity through the period ending August 31, 1998. Effective September 1,1998, Oglethorpe will purchase 500 MW of capacity through the period ending December 31,2004, subject to reductions or extension with proper notice. The Big Rivers agreement commenced in August 1992 and is effective through July 2002. Oglethorpe is obligated under this agreement to purchase on a take-or-pay basis 100 MW of firm capacity and certain minimum energy amounts associated with that capacity. The EPI agreement commenced in July 1992, has a term of ten years and represents a take-or-pay commitment by Oglethorpe to purchase 100 MW of capacity. Oglethorpe has a contract with Hartwell Energy Limited Partnership for the purchase of approximately 300 MW of capacity for a 25-year period commencing in April 1994. Oglethorpe has entered into a short-term seasonal power purchase agreement with Florida Power Corporation. Under the agreement, Oglethorpe will purchase 50 MW of capacity on a take-or-pay basis for the period June 1, 1997 through September 30, 1997 and 275 MW for the period June 1, 1998 through September 30, 1998. As of December 31, 1996, Oglethorpe's minimum purchase commitments under the above agreements, without regard to capacity reductions or adjustments for changes in costs, for the next five years are as follows: - -------------------------------------------------------------------------------- Year Ending December 31, (dollars in thousands) - -------------------------------------------------------------------------------- 1997 $ 130,457 1998 111,539 1999 92,873 2000 94,917 2001 97,116 - -------------------------------------------------------------------------------- Oglethorpe's power purchases from these agreements amounted to approximately $190,760,000 in 1996, $206,641,000 in 1995 and $182,965,000 in 1994. Oglethorpe has entered into an agreement with Alabama Electric Cooperative to sell 100 MW of 57 capacity for the period June 1998 through December 2005. As a means of reducing the cost of power provided to the Members, in 1996, Oglethorpe utilized short-term power supply agreements. The initial agreement was with Enron Power Marketing, Inc. and was in place from January 4, 1996 through August 31, 1996. From September 1, 1996 through December 31, 1996, Oglethorpe utilized a short-term power supply transaction with Duke/Louis Dreyfus L.L.C. Under both of the agreements, the power marketer was required to provide to Oglethorpe at a favorable fixed rate all the energy necessary to meet the Members' requirements and Oglethorpe was required to provide to the power marketer at cost, subject to certain limitations, upon request all energy available from Oglethorpe's total power resources. Under both agreements, Oglethorpe continued to operate the power supply system and continued to dispatch the generating resources to ensure system reliability. 10. Quarterly financial data (unaudited): Summarized quarterly financial information for 1996 and 1995 is as follows: - -------------------------------------------------------------------------------- First Second Third Fourth (dollars in thousands) Quarter Quarter Quarter Quarter - -------------------------------------------------------------------------------- 1996 Operating revenues $270,689 $275,228 $286,648 $ 268,872 Operating margin 73,568 72,514 75,009 61,658 Net margin 8,988 4,732 12,508 (4,476) 1995 Operating revenues $257,547 $281,228 $317,536 $ 293,250 Operating margin 68,682 82,048 82,949 74,998 Net margin 8,462 20,292 10,656 (17,152) - -------------------------------------------------------------------------------- Oglethorpe's business is influenced by seasonal weather conditions. Second quarter 1996 net margin was lower than the same period of 1995 primarily as a result of unbudgeted savings in 1995 from the continued capitalization of costs of Rocky Mountain due to delay in commercial operation of the initial unit from April 1995 to June 1995. The negative net margin for the fourth quarter of 1996 is consistent with expectations and reflects incurrence of certain nonrecurring expenses. The negative net margin for the fourth quarter of 1995 was primarily attributable to the deferral of excess margin. For a discussion of the amount of excess margin deferred, see Note 1. 11. Subsequent events: a. Power supply arrangements Oglethorpe has entered into power supply agreements for approximately 50% of its Members' load requirements with LG&E Power Marketing Inc. These agreements commenced on January 1, 1997, initially on a short-term basis. These agreements converted to a long-term arrangement upon the closing of the Corporate Restructuring discussed below. Oglethorpe is now working to complete a long-term contract for the remaining approximately 50% of its load. b. Corporate restructuring Oglethorpe and the Members completed on March 11, 1997, a corporate restructuring (the Corporate Restructuring). Pursuant to the Corporate Restructuring, Oglethorpe divided itself into three specialized companies to respond to increasing competition and deregulation in the electric industry. As part of the Corporate Restructuring, Oglethorpe transferred its transmission business and assets to a newly formed Georgia electric membership corporation, Georgia Transmission Corporation (An Electric Membership Corporation) (GTC), and transferred its system operations business to a newly formed Georgia nonprofit corporation, Georgia System Operations Corporation (GSOC). Oglethorpe retained its generation business and owned and leased generation assets. The following unaudited pro-forma balance sheet as of December 31, 1996 reflects the financial position of Oglethorpe as reported and as restated reflecting the exclusion of the transmission business as though the Corporate Restructuring had occurred at December 31, 1996. The following unaudited pro-forma statement of revenues and expenses for the year ended December 31, 1996 reflects the operations of Oglethorpe as reported and as restated, reflecting the exclusion of the transmission business as though the Corporate Restructuring had occurred at the beginning of 1996. These unaudited pro-forma financial statements have been prepared based on assumptions and estimates deemed appropriate and are presented for illustrative purposes only and are not necessarily indicative of the financial position or results of operations which would have actually been reported had the transactions occurred in the period reported. The columns titled Oglethorpe post-restructuring in the following unaudited pro-forma financial statements have been restated reflecting the exclusion of the system operations business as though the Corporate Restructuring had occurred in the period reported. The system operations business is not shown separately due to immateriality. 58 Pro-Forma Balance Sheet (Unaudited) As of December 31,1996 (dollars in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------ Oglethorpe Transmission Oglethorpe Pro-Forma Pro-Forma (Pre- (Post- (Post- Restructuring) Restructuring) Restructuring) - ------------------------------------------------------------------------------------------------------------------------------------ Assets Electric plant, at original cost: In service $ 5,742,597 $ 4,908,752 $ 815,929 Less: Accumulated provision for depreciation (1,488,272) (1,299,328) (179,960) ----------- ----------- ----------- 4,254,325 3,609,424 635,969 Nuclear Fuel, at amortized cost 86,722 86,722 -- Plant acquisition adjustments, at amortized cost 4,153 -- 8,780 Construction work in progress 31,181 12,466 18,715 ----------- ----------- ----------- 4,376,381 3,708,612 663,464 ----------- ----------- ----------- Investments and funds 197,288 200,812 -- ----------- ----------- ----------- Current assets: Cash and temporary cash investments, at cost 224,282 245,424 -- Receivables 113,289 113,289 -- Inventories, at average cost 89,825 84,018 5,807 Prepayments and other current assets 14,625 14,264 361 ----------- ----------- ----------- 442,021 456,995 6,168 ----------- ----------- ----------- Deferred charges: Premium and loss on reacquired debt, being amortized 201,007 169,081 31,926 Deferred debt expense, being amortized 21,703 18,256 3,447 Other 123,775 123,775 -- ----------- ----------- ----------- 346,485 311,112 35,373 ----------- ----------- ----------- $ 5,362,175 $ 4,677,531 $ 705,005 =========== =========== =========== Equities and Liabilities Capitalization: Patronage capital and membership fees $ 356,229 $ 356,229 $ -- Long-term debt 4,052,470 3,380,581 688,878 Obligations under capital leases 293,682 293,682 -- Obligations under Rocky Mountain transactions 41,685 41,685 -- ----------- ----------- ----------- 4,744,066 4,072,177 688,878 ----------- ----------- ----------- Current liabilities: Long-term debt and capital leases due within one year 159,622 144,565 15,057 Accounts payable 42,891 41,788 -- Accrued interest 15,931 15,931 -- Accrued and witheld taxes 4,940 4,940 -- Other current liabilities 14,022 12,799 1,070 ----------- ----------- ----------- 237,406 220,023 16,127 ----------- ----------- ----------- Deferred credits and other liabilities 380,703 385,331 -- ----------- ----------- ----------- $ 5,362,175 $ 4,677,531 $ 705,005 =========== =========== =========== - ------------------------------------------------------------------------------------------------------------------------------------
Pro-Forma Statement of Revenues and Expenses (Unaudited) For the year ended December 31,1996 (dollars in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------ Oglethorpe Transmission Oglethorpe Pro-Forma Pro-Forma (Pre- (Post- (Post- Restructuring) Restructuring) Restructuring) - ------------------------------------------------------------------------------------------------------------------------------------ Operating revenues: Sales to Members $ 1,023,094 $ 927,156 $ 95,938 Sales to non-Members 78,343 68,554 9,789 ----------- ----------- ----------- Total operating revenues 1,101,437 995,710 105,727 ----------- ----------- ----------- Operating expenses: Fuel 206,524 206,524 -- Production 129,178 129,178 -- Purchased power 229,089 229,089 -- Power delivery 18,216 -- 18,216 Depreciation and amortization 163,130 138,008 25,122 Taxes other than income taxes 30,262 22,728 7,534 Other operating expenses 42,289 33,307 8,982 ----------- ----------- ----------- Total operating expenses 818,688 758,834 59,854 ----------- ----------- ----------- Operating margin 282,749 236,876 45,873 ----------- ----------- ----------- Other income (expense): Interest income 23,485 20,129 3,356 Amortization of deferred margins 32,047 29,336 2,711 Allowance for equity funds used during construction 238 114 124 Other 9,564 10,270 (706) ----------- ----------- ----------- Total other income 65,334 59,849 5,485 ----------- ----------- ----------- Interest charges: Interest on long-term debt and other obligations 328,907 279,542 49,365 Allowance for debt funds used during construction (2,576) (1,231) (1,345) ----------- ----------- ----------- Net interest charges 326,331 278,311 48,020 ----------- ----------- ----------- Net margin $ 21,752 $ 18,414 $ 3,338 =========== =========== =========== - ------------------------------------------------------------------------------------------------------------------------------------
The above pro-forma balance sheet reflects the transfer of the transmission and system operations businesses, and the related financing activities related to the transfer based on the purchase price formula. In connection with the Corporate Restructuring, Oglethorpe also made a special patronage capital distribution to the Members totaling $48,863,000 which was used by the Members to establish equity in and to provide initial working capital to GTC. 59 REPORT OF MANAGEMENT The management of Oglethorpe Power Corporation has prepared this report and is responsible for the financial statements and related information. These statements were prepared in accordance with generally accepted accounting principles appropriate in the circumstances and necessarily include amounts that are based on best estimates and judgments of management. Financial information throughout this annual report is consistent with the financial statements. Oglethorpe maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that the books and records reflect only authorized transactions. Limitations exist in any system of internal control based upon the recognition that the cost of the system should not exceed its benefits. Oglethorpe believes that its system of internal accounting control, together with the internal auditing function, maintains appropriate cost/benefit relations. Oglethorpe's system of internal controls is evaluated on an ongoing basis by its qualified internal audit staff. The Corporation's independent public accountants (Coopers & Lybrand L.L.P.) also consider certain elements of the internal control system in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. Coopers & Lybrand L.L.P. also provides an objective assessment of how well management meets its responsibility for fair financial reporting. Management believes that its policies and procedures provide reasonable assurance that Oglethorpe's operations are conducted with a high standard of business ethics. In management's opinion, the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of Oglethorpe Power Corporation. T. D. Kilgore President and Chief Executive Officer REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Oglethorpe Power Corporation: We have audited the accompanying balance sheets and statements of capitalization of Oglethorpe Power Corporation (a Georgia corporation) as of December 31, 1996 and 1995 and the related statements of revenues and expenses, patronage capital, and cash flows for the years then ended. These financial statements are the responsibility of Oglethorpe's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Oglethorpe Power Corporation as of December 31, 1996 and 1995 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Atlanta, Georgia, February 21, 1997, except for Note 11, as to which the date is March 11, 1997. 60 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Oglethorpe Power Corporation: We have audited the statement of revenues and expenses, patronage capital, and cash flows of Oglethorpe Power Corporation (a Georgia corporation) for the year ended December 31, 1994. These financial statements are the responsibility of Oglethorpe's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations, changes in patronage capital, and cash flows of Oglethorpe Power Corporation for the year ended December 31, 1994 in conformity with generally accepted accounting principles. As explained in Note 2 of notes to financial statements, effective January 1, 1994, Oglethorpe Power Corporation changed its method of accounting for certain investments in debt and equity securities. Arthur Andersen LLP Atlanta, Georgia, February 24, 1995. 61 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a) Identification of Directors: As part of the Corporate Restructuring, Oglethorpe amended its Bylaws to provide for an eleven member board of directors consisting of six directors elected from the Members (the "Member Directors"), four independent outside directors (the "Outside Directors") and Oglethorpe's President and Chief Executive Officer. The Member Directors must be a director or general manager of an Oglethorpe Member. Five of the six Member Directors must be located in one of five geographical regions of the State of Georgia. The sixth Member Director is elected statewide. The four Outside Directors must not be a director, officer or employee of Oglethorpe or any Member. All eleven directors are nominated by representatives from each Member whose weighted nomination is based on the number of retail customers served by each Member. After nomination, the directors are elected by a majority vote of each Member, voting on a one-Member, one-vote basis. All of the new directors have been elected with terms beginning on March 11, 1997, except for two of the four Outside Directors which are expected to be elected at the annual meeting of Members on March 27, 1997. The Bylaws provide for staggering the terms of the directors by dividing the number of directors into three groups. As noted below, some of the directors were elected to an initial term of 1 year, some 2 years and some 3 years. As these initial terms expire, directors will thereafter be elected for a term of three years. The Directors of Oglethorpe are as follows: Larry N. Chadwick, age 56, is the Member Director from the Northwest Region. He is the owner of Chadwick's Hardware in Woodstock, Georgia. He has served on the Board of Directors of Oglethorpe since July 1989. His present term will expire in March 1999. Mr. Chadwick is an engineer, with experience in the design of hydrogen gas plants. He is Chairman of the Board of Cobb EMC. Benny W. Denham, age 66, is the Vice Chairman of the Board and is the Member Director from the Southwest Region. Mr. Denham has served as an executive officer of Oglethorpe since March 1993. He has served on the Board of Directors of Oglethorpe since December 1988. His present term will expire in March 1998. He was previously the Vice-Chairman of the Executive Committee and a member of the Power Planning and Technical Advisory Committee. Mr. Denham is co-owner of Denham Farms in Turner County, Georgia. He served on the Turner County Commission from 1980 to 1990, and was Chairman for six of those years. Mr. Denham is a Director of Community National Bank in Ashburn, Georgia and a Director of Irwin EMC. J. Calvin Earwood, age 55, is the Chairman of the Board and is the Member Director elected statewide. Mr. Earwood has served as an executive officer of Oglethorpe since March 1984 (from March 1984 to July 1986, as Vice President; from July 1986 to March 1989, as Vice Chairman of the Board; and since March 1989, as Chairman of the Board). Mr. Earwood has served as a Director of Oglethorpe since March 1981. His present term will expire in March 2000. He was previously a member of the Operations Review Committee. From 1965 through 62 1982, Mr. Earwood was a salesman and part owner of Builders Equipment Company. Since January 1983, he has been the owner and President of Sunbelt Fasteners, Inc., which sells specialty tools and fasteners to the commercial construction trade. He is also Vice Chairman of the Board of Directors of Community Trust Bank in Hiram, Georgia and a Director of GreyStone Power Corporation. Sammy M. Jenkins, age 70, is the Member Director from the Southeast Region. He is in the farm machinery business and has been President of Jenkins Ford Tractor Co., Inc. since 1973. He has served on the Board of Directors of Oglethorpe since March 1988. His present term will expire in March 1999. He was Vice Chairman of the Board of Oglethorpe from March 1989 to March 1990. Mac F. Oglesby, age 64, is the Member Director from the Northeast Region. He served as Assistant Secretary-Treasurer of Hart EMC from July 1986 through December 1987, when he was appointed President. He has served as a Director of Oglethorpe since February 1987. His present term will expire in March 2000. Mr. Oglesby was a U.S. Postal Service Rural Carrier for 30 years. J. Sam L. Rabun, age 65, is the Member Director from the Central Region. He is the owner and operator of a farm in Jefferson County, Ga. He is also a 50% owner of R&R Livestock Farms, Inc. He has served as a Director of Oglethorpe since March 1993, with his present term to expire in March 1998. Mr. Rabun served as the President of Jefferson EMC from 1993 to 1996. Ashley C. Brown, age 51, is an Outside Director. His present term will expire in March 1999. He is Executive Director of the Harvard Electricity Policy Group at Harvard University's John F. Kennedy School of Government. He is Of Counsel to the law firm of Verner, Liipfert, Bernhard, McPherson and Hand of Washington, D.C. In addition, he is a Principal Consultant with the firm of Hagler Bailly Consulting, Inc. From April 1983 through April 1993, Mr. Brown served as Commissioner of the Public Utilities Commission of Ohio. Prior to his appointment to the Ohio Commission, he was Coordinator and Counsel of the Montgomery County, Ohio, Fair Housing Center. From 1979 to 1981, he was Managing Attorney for the Legal Aid Society of Dayton (Ohio), Inc. From 1977 to 1979, he was Legal Advisor of the Miami Valley Regional Planning Commission in Dayton, Ohio. While practicing law, he specialized in litigation in federal and state courts, as well as before administrative bodies. In addition, Mr. Brown has extensive teaching experience in public schools and universities and has published widely in the field of utility regulation. Mr. Brown has a law degree from the University of Dayton School of Law, a Master of Administration degree from the University of Cincinnati, and a Bachelor of Science degree from Bowling Green State University. Newton A. Campbell, age 68, is an Outside Director. His term will expire in March 2000. He retired in January 1994 as Chairman and Chief Executive Officer of Burns & McDonnell Engineering Company after serving 41 years with the firm. Mr. Campbell directed the overall operations of Burns & McDonnell from 1982 until his retirement. From 1976 through 1982, he served as Vice President and General Manager of the Power Division, and was responsible for directing the company's work in the planning and design of fossil fueled power generation facilities, high voltage transmission systems, and other power related facilities. Mr. Campbell has been involved in feasibility, planning and financial studies for numerous new and existing public and privately owned electric utilities during various phases of their organization and development. He also has considerable experience in conceptual studies, design, and project management for large electric utility generation, transmission, substation and distribution facilities throughout the United States. Mr. Campbell received a Master of Business Administration degree from the University of Missouri at Kansas City with a concentration in finance. He also holds a Bachelor of Science degree in Electrical Engineering from the University of Illinois. T. D. Kilgore, age 49, is the President and Chief Executive Officer of Oglethorpe and has served as an executive of Oglethorpe since July 1984 (from July 1984 to July 1986, as Division Manager, Power Supply; July 1986 to July 1991, as Senior Vice President, Power Supply; and since July 1991, as President and Chief Executive Officer). He also currently serves as the President and Chief Executive Officer and as a director of both GTC and GSOC. Mr. Kilgore has over 20 years of experience, including five years in senior management positions with 63 Arkansas Power & Light Co. and seven years as a civilian employee with the Department of the Army in positions ranging from reliability engineering to construction management. Mr. Kilgore has served on various industry committees including Electric Power Research Institute's Board of Directors and its Advanced Power Systems Division and Coal System Division Advisory Committees. He has also served on the Boards of Directors of the U.S. Committee for Energy Awareness, the Advanced Reactor Corporation, on the Edison Electric Institute's Power Plant Availability Improvement Task Force and the Nuclear Power Oversight Committee. Mr. Kilgore currently serves on the Board of Directors of the Georgia Chamber of Commerce and on the National Rural Electric Cooperative Association's Power and Generation Committee. Mr. Kilgore has a Bachelor of Science degree in Mechanical Engineering from the University of Alabama, where he has been recognized as a Distinguished Engineering Fellow, and an Masters of Engineering degree in industrial engineering from Texas A&M. (b) Identification of Senior Executives: Oglethorpe is managed and operated under the direction of a President and Chief Executive Officer, who is appointed by the Board of Directors. The senior executives assisting Mr. Kilgore, their areas of responsibility and a brief summary of their experience are as follows: Clarence D. Mitchell, Senior Vice President, Power Supply, age 43, has served as an executive of Oglethorpe since January 1995. Prior to that time, Mr. Mitchell served as Assistant to the Senior Vice President for Generation from February 1994 to December 1994; Manager of Corporate Planning from September 1992 to January 1994; Manager of Construction from January 1992 to August 1992; Program Director of Technical Services (environmental, survey and mapping, land acquisition and R&D) from January 1989 to December 1991; and from April 1981 to December 1988 held various positions in the generation area, including supervisor, project engineer and generation engineer. Before coming to Oglethorpe, Mr. Mitchell spent four years as a field engineer with General Electric Company and worked various installation and maintenance projects related to coal, nuclear, gas and oil-fired generation. Mr. Mitchell has an MS degree in Management from Georgia State University, a Bachelor of Science degree in Mechanical Engineering from Georgia Institute of Technology and a Bachelor of Science degree in Interdisciplinary Science from Morehouse College. Mr. Mitchell is presently the Oglethorpe representative on both the Nuclear Managing Board and the Plant Scherer Managing Board. For information about the Managing Boards see "CO-OWNERS OF THE PLANTS AND THE PLANT AGREEMENTS--The Plant Agreements" in Item 2. Mr. Mitchell also serves as a Trustee of the Foundation of the Southern Polytechnic State University. Nelson G. Hawk, Senior Vice President and Group Executive, Marketing, age 47, has served as an executive at Oglethorpe since February 1994, responsible for Market Planning, Economic Development, Commercial/Industrial Marketing and Pricing, Commercial/Industrial Services, and Residential Marketing. Prior to coming to Oglethorpe, Mr. Hawk spent almost 24 years with the Florida Power & Light Company and related subsidiaries, serving as Director of Regulatory Affairs from October 1993 to January 1994, Director of Market Planning from July 1991 to September 1993, and as Director of Strategic Business and President of FPL Enersys Services, Inc. (A utility subsidiary providing energy services to commercial/industrial customers) from April 1989 to June 1991. Mr. Hawk has a wide range of utility management experience in energy management, finance, strategic planning, marketing, system planning, quality assurance, and distribution engineering. Mr. Hawk is a board member of the Georgia Electrification Council, Inc. and the Georgia Partnership for Excellence in Education, and served on the board of directors as well as President of the National Association of Energy Services Companies (NAESCO), a national trade association, during the late 1980s. Mr. Hawk is a registered Professional Engineer in Florida and has a Bachelor of Science degree in Electrical Engineering from the Georgia Institute of Technology and a Master of Business Administration degree from Florida International University. 64 Item 11. EXECUTIVE COMPENSATION Summary Compensation Table The following table sets forth, for Oglethorpe's President and Chief Executive Officer and the five most highly compensated senior executives, all compensation paid or accrued for services rendered in all capacities during the years ended December 31, 1996, 1995 and 1994. Amounts included in the table under "Bonus" represent payments based on an incentive compensation policy. All amounts paid under this policy are fully at risk each year and are earned based upon the achievement of corporate goals and each individual's contribution to achieving those goals. In conjunction with this policy, base salaries are targeted below the market valuations for similar positions and remain fairly stable unless the job content changes.
Annual Name and Compensation All Other Principal Position Year Salary Bonus (2) Compensation ------------------ ---- --------- ---------- ------------ T. D. Kilgore 1996 $265,627 $0 $6,246 (1) President and Chief Executive Officer 1995 235,000 10,000 6,012 1994 224,997 0 6,758 W. Clayton Robbins (3) 1996 144,460 17,112 5,425 (1) Sr. Vice President, 1995 142,310 10,631 4,716 Support Services 1994 140,366 11,946 4,986 Nelson G. Hawk 1996 142,535 16,530 5,246 (1) Sr. Vice President, 1995 140,000 10,899 4,589 Marketing 1994 116,005 9,620 32,821 Clarence D. Mitchell 1996 133,369 17,112 3,887 (1) Sr. Vice President, 1995 110,058 7,776 4,251 Power Supply 1994 91,705 5,765 3,354 Wiley H. Sanders (4) 1996 123,750 9,340 82,715 (1) (4) Vice President, Transmission 1995 135,000 9,295 5,703 1994 119,785 12,737 25,178 Eugen Heckl (5) 1996 99,480 16,734 117,245 (1) (5) Sr. Vice President, Finance 1995 142,114 13,174 7,651 1994 142,114 13,919 7,600
- ---------- (1) Includes contributions made in 1996 by Oglethorpe under the 401(k) Retirement Savings Plan on behalf of Messrs. Kilgore, Robbins, Hawk, Mitchell, Sanders and Heckl of $4,750, $4,072, $4,446, $2,969, $3,654 and $2,958, respectively; and insurance premiums paid on term life insurance on behalf of Messrs. Kilgore, Robbins, Hawk, Mitchell, Sanders and Heckl of $1,496, $1,353, $800, $918, $2,831 and $2,200, respectively. (2) All executives listed above, except Mr. Kilgore, participate in an incentive compensation program. Mr. Kilgore's compensation is governed solely by the Board of Directors. (3) In conjunction with the Corporate Restructuring, Mr. Robbins ceased to be a senior executive of Oglethorpe as of January 31, 1997. Mr. Robbins now serves as Vice President of Intellisource's Southeast operations, including support services to Oglethorpe, GTC and GSOC. See "OGLETHORPE POWER CORPORATION--Relationship with Intellisource" in Item 1 for further discussion. (4) Mr. Sanders retired from Oglethorpe as of November 30, 1996. Mr. Sanders' 1996 compensation includes accrued severance benefits of $59,114, payment of accrued vacation and sick benefits of $4,998 and relocation costs of $12,118. 65 (5) Mr. Heckl elected to retire from Oglethorpe under the provisions of an early retirement program as of September 11, 1996. Mr. Heckl's 1996 compensation includes severance benefits of $65,258, retirement-related contributions to his deferred compensation account of $34,938 and payment of accrued vacation and sick benefits of $11,891. Pension Plan Table
Years of Credited Service ----------------------------------------------- Average Compensation 15 20 25 - -------------------- ---------- --------- --------- $ 50,000.................................................. $12,684 $16,911 $21,139 75,000.................................................. 20,184 26,911 33,639 100,000.................................................. 27,684 36,911 46,139 125,000.................................................. 35,184 46,911 58,639 150,000.................................................. 42,684 56,911 71,139 175,000.................................................. 50,184 66,911 83,639 200,000.................................................. 57,684 76,911 96,139 225,000.................................................. 65,184 86,911 108,639 250,000.................................................. 72,684 96,911 121,139 275,000.................................................. 80,184 106,911 133,639
The preceding table shows estimated annual straight life annuity benefits payable upon retirement to persons in specified compensation and years-of-service classifications assuming such persons had attained age 65 and retired during 1996. For purposes of calculating pension benefits, compensation is defined as total salary and bonus, as shown in the above Summary Compensation Table. Because covered compensation changes each year, the estimated pension benefits for the classifications above will also change in future years. The above pension benefits are not subject to any deduction for Social Security or other offset amounts. As of December 31, 1996, the years of credited service under the Pension Plan for the individuals listed in the Summary Compensation Table are as follows: Years of Name Credited Service ---- ---------------- Mr. Kilgore.......................................... 11 Mr. Robbins.......................................... 10 Mr. Hawk ............................................ 1 Mr. Mitchell......................................... 15 Mr. Sanders.......................................... 1 Mr. Heckl............................................ 20 Compensation of Directors Under a proposed policy which is scheduled for approval at the March 27, 1997 Board meeting, Oglethorpe will pay its Outside Directors a per diem fee of $5,500 per Board meeting for the first four meetings in a year; a per diem of $1,000 per Board meeting will be paid for the fifth and subsequent meetings in a year. Outside Directors will also be paid $1,000 per day for attending committee meetings, annual meetings of the Members or other official meetings of Oglethorpe. Under the proposed policy, Member Directors will be paid a per diem fee of $1,000 per Board meeting and a per diem of $300 per day for attending committee meetings, annual meetings of the Members or other official meetings of Oglethorpe. In addition, Oglethorpe will reimburse all Directors for 66 out-of-pocket expenses incurred in attending a meeting. All Directors will be paid a per diem fee of $50 per day when participating in meetings conducted by conference call. The Chairman of the Board will be paid an additional 20% of the per diem per Board meeting for time involved in preparing for the meetings. Employment Contracts Effective January 1, 1996, Oglethorpe entered into an employment agreement with its President and Chief Executive Officer. The term of the agreement extends to December 31, 1998, with certain automatic annual extension provisions beyond that date unless either party gives notice of termination 60 days prior to an extension. Pursuant to the agreement, Mr. Kilgore's base salary and bonus will be determined by Oglethorpe's Board, with annual base salary being at least $240,000. Under the agreement, if Oglethorpe terminates Mr. Kilgore's employment without cause, he will be entitled to all salary and benefits he would have received between the date of termination to the end of the agreement. In addition, if Oglethorpe terminates Mr. Kilgore's employment without cause or meaningfully reduces his stated duties or prerogatives within three months prior to or 24 months subsequent to a Change in Control of Oglethorpe (as defined in the agreement), a severance payment will be paid in an amount not less than two times Mr. Kilgore's annual base salary on the date of termination or the date on which his duties or prerogatives are reduced, whichever is applicable. If such reduction in duties occurs, Mr. Kilgore will be entitled to severance regardless whether he is terminated or resigns. If Mr. Kilgore voluntarily separates himself from Oglethorpe, he will be prohibited from working with a competitor of Oglethorpe for a period of one year thereafter and will be paid an amount equal to his then current salary, bonus and benefits for such period. Compensation Committee Interlocks and Insider Participation E. J. Martin, Jr., J. Calvin Earwood, John B. Floyd, Jr., and J. G. McCalmon served as members of the Oglethorpe Human Resources Management Committee which functioned as Oglethorpe's compensation committee for 1996. J. Calvin Earwood has served as an executive officer of Oglethorpe since 1984 and has served as the Chairman of the Board since 1989. 67 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Not applicable. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS T. D. Kilgore is the President and Chief Executive Officer and a Director of Oglethorpe, GTC and GSOC. Oglethorpe plans to make payments to GSOC for system operations services in 1997 of approximately $6.8 million, which is 55% of GSOC's budgeted revenues. (See "OGLETHORPE POWER CORPORATION--Corporate Restructuring" in Item 1.) 68 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K Page ---- List of Documents Filed as a Part of This Report. (1) Financial Statements (Included under "Item 8. Financial Statements and Supplementary Data") Statements of Revenues and Expenses, For the Years Ended December 31, 1996, 1995 and 1994.............................. 43 Statements of Patronage Capital, For the Years Ended December 31, 1996, 1995 and 1994.................................... 43 Balance Sheets, As of December 31, 1996 and 1995...................... 44 Statements of Capitalization, As of December 31, 1996 and 1995............................................................ 46 Statements of Cash Flows, For the Years Ended December 31, 1996, 1995 and 1994................................................. 47 Notes to Financial Statements, including pro-forma financial statements relating to the Corporate Restructuring.................. 48 Report of Management.................................................. 60 Reports of Independent Public Accountants............................. 60 (2) Financial Statement Schedules None applicable. (3) Exhibits Exhibits marked with an asterisk (*) are hereby incorporated by reference to exhibits previously filed by the Registrant as indicated in parentheses following the description of the exhibit. Number Description 2.1(1) -- Second Amended and Restated Restructuring Agreement, dated February 24, 1997, by and among Oglethorpe, Georgia Transmission Corporation (An Electric Membership Corporation) and Georgia System Operations Corporation. 2.2(1) -- Member Agreement, dated August 1, 1996, by and among Oglethorpe, Georgia Transmission Corporation (An Electric Membership Corporation), Georgia System Operations Corporation and the Members of Oglethorpe. *3(i)(a) -- Restated Articles of Incorporation of Oglethorpe, dated as of July 26, 1988. (Filed as Exhibit 3.1 to the Registrant's Form 10-K for the fiscal year ended December 31, 1988, File No. 33-7591.) 3(i)(b) -- Amendment to Articles of Incorporation of Oglethorpe, dated as of March 11, 1997. 69 3(ii) -- Bylaws of Oglethorpe, as amended on February 24, 1997, and effective as of March 11, 1997. *4.1 -- Serial Facility Bond (included in Collateral Trust Indenture listed as Exhibit 4.2). *4.2 -- Collateral Trust Indenture, dated as of October 15, 1986, between OPC Scherer Funding Corporation, Oglethorpe and Trust Company Bank, a banking corporation, as Trustee. (Filed as Exhibit 4.2 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *4.3 -- Refunding Lessor Notes. (Filed as Exhibit 4.3.1 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *4.4(a) -- Nonrecourse Promissory Secured Note, due June 30, 2011, from Wilmington Trust Company and William J. Wade, as Owner Trustees, to Columbia Bank for Cooperatives. (Filed as Exhibit 4.3.4 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *4.4(b) -- First Amendment to Nonrecourse Promissory Secured Note, dated as of June 30, 1987, by Wilmington Trust Company and The Citizens and Southern National Bank, as Owner Trustee under Trust Agreement No. 1 with IBM Credit Financing Corporation, to Columbia Bank for Cooperatives. (Filed as Exhibit 4.3.4(a) to the Registrant's Form 10-K for the fiscal year ended December 31, 1987, File No. 33-7591.) *4.5(a) -- Indenture of Trust, Deed to Secure Debt and Security Agreement No. 2, dated December 30, 1985, between Wilmington Trust Company and William J. Wade, as Owner Trustees under Trust Agreement No. 2 dated December 30, 1985, with Ford Motor Credit Company and The First National Bank of Atlanta, as Indenture Trustee, together with a Schedule identifying three other substantially identical Indentures of Trust, Deeds to Secure Debt and Security Agreements. (Filed as Exhibit 4.4(b) to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *4.5(b) -- First Supplemental Indenture of Trust, Deed to Secure Debt and Security Agreement No. 2 (included as Exhibit A to the Supplemental Participation Agreement No. 2 listed as 10.1.1(b)). *4.5(c) -- First Supplemental Indenture of Trust, Deed to Secure Debt and Security Agreement No. 1, dated as of June 30, 1987, between Wilmington Trust Company and The Citizens and Southern National Bank, collectively as Owner Trustee under Trust Agreement No. 1 with IBM Credit Financing Corporation, and The First National Bank of Atlanta, as Indenture Trustee. (Filed as Exhibit 4.4(c) to the Registrant's Form 10-K for the fiscal year ended December 31, 1987, File No. 33-7591.) *4.6(a) -- Lease Agreement No. 2 dated December 30, 1985, between Wilmington Trust Company and William J. Wade, as Owner Trustees under Trust Agreement No. 2, dated December 30, 1985, with Ford Motor Credit Company, Lessor, and Oglethorpe, Lessee, with a Schedule identifying three other substantially identical Lease Agreements. (Filed as Exhibit 4.5(b) to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) 70 *4.6(b) -- First Supplement To Lease Agreement No. 2 (included as Exhibit B to the Supplemental Participation Agreement No. 2 listed as 10.1.1(b)). *4.6(c) -- First Supplement to Lease Agreement No. 1, dated as of June 30, 1987, between The Citizens and Southern National Bank as Owner Trustee under Trust Agreement No. 1 with IBM Credit Financing Corporation, as Lessor, and Oglethorpe, as Lessee. (Filed as Exhibit 4.5(c) to the Registrant's Form 10-K for the fiscal year ended December 31, 1987, File No. 33-7591.) 4.7 -- Amended and Consolidated Loan Contract, dated as of March 1, 1997, between Oglethorpe and the United States of America, together with four notes executed and delivered pursuant thereto. 4.8.1 -- Indenture, dated as of March 1, 1997, made by Oglethorpe to SunTrust Bank, Atlanta, as trustee. 4.8.2 -- Security Agreement, dated as of March 1, 1997, made by Oglethorpe to SunTrust Bank, Atlanta, as trustee. 4.9.1(3) -- Loan Agreement, dated as of October 1, 1992, between Development Authority of Monroe County and Oglethorpe relating to Development Authority of Monroe County Pollution Control Revenue Bonds (Oglethorpe Power Corporation Scherer Project), Series 1992A. 4.9.2(3) -- Note, dated October 1, 1992, from Oglethorpe to Trust Company Bank, as trustee acting pursuant to a Trust Indenture, dated as of October 1, 1992, between Development Authority of Monroe County and Trust Company Bank. 4.9.3(3) -- Trust Indenture, dated as of October 1, 1992, between Development Authority of Monroe County and Trust Company Bank, Trustee, relating to Development Authority of Monroe County Pollution Control Revenue Bonds (Oglethorpe Power Corporation Scherer Project), Series 1992A. 4.10.1(4) -- Loan Agreement, dated as of December 1, 1992, between Development Authority of Burke County and Oglethorpe relating to Development Authority of Burke County Adjustable Tender Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1993A. 4.10.2(4) -- Note, dated December 1, 1992, from Oglethorpe to Trust Company Bank, as trustee acting pursuant to a Trust Indenture, dated as of December 1, 1992, between Development Authority of Burke County and Trust Company Bank. 4.10.3(4) -- Trust Indenture, dated as of December 1, 1992, from Development Authority of Burke County to Trust Company Bank, as trustee, relating to Development Authority of Burke County Adjustable Tender Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1993A. 4.10.4(4) -- Interest Rate Swap Agreement, dated as of December 1, 1992, by and between Oglethorpe and AIG Financial Products Corp. relating to Development Authority of Burke County Adjustable Tender Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1993A. 71 4.10.5(4) -- Liquidity Guaranty Agreement, dated as of December 1, 1992, by and between Oglethorpe and AIG Financial Products Corp. relating to Development Authority of Burke County Adjustable Tender Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1993A. 4.10.6(2) -- Standby Bond Purchase Agreement, dated as of December 14, 1995, between Oglethorpe and Canadian Imperial Bank of Commerce, New York Agency, relating to Development Authority of Burke County Adjustable Tender Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1993A. 4.10.7(2) -- Standby Bond Purchase Agreement, dated as of November 30, 1994, between Oglethorpe and Credit Local de France, Acting through its New York Agency, relating to the Development Authority of Burke County Adjustable Tender Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1994A. 4.11.1(4) -- Loan Agreement, dated as of October 1, 1996, between Development Authority of Burke County and Oglethorpe relating to Development Authority of Burke County Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1996. 4.11.2(4) -- Note, dated October 1, 1996, from Oglethorpe to SunTrust Bank, Atlanta, as trustee pursuant to an Indenture of Trust, dated as of October 1, 1996, between Development Authority of Burke County and SunTrust Bank, Atlanta. 4.11.3(4) -- Indenture of Trust, dated as of October 1, 1996, between Development Authority of Burke County and SunTrust Bank, Atlanta, as trustee, relating to Development Authority of Burke County Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1996. 4.12.1(2) -- Loan Agreement, dated as of April 2, 1992, between the Development Authority of Burke County and Oglethorpe, as amended and supplemented by First Amendatory and Supplemental Loan Agreement, dated as of March 1, 1997, relating to Development Authority of Burke County Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1997A. 4.12.2(2) -- Note, dated March 1, 1997, from Oglethorpe to SunTrust Bank, Atlanta, as trustee acting pursuant to a Trust Indenture, dated as of April 1, 1992, between Development Authority of Burke County and SunTrust Bank, Atlanta, as supplemented by First Supplemental Trust Indenture, dated as of March 1, 1997. 4.12.3(2) -- Trust Indenture, dated as of April 2, 1992, between Development Authority of Burke County and SunTrust Bank, Atlanta, as trustee, as supplemented by a First Supplemental Trust Indenture, dated as of March 1, 1997, relating to Development Authority of Burke County Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1997A. 4.13.1 -- Indemnity Agreement, dated as of March 1, 1997, by and between Oglethorpe and Georgia Transmission Corporation (An Electric Membership Corporation). 4.13.2 -- Indemnification Agreement, dated as of March 11, 1997, by Oglethorpe and Georgia Transmission Corporation (An Electric Membership Corporation) for the benefit of the United States of America. 72 4.14.1(2) -- Master Loan Agreement, dated as of March 1, 1997, between Oglethorpe and CoBank, ACB, MLA No. 0459. 4.14.2(2) -- Consolidating Supplement, dated as of March 1, 1997, between Oglethorpe and CoBank, ACB, relating to Loan No. ML0459T1. 4.14.3(2) -- Promissory Note, dated March 1, 1997, in the original principal amount of $7,102,740.26, from Oglethorpe to CoBank, ACB, relating to Loan No. ML0459T1. 4.14.4(2) -- Consolidating Supplement, dated as of March 1, 1997, between Oglethorpe and CoBank, ACB, relating to Loan No. ML0459T2. 4.14.5(2) -- Promissory Note, dated March 1, 1997, in the original principal amount of $1,856,475.12, made by Oglethorpe to CoBank, ACB, relating to Loan No. ML0459T2. *4.15.1 -- Loan Agreement, Loan No. T-830404, between Oglethorpe and Columbia Bank for Cooperatives, dated as of April 29, 1983. (Filed as Exhibit 4.18.1 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *4.15.2 -- Promissory Note, Loan No. T-830404-1, in the original principal amount of $9,935,000, from Oglethorpe to Columbia Bank for Cooperatives, dated as of April 29, 1983. (Filed as Exhibit 4.18.2 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *4.15.3 -- Security Deed and Security Agreement, dated April 29, 1983, between Oglethorpe and Columbia Bank for Cooperatives. (Filed as Exhibit 4.18.3 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.1.1(a) -- Participation Agreement No. 2 among Oglethorpe as Lessee, Wilmington Trust Company as Owner Trustee, The First National Bank of Atlanta as Indenture Trustee, Columbia Bank for Cooperatives as Loan Participant and Ford Motor Credit Company as Owner Participant, dated December 30, 1985, together with a Schedule identifying three other substantially identical Participation Agreements. (Filed as Exhibit 10.1.1(b) to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.1.1(b) -- Supplemental Participation Agreement No. 2. (Filed as Exhibit 10.1.1(a) to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.1.1(c) -- Supplemental Participation Agreement No. 1, dated as of June 30, 1987, among Oglethorpe as Lessee, IBM Credit Financing Corporation as Owner Participant, Wilmington Trust Company and The Citizens and Southern National Bank as Owner Trustee, The First National Bank of Atlanta, as Indenture Trustee, and Columbia Bank for Cooperatives, as Loan Participant. (Filed as Exhibit 10.1.1(c) to the Registrant's Form 10-K for the fiscal year ended December 31, 1987, File No. 33-7591.) *10.1.2 -- General Warranty Deed and Bill of Sale No. 2 between Oglethorpe, Grantor, and Wilmington Trust Company and William J. Wade, as Owner Trustees under Trust Agreement No. 2, dated December 30, 1985, with Ford Motor Credit Company, Grantee, together with a Schedule identifying three substantially identical General Warranty Deeds 73 and Bills of Sale. (Filed as Exhibit 10.1.2 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.1.3(a) -- Supporting Assets Lease No. 2, dated December 30, 1985, between Oglethorpe, Lessor, and Wilmington Trust Company and William J. Wade, as Owner Trustees, under Trust Agreement No. 2, dated December 30, 1985, with Ford Motor Credit Company, Lessee, together with a Schedule identifying three substantially identical Supporting Assets Leases. (Filed as Exhibit 10.1.3 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.1.3(b) -- First Amendment to Supporting Assets Lease No. 2, dated as of November 19, 1987, together with a Schedule identifying three substantially identical First Amendments to Supporting Assets Leases. (Filed as Exhibit 10.1.3(a) to the Registrant's Form 10-K for the fiscal year ended December 31, 1987, File No. 33-7591.) *10.1.4(a) -- Supporting Assets Sublease No. 2, dated December 30, 1985, between Wilmington Trust Company and William J. Wade, as Owner Trustees under Trust Agreement No. 2 dated December 30, 1985, with Ford Motor Credit Company, Sublessor, and Oglethorpe, Sublessee, together with a Schedule identifying three substantially identical Supporting Assets Subleases. (Filed as Exhibit 10.1.4 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.1.4(b) -- First Amendment to Supporting Assets Sublease No. 2, dated as of November 19, 1987, together with a Schedule identifying three substantially identical First Amendments to Supporting Assets Subleases. (Filed as Exhibit 10.1.4(a) to the Registrant's Form 10-K for the fiscal year ended December 31, 1987, File No. 33-7591.) *10.1.5 -- Tax Indemnification Agreement No. 2, dated December 30, 1985, between Ford Motor Credit Company, Owner Participant, and Oglethorpe, Lessee, together with a Schedule identifying three substantially identical Tax Indemnification Agreements. (Filed as Exhibit 10.1.5 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.1.6 -- Assignment of Interest in Ownership Agreement and Operating Agreement No. 2, dated December 30, 1985, between Oglethorpe, Assignor, and Wilmington Trust Company and William J. Wade, as Owner Trustees under Trust Agreement No. 2, dated December 30, 1985, with Ford Motor Credit Company, Assignee, together with Schedule identifying three substantially identical Assignments of Interest in Ownership Agreement and Operating Agreement. (Filed as Exhibit 10.1.6 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.1.7 -- Consent, Amendment and Assumption No. 2 dated December 30, 1985, among Georgia Power Company and Oglethorpe and Municipal Electric Authority of Georgia and City of Dalton, Georgia and Gulf Power Company and Wilmington Trust Company and William J. Wade, as Owner Trustees under Trust Agreement No. 2, dated December 30, 1985, with Ford Motor Credit Company, together with a Schedule identifying three substantially identical Consents, Amendments and Assumptions. (Filed as Exhibit 10.1.9 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.1.7(a) -- Amendment to Consent, Amendment and Assumption No. 2, dated as of August 16, 1993, among Oglethorpe, Georgia Power Company, Municipal Electric Authority of 74 Georgia, City of Dalton, Georgia, Gulf Power Company, Jacksonville Electric Authority, Florida Power & Light Company and Wilmington Trust Company and NationsBank of Georgia, N.A., as Owner Trustees under Trust Agreement No. 2, dated December 30, 1985, with Ford Motor Credit Company, together with a Schedule identifying three substantially identical Amendments to Consents, Amendments and Assumptions. (Filed as Exhibit 10.1.9(a) to the Registrant's Form 10-Q for the quarterly period ended September 30, 1993, File No. 33-7591.) *10.2.1 -- Section 168 Agreement and Election dated as of April 7, 1982, between Continental Telephone Corporation and Oglethorpe. (Filed as Exhibit 10.2 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.2.2 -- Section 168 Agreement and Election dated as of April 9, 1982, between National Service Industries, Inc. and Oglethorpe. (Filed as Exhibit 10.3 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.2.3 -- Section 168 Agreement and Election dated as of April 9, 1982, between Rollins, Inc. and Oglethorpe. (Filed as Exhibit 10.4 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.2.4 -- Section 168 Agreement and Election dated as of December 13, 1982, between Selig Enterprises, Inc. and Oglethorpe. (Filed as Exhibit 10.5 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.3.1(a) -- Plant Robert W. Scherer Units Numbers One and Two Purchase and Ownership Participation Agreement among Georgia Power Company, Oglethorpe, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated as of May 15, 1980. (Filed as Exhibit 10.6.1 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.3.1(b) -- Amendment to Plant Robert W. Scherer Units Numbers One and Two Purchase and Ownership Participation Agreement among Georgia Power Company, Oglethorpe, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated as of December 30, 1985. (Filed as Exhibit 10.1.8 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.3.1(c) -- Amendment Number Two to the Plant Robert W. Scherer Units Numbers One and Two Purchase and Ownership Participation Agreement among Georgia Power Company, Oglethorpe, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated as of July 1, 1986. (Filed as Exhibit 10.6.1(a) to the Registrant's Form 10-K for the fiscal year ended December 31, 1987, File No. 33-7591.) *10.3.1(d) -- Amendment Number Three to the Plant Robert W. Scherer Units Numbers One and Two Purchase and Ownership Participation Agreement among Georgia Power Company, Oglethorpe, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated as of August 1, 1988. (Filed as Exhibit 10.6.1(b) to the Registrant's Form 10-Q for the quarterly period ended September 30, 1993, File No. 33-7591.) *10.3.1(e) -- Amendment Number Four to the Plant Robert W. Scherer Units Number One and Two Purchase and Ownership Participation Agreement among Georgia Power Company, Oglethorpe, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated 75 as of December 31, 1990. (Filed as Exhibit 10.6.1(c) to the Registrant's Form 10-Q for the quarterly period ended September 30, 1993, File No. 33-7591.) *10.3.2(a) -- Plant Robert W. Scherer Units Numbers One and Two Operating Agreement among Georgia Power Company, Oglethorpe, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated as of May 15, 1980. (Filed as Exhibit 10.6.2 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.3.2(b) -- Amendment to Plant Robert W. Scherer Units Numbers One and Two Operating Agreement among Georgia Power Company, Oglethorpe, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated as of December 30, 1985. (Filed as Exhibit 10.1.7 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.3.2(c) -- Amendment Number Two to the Plant Robert W. Scherer Units Numbers One and Two Operating Agreement among Georgia Power Company, Oglethorpe, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated as of December 31, 1990. (Filed as Exhibit 10.6.2(a) to the Registrant's Form 10-Q for the quarterly period ended September 30, 1993, File No. 33-7591.) *10.3.3 -- Plant Scherer Managing Board Agreement among Georgia Power Company, Oglethorpe, Municipal Electric Authority of Georgia, City of Dalton, Georgia, Gulf Power Company, Florida Power & Light Company and Jacksonville Electric Authority, dated as of December 31, 1990. (Filed as Exhibit 10.6.3 to the Registrant's Form 10-Q for the quarterly period ended September 30, 1993, File No. 33-7591.) *10.4.1(a) -- Alvin W. Vogtle Nuclear Units Numbers One and Two Purchase and Ownership Participation Agreement among Georgia Power Company, Oglethorpe, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated as of August 27, 1976. (Filed as Exhibit 10.7.1 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.4.1(b) -- Amendment Number One, dated January 18, 1977, to the Alvin W. Vogtle Nuclear Units Numbers One and Two Purchase and Ownership Participation Agreement among Georgia Power Company, Oglethorpe, Municipal Electric Authority of Georgia and City of Dalton, Georgia. (Filed as Exhibit 10.7.3 to the Registrant's Form 10-K for the fiscal year ended December 31, 1986, File No. 33-7591.) *10.4.1(c) -- Amendment Number Two, dated February 24, 1977, to the Alvin W. Vogtle Nuclear Units Numbers One and Two Purchase and Ownership Participation Agreement among Georgia Power Company, Oglethorpe, Municipal Electric Authority of Georgia and City of Dalton, Georgia. (Filed as Exhibit 10.7.4 to the Registrant's Form 10-K for the fiscal year ended December 31, 1986, File No. 33-7591.) *10.4.2 -- Alvin W. Vogtle Nuclear Units Numbers One and Two Operating Agreement among Georgia Power Company, Oglethorpe, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated as of August 27, 1976. (Filed as Exhibit 10.7.2 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.5.1 -- Plant Hal Wansley Purchase and Ownership Participation Agreement between Georgia Power Company and Oglethorpe, dated as of March 26, 1976. (Filed as Exhibit 10.8.1 to 76 the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.5.2(a) -- Plant Hal Wansley Operating Agreement between Georgia Power Company and Oglethorpe, dated as of March 26, 1976. (Filed as Exhibit 10.8.2 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.5.2(b) -- Amendment, dated as of January 15, 1995, to the Plant Hal Wansley Operating Agreements by and among Georgia Power Company, Oglethorpe, Municipal Electric Authority of Georgia and City of Dalton, Georgia. (Filed as Exhibit 10.5.2(a) to the Registrant's Form 10-Q for the quarterly period ended September 30, 1996, File No. 33-7591.) *10.5.3 -- Plant Hal Wansley Combustion Turbine Agreement between Georgia Power Company and Oglethorpe, dated as of August 2, 1982 and Amendment No. 1, dated October 20, 1982. (Filed as Exhibit 10.18 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.6.1 -- Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement between Georgia Power Company and Oglethorpe, dated as of January 6, 1975. (Filed as Exhibit 10.9.1 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.6.2 -- Edwin I. Hatch Nuclear Plant Operating Agreement between Georgia Power Company and Oglethorpe, dated as of January 6, 1975. (Filed as Exhibit 10.9.2 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.7.1 -- Rocky Mountain Pumped Storage Hydroelectric Project Ownership Participation Agreement, dated as of November 18, 1988, by and between Oglethorpe and Georgia Power Company. (Filed as Exhibit 10.22.1 to the Registrant's Form 10-K for the fiscal year ended December 31, 1988, File No. 33-7591.) *10.7.2 -- Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement, dated as of November 18, 1988, by and between Oglethorpe and Georgia Power Company. (Filed as Exhibit 10.22.2 to the Registrant's Form 10-K for the fiscal year ended December 31, 1988, File No. 33-7591.) 10.8.1 -- Amended and Restated Wholesale Power Contract, dated as of August 1, 1996, between Oglethorpe and Altamaha Electric Membership Corporation and all schedules thereto, together with a Schedule identifying 37 other substantially identical Amended and Restated Wholesale Power Contracts, and an additional Amended and Restated Wholesale Power Contract that is not substantially identical. 10.8.2 -- Amended and Restated Supplemental Agreement, dated as of August 1, 1996, by and between Oglethorpe, Altamaha Electric Membership Corporation and the United States of America, together with a Schedule identifying 38 other substantially identical Amended and Restated Supplemental Agreements. 10.8.3 -- Supplemental Agreement to the Amended Restated Wholesale Power Contract, dated as of January 1, 1997, by and among Georgia Power Company, Oglethorpe and Altamaha Electric Membership Corporation, together with a Schedule identifying 38 other substantially identical Supplemental Agreements. 77 10.8.4 -- Supplemental Agreement to the Amended Restated Wholesale Power Contract, dated as of March 1, 1997, by and between Oglethorpe and Altamaha Electric Membership Corporation, together with a Schedule identifying 36 other substantially identical Supplemental Agreements, and an additional Supplemental Agreement that is not substantially identical. 10.8.5 -- Supplemental Agreement to the Amended Restated Wholesale Power Contract, dated as of March 1, 1997, by and between Oglethorpe and Coweta-Fayette Electric Membership Corporation, together with a Schedule identifying 1 other substantially identical Supplemental Agreement. *10.9 -- Transmission Facilities Operation and Maintenance Contract between Georgia Power Company and Oglethorpe dated as of June 9, 1986. (Filed as Exhibit 10.13 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.10(a) -- Joint Committee Agreement among Georgia Power Company, Oglethorpe, Municipal Electric Authority of Georgia and the City of Dalton, Georgia, dated as of August 27, 1976. (Filed as Exhibit 10.14(b) to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.10(b) -- First Amendment to Joint Committee Agreement among Georgia Power Company, Oglethorpe, Municipal Electric Authority of Georgia and the City of Dalton, Georgia, dated as of June 19, 1978. (Filed as Exhibit 10.14(a) to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.11 -- Interconnection Agreement between Oglethorpe and Alabama Electric Cooperative, Inc., dated as of November 12, 1990. (Filed as Exhibit 10.16(a) to the Registrant's Form 10-K for the fiscal year ended December 31, 1990, File No. 33-7591.) *10.11(a) -- Amendment No. 1 to Interconnection Agreement between Alabama Electric Cooperative, Inc. and Oglethorpe, dated as of April 22, 1994. (Filed as Exhibit 10.11(a) to the Registrant's Form 10-Q for the quarter ended June 30, 1994, File No. 33-7591.) *10.11(b) -- Letter of Commitment (Firm Power Sale) Under Service Schedule J - Negotiated Interchange Service between Alabama Electric Cooperative, Inc. and Oglethorpe, dated March 31, 1994. (Filed as Exhibit 10.11(b) to the Registrant's Form 10-Q for the quarter ended June 30, 1994, File No. 33-7591.) *10.12 -- Oglethorpe Deferred Compensation Plan for Key Employees, as Amended and Restated January, 1987. (Filed as Exhibit 10.19 to the Registrant's Form 10-K for the fiscal year ended December 31, 1986, File No. 33-7591.) *10.13.1 -- Assignment of Power System Agreement and Settlement Agreement, dated January 8, 1975, by Georgia Electric Membership Corporation to Oglethorpe. (Filed as Exhibit 10.20.1 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.13.2 -- Power System Agreement, dated April 24, 1974, by and between Georgia Electric Membership Corporation and Georgia Power Company. (Filed as Exhibit 10.20.2 to the 78 Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.13.3 -- Settlement Agreement, dated April 24, 1974, by and between Georgia Power Company, Georgia Municipal Association, Inc., City of Dalton, Georgia Electric Membership Corporation and Crisp County Power Commission. (Filed as Exhibit 10.20.3 to the Registrant's Form S-1 Registration Statement, File No. 33-7591, filed on October 9, 1986.) *10.14 -- Distribution Facilities Joint Use Agreement between Oglethorpe and Georgia Power Company, dated as of May 12, 1986. (Filed as Exhibit 10.21 to the Registrant's Form 10-K for the fiscal year ended December 31, 1986, File No. 33-7591.) *10.15.1 -- Long Term Firm Power Purchase Agreement, dated as of July 19, 1989, by and between Oglethorpe and Big Rivers Electric Corporation. (Filed as Exhibit 10.24.1 to the Registrant's Form 10-K for the fiscal year ended December 31, 1989, File No. 33-7591.) *10.15.2 -- Coordination Services Agreement, dated as of August 21, 1989, by and between Oglethorpe and Georgia Power Company. (Filed as Exhibit 10.24.2 to the Registrant's Form 10-K for the fiscal year ended December 31, 1989, File No. 33-7591.) *10.15.3 -- Long Term Firm Power Purchase Agreement between Big Rivers Electric Corporation and Oglethorpe, dated as of December 17, 1990. (Filed as Exhibit 10.24.3 to the Registrant's Form 10-K for the fiscal year ended December 31, 1990, File No. 33-7591.) *10.15.4 -- Interchange Agreement between Oglethorpe and Big Rivers Electric Corporation, dated as of November 12, 1990. (Filed as Exhibit 10.24.4 to the Registrant's Form 10-K for the fiscal year ended December 31, 1990, File No. 33-7591.) *10.16 -- Block Power Sale Agreement between Georgia Power Company and Oglethorpe, dated as of November 12, 1990. (Filed as Exhibit 10.25 to the Registrant's Form 8-K, filed January 4, 1991, File No. 33-7591.) *10.17 -- Coordination Services Agreement between Georgia Power Company and Oglethorpe, dated as of November 12, 1990. (Filed as Exhibit 10.26 to the Registrant's Form 8-K, filed January 4, 1991, File No. 33-7591.) *10.18 -- Revised and Restated Integrated Transmission System Agreement between Oglethorpe and Georgia Power Company, dated as of November 12, 1990. (Filed as Exhibit 10.27 to the Registrant's Form 8-K, filed January 4, 1991, File No. 33-7591.) *10.19 -- ITSA, Power Sale and Coordination Umbrella Agreement between Oglethorpe and Georgia Power Company, dated as of November 12, 1990. (Filed as Exhibit 10.28 to the Registrant's Form 8-K, filed January 4, 1991, File No. 33-7591.) *10.20 -- Amended and Restated Nuclear Managing Board Agreement among Georgia Power Company, Oglethorpe Power Corporation, Municipal Electric Authority of Georgia and City of Dalton, Georgia dated as of July 1, 1993. (Filed as Exhibit 10.36 to the Registrant's 10-Q for the quarterly period ended September 30, 1993, File No. 33-7591.) *10.21 -- Supplemental Agreement by and among Oglethorpe, Tri-County Electric Membership Cooperation and Georgia Power Company, dated as of November 12, 1990, together with 79 a Schedule identifying 38 other substantially identical Supplemental Agreements. (Filed as Exhibit 10.30 to the Registrant's Form 8-K, filed January 4, 1991, File No. 33-7591.) *10.22 -- Unit Capacity and Energy Purchase Agreement between Oglethorpe and Entergy Power Incorporated, dated as of October 11, 1990. (Filed as Exhibit 10.31 to the Registrant's Form 10-K for the fiscal year ended December 31, 1990, File No. 33-7591.) *10.23 -- Interchange Agreement between Oglethorpe and Arkansas Power & Light Company, Louisiana Power & Light Company, Mississippi Power & Light Company, New Orleans Public Service, Inc., Energy Services, Inc., dated as of November 12, 1990. (Filed as Exhibit 10.32 to the Registrant's Form 10-K for the fiscal year ended December 31, 1990, File No. 33-7591.) *10.24 -- Interchange Agreement between Oglethorpe and Seminole Electric Cooperative, Inc., dated as of November 12, 1990. (Filed as Exhibit 10.33 to the Registrant's Form 10-K for the fiscal year ended December 31, 1990, File No. 33-7591.) *10.25.1 -- Excess Energy and Short-term Power Agreement between Oglethorpe and Tennessee Valley Authority, effective as of January 23, 1991. (Filed as Exhibit 10.34.1 to the Registrant's Form 10-K for the fiscal year ended December 31, 1990, File No. 33-7591.) *10.25.2 -- Transmission Service Agreement between Oglethorpe and Tennessee Valley Authority, effective as of January 23, 1991. (Filed as Exhibit 10.34.2 to the Registrant's Form 10-K for the fiscal year ended December 31, 1990, File No. 33-7591.) *10.26 -- Power Purchase Agreement between Oglethorpe and Hartwell Energy Limited Partnership, dated as of June 12, 1992. (Filed as Exhibit 10.35 to the Registrant's Form 10-K for the fiscal year ended December 31, 1992, File No. 33-7591). *10.27(5) -- Master Power Purchase and Sale Agreement between Enron Power Marketing, Inc. and Oglethorpe, dated as of January 3, 1996. (Filed as Exhibit 10.27 to the Registrant's Form 10-K for the fiscal year ended December 31, 1995, File No. 33-7591.) *10.27(a) (5) -- Extension and Modification Agreement between Enron Power Marketing, Inc. and Oglethorpe, dated as of April 30, 1996. (Filed as Exhibit 10.27(a) to the Registrant's Form 10-Q for the quarterly period ended March 31, 1996, File No. 33-7591.) *10.28(6) -- Employment Agreement between Oglethorpe and T. D. Kilgore, dated as of December 20, 1995. (Filed as Exhibit 10.28 to the Registrant's Form 10-K for the fiscal year ended December 31, 1995, File No. 33-7591.) *10.29(5) -- Master Power Purchase and Sale Agreement between Duke/Louis Dreyfus L.L.C. and Oglethorpe, dated as of August 31, 1996. (Filed as Exhibit 10.29 to the Registrant's Form 10-Q for the quarterly period ended September 30, 1996, File No. 33-7591.) 10.30(5) -- Power Purchase and Sale Agreement among LG&E Power Marketing Inc., LG&E Energy Corp. and Oglethorpe, dated as of November 19, 1996. 10.31(5) -- Power Purchase and Sale Agreement among LG&E Power Marketing Inc., LG&E Power Inc. and Oglethorpe, dated as of January 1, 1997. 80 10.32.1 -- Participation Agreement (P1), dated as of December 30, 1996, among Oglethorpe, Rocky Mountain Leasing Corporation, Fleet National Bank, as Owner Trustee, SunTrust Bank, Atlanta, as Co-Trustee, the Owner Participant named therein and Utrecht-America Finance Co., as Lender, together with a Schedule identifying five other substantially identical Participation Agreements. 10.32.2 -- Rocky Mountain Head Lease Agreement (P1), dated as of December 30, 1996, between Oglethorpe and SunTrust Bank, Atlanta, as Co-Trustee, together with a Schedule identifying five other substantially identical Rocky Mountain Head Lease Agreements. 10.32.3 -- Ground Lease Agreement (P1), dated as of December 30, 1996, between Oglethorpe and SunTrust Bank, Atlanta, as Co-Trustee, together with a Schedule identifying five other substantially identical Ground Lease Agreements. 10.32.4 -- Rocky Mountain Agreements Assignment and Assumption Agreement (P1), dated as of December 30, 1996, between Oglethorpe and SunTrust Bank, Atlanta, as Co-Trustee, together with a Schedule identifying five other substantially identical Rocky Mountain Agreements Assignment and Assumption Agreements. 10.32.5 -- Facility Lease Agreement (P1), dated as of December 30, 1996, between SunTrust Bank, Atlanta, as Co-Trustee and Rocky Mountain Leasing Corporation, together with a Schedule identifying five other substantially identical Facility Lease Agreements. 10.32.6 -- Ground Sublease Agreement (P1), dated as of December 30, 1996, between SunTrust Bank, Atlanta, as Co-Trustee and Rocky Mountain Leasing Corporation, together with a Schedule identifying five other substantially identical Ground Sublease Agreements. 10.32.7 -- Rocky Mountain Agreements Re-assignment and Assumption Agreement (P1), dated as of December 30, 1996, between SunTrust and Rocky Mountain Leasing Corporation, together with a Schedule identifying five other substantially identical Rocky Mountain Agreements Re-assignment and Assumption Agreements. 10.32.8 -- Facility Sublease Agreement (P1), dated as of December 30, 1996, between Oglethorpe and Rocky Mountain Leasing Corporation, together with a Schedule identifying five other substantially identical Facility Sublease Agreements. 10.32.9 -- Ground Sub-sublease Agreement (P1), dated as of December 30, 1996, between Rocky Mountain Leasing Corporation and Oglethorpe, together with a Schedule identifying five other substantially identical Ground Sub-sublease Agreements. 10.32.10 -- Rocky Mountain Agreements Second Re-assignment and Assumption Agreement (P1), dated as of December 30, 1996, between Rocky Mountain Leasing Corporation and Oglethorpe, together with a Schedule identifying five other substantially identical Rocky Mountain Agreements Second Re-assignment and Assumption Agreements. 10.32.11 -- Payment Undertaking Agreement (P1), dated as of December 30, 1996, between Rocky Mountain Leasing Corporation and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., New York Branch, as the Bank, together with a Schedule identifying five other substantially identical Payment Undertaking Agreements. 10.32.12 -- Payment Undertaking Pledge Agreement (P1), dated as of December 30, 1996, between Rocky Mountain Leasing Corporation, Fleet National Bank, as Owner Trustee, and 81 SunTrust Bank, Atlanta, as Co-Trustee, together with a Schedule identifying five other substantially identical Payment Undertaking Pledge Agreements. 10.32.13 -- Equity Funding Agreement (P1), dated as of December 30, 1996, between Rocky Mountain Leasing Corporation, AIG Match Funding Corp., the Owner Participant named therein, Fleet National Bank, as Owner Trustee, and SunTrust Bank, Atlanta, as Co-Trustee, together with a Schedule identifying five other substantially identical Equity Funding Agreements. 10.32.14 -- Equity Funding Pledge Agreement (P1), dated as of December 30, 1996, between Rocky Mountain Leasing Corporation and SunTrust Bank, Atlanta, as Co-Trustee, together with a Schedule identifying five other substantially identical Equity Funding Pledge Agreements. 10.32.15 -- Deed to Secure Debt, Assignment of Surety Bond and Security Agreement (P1), dated as of December 30, 1996, between Rocky Mountain Leasing Corporation, SunTrust Bank, Atlanta, as Co-Trustee, together with a Schedule identifying five other substantially identical Collateral Assignment, Assignment of Surety Bond and Security Agreements. 10.32.16 -- Subordinated Deed to Secure Debt and Security Agreement (P1), dated as of December 30, 1996, among Oglethorpe, AMBAC Indemnity Corporation and SunTrust Bank, Atlanta, as Co-Trustee, together with a Schedule identifying five other substantially identical Subordinated Deed to Secure Debt and Security Agreements. 10.32.17 -- Tax Indemnification Agreement (P1), dated as of December 30, 1996, between Oglethorpe and the Owner Participant named therein, together with a Schedule identifying five other substantially identical Tax Indemnification Agreements. 10.32.18 -- Consent No. 1, dated as of December 30, 1996, among Georgia Power Company, Oglethorpe, SunTrust Bank, Atlanta, as Co-Trustee, and Fleet National Bank, as Owner Trustee, together with a Schedule identifying five other substantially identical Consents. 10.32.19 -- OPC Intercreditor and Security Agreement No. 1, dated as of December 30, 1996, among the United States of America, acting through the Administrator of the Rural Utilities Service, SunTrust Bank, Atlanta, Oglethorpe, Rocky Mountain Leasing Corporation, SunTrust Bank, Atlanta, as Co-Trustee, Fleet National Bank, as Owner Trustee, Utrecht-America Finance Co., as Lender and AMBAC Indemnity Corporation, together with a Schedule identifying five other substantially identical Intercreditor and Security Agreements. 10.33.1 -- Member Transmission Service Agreement, dated as of March 1, 1997, by and between Oglethorpe and Georgia Transmission Corporation (An Electric Membership Corporation). 10.33.2 -- Generation Services Agreement, dated as of March 1, 1997, by and between Oglethorpe and Georgia System Operations Corporation. 10.33.3 -- Operation Services Agreement, dated as of March 1, 1997, by and between Oglethorpe and Georgia System Operations Corporation. 21.1 -- Rocky Mountain Leasing Corporation, a Delaware corporation. 82 27.1 -- Financial Data Schedule (for SEC use only) - ---------- (1) Pursuant to 17 C.F.R. 229.601(b)(2), the schedules and exhibits to this document are identified on a list of schedules and exhibits included within this document and are not filed herewith; however the registrant hereby agrees that such schedules and exhibits will be provided to the Commission upon request. (2) Pursuant to 17 C.F.R. 229.601(b)(4)(iii), this document is not filed herewith; however the registrant hereby agrees that such document will be provided to the Commission upon request. (3) For the reason stated in footnote (2), this document and five other substantially identical documents are not filed as exhibits to this Registration Statement. (4) For the reason stated in footnote (2), this document and another substantially identical document are not filed as exhibits to this Registration Statement. (5) Certain portions of this document have been omitted as confidential and filed separately with the Commission. (6) Indicates a management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 14(c) of this report. All other schedules and exhibits are omitted because of the absence of the conditions under which they are required or because the required information is included in the financial statements and related notes to financial statements. (b) Reports on Form 8-K. No reports on Form 8-K were filed by Oglethorpe for the quarter ended December 31, 1996. 83 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 26th day of March 1997. OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION) By: /s/ J. CALVIN EARWOOD ---------------------------------------------- J. Calvin EARWOOD, CHAIRMAN OF THE BOARD Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ J. CALVIN EARWOOD Chairman of the Board, March 26, 1997 - ------------------------------------- Director (Principal Executive J. CALVIN EARWOOD Officer) /s/ T. D. KILGORE President and Chief Executive March 26, 1997 - ------------------------------------- Officer (Principal Executive T. D. KILGORE Officer) /s/ VACANT (Principal Financial Officer) March 26, 1997 - ------------------------------------- VACANT /s/ ROBERT D. STEELE Controller March 26, 1997 - ------------------------------------- (Principal Accounting Officer) ROBERT D. STEELE /s/ ASHLEY C. BROWN Director March 26, 1997 - ------------------------------------- ASHLEY C. BROWN /s/ NEWTON A. CAMPBELL Director March 26, 1997 - ------------------------------------- NEWTON A. CAMPBELL /s/ LARRY N. CHADWICK Director March 26, 1997 - ------------------------------------- LARRY N. CHADWICK /s/ BENNY W. DENHAM Director March 26, 1997 - ------------------------------------- BENNY W. DENHAM /s/ SAMMY M. JENKINS Director March 26, 1997 - ------------------------------------- SAMMY M. JENKINS /s/ MAC F. OGLESBY Director March 26, 1997 - ------------------------------------- MAC F. OGLESBY /s/ J. SAM L. RABUN Director March 26, 1997 - ------------------------------------- J. SAM L. RABUN
84 SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT. The registrant is a membership corporation and has no authorized or outstanding equity securities. Proxies are not solicited from the holders of Oglethorpe's public bonds. No annual report or proxy material has been sent to such bondholders. 85 EX-2.1 2 EXHIBIT 2.1 Exhibit 2.1 SECOND AMENDED AND RESTATED RESTRUCTURING AGREEMENT BY AND AMONG OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), GEORGIA TRANSMISSION CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION) AND GEORGIA SYSTEM OPERATIONS CORPORATION February 24, 1997 TABLE OF CONTENTS ARTICLE 1 DEFINITIONS............................................................2 1.1 Defined Terms..............................................2 (a) "Business Day".......................................2 (b) "Calculation Date"...................................2 (c) "Closing"............................................2 (d) "Closing Conditions".................................2 (e) "Closing Date".......................................2 (f) "Effective Date".....................................2 (g) "Existing Wholesale Power Contracts".................2 (h) "FERC"...............................................3 (i) "FFB"................................................3 (j) "GSOC Asset Transfer Date"...........................3 (k) "GTC Assumed OPC Debt"...............................3 (l) "GTC CoBank Notes"...................................3 (m) "GTC FFB Note".......................................3 (n) "GTC Indenture"......................................3 (o) "GTC PCB Assumption Agreements"......................3 (p) "GTC RUS Notes"......................................3 (q) "ITSA"...............................................4 (r) "Member Agreement"...................................4 (s) "New Wholesale Power Contracts"......................4 (t) "Net Book Value".....................................4 (u) "OPC Bylaw Amendments"...............................4 (v) "OPC Closing Date Distribution"......................4 (w) "OPC Indenture"......................................4 (x) "OPC Mortgage".......................................4 (y) "PCB Trustees".......................................5 (z) [Reserved]...........................................5 (aa) [Reserved]...........................................5 (ab) "Purchase Price Adjustment"..........................5 (ac) "Purchase Price Adjustment Event"....................5 (ad) "RUS"................................................5 (ae) "SEC"................................................5 (af) "System Operations Assets"...........................5 (ag) "System Operations Business".........................6 (ah) "System Operations Contracts"........................6 (ai) "System Operations Employees"........................6 i (aj) "System Operations Liabilities"......................6 (ak) "Transmission Assets"................................6 (al) "Transmission Business"..............................7 (am) "Transmission Contracts".............................7 (an) "Transmission Employees".............................7 (ao) "Transmission Liabilities"...........................7 1.2 Other Definitions..........................................7 ARTICLE 2 THE RESTRUCTURING......................................................8 2.1 The Restructuring and Division of Functions................8 (a) Systems Operations Business..........................8 (b) OPC Closing Date Distribution........................8 (c) Transmission Business................................8 2.2 New Wholesale Power Contracts..............................8 2.3 OPC Closing Date Distribution..............................9 (a) Allocation Among Members.............................9 (b) Methodology for Charging Each Member's Patronage Account..............................................9 2.4 Acquisition of Transmission Business.......................9 (a) Purchase and Sale of Transmission Assets.............9 (b) Assumption of Transmission Liabilities..............10 (c) Purchase Price......................................10 (d) Payment of GTC Purchase Price.......................10 (e) Debt Payments Prior to Effective Date...............11 (f) Transfer of Employees...............................11 (g) Adjustment to Purchase Price Resulting from Certain Events Subsequent to the Closing Date.......11 (h) Assets Owned in Common..............................11 2.5 Transmission Contracts....................................12 2.6 Transfer of System Operations Business....................12 (a) Purchase and Sale of System Operations Assets.......12 (b) Assumption of System Operations Liabilities.........12 (c) Purchase Price......................................12 (d) Transfer of Employees...............................13 2.7 System Operations Contracts...............................13 2.8 Change of OPC Name........................................13 2.9 Provision of Administrative Services......................13 2.10 Office Space Leases.......................................13 ii 2.11 Employee Benefit Plans....................................13 (a) Amendments To Be Adopted............................14 (b) Allocation of Costs.................................14 (c) Plans Covered.......................................14 (d) Right to Terminate Sponsorship......................14 2.12 Further Assurances........................................14 ARTICLE 3 OPC GOVERNANCE MATTERS................................................15 3.1 New OPC Governance........................................15 (a) Conditions to Full Implementation of Governance Changes..................................15 (b) Possible Modifications..............................15 3.2 Interim Governance........................................15 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF OPC.................................16 4.1 Organization and Qualification, Etc.......................16 4.2 Authorization, Etc........................................16 4.3 Non-Contravention.........................................16 4.4 Governmental Consents, Etc................................17 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF GTC AND GSOC........................17 5.1 Organization and Qualification, Etc.......................17 5.2 Authorization, Etc........................................17 5.3 Non-Contravention.........................................18 5.4 Governmental Consents, Etc................................18 ARTICLE 6 ADDITIONAL COVENANTS AND AGREEMENTS...................................19 6.1 Conduct of Business.......................................19 6.2 Interim Cost Allocations..................................19 6.3 HSR Act Filings...........................................19 iii 6.4 Consents, Authorizations, Etc.............................19 (a) OPC Closing Date Distribution.......................19 (b) New Wholesale Power Contracts.......................19 (c) Release from OPC Mortgage...........................20 (d) GTC Assumption Documents............................20 (e) OPC Indenture.......................................20 (f) Transmission Contracts..............................20 (g) GSOC Matters........................................20 (h) System Operations Contracts.........................20 (i) Other Matters Contemplated Hereby...................20 6.5 IRS Ruling..........................................20 6.6 Access; Confidentiality...................................20 (a) Access..............................................20 (b) Confidentiality.....................................20 6.7 Expenses..................................................21 6.8 Publicity.................................................21 6.9 Actions to Avoid and Notices of, Breaches of Representations and Warranties............................................21 6.10 Additional Agreements.....................................21 ARTICLE 7 CLOSING CONDITIONS....................................................22 7.1 Closing Conditions........................................22 (a) Governance Changes..................................22 (b) Member Agreement....................................22 (c) RUS Approvals.......................................22 (d) Hart-Scott-Rodino...................................23 (e) PUHCA Matters.......................................23 (f) Federal Power Act Matters...........................23 (g) No Injunction, Etc..................................23 (h) Other Consents, Authorizations, Etc.................23 (i) Representations and Warranties; Compliance With Covenants and Obligations...........................23 (j) Confirmation of Ratings.............................24 (k) New Wholesale Power Contracts.......................24 (l) Membership In GTC...................................24 (m) Transmission Contracts..............................24 (n) Membership In GSOC..................................24 iv (o) System Operations Contracts.........................24 (p) State Tax Matters...................................24 (q) Opinions of Counsel and Certified Resolutions.......24 7.2 Waiver of Conditions......................................24 ARTICLE 8 CLOSING...............................................................25 8.1 Closing...................................................25 8.2 Pre-Closing...............................................25 8.3 Deliveries at or prior to GSOC Asset Transfer Date........25 8.4 Effective Date............................................25 ARTICLE 9 TERMINATION AND ABANDONMENT...........................................26 9.1 Termination and Abandonment...............................26 (a) By Mutual Action....................................27 (b) By OPC..............................................27 9.2 Procedure for Termination.................................27 9.3 Effect of Termination.....................................27 ARTICLE 10 MISCELLANEOUS.........................................................27 10.1 Survival..................................................27 10.2 Dispute Resolution and Arbitration........................27 (a) Arbitration Procedures..............................28 (b) Arbitration Decision................................28 10.3 Specific Performance, Etc.................................28 10.4 Waiver....................................................28 10.5 Notices...................................................28 10.6 Counterparts; Facsimile Delivery..........................29 10.7 Headings..................................................29 10.8 Amendment.................................................29 10.9 Severability..............................................29 10.10 Miscellaneous.............................................30 v LIST OF SCHEDULES AND EXHIBITS Schedules Schedule 1.1(af) System Operations Assets Schedule 1.1(aj) Certain System Operations Liabilities Schedule 1.1(ao) Certain Transmission Liabilities Schedule 2.3 Methodology for Determining OPC Closing Date Distribution and Members' Capital Contribution to GTC Schedule 2.4(d)(i) Debt Allocation Methodology Exhibits Exhibit A Draft of Indemnity Agreement between OPC and GTC Exhibit B Draft of Assumption Agreement between GTC and the PCB Trustees vi LIST OF CERTAIN DEFINED TERMS DEFINED IN SECTIONS OTHER THAN SECTION 1.1 Term Section - ---- ------- Additional OPC Contract 4.2 Additional GSOC Contract 5.2 Additional GTC Contract 5.2 Agreement Preamble Applicable Additional Contract 6.4 Appraisal 2.4(c) Calculation Date 2.4 Closing 8.1 Confidential Material 6.6(b) Employee Benefit Plans 2.11(c) First Amended and Restated Agreement Preamble GSOC Preamble GSOC Assumed OPC Debt 2.6(c) GSOC Assumption Agreement 2.6(c) GSOC Purchase Money Note 2.6(c) GTC Preamble GTC Assumed OPC Deferred Charges 2.4(c) GTC Purchase Price 2.4(c) HSR Act 4.4 IRS Ruling 3.1(a) Members Preamble OPC Preamble OPC Closing Date Distribution 2.3 Original Agreement Preamble Pre-Closing 8.2 Purchase Price Premium 2.4(c) Reimbursement Amount 2.4(e) Representatives 6.6(b) vii SECOND AMENDED AND RESTATED RESTRUCTURING AGREEMENT This Second Amended and Restated Restructuring Agreement (this "Agreement") is dated as of February 24, 1997, by and among Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) ("OPC"), Georgia Transmission Corporation (An Electric Membership Corporation) ("GTC") and Georgia System Operations Corporation ("GSOC"). BACKGROUND STATEMENT Since its formation, OPC has provided generation, transmission and ancillary and other related services for the 39 electric membership cooperatives that are members of OPC (the "Members") in order to satisfy the Members' requirements for power. Because of the increasing competition occurring in the electric industry and related changes in law and regulation, OPC and the Members have determined that it is in their mutual best interests to restructure OPC to provide greater flexibility for the future and to settle certain issues and controversies confronting OPC and the Members, as contemplated by a Statement of Agreement, dated November 21, 1995, among representatives of OPC and certain Members named therein, as approved by the OPC Board of Directors on December 4, 1995. On March 29, 1996, the Boards of Directors of OPC, GTC and GSOC approved the Restructuring Agreement, dated as of March 29, 1996 (the "Original Agreement"), by and among OPC, GTC and GSOC and the restructuring and other transactions and matters contemplated thereby. Also on March 29, 1996, the Boards of Directors of OPC, GTC and GSOC approved the "Member Agreement" (as defined in Section 1.1) for the purpose of submitting the Member Agreement to the Members for their consideration. The Board of Directors of OPC also has recommended to the Members that they join OPC, GTC and GSOC in executing the Member Agreement and thereby agree among themselves and with OPC, GSOC and GTC as to those matters contemplated hereby and thereby that directly involve the Members in their capacities as separate corporations. At OPC, GTC and GSOC board meetings held on July 8, 1996, June 26, 1996, and July 2, 1996, respectively, the Boards of Directors of OPC, GTC and GSOC approved certain amendments to the Original Agreement and approved a First Amended and Restated Restructuring Agreement, dated as of August 1, 1996, by and among OPC, GTC and GSOC (the "First Amended and Restated Agreement"), to replace and supersede the Original Agreement in its entirety. At meetings of the Special Restructuring Committees of the Boards of Directors of OPC, GTC and GSOC held on December 17, 1996, the Special Restructuring Committees of OPC, GTC and GSOC approved an amendment to Section 3.1(a) of the First Amended and Restated Agreement. This Agreement amends and restates the First Amended and Restated Agreement, as heretofore amended. From and after the date hereof, this Agreement replaces and supersedes the First Amended and Restated Agreement, as heretofore amended, in its entirety to set forth the terms on which the restructuring and related changes will occur. Among other things, the restructuring will separate OPC's "Transmission Business" substantially as an entirety and its "System Operations Business" substantially as an entirety (as such terms are defined in Section 1.1) from OPC's generation business and any other retained business. OPC will transfer the Transmission Business to GTC and the System Operations Business to GSOC. AGREEMENT In consideration of the mutual representations, warranties, covenants and agreements contained herein, the parties agree as follows: ARTICLE 1 DEFINITIONS 1.1 Defined Terms. For the purposes of this Agreement, the following terms, whether singular or plural, shall have the meanings set forth below: (a) "Business Day" shall mean any day on which both: (i) OPC is open for business, and (ii) commercial banks in the City of Atlanta or in the City of New York are not authorized or required to close. (b) "Calculation Date" shall have the meaning specified in Section 2.4. (c) "Closing" shall have the meaning specified in Section 8.1. (d) "Closing Conditions" shall mean all of the conditions set forth in Article 7 of this Agreement. (e) "Closing Date" shall mean the date on which the Closing occurs pursuant to Article 8 of this Agreement. (f) "Effective Date" shall mean the date established pursuant to Section 8.4. (g) "Existing Wholesale Power Contracts" shall mean the Amended and Consolidated Wholesale Power Contracts, dated as of December 1, 1988, between OPC and each 2 of OPC's 39 Members pursuant to which the Members currently purchase electric power and transmission services from OPC. (h) "FERC" shall mean the Federal Energy Regulatory Commission. (i) "FFB" shall mean the Federal Financing Bank, which is an instrumentality and wholly owned corporation of the United States of America. (j) "GSOC Asset Transfer Date" shall mean the date on which the System Operations Assets are sold and transferred to GSOC and GSOC assumes certain System Operations Liabilities, as provided in Section 2.6. (k) "GTC Assumed OPC Debt" shall mean that portion of OPC's indebtedness that GTC assumes pursuant to the GTC CoBank Notes, the GTC FFB Note, the GTC RUS Notes and the GTC PCB Assumption Agreements. (l) "GTC CoBank Notes" shall mean the notes, and the other agreements and instruments, in the form required by CoBank pursuant to which GTC will assume, and replace OPC as an obligor with respect to, that portion of OPC's indebtedness to CoBank that OPC and GTC have agreed will be assumed as part of the payment of the purchase price pursuant to Section 2.4(d)(i). (m) "GTC FFB Note" shall mean the note in the form required by FFB pursuant to which GTC will assume, and replace OPC as an obligor with respect to, that portion of OPC's indebtedness to the FFB that OPC and GTC have agreed will be assumed as part of the payment of the purchase price pursuant to Section 2.4(d)(i). (n) "GTC Indenture" shall mean an indenture to be agreed to by GTC and RUS prior to the Closing, or any other form of real and personal property security document(s) that GTC and RUS shall mutually agree upon, pursuant to which GTC will pledge, and grant security title to and a security interest in, substantially all of the Transmission Assets to secure the GTC FFB Note, the GTC RUS Notes, the GTC CoBank Notes and the GTC PCB Assumption Agreements. (o) "GTC PCB Assumption Agreements" shall mean collectively the Indemnity Agreement between GTC and OPC and the Assumption Agreements between GTC and the PCB Trustees based on the drafts attached hereto as Exhibits A and B, respectively, as such drafts may be revised from time to time and, when they become available, the final forms of such agreements as they may be agreed upon by OPC and GTC prior to the Closing, pursuant to which GTC will agree to assume the obligation to pay that portion of OPC's pollution control debt secured under the OPC Mortgage (and related obligations) that OPC and GTC have agreed will be assumed as part of the payment of the purchase price pursuant to Section 2.4(d)(i). (p) "GTC RUS Notes" shall mean the notes in the form required by RUS pursuant to which GTC will assume, and replace OPC as an obligor with respect to, that portion of OPC's 3 indebtedness to RUS that OPC and GTC have agreed will be assumed as part of the payment of the purchase price pursuant to Section 2.4(d)(i). (q) "ITSA" shall mean the Revised and Restated Integrated Transmission System Agreement, dated as of November 12, 1990, between OPC and Georgia Power Company. (r) "Member Agreement" shall mean the Member Agreement based on the draft presented to and approved by the OPC Board of Directors at their July 8, 1996 meeting, as such draft may be revised from time to time and, when it becomes available, such Member Agreement in final form as executed and delivered by and among the Members that become parties thereto, OPC, GTC and GSOC (as it may be amended and supplemented thereafter). (s) "New Wholesale Power Contracts" shall have the meaning specified in the Member Agreement. (t) "Net Book Value" of any asset shall mean at any given time the amount, net of depreciation, at which such asset is recorded on the books of the owner of such asset. (u) "OPC Bylaw Amendments" shall mean the amendments to OPC's Bylaws relating to the election of directors in the form adopted by the OPC member representatives at their March 29, 1996 annual meeting, subject to the conditions set forth in Section 3.1(a), as such Bylaw amendments may be amended pursuant to Section 3.1(b) or otherwise. (v) "OPC Closing Date Distribution" shall mean the distribution to be made by OPC on the Closing Date, as contemplated by Section 2.3. (w) "OPC Indenture" shall mean an indenture to be agreed to by OPC and RUS prior to the Closing, or any other form of real and personal property security document(s) that OPC and RUS shall mutually agree upon, pursuant to which OPC will pledge, and grant security title to and a security interest in, substantially all of the real and tangible personal property of OPC to secure the obligations currently secured under OPC Mortgage as to which OPC is not released from liability in connection with the assumption by GTC of the GTC Assumed OPC Debt. (x) "OPC Mortgage" shall mean the Consolidated Mortgage and Security Agreement, dated as September 1, 1994, by and among OPC, the United States of America, acting through the Administrator of the RUS, CoBank, ACB, as successor in interest to National Bank for Cooperatives, Credit Suisse, acting by and through its New York Branch, and SunTrust Bank, Atlanta, as successor to Trust Company Bank (as trustee under certain pollution control bond indentures), as mortgagees, either as originally executed or as the same may from time to time be supplemented, modified, amended, renewed, extended or consolidated, or any alternate mortgage, deed to secure debt, deed of trust, trust indenture or other security instrument entered into by OPC as a substitute or replacement for such mortgage, which secures equally and ratably the payment of principal of and interest on the obligations thereunder and creates a lien on substantially all of the 4 real and tangible personal property of OPC in favor of such mortgagees and/or additional and/or substitute mortgagees or secured parties. (y) "PCB Trustees" shall mean SunTrust Bank, Atlanta, acting as trustee under the several pollution control bond indentures identified in the OPC Mortgage. (z) [Reserved] (aa) [Reserved] (ab) "Purchase Price Adjustment" shall mean: (A) 75% of that amount, if any, by which (i) the consideration received by GTC for any sale, lease or exchange of any part or all of the Transmission Assets constituting a Purchase Price Adjustment Event exceeds the amount paid to OPC for such Transmission Assets, or (ii) the value of the Transmission Assets reflected in the consideration received by GTC or its members in any merger or consolidation of GTC or any other disposition or reduction of the GTC members' capital interests constituting a Purchase Price Adjustment Event exceeds the amount paid to OPC for such Transmission Assets, in each of the cases (i) and (ii) net of taxes and other expenses attributable to the transaction, minus (B) any Purchase Price Adjustment previously paid with respect to such Transmission Assets. (ac) "Purchase Price Adjustment Event" shall mean the consummation by GTC or one or more members of GTC of any one or more transactions after the Closing Date and prior to the fifth anniversary of the Effective Date (or thereafter if consummated pursuant to a binding contract entered into after the Closing Date and prior to the fifth anniversary of the Effective Date) pursuant to which: (i) GTC sells, leases or exchanges 20% or more, in the aggregate (measured based on Net Book Value at the time of the transaction or during the time of any series of related transactions), of the Transmission Assets, or merges or consolidates with another entity, or (ii) any member or members of GTC, in a transaction or series of transactions involving any party which is not one of the 39 Members of OPC as of the Effective Date, dispose of or in any other manner reduce the capital interests in GTC of those entities constituting the members of GTC as of the Effective Date (tested separately based on both the dollar value of such members' capital interests and the percentage such members' capital interests represent of the total GTC capital interests, in each case at the time of the transaction or during any series of related transactions). (ad) "RUS" shall mean the Rural Utilities Service, as successor to the Rural Electrification Administration, which is an agency of the United States Department of Agriculture, or any governmental agency succeeding to its powers and functions. (ae) "SEC" shall mean the Securities and Exchange Commission. (af) "System Operations Assets" shall mean the computers, other equipment, equipment leases, and other property of OPC identified on Schedule 1.1(af) as constituting the 5 System Operations Assets, as such Schedule may be amended by OPC and GSOC from time to time, all of which assets are used to perform system operations services. (ag) "System Operations Business" shall mean the performance of system operations and related services and the use and ownership of and rights to the System Operations Assets and shall include the System Operations Liabilities. (ah) "System Operations Contracts" shall mean the contracts (i) relating to system operations services to be agreed to between GSOC and OPC and between GSOC and GTC, respectively, as such contracts are executed and delivered by the parties thereto, (ii) the "Member System Operations Contracts" between GSOC and each Member, as defined in the Member Agreement, and (iii) the generation services contract to be agreed to between GSOC and OPC, as such contract is executed and delivered by the parties thereto. (ai) "System Operations Employees" shall mean those individuals so designated by the President and Chief Executive Officer of OPC. (aj) "System Operations Liabilities" shall mean (i) the obligations assumed by GSOC from OPC under the leases and other contractual undertakings identified on Schedule 1.1(aj) as such obligations exist as of the GSOC Asset Transfer Date; (ii) OPC's obligations relating to the System Operations Employees as such obligations exist as of the date which OPC terminates such employees pursuant to Section 2.6(d); and (iii) such other obligations relating to the performance of system operations services as OPC and GSOC shall agree upon from time to time. (ak) "Transmission Assets" shall mean all assets of OPC of every kind and description and wherever located, which, as of the Closing Date, (A) are properly classified as transmission assets under accounts 350 to 397 of the System of Accounts as prescribed by RUS in effect on the Closing Date, or (B) qualify for treatment as "Transmission Facilities" under the ITSA or (C) are shown on OPC's books as of the Closing Date as transmission assets, plus the warehouse facility located in Conyers, Georgia, and all inventories relating to the transmission assets contained therein, all claims and rights under work in progress, contracts (including the right to provide transmission services to the Members in the manner contemplated by the Transmission Contracts), leases, licenses or other agreements (whether governmental or private) and rights in condemnation proceedings and other litigation matters (including by way of counterclaim), in each case, used in or otherwise relating to its Transmission Business; provided, however, that the Transmission Assets shall not include: (i) any accounts receivable of OPC; (ii) any of the real property, buildings and fixtures constituting OPC's headquarters facility or, except as OPC and GTC may mutually agree, any equipment (except the types expressly specified above), furniture and other personal property located at OPC's headquarters facility (subject to OPC's obligations under Section 2.10 to enter into certain office space leases); (iii) any books or records (subject to OPC's obligations to provide access and copies pursuant to Section 6.6); (iv) any assets which OPC owns as a tenant in common with others (except to the extent otherwise provided by the third sentence of Section 2.4(h)); or (v) any step-up substation transformers located at generation facilities. For all purposes of this Agreement, 6 including all provisions relating to the Purchase Price Adjustment, "Transmission Assets" shall be limited to the assets acquired or to be acquired by GTC from OPC on the Closing Date. (al) "Transmission Business" shall mean the performance of transmission and related services and the use and ownership of and rights to the Transmission Assets and shall include the Transmission Liabilities. (am) "Transmission Contracts" shall mean the "Member Transmission Contracts" as defined in the Member Agreement and the contract(s) to be executed and delivered between GTC and OPC providing for transmission and related services based on the form of the Member Transmission Contracts, with such changes from such form as GTC and OPC shall agree upon (the "OPC Transmission Contract"). (an) "Transmission Employees" shall mean those individuals so designated by the President and Chief Executive Officer of OPC. (ao) "Transmission Liabilities" shall mean all obligations, taxes and liabilities of every kind and nature, known or unknown, contingent or otherwise, that exist as of the Effective Date and are primarily related to the Transmission Business or the Transmission Employees (except for the OPC Closing Date Distribution); provided, however, that any such obligations or liabilities shall not be included as Transmission Liabilities to the extent OPC's President and Chief Executive Officer determines that it would not be in the best interests of OPC and GTC to so include them and so notifies GTC at least 10 Business Days prior to Closing. Without in any way limiting the foregoing, but subject to the foregoing proviso, the Transmission Liabilities shall include any and all costs, expenses, obligations and liabilities incurred in connection with or otherwise relating to any litigation described on Schedule 1.1(ao) and not paid prior to the Effective Date. Notwithstanding the foregoing, Transmission Liabilities shall not include: (A) the GTC Assumed OPC Debt; (B) any taxes or accounts payable to the extent they arise from the conduct of the Transmission Business prior to the Effective Date; (C) any taxes of any kind imposed on OPC by reason of the consummation of the transactions contemplated by this Agreement; (D) or any taxes imposed on any Members of OPC. 1.2 Other Definitions. Certain other terms are defined elsewhere in this Agreement and have the meanings so indicated. A List of Certain Defined Terms immediately following the Table of Contents has been included for the convenience of the parties to assist in locating such definitions, but such list shall not affect the interpretation of this Agreement. 7 ARTICLE 2 THE RESTRUCTURING 2.1 The Restructuring and Division of Functions. On the terms and conditions set forth herein, the Transmission Business and the System Operations Business shall be separated from OPC's other business functions, assets and liabilities (including those relating to the generation of power). OPC shall retain all of its business functions, assets and liabilities that are not being sold to and assumed by GTC or GSOC. (a) Systems Operations Business. (i) As soon as all required approvals have been obtained and the conditions contained in Section 7.1(e) and (f), to the extent they relate to the sale and transfer of the System Operations Assets, have been satisfied or waived, and without waiting for the Closing of the other transactions contemplated hereby, the System Operations Assets and the System Operations Liabilities shall be transferred and sold to and assumed by GSOC, as contemplated by and subject to the provisions contained in Section 2.6. (ii) On or before the Closing Date, OPC shall transfer to GSOC the System Operations Employees to the extent contemplated by Section 2.6(d). (iii) GSOC shall provide system operations and related services pursuant to the System Operations Contracts. (b) OPC Closing Date Distribution. At the Closing, OPC shall effect the OPC Closing Date Distribution contemplated by Section 2.3. (c) Transmission Business. At the Closing, the Transmission Business shall be transferred and sold to and assumed by GTC, as contemplated by Section 2.4. On or before the Closing, OPC shall transfer to GTC the Transmission Employees to the extent contemplated by Section 2.4(f). GTC shall provide transmission and related services pursuant to the Transmission Contracts. 2.2 New Wholesale Power Contracts. To facilitate the restructuring, including the transfer of the Transmission Business to GTC, OPC shall seek to execute and deliver at or before Closing a New Wholesale Power Contract with each Member pursuant to the terms of the Member Agreement. Each New Wholesale Power Contract shall govern the purchase and sale of power between OPC and each respective Member that is a party to such a New Wholesale Power Contract as provided therein and in Section 8.4. Unless and until a Member's New Wholesale Power Contract becomes effective in accordance with its terms, such Member's Existing Wholesale Power Contract shall govern the purchase and sale of power and other services between OPC and such Member. 8 2.3 OPC Closing Date Distribution. On the Closing Date, OPC shall make a special patronage capital distribution to (or at the direction of) its Members in an aggregate amount determined using the methodology set forth on Schedule 2.3 (the "OPC Closing Date Distribution"). (a) Allocation Among Members. The OPC Closing Date Distribution shall be made to (or at the direction of) the Members based on allocation percentages determined by dividing each Member's patronage capital in OPC as of December 31, 1995, by the total of all Members' patronage capital in OPC as of December 31, 1995. (b) Methodology for Charging Each Member's Patronage Account. For purposes of charging each Member's patronage account, such distribution shall be allocated on a proportional basis to each annual period through December 31, 1995, for which any portion of such Member's total patronage capital has been allocated. 2.4 Acquisition of Transmission Business. At the Closing, the Transmission Business shall be transferred by OPC to GTC in a complete and bona fide liquidation of OPC's Transmission Business. The parties acknowledge and agree that the precise identity of certain of the Transmission Assets and the Transmission Liabilities, as well as the amount of the purchase price, initially and preliminarily will be based on OPC's projected financial statements and records as of the last day of the calendar month preceding the month in which the Closing Date occurs (the "Calculation Date"), and shall be subject to adjustment when OPC's actual financial statements and records become available in final form. The parties shall cooperate with each other in taking such actions as shall be appropriate to effect and reflect such adjustments. (a) Purchase and Sale of Transmission Assets. At the Closing, OPC shall sell, convey, transfer, assign and deliver to GTC, and GTC will receive, accept and pay for all of the Transmission Assets. At the Closing, OPC shall deliver to GTC limited warranty deeds conveying to GTC all of OPC's right, title and interest in and to the real property included in the Transmission Assets, subject to the reservation by OPC of nonexclusive easements to use such property in any way that does not interfere with GTC's use of such property to conduct the Transmission Business, and bills of sale, endorsements, assignments and other good and sufficient instruments of conveyance and transfer as shall be effective to vest in GTC all of OPC's right, title and interest in and to all other Transmission Assets. At the Closing, OPC will take such other steps as may be reasonably required to put GTC in actual possession and operating control of the Transmission Assets and Transmission Business. From time to time after the Closing, at GTC's request and expense but without further consideration, OPC will execute and deliver such other instruments of conveyance and transfer and take such other actions as GTC reasonably may require to vest more effectively in GTC, and to put GTC in possession of, the Transmission Assets, subject to the above mentioned easement reserved by OPC. 9 (b) Assumption of Transmission Liabilities. At the Closing, and hereafter, to the extent necessary, GTC shall execute and deliver to OPC and to such other persons and entities as may be appropriate all such assumptions of liability, endorsements, acknowledgments of assignment and such other instruments as shall be effective to evidence and effect GTC's assumption and agreement to pay, perform and discharge all Transmission Liabilities. (c) Purchase Price. The purchase price (the "GTC Purchase Price") for the Transmission Business shall be the sum of: (i) OPC's Net Book Value of the Transmission Assets as of the Effective Date; plus (ii) That portion of OPC's deferred charges relating to OPC's debt secured under the OPC Mortgage which is determined in accordance with the allocation formula set forth on Schedule 2.4(d)(i) (the "GTC Assumed OPC Deferred Charges"); plus (iii) An amount, if any, by which the Purchase Price Premium exceeds the GTC Assumed OPC Deferred Charges. An appraisal of the Transmission Business has been prepared. In the event the Closing is rescheduled as provided in Section 8.1, the appraisal shall be updated by the appraiser at a date selected by OPC closer to the Closing (such appraisal, as it may be updated, the "Appraisal"). For purposes of the provisions of this Section 2.4, the term "Purchase Price Premium" shall be the amount identified as such in the Appraisal. If the Purchase Price Premium is greater than an amount equal to 6% of OPC's Net Book Value for the Transmission Assets used in preparing the Appraisal, then GTC's payment of the amount called for by this Section 2.4(c) must be approved by GTC's Board of Directors. If the Appraisal names a range of values and a most likely value within the range, the Purchase Price Premium shall be deemed to be the Purchase Price Premium named by the Appraisal as the one most likely to be paid. For purposes of determining the amount of the GTC Purchase Price to be paid at Closing, the amount set forth in subsection (i) shall be determined on a preliminary basis based on OPC's projected financial statements and records as of the Calculation Date. Not later than 75 days after the Closing Date, for purposes of determining the final GTC Purchase Price, the amount set forth in subsection (i) shall be adjusted based on OPC's actual financial statements and records. (d) Payment of GTC Purchase Price. GTC shall pay the GTC Purchase Price as follows: (i) GTC shall assume (as evidenced and effected by delivery of the GTC Indenture, the GTC FFB Note, the GTC RUS Notes, the GTC CoBank Notes, and the GTC PCB Assumption Agreements) that portion of OPC's debt secured under the OPC Mortgage which is determined by the allocation formula set forth on Schedule 2.4(d)(i), along with certain related obligations; and 10 (ii) GTC shall pay in cash by wire transfer on the Closing Date an amount equal to (a) the sum of the GTC Purchase Price (based on OPC's projected financial statements as of the Calculation Date) plus an amount equal to the "Reimbursement Amount" (as defined in Section 2.4(e)), less (b) the sum of the principal amount of debt assumed under subsection (i) plus the booked value of the Transmission Liabilities assumed (based on such projected financial statements). The remainder of the GTC Purchase Price, if any, due from GTC (or any refund by OPC of a portion of the initial payment made by GTC at the Closing) based on OPC's actual financial statements shall be paid by the party owing such amount in cash by wire transfer within 10 Business Days after such actual financial statements become available in final form. (e) Debt Payments Prior to Effective Date. On or before the due dates thereof, OPC shall pay to GTC (or to another party at GTC's written direction) in cash by wire transfer an amount equal to the amount of each payment of principal and accrued interest assumed by GTC under the GTC FFB Note, the GTC RUS Notes and the GTC CoBank Notes that is due and payable before the Effective Date (the aggregate amount of any such principal payments, the "Reimbursement Amount"). (f) Transfer of Employees. On or before the Closing Date, OPC will terminate the employment of all Transmission Employees of OPC. GTC immediately thereupon shall have the right to employ such employees upon such terms and conditions as GTC shall determine. For any such employees so hired, the provision of any benefits under the "Employee Benefit Plans" (as hereinafter defined) shall be pursuant to Section 2.11. This paragraph (f) does not and shall not be construed to create any rights (of continued employment or otherwise) in any employee or any other third party. (g) Adjustment to Purchase Price Resulting from Certain Events Subsequent to the Closing Date. Upon the occurrence of any Purchase Price Adjustment Event, the purchase price for the Transmission Assets purchased from OPC pursuant to this Agreement, as determined pursuant to Section 2.4(c), shall be increased by an amount equal to the Purchase Price Adjustment, if any. The Purchase Price Adjustment, if any, shall be paid to OPC by GTC (or any successor entity) in cash within 90 days after the occurrence of the applicable Purchase Price Adjustment Event. (h) Assets Owned in Common. Any asset that would be a Transmission Asset but for the exclusion of assets owned in common under clause (iv) of the definition of Transmission Assets in Section 1.1 shall be the subject of a lease or other agreement between OPC and GTC pursuant to which, from and after the Closing Date and for mutually agreed consideration from GTC to OPC, GTC shall have the right to use, possess and operate such assets as fully as may be permitted by the terms of any agreements relating to the common ownership of such assets. Any such lease or other agreement shall be upon such terms as OPC and GTC shall agree. If OPC is permitted by the terms of any agreements relating to the common ownership of such assets and by any necessary consents, waivers or other actions of the other co-owner(s) of such assets to transfer OPC's interest in the title to such assets, then such assets, to the extent of OPC's interest therein, shall be treated as part of the Transmission Assets. Nothing in this Section 2.4(h) shall affect the 11 exclusion from Transmission Assets of step-up substation transformers located at generation facilities. 2.5 Transmission Contracts. At or before the Closing, GTC shall seek to execute and deliver Member Transmission Contract(s) with each Member pursuant to the Member Agreement, and GTC and OPC shall execute and deliver OPC Transmission Contract(s), pursuant to which GTC shall provide transmission and related services to the Members and to OPC. 2.6 Transfer of System Operations Business. As soon as all required approvals have been obtained and the conditions contained in Sections 7.1(e) and (f), to the extent they relate to the sale and transfer of the System Operations Business, have been satisfied or waived (which may be earlier, but no later, than the Closing), OPC and GSOC shall mutually determine the GSOC Asset Transfer Date which shall be the date on which the System Operations Assets shall be transferred and sold to GSOC and GSOC shall assume the System Operations Liabilities. (a) Purchase and Sale of System Operations Assets. On the GSOC Asset Transfer Date, OPC shall sell, convey, transfer, assign and deliver to GSOC, and GSOC will receive, accept and pay for, all of the System Operations Assets, subject to the continuing lien of the OPC Mortgage. On the GSOC Asset Transfer Date, OPC shall deliver to GSOC such bills of sale, endorsements, assignments and other good and sufficient instruments of conveyance and transfer as shall be effective to vest in GSOC all of OPC's title to and interest in the System Operations Assets, subject to the continuing lien of the OPC Mortgage. On the GSOC Asset Transfer Date, OPC will take such other steps as may be reasonably required to put GSOC in actual possession of the System Operations Assets. From time to time thereafter, at GSOC's request and expense but without further consideration, OPC will execute and deliver such other instruments of conveyance and transfer and take such other actions as GSOC reasonably may require to vest more effectively in GSOC, and to put GSOC in possession of, the System Operations Assets, subject to the continuing lien of the OPC Mortgage. OPC and GSOC will enter into appropriate agreements to permit OPC such use of the System Operations Assets as OPC and GSOC may agree. (b) Assumption of System Operations Liabilities. On the GSOC Asset Transfer Date, and thereafter, to the extent necessary, GSOC shall execute and deliver to OPC all such assumptions of liability, endorsements, acknowledgments of assignment and such other instruments as shall be effective to evidence and effect GSOC's assumption and agreement to pay, perform and discharge all System Operations Liabilities. (c) Purchase Price. The purchase price for the System Operations Assets shall be the Net Book Value of such assets on the GSOC Asset Transfer Date. Such purchase price shall be paid on the GSOC Asset Transfer Date: (i) By GSOC's assumption of OPC's obligations under that certain Note from OPC, dated June 1, 1984, in the original principal amount of $5,543,000, payable to the United States of America with a final maturity of May 31, 2019, as such obligations of OPC exist from time to time (the "GSOC Assumed OPC Debt"), which assumption shall be evidenced by GSOC's 12 execution and delivery of an assumption document in the form required by RUS (the "GSOC Assumption Agreement"); and (ii) By GSOC's execution and delivery to OPC of a purchase money note (the "GSOC Purchase Money Note") for the portion of the purchase price in excess of: (A) the balance assumed by GSOC under the RUS Note identified in clause (i) above and (B) the booked value of any (I) capital lease or (II) obligation relating to the System Operations Employees assumed as part of the System Operations Liabilities. The GSOC Assumption Agreement and the GSOC Purchase Money Note shall contain such terms and conditions as RUS shall approve (with the concurrence of OPC in the case of the GSOC Purchase Money Note). (d) Transfer of Employees. On or before the Closing Date, OPC will terminate the employment of all System Operations Employees of OPC. GSOC shall immediately thereupon have the right to employ such employees upon such terms and conditions as GSOC shall determine. For any such employees so hired, the provision of any benefits under the Employee Benefit Plans shall be pursuant to Section 2.11. This paragraph (d) does not and shall not be construed to create any rights (of continued employment or otherwise) in any employee or any other third party. 2.7 System Operations Contracts. At or before the Closing, GSOC and the other parties thereto shall execute and deliver the System Operations Contracts. 2.8 Change of OPC Name. Before or promptly after the Closing Date, OPC's name shall be changed to "Oglethorpe Power Corporation (An Electric Membership Corporation)." OPC shall execute and file the appropriate documents with the Georgia Secretary of State to effect such name change. 2.9 Provision of Administrative Services. At or before the Closing, OPC and GTC shall execute and deliver an administrative services contract, and OPC and GSOC shall execute and deliver an administrative services contract, both substantially in the form recommended by OPC's President and Chief Executive Officer, subject to such changes as the parties thereto may mutually agree upon. OPC shall provide to GTC and GSOC pursuant to the administrative services contracts the administrative services specified therein. 2.10 Office Space Leases. At or before the Closing, OPC and GTC shall execute and deliver an office space lease, and OPC and GSOC shall execute and deliver an office space lease, both substantially in the form recommended by OPC's President and Chief Executive Officer, subject to such changes as the parties thereto may mutually agree upon. OPC shall lease office space to GTC and GSOC pursuant to the office space leases. 2.11 Employee Benefit Plans. As soon as practical after the Closing Date, OPC shall amend its "Employee Benefit Plans" to permit the Employee Benefit Plans to be jointly sponsored by OPC, GTC, GSOC and any other employer acceptable to OPC. Each such Employee Benefit 13 Plan shall be a single plan, with all plan assets available to pay benefits to participating employees of any sponsoring employer. (a) Amendments To Be Adopted. Each such Employee Benefit Plan shall be amended: (i) to credit employees of OPC, GTC, GSOC and any other sponsoring employer with service with, and compensation paid by, OPC, GTC, GSOC or any other sponsoring employer; (ii) to authorize the Board of Directors of OPC to appoint the plan administrator of such plan; and (iii) to authorize the Board of Directors of OPC to amend such plans, provided that any amendment that materially increases the benefit cost to GTC, GSOC or any other sponsoring employer shall be subject to the approval of the Board of Directors of GTC, the Board of Directors of GSOC or the governing body of such other sponsoring employers, which approval may not be unreasonably withheld by such Board of Directors or other governing body. (b) Allocation of Costs. The benefit and administrative cost of each such Employee Benefit Plan shall be allocated among OPC, GTC, GSOC and every other sponsoring employer, in a manner determined by the actuary or contract administrator then engaged by OPC on behalf of the plan, so as to most equitably allocate such costs, including extraordinary one time costs, to the employer whose employees are covered by the Plan; provided, however, in the case of employee health care costs, such costs shall be allocated among OPC, GTC, GSOC and every other sponsoring employer so as to most equitably spread the risk of adverse claim experience among all such sponsoring employers in proportion to the number of participating employees employed by such sponsoring employers. (c) Plans Covered. For purposes of this Section 2.11, "Employee Benefit Plans" shall include the following plans currently sponsored by OPC: (i) the Retirement Income Plan; (ii) the Retirement Savings Plan; (iii) the Health Insurance Plan; (iv) the Flexible Spending Account Plan; (v) the Long Term Disability Plan; (vi) the Group Life Insurance Plan; (vii) the Deferred Compensation Plan for Key Employees; and (viii) the Business Travel Accident Insurance Plan. (d) Right to Terminate Sponsorship. OPC, GTC or GSOC may terminate its sponsorship of any Employee Benefit Plan upon 90 days advance written notice to the other parties. 2.12 Further Assurances. If at any time after the Closing Date for GTC or after the GSOC Asset Transfer Date for GSOC, any further assignments or assurances are necessary or desirable to vest or to perfect or confirm of record in GTC or GSOC the title to any property or right included in the Transmission Assets or the System Operations Assets, respectively (subject to the easement reserved by OPC pursuant to Section 2.4(a)), or to evidence and effect the assumption by GTC or GSOC of the Transmission Liabilities or the System Operations Liabilities, respectively, or otherwise to carry out the provisions of this Agreement, the officers of OPC, GTC and GSOC are hereby authorized and empowered on behalf of such respective corporations, in the name of and on behalf of the appropriate corporation, to execute and deliver any and all things necessary or proper to vest or to perfect or confirm title to such property or rights in GTC or GSOC (subject to the aforementioned easement) or to evidence and effect such assumption by GTC or GSOC, and otherwise to carry out the purposes and provisions of this Agreement. 14 ARTICLE 3 OPC GOVERNANCE MATTERS 3.1 New OPC Governance. Subject to satisfaction of the conditions specified below prior to the full implementation of the governance changes contemplated by the OPC Bylaw Amendments, OPC shall take appropriate steps on a timely basis to elect a new Board of Directors in accordance with the OPC Bylaw Amendments and to implement the new governance structure contemplated by the OPC Bylaw Amendments. (a) Conditions to Full Implementation of Governance Changes. The terms of the individuals elected as the new Board of Directors of OPC pursuant to the OPC Bylaw Amendments shall commence, and the other governance changes contemplated by the OPC Bylaw Amendments shall be fully and unconditionally implemented, only on the Closing Date (or if earlier, on the fifth Business Day following satisfaction or waiver of the following conditions) and shall be conditioned upon satisfaction of all of the following conditions (or waiver by the existing OPC Board of Directors of either or both of the conditions contained in paragraphs (i) and (ii), provided that any waiver of the condition in paragraph (ii) is also approved by RUS): (i) A ruling from the Internal Revenue Service (the "IRS Ruling") shall have been received to the effect that the adoption and implementation of the OPC Bylaw Amendments and the New Wholesale Power Contracts will not affect OPC's status for federal income tax purposes as a corporation operating on a cooperative basis; and (ii) Either a New Wholesale Power Contract, including Rate Schedule A, shall have become effective for each Member or an OPC rate schedule which allocates to each Member responsibility for the fixed percentage of all costs of OPC's existing resources as provided in Exhibit 1 to Appendix 1 of Rate Schedule A to the New Wholesale Power Contracts shall have otherwise become legally binding and effective as to each Member. (b) Possible Modifications. If any changes in the governance provisions contemplated by the OPC Bylaw Amendments are required in order to obtain the IRS Ruling, OPC and the Members may develop changes that are mutually acceptable to OPC, the Members and the IRS. Any such modification to the OPC Bylaw Amendments may be adopted only by the requisite vote of the Members prescribed by applicable law and by OPC's Bylaws. 3.2 Interim Governance. Until the terms of the individuals elected as the new OPC Board of Directors commence and the other governance changes contemplated by the OPC Bylaw Amendments are fully implemented in accordance with Section 3.1(a), the existing Board of Directors of OPC shall continue to serve as the directors of OPC. 15 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF OPC OPC represents and warrants to GTC and GSOC as follows: 4.1 Organization and Qualification, Etc. OPC is an electric membership corporation duly organized, validly existing and in good standing under the laws of the State of Georgia and has the corporate power and authority to own its properties and assets and to carry on its business as it is now being conducted. 4.2 Authorization, Etc. OPC has the corporate power and authority to execute and deliver this Agreement and each additional contract which this Agreement contemplates will be executed and delivered by OPC (each such contract being referred to as an "Additional OPC Contract") and to consummate the transactions and actions contemplated hereby and thereby on the part of OPC. The execution and delivery by OPC of this Agreement and each Additional OPC Contract and the consummation by OPC of the transactions and actions contemplated on its part hereby and thereby have been duly authorized by the Board of Directors of OPC, and the Members of OPC have adopted the OPC Bylaw Amendments. This Agreement has been duly executed and delivered by OPC and is a valid agreement of OPC, enforceable against OPC in accordance with its terms, subject to (a) bankruptcy, insolvency and other laws of similar import, (b) principles of equity and (c) applicable public policy. 4.3 Non-Contravention. Except as may be contemplated by this Agreement, the execution and delivery by OPC of this Agreement and each Additional OPC Contract and the consummation of the transactions and actions contemplated hereby and thereby, do not and will not: (a) violate any provision of the Articles of Incorporation or Bylaws of OPC; (b) violate, or result (with the giving of notice or the lapse of time or both) in a violation of any provision of, or result in the acceleration of or entitle any party to accelerate (whether after the giving of notice or lapse of time or both) any obligation under, or result in the creation or imposition of any lien, charge, pledge, security interest or other encumbrance upon any of the property of OPC pursuant to any provision of, any mortgage, lien, lease, agreement, license, instrument, law, ordinance, regulation, order, arbitration award, judgment or decree to which OPC is a party or by which OPC is bound; (c) violate or conflict with any other restriction of any kind or character to which OPC is subject or by which any assets of OPC may be bound; or (d) constitute an event permitting termination of any mortgage, lien, lease, agreement, license or instrument to which OPC is a party, in each case, if such violation, acceleration, entitlement to accelerate, creation or imposition of a lien, charge, pledge, security interest or other encumbrance, conflict, or event would, when taken together with all such other violations, accelerations, entitlements to accelerate, creations and impositions of liens, charges, pledges, security interests and other encumbrances, conflicts, and events, affect materially and adversely the business of OPC or OPC's ability to consummate the transactions and actions contemplated by this Agreement. 16 4.4 Governmental Consents, Etc. Except for the RUS approvals contemplated by Section 7.1(c), the IRS Ruling contemplated by Section 3.1(a), any filings and other coordination with the SEC and FERC contemplated by Sections 7.1(e) and (f), and any filings that may be required with the Federal Trade Commission and the Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), no consent, authorization, order or approval, or filing or registration with, any governmental commission, board or other regulatory body is required to be made or obtained by OPC for or in connection with the execution and delivery by OPC of this Agreement and each Additional OPC Contract and the consummation by OPC of the transactions and actions contemplated hereby and thereby, other than such as have been or, prior to the Closing Date, will be made or obtained. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF GTC AND GSOC Each of GTC and GSOC represents and warrants to OPC and each other as follows, each such corporation making each representation and warranty severally as to itself only: 5.1 Organization and Qualification, Etc. GTC is an electric membership corporation duly organized, validly existing and in good standing under the laws of the State of Georgia. GSOC is a non-profit corporation duly organized, validly existing and in good standing under the laws of the State of Georgia. Each such corporation has the corporate power and authority to own the properties and assets it will own following the Closing Date (or following the GSOC Asset Transfer Date in the case of GSOC) and to carry on its business as it will be conducted following the Closing Date. 5.2 Authorization, Etc. Such corporation has the corporate power and authority to execute and deliver this Agreement and each additional contract which this Agreement contemplates will be executed and delivered by GTC or GSOC, as the case may be (each such contract being referred to as an "Additional GTC Contract" or an "Additional GSOC Contract," respectively) and to consummate the transactions and actions contemplated hereby and thereby on the part of such corporation. The execution and delivery by such corporation of this Agreement and each Additional GTC Contract or each Additional GSOC Contract, as the case may be, and the consummation by such corporation of the transactions and actions contemplated on its part hereby and thereby have been duly authorized by the Board of Directors of such corporation. This Agreement has been duly executed and delivered by such corporation and is a valid agreement of such corporation, enforceable against such corporation in accordance with its terms, subject to (a) bankruptcy, insolvency and other laws of similar import, (b) principles of equity and (c) applicable public policy. 17 5.3 Non-Contravention. Except as may be contemplated by this Agreement, the execution and delivery by such corporation of this Agreement and each Additional GTC Contract or Additional GSOC Contract, as the case may be, and the consummation of the transactions and actions contemplated hereby and thereby, do not and will not: (a) violate any provision of the Articles of Incorporation or Bylaws of such corporation; (b) violate, or result (with the giving of notice or the lapse of time or both) in a violation of any provision of, or result in the acceleration of or entitle any party to accelerate (whether after the giving of notice or lapse of time or both) any obligation under, or result in the creation or imposition of any lien, charge, pledge, security interest or other encumbrance upon any of the property of such corporation pursuant to any provision of, any mortgage, lien, lease, agreement, license, instrument, law, ordinance, regulation, order, arbitration award, judgment or decree to which such corporation is a party or by which such corporation is bound; (c) violate or conflict with any other restriction of any kind or character to which such corporation is subject or by which any assets of such corporation may be bound; or (d) constitute an event permitting termination of any mortgage, lien, lease, agreement, license or instrument to which such corporation is a party, in each case, if such violation, acceleration, entitlement to accelerate, creation or imposition of a lien, charge, pledge, security interest or other encumbrance, conflict, or event would, when taken together with all such other violations, accelerations, entitlements to accelerate, creations and impositions of liens, charges, pledges, security interests and other encumbrances, conflicts, and events, affect materially and adversely the business of such corporation or such corporation's ability to consummate the transactions and actions contemplated by this Agreement. 5.4 Governmental Consents, Etc. Except for the RUS approvals contemplated by Section 7.1(c), the IRS Ruling contemplated by Section 3.1(a), any filings and other coordination with the SEC and FERC contemplated by Sections 7.1(e) and (f), and any filings that may be required with the Federal Trade Commission and the Department of Justice under the HSR Act, no consent, authorization, order or approval, or filing or registration with, any governmental commission, board or other regulatory body is required to be made or obtained by such corporation for or in connection with the execution and delivery by such corporation of this Agreement and each Additional GTC Contract or Additional GSOC Contract, as the case may be, and the consummation by such corporation of the transactions and actions contemplated hereby, other than such as have been or, prior to the Closing Date, will be made or obtained. 18 ARTICLE 6 ADDITIONAL COVENANTS AND AGREEMENTS 6.1 Conduct of Business. OPC covenants that during the period from the date hereof to the later of the Effective Date or the Closing Date, it shall conduct its operations in the ordinary and usual course of business, except as otherwise provided in or contemplated by this Agreement. 6.2 Interim Cost Allocations. Subject to any subsequent amendments or other changes by OPC's Board of Directors (and all necessary approvals thereof), the interim rate, OPC-15ir, approved and adopted by OPC's Board of Directors at its meeting on December 4, 1995 and currently applicable under the Existing Wholesale Power Contracts, shall continue in effect in accordance with its terms until the earlier of the Effective Date or December 31, 1996. 6.3 HSR Act Filings. Following the execution of this Agreement, each party shall make appropriate filings as may be required, if any, with the Federal Trade Commission and the Department of Justice under the HSR Act, with respect to the transactions contemplated by this Agreement. In connection with any such filings, each party shall, in cooperation with each other, and from time to time thereafter, make all such further filings and submissions, and take such further actions, as may be required in connection therewith. Each party shall furnish the other all information in its possession necessary for compliance by the other with the provisions of this Section. No party shall withdraw any such filing or submission prior to the termination of this Agreement without the written consent of each other party required to file under the HSR Act. 6.4 Consents, Authorizations, Etc. Each party hereto will use its reasonable efforts to obtain all consents, authorizations, waivers, orders and approvals from any governmental commission, board or other regulatory body, and to make all related filings and registrations, which may be necessary or desirable in connection with the consummation of any of the transactions and actions contemplated by this Agreement and by each additional contract which this Agreement contemplates will be executed by such party (each such contract applicable to a respective party being referred to as an "Applicable Additional Contract"). Each party also will use its reasonable efforts to obtain all consents, authorizations, waivers and approvals from any non-governmental third party which may be necessary or desirable in connection with the consummation of the transactions and actions contemplated by this Agreement and by each Applicable Additional Contract. Each party will cooperate fully with the other parties in assisting them to obtain such consents, authorizations, waivers, orders and approvals that the other parties are required to obtain or make. Without in any way limiting the foregoing, the parties shall use reasonable efforts to obtain the approval of RUS of all of the following (as well as the approvals and related actions by FFB, CoBank, Credit Suisse and the PCB Trustees necessary to implement the matters referenced in subsections (c), (d) and (e)): (a) OPC Closing Date Distribution. The OPC Closing Date Distribution contemplated by Section 2.3; 19 (b) New Wholesale Power Contracts. The New Wholesale Power Contracts; (c) Release from OPC Mortgage. Appropriate instruments to release from the OPC Mortgage and to permit the transfer by OPC to GTC of the Transmission Business; (d) GTC Assumption Documents. The GTC PCB Assumption Agreements, the GTC Indenture, the GTC FFB Note, the GTC RUS Notes and the GTC CoBank Notes; (e) OPC Indenture. The OPC Indenture; (f) Transmission Contracts. The Transmission Contracts between GTC and the Members and GTC and OPC; (g) GSOC Matters. The transfer to GSOC of the System Operations Business and the assumption by GSOC of the GSOC Assumed OPC Debt; (h) System Operations Contracts. The System Operations Contracts between GSOC and GTC, GSOC and OPC, and GSOC and the Members; and (i) Other Matters Contemplated Hereby. Such other transactions, actions and contracts contemplated by this Agreement to the extent OPC determines that approval by the RUS of such matters is necessary. 6.5 IRS Ruling. OPC shall use its reasonable efforts to obtain a favorable tax ruling of the Internal Revenue Service meeting the requirements of Section 3.1(a). 6.6 Access; Confidentiality. (a) Access. Prior to and following the Closing Date, GTC and GSOC shall continue to have access to the premises, books and records, officers and employees of OPC at reasonable hours and the right to copy all books and records relating to the Transmission Business and the System Operations Business, respectively, as may be necessary or desirable for the conduct of the Transmission Business and the System Operations Business, respectively. The officers of OPC will furnish GTC and GSOC with such financial and operating data and other information with respect to the Transmission Business and the System Operations Business as GTC and GSOC may request from time to time. (b) Confidentiality. Except as otherwise required in filings which any party makes with regulatory entities, any information which any party provides to the other or to the other's Representatives, whether written or oral, which is confidential or identified as confidential shall be treated as confidential material (the "Confidential Material"), except that this shall not apply to information that is generally available to the public or becomes generally available to the public other than as a result of a disclosure by the receiving party or its Representatives. For purposes of this Agreement, the term "Representatives" shall mean a party's directors, officers, employees, 20 attorneys, accountants, investment bankers, brokers, bankers and others engaged by such party or intended to be engaged by such party to advise it regarding the Confidential Material or the transactions contemplated hereby or to assist in financing the transactions contemplated hereby and who receive Confidential Material. It is hereby agreed that the Confidential Material will be used by the receiving party and/or its Representatives only for purposes of evaluating and facilitating the transactions contemplated hereby, and that the Confidential Material will be kept confidential by the receiving party and its Representatives; provided, however, that (i) any of such information may be disclosed to the receiving party's Representatives who need to know such information for purposes relating to the transactions contemplated hereby (it being understood that such Representatives shall be informed by the receiving party of the confidential nature of such information and shall be directed by the receiving party to treat such information confidentially), and (ii) any other disclosure of such information may be made to which the party providing the information consents in writing. The provisions of this Section 6.6(b) shall remain in effect for a period of three years after the date hereof; provided, however, that following the Effective Date, GTC and GSOC and their respective Representatives shall not be restricted hereunder with respect to any information regarding the Transmission Business and the System Operations Business, respectively. 6.7 Expenses. Whether or not the transactions and actions contemplated by this Agreement are consummated, all costs and expenses (including reasonable attorneys' and accountants' fees) incurred in connection with this Agreement and the transactions and actions contemplated hereby shall be allocated by agreement among the parties hereto. 6.8 Publicity. Except as otherwise required by law, OPC shall coordinate any press releases or other public announcements through the Closing Date with respect to this Agreement and the transactions contemplated hereby, and neither GTC nor GSOC shall act unilaterally in this regard without prior consultation with OPC. 6.9 Actions to Avoid and Notices of, Breaches of Representations and Warranties. Each party: (a) shall take such actions so that such party's representations and warranties in this Agreement remain true and correct and shall not take any action that would cause such representations and warranties to cease to be true and correct; and (b) shall inform the other parties hereto promptly of any facts or circumstances that could be reasonably expected to constitute or result in a breach of any such party's representations and warranties in this Agreement. 6.10 Additional Agreements. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use its reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective, as soon as reasonably practicable, the transactions and actions contemplated by this Agreement. 21 ARTICLE 7 CLOSING CONDITIONS 7.1 Closing Conditions. Subject in each case to the rights of OPC (with the approval of RUS when applicable) to waive (in whole or in part) any condition pursuant to Section 7.2, each party's obligation to consummate the transactions and actions contemplated by this Agreement is subject to the fulfillment, to the reasonable satisfaction of such party, of each of the following conditions, prior to or contemporaneously with the Closing; provided, however, that the full implementation of the OPC Bylaw Amendments and related governance changes are subject only to the fulfillment (or waiver) of the conditions contained in Section 3.1(a), and provided further that the transfer of the System Operations Assets and Liabilities to GSOC is subject only to the fulfillment (or waiver) prior to or contemporaneously with the GSOC Asset Transfer Date of the condition that the parties receive such approvals and consents described below that are specifically applicable to such transfer of the System Operation Assets and Liabilities and of the conditions contained in Sections 7.1(e) and (f) to the extent they relate to the sale and transfer of the System Operations Assets. (a) Governance Changes. The conditions set forth in Section 3.1(a) shall have been satisfied or waived in accordance with the provisions of Section 3.1(a), the OPC Bylaw Amendments shall have been implemented on a full and unconditional basis, and the terms of the individuals elected as the new Board of Directors of OPC pursuant to the OPC Bylaw Amendments shall have commenced. (b) Member Agreement. The Member Agreement shall have been executed and delivered by and among all Members, OPC, GTC and GSOC. (c) RUS Approvals. RUS shall have approved: (i) The OPC Closing Date Distribution; (ii) The New Wholesale Power Contracts; (iii) The transfer of the Transmission Business to GTC, the related release from the OPC Mortgage contemplated by Section 6.4(c) (which release shall be joined in by the other secured parties under the OPC Mortgage), the GTC PCB Assumption Agreements, the GTC Indenture, the GTC FFB Note, the GTC RUS Notes, the GTC CoBank Notes, the Transmission Contracts, the transfer of the System Operations Business to GSOC, the assumption by GSOC of the GSOC Assumed OPC Debt, and the System Operations Contracts; (iv) The OPC Indenture; and (v) The other transactions, actions and contracts contemplated by this Agreement to the extent OPC determines that approval by the RUS of such matters is necessary. 22 (d) Hart-Scott-Rodino. Any applicable waiting period under the HSR Act shall have expired or been terminated, and no proceeding by the Department of Justice or the Federal Trade Commission shall be pending or threatened with respect to the transactions contemplated by this Agreement, which, if determined adversely, would have a material adverse effect on the financial condition or results of operations of OPC, GTC or GSOC. (e) PUHCA Matters. A no-action letter shall have been obtained from the SEC to the effect that none of the members of GTC or GSOC shall be deemed a public utility holding company within the meaning of the Public Utility Holding Company Act of 1935, or there shall have otherwise been obtained assurance satisfactory to OPC that the parties will be exempt from compliance or in compliance with such Act and related regulations of the SEC. (f) Federal Power Act Matters. There shall have been obtained assurance satisfactory to OPC that the parties will be exempt from compliance or in compliance with the Federal Power Act and related regulations of FERC. (g) No Injunction, Etc. There shall be no judgment, decree, injunction, ruling or order of any court, governmental department, commission, agency or instrumentality outstanding against OPC, GTC or GSOC which prohibits, restricts or delays consummation of the transactions and other actions contemplated hereby or limits the right of GTC to control in any material respect the Transmission Business after the Closing or the right of GSOC to control in any material respect the System Operations Business after the transfer of such business to GSOC. (h) Other Consents, Authorizations, Etc. In addition to the approvals described under any of the foregoing provisions of this Section 7.1, all other consents, authorizations, waivers, orders and approvals of, and filings and registrations with, any governmental commission, board or other regulatory body or any non-governmental third party which are required for or in connection with the execution and delivery by OPC, GTC and GSOC of this Agreement and each Applicable Additional Contract and the consummation by OPC, GTC and GSOC of the transactions and actions contemplated hereby shall have been obtained or made. (i) Representations and Warranties; Compliance With Covenants and Obligations. In the case of each party: (A) the representations and warranties of each of the other parties contained in this Agreement shall have been true and correct at the date hereof and also shall be true and correct in all material respects at and as of the Closing (and, to the extent applicable, at and as of the GSOC Asset Transfer Date), except for changes contemplated by this Agreement, with the same force and effect as if made at and as of the Closing (and, to the extent applicable, at and as of the GSOC Asset Transfer Date); (B) each of the other parties shall have performed and complied with in all material respects all agreements and covenants required by this Agreement to be performed or complied with by it at or prior to the Closing (and, to the extent applicable, at or prior to the GSOC Asset Transfer Date); and (C) each party shall have received one or more certificates of the President or other senior executive officer of each of the other parties certifying, to the best of his or her knowledge, all of the foregoing effects. 23 (j) Confirmation of Ratings. OPC shall have received confirmation from the rating agencies then rating OPC's outstanding fixed rate uninsured pollution control bonds that the ratings assigned by such rating agencies to such bonds shall not be lowered below "A", in the case of Fitch Investor Service, Inc., below "A3", in the case of Moody's Investor Service, Inc. or below "A", in the case of Standard & Poor's Rating Service, A Division of The McGraw-Hill Companies, Inc. as a result of the consummation of the transactions and actions contemplated hereby. Such rating agencies also shall have provided satisfactory assurance that they would assign to any comparable bonds issued directly by GTC the same or higher ratings as those then assigned to OPC's fixed rate uninsured pollution control bonds. (k) New Wholesale Power Contracts. A New Wholesale Power Contract shall have been executed, delivered and approved by RUS for each Member. (l) Membership In GTC. The Members shall have completed the actions necessary to become Members of GTC. (m) Transmission Contracts. A Transmission Contract between GTC and each Member and between GTC and OPC shall have been executed, delivered and approved by RUS. (n) Membership In GSOC. The Members shall have completed the actions necessary to become Members of GSOC. (o) System Operations Contracts. The System Operations Contracts between GSOC and OPC, GSOC and GTC, and GSOC and each Member shall have been executed, delivered and approved by RUS. (p) State Tax Matters. Satisfactory assurance shall have been obtained from the Georgia Department of Revenue (or otherwise) with respect to Georgia sales tax associated with the transfer of the Transmission Assets from OPC to GTC. (q) Opinions of Counsel and Certified Resolutions. All opinions of counsel to each Member and all certificates from each Member as to such legal matters as RUS shall require to be covered by any opinions or certificates and all certified resolutions evidencing approval of the Member Agreement and each Additional Member Contract (as defined in the Member Agreement), in the form required by RUS, shall have been delivered. 7.2 Waiver of Conditions. At its option, the Board of Directors of OPC may waive any or all of the conditions (in whole or in part) contained herein, except for those contained in Sections 7.1(c) and 7.1(d). 24 ARTICLE 8 CLOSING 8.1 Closing. Provided that all of the conditions set forth in Article 7 shall have been satisfied or waived, evidence of the fulfillment or waiver of such conditions shall be provided, and all documents and payments required to be delivered or made or otherwise necessary or desirable to consummate the transactions contemplated hereby (other than those consummated on the GSOC Asset Transfer Date) shall be executed and delivered and paid, by the parties hereto to each other at a closing (the "Closing") to be held at the headquarters of OPC, 2100 East Exchange Place, Tucker, Georgia 30085 at 10:00 a.m. Eastern time, on March 11, 1997 (or at such other date, time and place as OPC, GTC and GSOC may mutually agree). If the parties mutually agree to reschedule the Closing from March 11, 1997 to another date, the parties also shall cooperate with each other to make and appropriately document all adjustments as may be necessary or desirable in other dates contained in this Agreement which relate to the timing of the Closing. 8.2 Pre-Closing. The parties hereto shall cooperate with one another and shall seek the cooperation of the Members so that: (a) a pre-Closing (the "Pre-Closing") can occur at the headquarters of OPC on February 27, 1997 at 10:00 a.m. (or at such other date, time and place as OPC, GTC and GSOC may mutually agree); and (b) all documents that are a condition to Closing can be executed and delivered at or before such Pre-Closing, with such delivery being either to each other or to Sutherland, Asbill & Brennan, L.L.P. to be held in escrow until the Closing Date and then delivered. The parties hereto agree, and the parties shall seek to obtain each Member's agreement in the Member Agreement, that any document delivered in escrow to Sutherland, Asbill & Brennan, L.L.P. may be delivered on the Closing Date to the appropriate recipient(s) without further authorization, unless Barrett K. Hawks or Cada T. Kilgore, III of Sutherland, Asbill & Brennan actually receives a written notice from the party or Member that executed such document: indicating that a representation, warranty, certification, opinion or similar matter in such document is no longer true; setting forth the specific reason why such document cannot be delivered; and providing a substitute document which conforms as nearly as possible to the requirements applicable to the original document. 8.3 Deliveries at or prior to GSOC Asset Transfer Date. Provided that all applicable conditions to the sale and transfer of the System Operations Assets and Liabilities have been satisfied or waived, at or prior to the GSOC Asset Transfer Date (or any mutually agreed date for pre-closing such transaction), OPC and GSOC shall execute and deliver all documents necessary or desirable to consummate such transaction and evidence the satisfaction or waiver of applicable conditions. 8.4 Effective Date. The Effective Date shall be either the first day of the calendar month in which the Closing occurs or the first day of the next succeeding calendar month. The Effective Date shall be April 1, 1997, or such other date as may be selected by the President and Chief Executive Officer of OPC in accordance with the preceding sentence and evidenced in a certificate 25 delivered at the Closing. The purpose of the Effective Date shall be as provided in the Member Agreement and as follows: (a) The New Wholesale Power Contracts shall be effective as though executed, delivered and approved by RUS on the Effective Date; (b) The Transmission Contracts shall be effective as though executed, delivered and approved by RUS on the Effective Date; (c) GTC shall be treated as having operated the Transmission Business from and after the Effective Date; (d) As between OPC and GTC, and notwithstanding any contrary terms of the GTC FFB Note, the GTC RUS Notes or the GTC CoBank Notes, GTC's assumption of the GTC Assumed OPC Debt shall be treated as though it were effective as of the Effective Date, and all interest accrued thereon prior to the Effective Date shall be the responsibility of OPC and all interest accruing thereon from and after the Effective Date shall be the responsibility of GTC; (e) To serve as a defined term in the definitions of certain terms defined herein; (f) The OPC Closing Date Distribution and the "GTC Contributions" (as defined in the Member Agreement) made pursuant to Section 2.3(a) of the Member Agreement shall be treated as though they were made as of the Effective Date; and (g) The parties shall cooperate with one another in taking such actions and making such adjustments as shall be appropriate to cause the economic consequences of the transfer of assets from OPC to GTC and the liquidation by OPC of the Transmission Business to be effective, to the maximum extent feasible and reasonable, as of the Effective Date. ARTICLE 9 TERMINATION AND ABANDONMENT 9.1 Termination and Abandonment. This Agreement and all transactions and actions contemplated hereby may be terminated and abandoned in either manner set forth below at any time prior to the Closing Date, subject to any earlier implementation of the effectiveness of the OPC governance changes contemplated by, and effected pursuant to, Article 3 and subject to any earlier completion of the transfer of the System Operations Assets and Liabilities to GSOC on the GSOC Asset Transfer Date: 26 (a) By Mutual Action. By mutual action of the Boards of Directors of OPC, GTC and GSOC. (b) By OPC. By OPC if any condition set forth in Section 7.1 shall not have been complied with or performed in any material respect and such non-compliance or non-performance shall not have been cured or eliminated (or by its nature cannot be cured or eliminated other than by waiver) on or before March 27, 1997. 9.2 Procedure for Termination. The termination and abandonment of this Agreement and/or any of the transactions and actions contemplated hereby other than pursuant to mutual action under Section 9.1(a) shall be effective only when OPC gives written notice, signed by OPC, stating the grounds for such termination and abandonment, to the other parties. 9.3 Effect of Termination. In the event of the termination and abandonment of this Agreement and/or any of the transactions and actions contemplated hereby, no party shall have any liability (regardless of fault or control) if such termination and abandonment is by mutual action pursuant to Section 9.1(a), and no party hereto shall have any liability if this Agreement and/or any of the transactions and actions contemplated hereby are otherwise terminated or abandoned in accordance with Section 9.1, unless the failure to consummate or fulfill a condition is within the reasonable control of such party, in which case the party or parties having such reasonable control shall continue to be liable hereunder. ARTICLE 10 MISCELLANEOUS 10.1 Survival. The representations and warranties of the parties contained in Articles 4 and 5 hereof shall not survive the Closing. The covenants and other agreements contained in Sections 2.4(c), 2.4(d), 2.4(e), 2.4(g), 2.8, 2.11, 2.12, 6.6, 6.7, 8.4 and 10.2 shall survive the Closing. 10.2 Dispute Resolution and Arbitration. In the event of any disputes under this Agreement, the parties agree to try in good faith to settle the dispute by mediation under the Commercial Mediation Rules of the American Arbitration Association, before resorting to arbitration or some other dispute resolution procedure; provided that a party may not invoke mediation unless it has provided the other with written notice of the dispute and has attempted in good faith to resolve such dispute through negotiation. If the parties involved in such dispute shall not have reached agreement by negotiation or mediation within 120 days as to the matter in question, then the matter in dispute shall be submitted to and settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (subject to the provisions stated below). Notwithstanding the foregoing, any party may seek immediate equitable relief, without attempting to settle a dispute through mediation, in any case where such party is entitled to equitable relief by the terms of this Agreement or otherwise. 27 (a) Arbitration Procedures. The arbitrators shall have the right to employ experts to assist them in any arbitration proceeding under this Section and shall have the right to render equitable, as well as other, awards and relief. Before submitting a list of potential arbitrators to the parties for their consideration, the American Arbitration Association shall consult with each party to discuss the applicable qualifications for the proposed arbitrators. Upon request by the parties involved in the dispute, the American Arbitration Association shall select a panel of at least three arbitrators, but if no such request is made by the time the parties comment on any proposed list of arbitrators, the American Arbitration Association may select a single arbitrator unless the American Arbitration Association determines that a greater number of arbitrators is appropriate. (b) Arbitration Decision. Any decision of the arbitrator(s) shall be satisfied as provided in the order of the arbitrator(s). If necessary, any such decision and satisfaction procedure may be enforced by the prevailing party in any court of record having jurisdiction over the subject matter or over any of the parties. 10.3 Specific Performance, Etc. The parties hereto acknowledge that the rights of the other parties to consummate the transactions contemplated hereby are special, unique, and of extraordinary character, and that, in the event that any party violates or threatens to violate or fails and refuses to perform any covenant made by it herein, then the other parties hereto will be without adequate remedy at law. Therefore, each party agrees, that, in the event it violates, breaches, threatens to violate or breach, or fails and refuses to perform any covenant made by it herein, then the other applicable party or parties hereto, so long as it or they are not in breach hereof, may, in addition to any remedies at law, institute and prosecute an action in a court of competent jurisdiction to enforce specific performance of such covenant or seek any other equitable relief against the defaulting party. 10.4 Waiver. The failure of any party hereto at any time or times to require performance of any provisions hereof shall in no manner affect the right to enforce the same. No waiver by any party of any condition, or the breach of any term, provision, warranty, representation, agreement or covenant contained in this Agreement or the other contracts contemplated hereby, whether by conduct or otherwise, in any one or more instances shall be deemed or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of the breach of any other term, provision, warranty, representation, agreement or covenant herein or therein contained. 10.5 Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given if either (a) delivered personally, by courier or nationally recognized next business day delivery service or Express Mail, (b) transmitted by telecopy mechanism, provided that any notice so given is also sent for delivery as provided in clause (a) or mailed as provided in clause (c), or (c) sent by registered or certified mail, postage prepaid, addressed to each applicable party at the address shown below (or to such other address or person as any party shall have designated by notice to the other party): 28 If to OPC: Oglethorpe Power Corporation 2100 East Exchange Place Tucker, Georgia 30085-1349 Attention: President and Chief Executive Officer Fax: (770) 270-7977 If to GTC: Georgia Transmission Corporation 2100 East Exchange Place Tucker, Georgia 30085-2088 Attention: President and Chief Executive Officer Fax: (770) 270-7977 If to GSOC: Georgia System Operations Corporation 2100 East Exchange Place Tucker, Georgia 30085-2087 Attention: President and Chief Executive Officer Fax: (770) 270-7977 Each such notice or other communication shall be effective (i) if given by telecopy, when transmitted to the applicable number so specified in (or pursuant to) this Section and an appropriate answer back is received, or (ii) if given by any other means, when actually received at such address. 10.6 Counterparts; Facsimile Delivery. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Any party may deliver an executed copy of this Agreement and an executed copy of any documents contemplated hereby by facsimile transmission to another party except when the law expressly requires physical delivery with respect to stock certificates or other special types of documents, and such delivery shall have the same force and effect as any other delivery of a manually signed copy of this Agreement or such other document. 10.7 Headings. The headings herein are for convenience of reference only, do not constitute a part of this Agreement, and shall not be deemed to limit or affect any of the provisions hereof. 10.8 Amendment. This Agreement may be amended at any time by OPC, GTC and GSOC by written instrument executed by the parties affected by such amendment. 10.9 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal 29 substance of the transactions and other actions contemplated hereby is not affected in any manner adverse to any party hereto. Upon any such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions and other actions contemplated by this Agreement are consummated to the extent possible. 10.10 Miscellaneous. This Agreement (a) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties, with respect to the subject matter hereof; (b) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder; (c) shall not be assigned, by operation of law or otherwise; and (d) shall be governed in all respects, including validity, interpretation and effect, by the laws of the State of Georgia except that the Federal Arbitration Act shall govern any arbitration proceedings. [Signatures are on the following page.] 30 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, and their seals affixed, on the date first above written. OPC: [CORPORATE SEAL] OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) By: /s/ J. Calvin Earwood -------------------------------------- J. Calvin Earwood, Chairman of the Board Attest: /s/ Gary M. Bullock - ------------------------------------ Gary M. Bullock, Secretary-Treasurer GTC: [CORPORATE SEAL] GEORGIA TRANSMISSION CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION) By: /s/ Charles R. Fendley -------------------------------------- Charles R. Fendley, Chairman of the Board Attest: /s/ Roy Tollerson, Jr. - ------------------------------------ Roy Tollerson, Jr., Secretary GSOC: [CORPORATE SEAL] GEORGIA SYSTEM OPERATIONS CORPORATION By: /s/ James E. Estes -------------------------------------- James E. Estes, Chairman of the Board Attest: /s/ Jarnett W. Wigington - ------------------------------------ Jarnett W. Wigington, Secretary-Treasurer 31 EX-2.2 3 EXHIBIT 2.2 Exhibit 2.2 MEMBER AGREEMENT BY AND AMONG OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), GEORGIA TRANSMISSION CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION), GEORGIA SYSTEM OPERATIONS CORPORATION AND THE MEMBERS OF OGLETHORPE POWER CORPORATION IDENTIFIED ON THE SIGNATURE PAGES August 1, 1996 TABLE OF CONTENTS ARTICLE 1 DEFINITIONS..................................................................2 1.1 Defined Terms....................................................2 (a) "Business Day".............................................2 (b) "Closing"..................................................2 (c) "Closing Conditions".......................................2 (d) "Closing Date".............................................2 (e) "Effective Date"...........................................2 (f) "Existing Wholesale Power Contracts".......................2 (g) "GSOC Asset Transfer Date".................................2 (h) "ITSA".....................................................2 (i) "ITSA O&M Agreement".......................................2 (j) "Joint Committee Agreement"................................3 (k) "Members"..................................................3 (l) "New Wholesale Power Contracts"............................3 (m) "OPC Bylaw Amendments".....................................3 (n) "OPC Closing Date Distribution"............................3 (o) "RUS"......................................................3 (p) "System Operations Assets".................................3 (q) "System Operations Business"...............................3 (r) "System Operations Contracts"..............................3 (s) "System Operations Liabilities"............................4 (t) "Transmission Assets"......................................4 (u) "Transmission Business"....................................4 (v) "Transmission Contracts"...................................4 (w) "Transmission Liabilities".................................5 1.2 Restructuring Agreement Definitions..............................5 1.3 Other Definitions................................................5 ARTICLE 2 NEW RELATIONSHIPS AMONG THE MEMBERS, OPC, GTC AND GSOC.......................5 2.1 New Wholesale Power Contracts....................................5 2.2 OPC Closing Date Distribution....................................6 (a) Allocation Among Members...................................6 (b) Methodology for Charging Each Member's Patronage Account...6 2.3 Membership in and Capitalization of GTC..........................6 (a) Amount of Contributions....................................6 (b) OPC As Member of GTC.......................................6 2.4 Transmission Contracts...........................................7 i 2.5 System Operations Contracts......................................7 2.6 Membership in and Capitalization of GSOC.........................7 (a) Amount of Contributions....................................7 (b) OPC as Member of GSOC......................................7 2.7 Withdrawal from OPC..............................................7 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF OPC........................................8 3.1 Organization and Qualification, Etc..............................8 3.2 Authorization, Etc...............................................8 3.3 Non-Contravention................................................8 3.4 Governmental Consents, Etc.......................................9 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF GTC AND GSOC...............................9 4.1 Organization and Qualification, Etc..............................9 4.2 Authorization, Etc...............................................9 4.3 Non-Contravention...............................................10 4.4 Governmental Consents, Etc......................................10 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE MEMBERS...............................11 5.1 Organization and Qualification, Etc.............................11 5.2 Authorization, Etc..............................................11 5.3 Non-Contravention...............................................11 5.4 Governmental and Other Consents.................................12 5.5 Access to Information...........................................12 ARTICLE 6 ADDITIONAL COVENANTS AND AGREEMENTS.........................................12 6.1 Modifications to Restructuring Agreement........................12 6.2 GTC Bylaws......................................................12 6.3 Cost Allocations Reflected in Rates.............................12 6.4 HSR Act Filings.................................................13 6.5 Consents, Authorizations, Etc...................................13 6.6 Access; Confidentiality.........................................13 (a) Access....................................................13 (b) Confidentiality...........................................14 6.7 Expenses........................................................14 ii 6.8 Publicity.......................................................14 6.9 Restrictions on Certain Exclusive Actions.......................14 6.10 Actions to Avoid and Notices of, Breaches of Representations and Warranties..................................................15 6.11 Additional Agreements...........................................15 ARTICLE 7 CLOSING CONDITIONS..........................................................15 7.1 Closing Conditions..............................................15 (a) Conditions Under Restructuring Agreement..................15 (b) Hart-Scott-Rodino.........................................15 ARTICLE 8 CLOSING.....................................................................16 8.1 Closing.........................................................16 8.2 Pre-Closing.....................................................16 ARTICLE 9 TERMINATION AND ABANDONMENT.................................................16 9.1 Termination and Abandonment.....................................16 (a) By Mutual Action..........................................16 (b) By OPC....................................................17 9.2 Procedure for Termination.......................................17 9.3 Effect of Termination...........................................17 ARTICLE 10 MISCELLANEOUS...............................................................17 10.1 Survival........................................................17 10.2 Dispute Resolution and Arbitration..............................17 (a) Arbitration Procedures....................................18 (b) Arbitration Decision......................................18 10.3 Specific Performance, Etc.......................................18 10.4 Waiver..........................................................18 10.5 Notices.........................................................19 10.6 Counterparts; Facsimile Delivery................................19 10.7 Headings........................................................20 10.8 Amendment.......................................................20 10.9 Severability....................................................20 10.10 Miscellaneous...................................................20 iii LIST OF SCHEDULES AND EXHIBITS Schedules Schedule 2.6 Percentage Contribution To Be Made by Each Member to GSOC Schedule 5.3 Member Non-Contravention Exceptions Exhibits -------- Exhibit A New Wholesale Power Contract Exhibit B Draft of GSOC Operation Services Tariff Exhibit C Draft of GTC Transmission Service Tariff Exhibit D Form of Withdrawal Agreement Exhibit E Form of Notice of Intent to Withdraw Exhibit F Form of GSOC Member Application iv LIST OF CERTAIN DEFINED TERMS DEFINED IN SECTIONS OTHER THAN SECTION 1.1 Term Section - ---- ------- Additional GTC Contract 4.2 Additional GSOC Contract 4.2 Additional Member Contract 5.2 Additional OPC Contract 3.2 Agreement Preamble Applicable Additional Contract 6.5 Closing 8.1 Confidential Material 6.6(b) GSOC Preamble GTC Preamble GTC Contributions 2.3(a) HSR Act 3.4 OPC Preamble OPC Closing Date Distribution 2.2 Pre-Closing 8.2 Representatives 6.6(b) Restructuring Agreement Preamble v MEMBER AGREEMENT This Member Agreement (this "Agreement") is dated as of August 1, 1996, by and among Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) ("OPC"), Georgia Transmission Corporation (An Electric Membership Corporation) ("GTC"), Georgia System Operations Corporation ("GSOC") and the Members of OPC identified on the signature pages as signatories of this Agreement. BACKGROUND STATEMENT Since its formation, OPC has provided generation, transmission and ancillary and other related services for the 39 electric membership cooperatives that are Members of OPC in order to satisfy such Members' requirements for power. Because of the increasing competition occurring in the electric industry and related changes in law and regulation, OPC and the Members have determined that it is in their mutual best interests to restructure OPC to provide greater flexibility for the future and to settle certain issues and controversies confronting OPC and the Members, as contemplated by the Statement of Agreement, dated November 21, 1995 among representatives of OPC and certain Members named therein, as approved by the OPC Board of Directors on December 4, 1995. A separate Restructuring Agreement among OPC, GTC and GSOC, dated as of March 29, 1996, as amended, restated and superseded by the First Amended and Restated Restructuring Agreement, among OPC, GTC and GSOC, dated as of August 1, 1996 (as it may be further amended or restated, the "Restructuring Agreement") sets forth the terms and conditions on which the restructuring and related changes will occur. Among other things, the restructuring will separate OPC's "Transmission Business" substantially as an entirety and its "System Operations Business" substantially as an entirety (as such terms are defined below) from OPC's generation business and any other retained business. OPC will transfer the Transmission Business to GTC and the System Operations Business to GSOC. The Members are joining OPC, GTC and GSOC in executing and delivering this Agreement to evidence their agreement among themselves and with OPC, GSOC and GTC as to those matters contemplated by the Restructuring Agreement and by this Agreement that directly involve the Members in their capacities as separate corporations. AGREEMENT In consideration of the mutual representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS 1.1 Defined Terms. For the purposes of this Agreement, the following terms, whether singular or plural, shall have the meanings set forth below: (a) "Business Day" shall mean any day on which both: (i) OPC is open for business, and (ii) commercial banks in the City of Atlanta or in the City of New York are not authorized or required to close. (b) "Closing" shall have the meaning specified in Section 8.1 of the Restructuring Agreement and Section 8.1 of this Agreement. (c) "Closing Conditions" shall mean all of the conditions set forth in Article 7 of this Agreement. (d) "Closing Date" shall mean the date on which the Closing occurs. (e) "Effective Date" shall mean (i) January 1, 1997, or (ii) such other date as the parties to the Restructuring Agreement may mutually establish. (f) "Existing Wholesale Power Contracts" shall mean the Amended and Consolidated Wholesale Power Contracts, dated as of December 1, 1988, between OPC and each of OPC's 39 Members pursuant to which such Members currently purchase electric power and transmission services from OPC. (g) "GSOC Asset Transfer Date" shall mean the date on which the System Operations Assets are sold and transferred to GSOC and GSOC assumes certain System Operations Liabilities pursuant to Section 2.6 of the Restructuring Agreement. (h) "ITSA" shall mean the Revised and Restated Integrated Transmission System Agreement, dated as of November 12, 1990, between OPC and Georgia Power Company. (i) "ITSA O&M Agreement" shall mean the Transmission Facilities Operation and Maintenance Contract between Georgia Power Company and OPC, dated as of June 9, 1986. 2 (j) "Joint Committee Agreement" shall mean the Joint Committee Agreement, dated as of August 27, 1976, among Georgia Power Company, OPC, Municipal Electric Authority of Georgia and the City of Dalton, Georgia, as amended by the First Amendment thereto, dated as of June 19, 1978. (k) "Members" generally shall mean the Members of OPC that are parties to this Agreement and are identified on the signature pages as signatories of this Agreement. When the context clearly requires otherwise, "Members" shall mean all 39 Members of OPC, including any Non-Party Members. (l) "New Wholesale Power Contracts" shall mean the Amended and Restated Wholesale Power Contracts, by and between OPC and each of the Members, substantially in the form attached hereto as Exhibit A. (m) "OPC Bylaw Amendments" shall mean the amendments to OPC's Bylaws relating to the election of directors, in the form adopted by the OPC member representatives at their March 29, 1996, annual meeting, subject to the conditions set forth in Section 3.1(a) of the Restructuring Agreement, as such Bylaw amendments may be amended pursuant to Section 3.1(b) of the Restructuring Agreement. (n) "OPC Closing Date Distribution" shall mean the distribution to be made by OPC on the Closing Date, as contemplated by Section 2.3 of the Restructuring Agreement and Section 2.2 of this Agreement. (o) "RUS" shall mean the Rural Utilities Service, as successor to the Rural Electrification Administration, which is an agency of the United States Department of Agriculture, or any governmental agency succeeding to its powers and functions. (p) "System Operations Assets" shall mean the computers, other equipment, equipment leases, and other property of OPC identified on Schedule 1.1(af) to the Restructuring Agreement as constituting the System Operations Assets, as such Schedule may be amended by OPC and GSOC from time to time, all of which assets are used to perform system operations services. (q) "System Operations Business" shall mean the performance of system operations services and the use and ownership of and rights to the System Operations Assets and shall include the System Operations Liabilities. (r) "System Operations Contracts" shall mean (i) the contracts by and between GSOC and each Member electing to enter into such a contract (the "Member System Operations Contracts"), substantially in the form attached as Appendix A to the Operation Services Tariff of GSOC, a draft of which tariff is attached hereto as Exhibit B, as such tariff may be revised from time to time and, when it becomes available, the final form of such tariff, (ii) the contracts 3 relating to system operations services referred to in the Restructuring Agreement to be agreed to between GSOC and OPC and between GSOC and GTC, respectively, as such contracts are executed and delivered by the parties thereto, and (iii) the generation services contract to be agreed to between GSOC and OPC, as such contract is executed and delivered by the parties thereto. (s) "System Operations Liabilities" shall mean (i) the obligations assumed by GSOC from OPC under the leases and other contractual undertakings identified on Schedule 1.1(aj) to the Restructuring Agreement, as such obligations exist as of the GSOC Asset Transfer Date; (ii) OPC's obligations relating to the System Operations Employees which obligations are identified on Schedule 1.1(aj) to the Restructuring Agreement, as such obligations exist as of the Effective Date; and (iii) such other obligations relating to the performance of system operations services as OPC and GSOC shall agree upon from time to time. (t) "Transmission Assets" shall mean all assets of OPC of every kind and description and wherever located, which, as of the Effective Date, (A) are properly classified as transmission assets under accounts 350 to 397 of the System of Accounts as prescribed by RUS in effect on the Effective Date, or (B) qualify for treatment as "Transmission Facilities" under the ITSA or (C) are shown on OPC's books as of the Effective Date as transmission assets, plus the warehouse facility located in Conyers, Georgia, and all inventories contained therein, all claims and rights under work in progress, contracts (including the right to provide transmission services to the Members in the manner contemplated by the Transmission Contracts), leases, licenses or other agreements (whether governmental or private) and rights in condemnation proceedings and other litigation matters (including by way of counterclaim), in each case, used in or otherwise relating to its Transmission Business; provided, however, that the Transmission Assets shall not include: (i) any accounts receivable of OPC; (ii) any of the real property, buildings and fixtures constituting OPC's headquarters facility or, except as the parties may mutually agree, any equipment (except the types expressly specified above), furniture and other personal property located at OPC's headquarters facility (subject to OPC's obligations under Section 2.10 of the Restructuring Agreement to enter into certain office space leases); (iii) any books or records (subject to OPC's obligations to provide access and copies pursuant to Section 6.6 of the Restructuring Agreement); (iv) any assets which OPC owns as a tenant in common with others (except to the extent otherwise provided by the third sentence of Section 2.4(g) of the Restructuring Agreement); or (v) any step-up substation transformers located at generation facilities. For all purposes of this Agreement, "Transmission Assets" shall be limited to the assets acquired or to be acquired by GTC from OPC effective as of the Effective Date. (u) "Transmission Business" shall mean the performance of transmission services, and the use and ownership of and rights to the Transmission Assets and shall include the Transmission Liabilities. (v) "Transmission Contracts" shall mean the contracts by and between GTC and each Member (the "Member Transmission Contracts"), substantially in the form attached as 4 Appendix A to the Transmission Service Tariff of GTC, a draft of which tariff is attached hereto as Exhibit C, as such tariff may be revised from time to time and, when it becomes available the final form of such tariff, and the OPC Transmission Contract as defined in the Restructuring Agreement. (w) "Transmission Liabilities" shall mean (i) all obligations, taxes and liabilities of every kind and nature, known or unknown, contingent or otherwise, that exist as of the Effective Date and are primarily related to the Transmission Business or the Transmission Employees; and (ii) that portion of OPC's costs, expenses and other liabilities (except for the OPC Closing Date Distribution) incurred in effecting the transactions and actions contemplated hereby that corresponds to the portion of OPC's debt assumed pursuant to Section 2.4(d)(i) of the Restructuring Agreement; provided, however, that any obligations or liabilities otherwise covered by clause (i) above shall not be included as Transmission Liabilities to the extent OPC's President and Chief Executive Officer determines that it would not be in the best interests of OPC and GTC to so include them and so notifies GTC at least 10 Business Days prior to Closing. Without in any way limiting the foregoing, but subject to the foregoing proviso, the Transmission Liabilities shall include any and all costs, expenses, obligations and liabilities incurred in connection with or otherwise relating to any litigation described on Schedule 1.1(ao) of the Restructuring Agreement and not paid prior to the Effective Date. Notwithstanding the foregoing, Transmission Liabilities shall not include: (A) the GTC Assumed OPC Debt; (B) any taxes or accounts payable to the extent they arise from the conduct of the Transmission Business prior to the Effective Date; (C) any taxes of any kind imposed on OPC by reason of the consummation of the transactions contemplated by this Agreement or the Restructuring Agreement; (D) or any taxes imposed on any Members of OPC. 1.2 Restructuring Agreement Definitions. Any capitalized terms used, but not defined, in this Agreement which are defined in the Restructuring Agreement shall have the meanings given to them in the Restructuring Agreement. 1.3 Other Definitions. Certain other terms are defined elsewhere in this Agreement and have the meanings so indicated. A List of Certain Defined Terms immediately following the Table of Contents has been included for the convenience of the parties to assist in locating such definitions, but such list shall not affect the interpretation of this Agreement. ARTICLE 2 NEW RELATIONSHIPS AMONG THE MEMBERS, OPC, GTC AND GSOC 2.1 New Wholesale Power Contracts. To facilitate the restructuring, including the transfer of the Transmission Business to GTC, OPC and each Member shall execute and deliver, on or before the Closing Date and in accordance with Article 8 of this Agreement, a New Wholesale Power Contract. Commencing as of the Effective Date, provided RUS approval has 5 been obtained, each New Wholesale Power Contract shall govern the purchase and sale of power between OPC and each respective Member that is a party to such a New Wholesale Power Contract. 2.2 OPC Closing Date Distribution. On the Closing Date, OPC shall make a special patronage capital distribution to (or at the direction of) all 39 of its Members in an aggregate amount determined using the methodology set forth on Schedule 2.3 to the Restructuring Agreement (the "OPC Closing Date Distribution"). (a) Allocation Among Members. The OPC Closing Date Distribution shall be distributed to (or at the direction of) the 39 Members of OPC based on allocation percentages determined by dividing each Member's patronage capital in OPC as of December 31, 1995, by the total of all Members' patronage capital in OPC as of December 31, 1995. (b) Methodology for Charging Each Member's Patronage Account. For purposes of charging the patronage account of each of OPC's 39 Members, such distribution shall be allocated on a proportional basis to each annual period for which any portion of such Member's total patronage capital has been allocated. 2.3 Membership in and Capitalization of GTC. At or prior to the Pre-Closing provided for in Section 8.2, the Members shall complete the actions necessary to become members of GTC (to the extent they are not already members). The Members and OPC also shall make capital contributions to GTC's capital as provided below: (a) Amount of Contributions. The Members shall make capital contributions on or before the first Business Day occurring more than thirty (30) days following the Closing Date in an aggregate amount determined using the methodology specified on Schedule 2.3 of the Restructuring Agreement (the "GTC Contributions"). In the event the Board of Directors of GTC determines it necessary or advisable in connection with GTC's borrowing to pay the purchase price for the Transmission Business as provided in Section 2.4 of the Restructuring Agreement, the Members shall make the GTC contributions on such date, not earlier than the Closing Date, as shall be specified by the GTC Board. Each Member shall so contribute to the capital of GTC that portion of the GTC Contributions which is equal to the percentage of such aggregate contributions determined by dividing each Member's patronage capital in OPC as of December 31, 1995, by the total of all Members' patronage capital in OPC as of December 31, 1995. (b) OPC As Member of GTC. In the event OPC is admitted as a member of GTC and takes transmission services from GTC which OPC in turn provides to one or more of its Members that are not members of GTC, then OPC shall make (on or before the same date provided in subsection (a) above) a capital contribution to GTC in an aggregate amount equal to the amount of capital which such Members of OPC that are not members of GTC would have been obligated to contribute under subsection (a) above. 6 2.4 Transmission Contracts. On or before the Closing Date and in accordance with Article 8 of this Agreement, GTC and each Member shall execute and deliver a Member Transmission Contract. Commencing as of the Effective Date, GTC shall begin providing transmission and related services to the Members pursuant to the Transmission Contracts. 2.5 System Operations Contracts. On or before the Closing Date, and in accordance with Article 8 of this Agreement, (i) GSOC and each Member electing to do so shall execute and deliver a Member System Operations Contract; (ii) OPC and GSOC shall execute and deliver System Operations Contracts, and (iii) GTC and GSOC shall execute and deliver a System Operations Contract. On or before the Effective Date, GSOC shall begin providing system operations and related services, and OPC shall begin providing generation services to GSOC, pursuant to the System Operations Contracts. 2.6 Membership in and Capitalization of GSOC. On or before the Closing Date, each Member that executes and delivers a New Wholesale Power Contract may (and is encouraged by OPC, GTC and GSOC to) become a member of GSOC by executing a GSOC Member Application in the form attached hereto as Exhibit F and paying the membership fee required thereby. The Members and OPC shall make capital contributions to GSOC's capital as follows: (a) Amount of Contributions. Within 30 days of receiving a notice from the GSOC Board of Directors requesting a capital contribution, the members of GSOC shall make capital contributions to GSOC from time to time at such time and in such amounts as shall be determined by the GSOC Board of Directors as being adequate for operations. Such required capital contributions by all GSOC members shall in the aggregate not exceed $2,000,000 without the consent of such members. Each such member's proportionate share of such contributions that are payable on or before December 31, 1997, shall be the percentage shown for the respective member on Schedule 2.6 hereto. Thereafter, each such member's proportionate share of such contributions shall be the same as such member's proportionate share of voting power as provided in GSOC's Bylaws. (b) OPC as Member of GSOC. If OPC provides system operations services purchased from GSOC for one or more of OPC's Members that are not members of GSOC, OPC shall make capital contributions to GSOC in an aggregate amount equal to the amount of capital which such Members of OPC that are not members of GSOC would have been obligated to contribute under subsection (a) above had they been members of GSOC and scheduled their total load through GSOC. 2.7 Withdrawal from OPC. A form of Withdrawal Agreement and a form of Notice of Intent to Withdraw with respect to OPC are attached to this Agreement as Exhibits D and E respectively. A Member may withdraw as a member of OPC in accordance with the requirements of OPC's Bylaws, which incorporate by reference to this Agreement such forms of Withdrawal Agreement and Notice of Intent to Withdraw. 7 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF OPC OPC represents and warrants to GTC, GSOC and each Member as follows: 3.1 Organization and Qualification, Etc. OPC is an electric membership corporation duly organized, validly existing and in good standing under the laws of the State of Georgia and has the corporate power and authority to own its properties and assets and to carry on its business as it is now being conducted. 3.2 Authorization, Etc. OPC has the corporate power and authority to execute and deliver this Agreement, the Restructuring Agreement and each additional contract which this Agreement or the Restructuring Agreement contemplates will be executed and delivered by OPC (each such contract being referred to as an "Additional OPC Contract") and to consummate the transactions and actions contemplated hereby and thereby on the part of OPC. The execution and delivery by OPC of this Agreement, the Restructuring Agreement and each Additional OPC Contract and the consummation by OPC of the transactions and actions contemplated on its part hereby and thereby have been duly authorized by the Board of Directors of OPC, and the Members of OPC have adopted the OPC Bylaw Amendments. This Agreement and the Restructuring Agreement each has been duly executed and delivered by OPC and is a valid agreement of OPC, enforceable against OPC in accordance with its terms, subject to (a) bankruptcy, insolvency and other laws of similar import, (b) principles of equity and (c) applicable public policy. 3.3 Non-Contravention. Except as may be contemplated by this Agreement or the Restructuring Agreement, the execution and delivery by OPC of this Agreement, the Restructuring Agreement and each Additional OPC Contract and the consummation of the transactions and actions contemplated hereby and thereby, do not and will not: (a) violate any provision of the Articles of Incorporation or Bylaws of OPC; (b) violate, or result (with the giving of notice or the lapse of time or both) in a violation of any provision of, or result in the acceleration of or entitle any party to accelerate (whether after the giving of notice or lapse of time or both) any obligation under, or result in the creation or imposition of any lien, charge, pledge, security interest or other encumbrance upon any of the property of OPC pursuant to any provision of, any mortgage, lien, lease, agreement, license, instrument, law, ordinance, regulation, order, arbitration award, judgment or decree to which OPC is a party or by which OPC is bound; (c) violate or conflict with any other restriction of any kind or character to which OPC is subject or by which any assets of OPC may be bound; or (d) constitute an event permitting termination of any mortgage, lien, lease, agreement, license or instrument to which OPC is a party, in each case, if such violation, acceleration, entitlement to accelerate, creation or imposition of a lien, charge, pledge, security interest or other encumbrance, conflict, or event would, when taken together with all such other violations, accelerations, entitlements to accelerate, creations and impositions of liens, charges, pledges, security interests and other encumbrances, conflicts, and events, affect materially and 8 adversely the business of OPC or OPC's ability to consummate the transactions and actions contemplated by this Agreement and by the Restructuring Agreement. 3.4 Governmental Consents, Etc. Except for the RUS approvals contemplated by Section 7.1(c) of the Restructuring Agreement, the IRS Ruling contemplated by Section 3.1(a) of the Restructuring Agreement, any filings and other coordination with the SEC and FERC contemplated by Sections 7.1(e) and (f) of the Restructuring Agreement, and any filings that may be required with the Federal Trade Commission and the Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), no consent, authorization, order or approval, or filing or registration with, any governmental commission, board or other regulatory body is required to be made or obtained by OPC for or in connection with the execution and delivery by OPC of this Agreement, the Restructuring Agreement and each Additional OPC Contract and the consummation by OPC of the transactions and actions contemplated hereby and thereby, other than such as have been or, prior to the Closing Date, will be made or obtained. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF GTC AND GSOC Each of GTC and GSOC represents and warrants to OPC, each other and each Member as follows, each such corporation making each representation and warranty severally as to itself only: 4.1 Organization and Qualification, Etc. GTC is an electric membership corporation duly organized, validly existing and in good standing under the laws of the State of Georgia. GSOC is a non-profit corporation duly organized, validly existing and in good standing under the laws of the State of Georgia. Each such corporation has the corporate power and authority to own the properties and assets it will own following the Closing Date (or following the GSOC Asset Transfer Date in the case of GSOC) and to carry on its business as it will be conducted following the Closing Date. 4.2 Authorization, Etc. Such corporation has the corporate power and authority to execute and deliver this Agreement, the Restructuring Agreement and each additional contract which this Agreement or the Restructuring Agreement contemplates will be executed and delivered by GTC or GSOC, as the case may be (each such contract being referred to as an "Additional GTC Contract" or an "Additional GSOC Contract," respectively) and to consummate the transactions and actions contemplated hereby and thereby on the part of such corporation. The execution and delivery by such corporation of this Agreement, the Restructuring Agreement and each Additional GTC Contract or each Additional GSOC Contract, as the case may be, and the consummation by such corporation of the transactions and actions contemplated on its part hereby and thereby have been duly authorized by the Board of Directors of such corporation. This 9 Agreement and the Restructuring Agreement each has been duly executed and delivered by such corporation and is a valid agreement of such corporation, enforceable against such corporation in accordance with its terms, subject to (a) bankruptcy, insolvency and other laws of similar import, (b) principles of equity and (c) applicable public policy. 4.3 Non-Contravention. Except as may be contemplated by this Agreement or by the Restructuring Agreement, the execution and delivery by such corporation of this Agreement, the Restructuring Agreement and each Additional GTC Contract or Additional GSOC Contract, as the case may be, and the consummation of the transactions and actions contemplated hereby and thereby, do not and will not: (a) violate any provision of the Articles of Incorporation or Bylaws of such corporation; (b) violate, or result (with the giving of notice or the lapse of time or both) in a violation of any provision of, or result in the acceleration of or entitle any party to accelerate (whether after the giving of notice or lapse of time or both) any obligation under, or result in the creation or imposition of any lien, charge, pledge, security interest or other encumbrance upon any of the property of such corporation pursuant to any provision of, any mortgage, lien, lease, agreement, license, instrument, law, ordinance, regulation, order, arbitration award, judgment or decree to which such corporation is a party or by which such corporation is bound; (c) violate or conflict with any other restriction of any kind or character to which such corporation is subject or by which any assets of such corporation may be bound; or (d) constitute an event permitting termination of any mortgage, lien, lease, agreement, license or instrument to which such corporation is a party, in each case, if such violation, acceleration, entitlement to accelerate, creation or imposition of a lien, charge, pledge, security interest or other encumbrance, conflict, or event would, when taken together with all such other violations, accelerations, entitlements to accelerate, creations and impositions of liens, charges, pledges, security interests and other encumbrances, conflicts, and events, affect materially and adversely the business of such corporation or such corporation's ability to consummate the transactions and actions contemplated by this Agreement and by the Restructuring Agreement. 4.4 Governmental Consents, Etc. Except for the RUS approvals contemplated by Section 7.1(c) of the Restructuring Agreement, the IRS Ruling contemplated by Section 3.1(a) of the Restructuring Agreement, any filings and other coordination with the SEC and FERC contemplated by Sections 7.1(e) and (f) of the Restructuring Agreement, and any filings that may be required with the Federal Trade Commission and the Department of Justice under the HSR Act, no consent, authorization, order or approval, or filing or registration with, any governmental commission, board or other regulatory body is required to be made or obtained by such corporation for or in connection with the execution and delivery by such corporation of this Agreement, the Restructuring Agreement and each Additional GTC Contract or Additional GSOC Contract, as the case may be, and the consummation by such corporation of the transactions and actions contemplated hereby and thereby, other than such as have been or, prior to the Closing Date, will be made or obtained. 10 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE MEMBERS Each Member represents and warrants to OPC, GTC, GSOC and each other Member as to all of the following matters. 5.1 Organization and Qualification, Etc. Such Member is an electric membership corporation duly organized, validly existing and in good standing under the laws of the State of Georgia, has the corporate power and authority to own all of its properties and assets and to carry on its business as it is now being conducted. 5.2 Authorization, Etc. Such Member has the corporate power and authority to execute and deliver this Agreement, to execute each additional contract which this Agreement contemplates will be executed and delivered by such Member (each such contract being referred to as an "Additional Member Contract"), and to consummate the transactions and take the actions contemplated on its part hereby and thereby. The execution and delivery by such Member of this Agreement and each Additional Member Contract and the consummation by such Member of the transactions and actions contemplated on its part hereby and thereby have been duly authorized by such Member's Board of Directors. This Agreement has been duly executed and delivered by such Member and is a valid and binding agreement of such Member, enforceable against such Member in accordance with its terms, subject to: (a) bankruptcy, insolvency and other laws of similar import, (b) principles of equity and (c) applicable public policy. 5.3 Non-Contravention. Except as may be indicated on Schedule 5.3 or as otherwise contemplated by this Agreement, the execution and delivery of this Agreement by such Member, the execution and delivery of each Additional Member Contract by such Member, and the consummation of the transactions and actions contemplated on its part hereby and thereby do not and will not: (a) violate any provision of the Articles of Incorporation or Bylaws of such Member; (b) violate, or result (with the giving of notice or the lapse of time or both) in a violation of any provision of, or result in the acceleration of or entitle any party to accelerate (whether after the giving of notice or lapse of time or both) any obligation under, or result in the creation or imposition of any lien, charge, pledge, security interest or other encumbrance upon any of the property of such Member pursuant to any provision of, any mortgage, lien, lease, agreement, license, instrument, law, ordinance, regulation, order, arbitration award, judgment or decree to which such Member is a party or by which such Member is bound; (c) violate or conflict with any other restriction of any kind or character to which such Member is subject or by which any assets of such Member may be bound; or (d) constitute an event permitting termination of any mortgage, lien, lease, agreement, license or instrument to which such Member is a party, in each case, if such violation, acceleration, entitlement to accelerate, creation or imposition of a lien, charge, pledge, security interest or other encumbrance, conflict, or event would, when taken together with all such other violations, accelerations, entitlements to accelerate, creations and impositions of liens, charges, pledges, security interests and other encumbrances, conflicts, and events, affect 11 materially and adversely the business of such Member or such Member's ability to consummate the transactions and actions contemplated by this Agreement. 5.4 Governmental and Other Consents. Except for the RUS approvals contemplated by Section 7.1(c) of the Restructuring Agreement and any filings that may be required with the Federal Trade Commission and the Department of Justice under the HSR Act, no consent, authorization, order or approval of, or filing or registration with, any governmental commission, board or other regulatory body is required for or in connection with the execution and delivery by such Member of this Agreement and each Additional Member Contract and the consummation by such Member of the transactions and actions contemplated on its part hereby and thereby, other than such as have been or, prior to the Closing Date, will be made or obtained. 5.5 Access to Information. Such Member has adequate access, through the Member's representation on OPC's Board of Directors and otherwise, to information regarding OPC, GTC, GSOC, the Transmission Business, the System Operations Business, and the proposed restructuring and other transactions, actions and contracts contemplated by the Restructuring Agreement and this Agreement. ARTICLE 6 ADDITIONAL COVENANTS AND AGREEMENTS 6.1 Modifications to Restructuring Agreement. Each Member acknowledges and agrees that the Restructuring Agreement may be amended, and that the conditions to Closing contained therein may be waived, all in accordance with the terms of the Restructuring Agreement, and that any such amendment or waiver shall not in any way affect such Member's obligations hereunder. 6.2 GTC Bylaws. If changes are made pursuant to Section 3.1(b) of the Restructuring Agreement in the governance provisions of the OPC Bylaw Amendments corresponding changes shall be incorporated in the Bylaws of GTC. No such change shall in any way affect any Member's obligation hereunder. 6.3 Cost Allocations Reflected in Rates. Each Member acknowledges that the interim rate, OPC-15ir, approved and adopted by OPC's Board of Directors at its meeting on December 4, 1995, and currently applicable under the Existing Wholesale Power Contracts and Rate Schedule A to the New Wholesale Power Contracts each reflect an appropriate allocation of costs among the Members. Each Member further accepts OPC-15ir as the rate under which it agrees to purchase capacity and energy from Oglethorpe under the Existing Wholesale Power Contract until the earlier of the Effective Date or December 31, 1996, and agrees that such rate reflects a settlement among the Members as to an appropriate sharing of Oglethorpe's costs among the Members. Each Member also accepts Rate Schedule A as the rate under which it agrees to purchase capacity and energy from Oglethorpe under the New Wholesale Power Contract, and 12 agrees that such rate reflects a settlement among the Members as to an appropriate sharing of Oglethorpe's costs among the Members. Each Member acknowledges and agrees that the cost allocations reflected in such rates are valid, binding and enforceable as to such Member as a settlement which the Member has accepted and agreed to without reliance upon any representation of OPC or any other Member as to, and notwithstanding the possible inaccuracy of any assumptions or understandings of the Member with respect to, any state of facts that may have existed at any time prior to the date hereof. 6.4 HSR Act Filings. Following the execution of this Agreement, each party shall make appropriate filings as may be required, if any, with the Federal Trade Commission and the Department of Justice under the HSR Act, with respect to the transactions contemplated by this Agreement. In connection with any such filings, each party shall, in cooperation with each other, and from time to time thereafter, make all such further filings and submissions, and take such further actions, as may be required in connection therewith. Each party shall furnish the other all information in its possession necessary for compliance by the other with the provisions of this Section. No party shall withdraw any such filing or submission prior to the termination of this Agreement without the written consent of each other party required to file under the HSR Act. 6.5 Consents, Authorizations, Etc. Each party hereto will use its reasonable efforts to obtain all consents, authorizations, waivers, orders and approvals from any governmental commission, board or other regulatory body, and to make all related filings and registrations, which may be necessary or desirable in connection with the consummation of any of the transactions and actions contemplated by this Agreement and by each additional contract which this Agreement contemplates will be executed by such party (each such contract applicable to a respective party being referred to as an "Applicable Additional Contract"). Each party also will use its reasonable efforts to obtain all consents, authorizations, waivers and approvals from any non-governmental third party which may be necessary or desirable in connection with the consummation of the transactions and actions contemplated by this Agreement and by each Applicable Additional Contract. Each party will cooperate fully with the other parties in assisting them to obtain such consents, authorizations, waivers, orders and approvals that the other parties need to obtain or make. Without in any way limiting the foregoing, the parties shall use their reasonable efforts to obtain all approvals of RUS contemplated by Section 6.4 of the Restructuring Agreement. 6.6 Access; Confidentiality. (a) Access. Prior to and following the Closing Date, OPC, GTC and GSOC shall provide or otherwise make available to the Members all information required to be provided to the Members under applicable law, and the Members shall continue to have access to the premises, books and records, officers and employees of OPC, GTC and GSOC at reasonable hours to obtain such information. 13 (b) Confidentiality. Except as otherwise required in filings which any party makes with regulatory entities, any information which any party provides to the other or to the other's Representatives, whether written or oral, which is confidential or identified as confidential shall be treated as confidential material (the "Confidential Material"), except that this shall not apply to information that is generally available to the public or becomes generally available to the public other than as a result of a disclosure by the receiving party or its Representatives. For purposes of this Agreement, the term "Representatives" shall mean a party's directors, officers, employees, attorneys, accountants, investment bankers, brokers, bankers and others engaged by such party or intended to be engaged by such party to advise it regarding the Confidential Material or the transactions contemplated hereby or thereby or to assist in financing the transactions contemplated hereby and who receive Confidential Material. It is hereby agreed that the Confidential Material will be used by the receiving party and/or its Representatives only for purposes of evaluating and facilitating the transactions contemplated hereby, and that the Confidential Material will be kept confidential by the receiving party and its Representatives; provided, however, that (i) any of such information may be disclosed to the receiving party's Representatives who need to know such information for purposes relating to the transactions contemplated hereby (it being understood that such Representatives shall be informed by the receiving party of the confidential nature of such information and shall be directed by the receiving party to treat such information confidentially), and (ii) any other disclosure of such information may be made to which the party providing the information consents in writing. The provisions of this Section 6.6(b) shall remain in effect for a period of three years after the date hereof and shall be in addition to any other confidentiality obligations and agreements that exist between or among any of the parties, which shall not be superseded or limited by this Section 6.6(b); provided, however, that following the Effective Date, GTC and GSOC and their respective Representatives shall not be restricted hereunder with respect to any information regarding the Transmission Business and the System Operations Business, respectively. 6.7 Expenses. Whether or not the transactions and actions contemplated by this Agreement are consummated, all costs and expenses (including reasonable attorneys' and accountants' fees) incurred in connection with this Agreement, the Restructuring Agreement and the transactions and actions contemplated hereby and thereby shall be paid by the party incurring such expenses, subject to the obligation of GTC to assume that portion of OPC's expenses included in the definition of Transmission Liabilities. 6.8 Publicity. Except as otherwise required by law, OPC shall coordinate any press releases or other public announcements with respect to this Agreement and the transactions contemplated hereby through the Closing Date, and no other party shall act unilaterally in this regard without prior consultation with OPC. 6.9 Restrictions on Certain Exclusive Actions. Unless and until this Agreement and the Restructuring Agreement are terminated in accordance with their terms or the Closing occurs, neither OPC nor any Member unilaterally or in conjunction with less than all of OPC's 39 Members and OPC shall knowingly take any action, fail to take any action or solicit support for 14 any action which is intended or reasonably likely to be inconsistent with any transaction, action, obligation or contract contemplated by this Agreement or by the Restructuring Agreement. The foregoing is not intended, and shall not be construed, to prevent or limit any Member's full communications with and presentation of its views regarding the foregoing matters to OPC and all of OPC's other 39 Members either in writing or at any meeting of OPC's Board of Directors or OPC's Members, duly convened in accordance with OPC's Bylaws. Instead, the foregoing restriction is intended to assure that all interested and affected parties have full opportunity to participate in any deliberations and discussions regarding the proposed restructuring and related actions, obligations and contracts that any Member may consider desirable. 6.10 Actions to Avoid and Notices of, Breaches of Representations and Warranties. Each party: (a) shall take such actions so that such party's representations and warranties in this Agreement remain true and correct and shall not take any action that would cause such representations and warranties to cease to be true and correct; and (b) shall inform the other parties hereto promptly of any facts or circumstances that could be reasonably expected to constitute or result in a breach of any such party's representations and warranties in this Agreement. 6.11 Additional Agreements. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use its reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective, as soon as reasonably practicable, the transactions and actions contemplated by this Agreement. ARTICLE 7 CLOSING CONDITIONS 7.1 Closing Conditions. Subject to the provisions of Section 7.2 of the Restructuring Agreement permitting the Board of Directors of OPC (with the approval of RUS when applicable) to waive (in whole or in part) any condition to the obligations of OPC, GTC or GSOC under the Restructuring Agreement, each party's obligation to consummate the transactions and actions contemplated by this Agreement is subject to the fulfillment of each of the following conditions, prior to or contemporaneously with the Closing. (a) Conditions Under Restructuring Agreement. Each of the conditions to Closing under the Restructuring Agreement shall have been satisfied or waived in accordance with the terms of the Restructuring Agreement. (b) Hart-Scott-Rodino. Any applicable waiting period under the HSR Act shall have expired or been terminated, and no proceeding by the Department of Justice or the Federal Trade Commission shall be pending or threatened with respect to the transactions contemplated 15 by this Agreement or the Restructuring Agreement, which, if determined adversely, would have a material adverse effect on the financial condition or results of operations of any Member. ARTICLE 8 CLOSING 8.1 Closing. Provided that all of the conditions set forth in Article 7 shall have been satisfied or waived, evidence of the fulfillment or waiver of such conditions shall be provided, and all documents and payments required to be delivered or made or otherwise necessary or desirable to consummate the transactions contemplated hereby (other than those consummated on the GSOC Asset Transfer Date) shall be executed and delivered and paid, by the parties hereto to each other at a closing (the "Closing") to be held at the offices of Sutherland, Asbill & Brennan, 999 Peachtree Street, N.E., Atlanta, Georgia 30309 at 10:00 a.m. Eastern time, on January 2, 1997 (or at such other date, time and place as OPC, GTC and GSOC may mutually agree). 8.2 Pre-Closing. The parties hereto shall cooperate with one another so that: (a) a pre-Closing (the "Pre-Closing") can occur at the Atlanta offices of Sutherland, Asbill & Brennan on a date and at a time to be set by the OPC Board (on or before December 2, 1996, if possible); and (b) all documents that are a condition to Closing can be executed and delivered at or before such Pre-Closing, with such delivery being either to each other or to Sutherland, Asbill & Brennan to be held in escrow until the Closing Date and then delivered. The parties hereto agree that any document delivered in escrow to Sutherland, Asbill & Brennan may be delivered on the Closing Date to the appropriate recipient(s) without further authorization, unless Barrett K. Hawks or Cada T. Kilgore, III of Sutherland, Asbill & Brennan actually receives a written notice from the party that executed such document: indicating that a representation, warranty, certification, opinion or similar matter in such document is no longer true; setting forth the specific reason why such document cannot be delivered; and providing a substitute document which conforms as nearly as possible to the requirements applicable to the original document. ARTICLE 9 TERMINATION AND ABANDONMENT 9.1 Termination and Abandonment. This Agreement and all transactions and actions contemplated hereby may be terminated and abandoned in either manner set forth below at any time prior to the Closing Date: (a) By Mutual Action of OPC, GTC and GSOC. By mutual action of the Boards of Directors of OPC, GTC and GSOC. 16 (b) By OPC. By OPC if any condition set forth in Section 7.1 of the Restructuring Agreement or Section 7.1 of this Agreement shall not have been complied with or performed in any material respect and such non-compliance or non-performance shall not have been cured or eliminated (or by its nature cannot be cured or eliminated other than by waiver) on or before March 15, 1997. 9.2 Procedure for Termination. The termination and abandonment of this Agreement and/or any of the transactions and actions contemplated hereby other than pursuant to mutual action under Section 9.1(a) shall be effective only when OPC gives written notice, signed by OPC, stating the grounds for such termination and abandonment, to the other parties. 9.3 Effect of Termination. In the event of the termination and abandonment of this Agreement and/or any of the transactions and actions contemplated hereby, no party shall have any liability (regardless of fault or control) if such termination and abandonment is by mutual action pursuant to Section 9.1(a), and no party hereto shall have any liability if this Agreement and/or any of the transactions and actions contemplated hereby are otherwise terminated or abandoned in accordance with Section 9.1, unless the failure to consummate or fulfill a condition is within the reasonable control of such party, in which case the party or parties having such reasonable control shall continue to be liable hereunder. ARTICLE 10 MISCELLANEOUS 10.1 Survival. The representations and warranties of the parties contained in Articles 3, 4 and 5 hereof, other than the representation and warranty contained in Section 5.5, shall not survive the Closing. The covenants and other agreements contained in Sections 6.3, 6.6, 6.7 and 10.2 shall survive the Closing. 10.2 Dispute Resolution and Arbitration. In the event of any disputes under this Agreement, the parties involved in such dispute shall promptly consult with one another and in good faith seek to resolve the dispute through negotiation. If such dispute cannot be settled through negotiation, the parties agree to try in good faith to settle the dispute by mediation under the Commercial Mediation Rules of the American Arbitration Association, before resorting to arbitration or some other dispute resolution procedure; provided that a party may not invoke mediation unless it has provided the other with written notice of the dispute and has attempted in good faith to resolve such dispute through negotiation. If the parties involved in such dispute shall not have reached agreement by negotiation or mediation within 120 days as to the matter in question, then the matter in dispute shall be submitted to and settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (subject to the provisions stated below). Notwithstanding the foregoing, any party may seek immediate equitable 17 relief, without attempting to settle a dispute through mediation, in any case where such party is entitled to equitable relief by the terms of this Agreement or otherwise. (a) Arbitration Procedures. The arbitrators shall have the right to employ experts to assist them in any arbitration proceeding under this Section and shall have the right to render equitable, as well as other, awards and relief. Before submitting a list of potential arbitrators to the parties for their consideration, the American Arbitration Association shall consult with each party to discuss the applicable qualifications for the proposed arbitrators. Upon request by the parties involved in the dispute, the American Arbitration Association shall select a panel of at least three arbitrators, but if no such request is made by the time the parties comment on any proposed list of arbitrators, the American Arbitration Association may select a single arbitrator unless the American Arbitration Association determines that a greater number of arbitrators is appropriate. (b) Arbitration Decision. Any decision of the arbitrator(s) shall be satisfied as provided in the order of the arbitrator(s). If necessary, any such decision and satisfaction procedure may be enforced by the prevailing party in any court of record having jurisdiction over the subject matter or over any of the parties. 10.3 Specific Performance, Etc. The parties hereto acknowledge that the rights of the other parties to consummate the transactions contemplated hereby are special, unique, and of extraordinary character, and that, in the event that any party violates or threatens to violate or fails and refuses to perform any covenant made by it herein, then the other parties hereto will be without adequate remedy at law. Therefore, each party agrees, that, in the event it violates, breaches, threatens to violate or breach, or fails and refuses to perform any covenant made by it herein, then the other applicable party or parties hereto, so long as it or they are not in breach hereof, may, in addition to any remedies at law, institute and prosecute an action in a court of competent jurisdiction to enforce specific performance of such covenant or seek any other equitable relief against the defaulting party. 10.4 Waiver. The failure of any party hereto at any time or times to require performance of any provisions hereof shall in no manner affect the right to enforce the same. No waiver by any party of any condition, or the breach of any term, provision, warranty, representation, agreement or covenant contained in this Agreement or the other contracts contemplated hereby, whether by conduct or otherwise, in any one or more instances shall be deemed or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of the breach of any other term, provision, warranty, representation, agreement or covenant herein or therein contained. 18 10.5 Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given if either (a) delivered personally, or by courier or nationally recognized next business day delivery service or Express Mail, (b) transmitted by telecopy mechanism, provided that any notice so given is also sent for delivery as provided in clause (a) or mailed as provided in clause (c), or (c) sent by registered or certified mail, postage prepaid, addressed to each applicable party at the address shown below (or to such other address or person as any party shall have designated by notice to the other party): If to OPC: Oglethorpe Power Corporation 2100 East Exchange Place Tucker, Georgia 30085-1349 Attention: President and Chief Executive Officer Fax: (770) 270-7977 If to GTC: Georgia Transmission Corporation 2100 East Exchange Place Tucker, Georgia 30085-1349 Attention: President Fax: (770) 270-7977 If to GSOC: Georgia System Operations Corporation 2100 East Exchange Place Tucker, Georgia 30085-1349 Attention: President Fax: (770) 270-7977 If to a Member: To the respective address shown on the signature pages Each such notice or other communication shall be effective (i) if given by telecopy, when transmitted to the applicable number so specified in (or pursuant to) this Section and an appropriate answerback is received, or (ii) if given by any other means, when actually received at such address. 10.6 Counterparts; Facsimile Delivery. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Any party may deliver an executed copy of this Agreement and an executed copy of any documents contemplated hereby by facsimile transmission to another party, and such delivery shall have the same force and effect as any other delivery of a manually signed copy of this Agreement or such other document. Each of OPC, GTC and GSOC shall receive and retain one counterpart with original signatures of all parties to this Agreement and shall provide a copy thereof to any other party upon request. 19 10.7 Headings. The headings herein are for convenience of reference only, do not constitute a part of this Agreement, and shall not be deemed to limit or affect any of the provisions hereof. 10.8 Amendment. This Agreement may be amended at any time by written instrument executed by the parties affected by such amendment. 10.9 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions and other actions contemplated hereby is not affected in any manner adverse to any party hereto. Upon any such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions and other actions contemplated by this Agreement are consummated to the extent possible. 10.10 Miscellaneous. This Agreement (a) constitutes, together with the Restructuring Agreement which remains in full force, the entire agreement and, except as otherwise specifically provided, supersedes all prior agreements and understandings, both written and oral, among the parties, with respect to the subject matter hereof; (b) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder; (c) shall not be assigned, by operation of law or otherwise; and (d) shall be governed in all respects, including validity, interpretation and effect, by the laws of the State of Georgia except that the Federal Arbitration Act shall govern any arbitration proceedings. [Signatures are found on pages 21 through 60.] 20 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, and their seals affixed, on the date first above written. OPC: [CORPORATE SEAL] OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) By: /s/ J. Calvin Earwood ---------------------------------------- J. Calvin Earwood, Chairman of the Board ATTEST: /s/ Gary M. Bullock - ------------------------------------ Gary M. Bullock, Secretary-Treasurer GTC: [CORPORATE SEAL] GEORGIA TRANSMISSION CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION) By:/s/ Charles R. Fendley ----------------------------------------- Charles R. Fendley, Chairman of the Board ATTEST: /s/ Roy Tollerson, Jr. - ------------------------------------ Roy Tollerson, Jr., Secretary GSOC: [CORPORATE SEAL] GEORGIA SYSTEM OPERATIONS CORPORATION By: /s/ James E. Estes ---------------------------------------- James E. Estes, Chairman of the Board ATTEST: /s/ Jarnett W. Wigington - ------------------------------------ Jarnett W. Wigington, Secretary-Treasurer 21 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: ALTAMAHA ELECTRIC MEMBERSHIP CORPORATION By: /s/ Jmon Warnock ------------------------------------- Name: Jmon Warnock ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Bernard Hart -------------------------------------------- Name: Bernard Hart ------------------------------------- Title: Secretary-Treasurer ------------------------------------- Address for Notices: P. O. Box 346 Lyons, GA 30436-0346 Fax: (912) 526-4235 22 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: AMICALOLA ELECTRIC MEMBERSHIP CORPORATION By: /s/ John S. Dean ------------------------------------- Name: John S. Dean ------------------------------------- Title: President/Chief Executive Officer ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Patricia B. Evans -------------------------------------------- Name: Patricia B. Evans ------------------------------------- Title: Assistant Secretary ------------------------------------- Address for Notices: P. O. Box 10 Jasper, GA 30143-0010 Fax: (706) 276-5251 23 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: CANOOCHEE ELECTRIC MEMBERSHIP CORPORATION By: /s/ George C. Martin ------------------------------------- Name: George C. Martin ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Mourice Collins -------------------------------------------- Name: Mourice Collins ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P. O. Box 497 Reidsville, GA 30453-0497 Fax: (912) 557-4396 24 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: CARROLL ELECTRIC MEMBERSHIP CORPORATION By: /s/ J. G. McCalmon ------------------------------------- Name: J. G. McCalmon ------------------------------------- Title: Chairman of the Board ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Eddie Gore -------------------------------------------- Name: Eddie Gore ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P. O. Box 629 Carrollton, GA 30117-0629 Fax: (770) 832-0240 25 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: THE CENTRAL GEORGIA ELECTRIC MEMBERSHIP CORPORATION By: /s/ Benson Ham ------------------------------------- Name: Benson Ham ------------------------------------- Title: Chairman, Board of Directors ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ D.A. Robinson, III -------------------------------------------- Name: D.A. Robinson, III ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: 923 South Mulberry Street Jackson, GA 30233 Fax: (770) 775-7857, Ext. 799 26 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: COASTAL ELECTRIC MEMBERSHIP CORPORATION By: /s/ John T. Woods, Jr. ------------------------------------- Name: John T. Woods, Jr. ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ M. L. Coffer -------------------------------------------- Name: M. L. Coffer ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P. O. Box 109 Midway, GA 31320-0109 Fax: (912) 884-2789 27 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: COBB ELECTRIC MEMBERSHIP CORPORATION By: /s/ Dwight Brown ------------------------------------- Name: Dwight Brown ------------------------------------- Title: President/CEO ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Carl Hames -------------------------------------------- Name: Carl Hames ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P. O. Box 369 Marietta, GA 30061-0369 Fax: (770) 429-2122 28 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: COLQUITT ELECTRIC MEMBERSHIP CORPORATION By: /s/ Tommy Cothron ------------------------------------- Name: Tommy Cothron ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Bobby R. Griner -------------------------------------------- Name: Bobby R. Griner ------------------------------------- Title: Secretary-Treasurer ------------------------------------- Address for Notices: P. O. Box 400 Moultrie, GA 31776-0400 Fax: (912) 985-6705 29 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: COWETA-FAYETTE ELECTRIC MEMBERSHIP CORPORATION By: /s/ Thomas C. Parker ------------------------------------- Name: Thomas C. Parker ------------------------------------- Title: President [CORPORATE SEAL] ATTEST: /s/ Elwood Thompson -------------------------------------------- Name: Elwood Thompson ------------------------------------- Title: Secretary-Treasurer ------------------------------------- Address for Notices: P. O. Box 488 Newnan, GA 30264-0488 Fax: (770) 251-9788 30 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: EXCELSIOR ELECTRIC MEMBERSHIP CORPORATION By: /s/ W. D. Johnson ------------------------------------- Name: W. D. Johnson ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Lanier A. Hunnicutt -------------------------------------------- Name: Lanier A. Hunnicutt ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P.O. Box 297 Metter, GA 30439-0297 Fax: (912) 685-5782 31 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: FLINT ELECTRIC MEMBERSHIP CORPORATION By: /s/ Walter D. Whiting ------------------------------------- Name: Walter D. Whiting ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Vivian K. Blackstock -------------------------------------------- Name: Vivian K. Blackstock ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P. O. Box 308 Reynolds, GA 31076-0308 Fax: (912) 847-5181 32 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: GRADY ELECTRIC MEMBERSHIP CORPORATION By: /s/ Donald C. Cooper ------------------------------------- Name: Donald C. Cooper ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ H. Lamar Carlton -------------------------------------------- Name: H. Lamar Carlton ------------------------------------- Title: Secretary-Treasurer ------------------------------------- Address for Notices: P. O. Box 270 Cairo, GA 31728-0270 Fax: (912) 377-7176 33 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: GREYSTONE POWER CORPORATION, AN ELECTRIC MEMBERSHIP CORPORATION By: /s/ C. Billy Peek ------------------------------------- Name: C. Billy Peek ------------------------------------- Title: Chairman ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ William M. Parks -------------------------------------------- Name: William M. Parks ------------------------------------- Title: Secretary/Treasurer ------------------------------------- Address for Notices: P. O. Box 897 Douglasville, GA 30133-0897 Fax: (770) 942-6053 34 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: HABERSHAM ELECTRIC MEMBERSHIP CORPORATION By: /s/ Hugh D. Rucker ------------------------------------- Name: Hugh D. Rucker ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Carl Tallent, Jr. -------------------------------------------- Name: Carl Tallent, Jr. ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P. O. Box 25 Clarkesville, GA 30523-0025 Fax: (706) 754-2114, Ext. 119 35 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: HART ELECTRIC MEMBERSHIP CORPORATION By: /s/ Mac F. Oglesby ------------------------------------- Name: Mac F. Oglesby ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Jerry M. Snow -------------------------------------------- Name: Jerry M. Snow ------------------------------------- Title: Secretary-Treasurer ------------------------------------- Address for Notices: P. O. Box 250 Hartwell, GA 30643-0250 Fax: (800) 486-3277 36 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: IRWIN ELECTRIC MEMBERSHIP CORPORATION By: /s/ Donald Wiggins ------------------------------------- Name: Donald Wiggins ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Lorie Walters -------------------------------------------- Name: Lorie Walters ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P. O. Box 125 Ocilla, GA 31774-0125 Fax: (912) 468-7009 37 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: JACKSON ELECTRIC MEMBERSHIP CORPORATION By: /s/ Ray C. Jones ------------------------------------- Name: Ray C. Jones ------------------------------------- Title: Chairman of the Board ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Balfour Hunnicutt -------------------------------------------- Name: Balfour Hunnicutt -------------------------------------------- Title: Secretary-Treasurer ------------------------------------- Address for Notices: P. O. Box 38 Jefferson, GA 30549-0038 Fax: (706) 367-6102 38 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: JEFFERSON ELECTRIC MEMBERSHIP CORPORATION By: /s/ James M. Andrew ------------------------------------- Name: James M. Andrew ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Charles E. Perry, Sr. -------------------------------------------- Name: Charles E. Perry, Sr. ------------------------------------- Title: Secretary-Treasurer ------------------------------------- Address for Notices: P. O. Box 312 Louisville, GA 30434-0312 Fax: (912) 625-8354 39 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: LAMAR ELECTRIC MEMBERSHIP CORPORATION By:/s/ E. J. Martin, Jr. ------------------------------------- Name: E. J. Martin, Jr. ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ J. H. Gunnels -------------------------------------------- Name: J. H. Gunnels ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P. O. Box 40 Barnesville, GA 30204-0040 Fax: (770) 358-6078 40 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: LITTLE OCMULGEE ELECTRIC MEMBERSHIP CORPORATION By: /s/ Grant Rowe ------------------------------------- Name: Grant Rowe ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ LaRue Fountain -------------------------------------------- Name: LaRue Fountain ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P. O. Box 150 Alamo, GA 30411-0150 Fax: (912) 568-7174 41 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: MIDDLE GEORGIA ELECTRIC MEMBERSHIP CORPORATION By: /s/ Don Wood ------------------------------------- Name: Don Wood ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Teda Brannen -------------------------------------------- Name: Teda Brannen ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P. O. Box 157 Vienna, GA 31092-0157 Fax: (912) 268-7215 42 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: MITCHELL ELECTRIC MEMBERSHIP CORPORATION By: /s/ Gordon M. Sumner ------------------------------------- Name: Gordon M. Sumner ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ D. Lamar Cooper -------------------------------------------- Name: D. Lamar Cooper ------------------------------------- Title: Secretary-Treasurer ------------------------------------- Address for Notices: P.O. Box 409 Camilla, GA 31730-0409 Fax: (912) 336-7088 43 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: OCMULGEE ELECTRIC MEMBERSHIP CORPORATION By: /s/ Barry H. Martin ------------------------------------- Name: Barry H. Martin ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ James E. Perry, Sr. -------------------------------------------- Name: James E. Perry, Sr. ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P. O. Box 669 Eastman, GA 31023-0669 Fax: (912) 374-0759 44 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: OCONEE ELECTRIC MEMBERSHIP CORPORATION By: /s/ E. C. Lavender ------------------------------------- Name: E. C. Lavender ------------------------------------- Title: Board Chairman ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Charles L. Holliman -------------------------------------------- Name: Charles L. Holliman ------------------------------------- Title: Secretary/Treasurer ------------------------------------- Address for Notices: P. O. Box 37 Dudley, GA 31022-0037 Fax: (912) 676-4200 45 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: OKEFENOKE RURAL ELECTRIC MEMBERSHIP CORPORATION By: /s/ Robert W. Combs ------------------------------------- Name: Robert W. Combs ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ James L. Conner -------------------------------------------- Name: James L. Conner ------------------------------------- Title: Secretary/Treasurer ------------------------------------- Address for Notices: P. O. Box 602 Nahunta, GA 31553-0602 Fax: (912) 462-6100 46 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: PATAULA ELECTRIC MEMBERSHIP CORPORATION By:/s/ W. H. Boyett ------------------------------------- Name: W. H. Boyett ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ James Grubbs -------------------------------------------- Name: James Grubbs ------------------------------------- Title: Secretary/Treasurer ------------------------------------- Address for Notices: P. O. Box 289 Cuthbert, GA 31740-0289 Fax: (912) 732-5191 47 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: PLANTERS ELECTRIC MEMBERSHIP CORPORATION By: /s/ Ainsworth Zeagler ------------------------------------- Name: Ainsworth Zeagler ------------------------------------- Title: Chairman of the Board ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Linda Josey -------------------------------------------- Name: Linda Josey ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P. O. Box 979 Millen, GA 30442-0979 Fax: (912) 982-4798 48 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: RAYLE ELECTRIC MEMBERSHIP CORPORATION By: /s/ J. M. Sherrer ------------------------------------- Name: J. M. Sherrer ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Jimmie Williams -------------------------------------------- Name: Jimmie Williams ------------------------------------- Title: Secretary/Treasurer ------------------------------------- Address for Notices: P. O. Box 250 Washington, GA 30673 Fax: (706) 678-5381 49 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: THE SATILLA RURAL ELECTRIC MEMBERSHIP CORPORATION By: /s/ Jack D. Vickers ------------------------------------- Name: Jack D. Vickers ------------------------------------- Title: Chairman of the Board ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ James C. Bennett -------------------------------------------- Name: James C. Bennett ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P. O. Box 906 Alma, GA 31510-1006 Fax: (912) 632-8572 50 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: SAWNEE ELECTRIC MEMBERSHIP CORPORATION By: /s/ Rodney H. Reese ------------------------------------- Name: Rodney H. Reese ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Lee E. Pittman -------------------------------------------- Name: Lee E. Pittman ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P.O. Box 266 Cumming, GA 30130-0266 Fax: (770) 887-2363, Ext. 550 OR (770) 886-8119 51 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: SLASH PINE ELECTRIC MEMBERSHIP CORPORATION By:/s/ Johnnie Crumbley ------------------------------------- Name: Johnnie Crumbley ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Bob Joyce -------------------------------------------- Name: Bob Joyce ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P. O. Box 356 Homerville, GA 31634-0356 Fax: (912) 487-2948 52 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: SNAPPING SHOALS ELECTRIC MEMBERSHIP CORPORATION By: /s/ Jarnett W. Wigington ------------------------------------- Name: Jarnett W. Wigington ------------------------------------- Title: Chairman of the Board ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Olin Bonner -------------------------------------------- Name: Olin Bonner ------------------------------------- Title: Secretary/Treasurer ------------------------------------- Address for Notices: P. O. Box 509 Covington, GA 30209-0509 Fax: (770) 385-2720 53 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: SUMTER ELECTRIC MEMBERSHIP CORPORATION By: /s/ Bob Jernigan ------------------------------------- Name: Bob Jernigan ------------------------------------- Title: Chairman ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Ida N. Chambers -------------------------------------------- Name: Ida N. Chambers ------------------------------------- Title: Secretary/Treasurer ------------------------------------- Address for Notices: P. O. Box 1048 Americus, GA 31709-1048 Fax: (912) 924-4982 54 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: THREE NOTCH ELECTRIC MEMBERSHIP CORPORATION By: /s/ Warren G. Garrett ------------------------------------- Name: Warrent G. Garrett ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Bill Dozier -------------------------------------------- Name: Bill Dozier ------------------------------------- Title: Secretary-Treasurer ------------------------------------- Address for Notices: P. O. Box 367 Donalsonville, GA 31745-0367 Fax: (912) 524-8046 55 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: TRI-COUNTY ELECTRIC MEMBERSHIP CORPORATION By: /s/ Tom Thompson, Jr. ------------------------------------- Name: Tom Thompson, Jr. ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Thomas Noles ------------------------------------- Name: Thomas Noles ------------------------------------- Title: Secretary-Treasurer ------------------------------------- Address for Notices: P. O. Box 487 Gray, GA 31032-0487 Fax: (912) 986-4733 56 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: TROUP ELECTRIC MEMBERSHIP CORPORATION By: /s/ Lewis Bryant ------------------------------------- Name: Lewis Bryant ------------------------------------- Title: Chairman ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Larry Keith -------------------------------------------- Name: Larry Keith ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P. O. Box 160 LaGrange, GA 30241-0160 Fax: (706) 845-2020 57 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: UPSON COUNTY ELECTRIC MEMBERSHIP CORPORATION By: /s/ Hubert Hancock ------------------------------------- Name: Hubert Hancock ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Billie H. Salter -------------------------------------------- Name: Billie H. Salter ------------------------------------- Title: Secretary/Treasurer ------------------------------------- Address for Notices: P. O. Box 31 Thomaston, GA 30286-0031 Fax: (706) 647-8545 58 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: WALTON ELECTRIC MEMBERSHIP CORPORATION By: /s/ Doyle Mitchell ------------------------------------- Name: Doyle Mitchell ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Robin Paxson -------------------------------------------- Name: Robin Paxson ------------------------------------- Title: Secretary ------------------------------------- Address for Notices: P. O. Box 260 Monroe, GA 30655-0260 Fax: (770) 267-1223 59 SIGNATURE PAGE OF THE MEMBER AGREEMENT DATED AS OF AUGUST 1, 1996 MEMBER: WASHINGTON ELECTRIC MEMBERSHIP CORPORATION By: /s/ T.L. Bray ------------------------------------- Name: T.L.Bray ------------------------------------- Title: President ------------------------------------- [CORPORATE SEAL] ATTEST: /s/ Mike McCoy -------------------------------------------- Name: Mike McCoy ------------------------------------- Title: Secretary-Treasurer ------------------------------------- Address for Notices: P. O. Box 598 Sandersville, GA 31082-0598 Fax: (912) 552-5552 EX-3.(I)(B) 4 EXHIBIT 3(I)(B) Exhibit 3(i)(b) ARTICLES OF AMENDMENT TO RESTATED ARTICLES OF INCORPORATION OF OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) I. The name of the Corporation, which was organized under the Georgia Electric Membership Corporation Act, is "OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION)." II. The amendment adopted is to amend Article I of the Restated Articles of Incorporation of the Corporation to change the name of the corporation to "OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION)" so that, as amended, Article I is as follows: 'I. The name of the Corporation is "OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION)."' III. The amendment was adopted by the Members of the Corporation at a special meeting held on November 11, 1996. The Member vote required to adopt the amendment was twenty (20), the number of Members present and entitled to vote on adoption of the amendment was thirty-eight (38), and the number of Members who voted for the amendment was thirty-eight (38). DULY EXECUTED and delivered, under seal, by the undersigned as of March 11, 1997. OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) (CORPORATE SEAL) By: /s/ T.D. Kilgore --------------------------------------- T.D. Kilgore President and Chief Executive Officer Attest: /s/ Patricia N. Nash ------------------------------------ Patricia N. Nash Assistant Secretary -2- EX-3.(II) 5 EXHIBIT 3(II) Exhibit 3(ii) OGLETHORPE POWER CORPORATION (An Electric Membership Generation & Transmission Corporation) BYLAWS As Amended by the Members on February 24, 1997 To be Effective on the Restructuring Closing Date Table of Contents Article I. Membership.................................................. 1 Section 1. Qualifications for Membership ............................. 1 Section 2. Membership Fee ............................................ 1 Section 3. Purchase of Capacity and Energy by Members ................ 1 Section 4. Payment by Members of Obligations to the Corporation ............................................... 1 Section 5. Non-liability of Members for Debts of the Corporation ............................................... 1 Section 6. Expulsion of Member........................................ 1 Section 7. Withdrawal of Member ...................................... 2 Section 8. Transfer of Membership .................................... 3 Article II. Meetings of Members......................................... 3 Section 1. Annual Meeting of Members ................................. 3 Section 2. Special Meetings of Members ............................... 3 Section 3. Notice of Meetings of Members ............................. 3 Section 4. Quorum for Meetings of Members; Adjournment ............... 4 Section 5. Voting; Member Action ..................................... 4 Section 6. Member Representative and Alternate Representative......... 4 Section 7. Notification of Corporation of Identity of Member Representative and Alternate Representative ............... 5 Section 8. Written Consent of Members ................................ 5 Section 9. Compensation of Member Representatives and Alternate Representatives ................................. 5 Article III. Advisory Board and Nominating Committee.................... 5 Section 1. Advisory Board............................................. 5 Section 2. Nominating Committee....................................... 6 Article IV Directors.................................................. 7 Section 1. General Powers of Board of Directors ....................... 7 Section 2. Term of Directors .......................................... 7 Section 3. Number of Qualifications of Directors ...................... 7 Section 4. Nomination and Election of Directors ...................... 8 - i - Section 5. Filling Vacancies on Board of Directors ................... 10 Section 6. Resignation and Removal of Directors ...................... 10 Section 7. Compensation of Directors ................................. 11 Section 8. Power of Directors to Adopt Rules and Regulations and Policies............................................... 11 Section 9. Power to Appoint Committees ............................... 11 Article V. Meetings of Directors ..................................... 11 Section 1. Regular Meetings of Directors ............................. 11 Section 2. Special Meetings of Directors ............................. 11 Section 3. Notice of Special Meetings of Directors ................... 11 Section 4. Quorum for Meeting of Directors ........................... 12 Section 5. Action of Board of Directors .............................. 12 Section 6. Written Consent of Directors .............................. 12 Article VI. Officers .................................................. 12 Section 1. Officers; Qualifications .................................. 12 Section 2. Appointment and Term of Office of Officers ............... 12 Section 3. Removal of Officers ....................................... 13 Section 4. Chairman of the Board ..................................... 13 Section 5. President ................................................. 13 Section 6. Secretary ................................................. 13 Section 7. Treasurer ................................................. 13 Section 8. Appointment of Officers and Agents ........................ 14 Section 9. Bonds of Officers ......................................... 14 Section 10 Compensation of Officers................................... 14 Article VII. Cooperative Operation ..................................... 14 Section 1. Interest or Dividends on Capital Prohibited ............... 14 Section 2. Patronage Capital in Connection with Furnishing Electric Energy .................................................... 14 Section 3. Accounting System and Reports ............................. 15 Article VIII. Indemnification and Insurance.............................. 15 Section 1. Indemnification............................................ 15 Section 2. Insurance ................................................. 16 - ii - Article IX. Seal ...................................................... 16 Article X. Amendment ................................................. 16 - iii - Article I Membership Section 1. Qualifications for Membership. Any "EMC" (as defined in Section 46-3-171(3) of the Georgia Electric Membership Corporation Act) shall be eligible to become a Member. An EMC desiring to become a Member shall submit to the Secretary of the Corporation an application for membership in writing. The application shall be presented to the Board of Directors at the next meeting of the Board held ninety days or more after the date of submission of the application. The applicant shall become a Member at such time as the Board of Directors has approved its application and the EMC has: (a) Paid the membership fee established pursuant to Section 2 of this Article I; (b) Executed an agreement to purchase capacity and energy at wholesale from the Corporation on terms and conditions satisfactory to the Board of Directors; (c) Agreed to comply with and be bound by the Articles of Incorporation and Bylaws of the Corporation, as amended from time to time, and such policies, rules and regulations as may from time to time be adopted by the Board of Directors; and (d) Satisfied all other conditions established for membership by the Board of Directors. Section 2. Membership Fee. The amount of the fee for admission to membership shall be established from time to time by the Board of Directors. Section 3. Purchase of Capacity and Energy by Members. Each Member shall purchase capacity and energy from the Corporation on such terms and conditions as are provided in the Wholesale Power Contract between the Corporation and the Member as the same may exist from time to time. Section 4. Payment by Members of Obligations to the Corporation. Each Member shall pay any and all amounts which may from time to time become due and payable by the Member to the Corporation as and when the same shall become due and payable. Section 5. Non-liability of Members for Debts of the Corporation. A Member shall not, solely by virtue of its status as such, be liable for the debts of the Corporation; and the property of a Member shall not, solely by virtue of its status as such, be subject to attachment, garnishment, execution or other procedure for the collection of such debts. Section 6. Expulsion of Member. Any Member which shall have violated or refused to comply with any of the provisions of the Articles of Incorporation of the Corporation, these Bylaws, or any policy, rule or regulation adopted from time to time by the Board of Directors may be expelled from membership by the affirmative vote of not less than two-thirds of all of the Directors. Any Member so expelled -1- may be reinstated as a Member by a majority vote of all of the Directors. Termination of membership shall not release the Member from its debts, liabilities or obligations to the Corporation, including, without limitation, its obligations under the Wholesale Power Contract between the Member and the Corporation. Section 7. Withdrawal of Member. Any Member may withdraw from membership upon payment in full, or making adequate provisions for the payment in full, of all its debts to the Corporation and upon satisfying or making adequate provisions for the satisfaction of all its liabilities and obligations to the Corporation, including, without limitation, its obligations under the Wholesale Power Contract between the Member and the Corporation, and upon compliance with such other terms and conditions as the Board of Directors may prescribe. Section 7a. (1) As to all Members who have executed an Amended and Restated Wholesale Power Contract between the Corporation and the Member dated as of August 1, 1996, as amended from time to time, a Member may withdraw on the following terms. A Member shall be deemed to have withdrawn from the Corporation, and it shall no longer be a member of the Corporation for any purpose, on the date on which all three (3) of the following conditions have been satisfied: (a) the Withdrawing Member has delivered to the Chairman of the Board of the Corporation a Notice of Intent to Withdraw in the form attached as an Exhibit to the Member Agreement, dated as of August 1, 1996, by and among the Corporation, Georgia Transmission Corporation, Georgia System Operations Corproation, and certain members of the Corproation (the "Member Agreement"); and (b) the Withdrawing Member has executed and delivered to the Corporation the form of withdrawal agreement attached as an Exhibit to the Member Agreement (the "Withdrawal Agreement"); and (c) the Withdrawal has become effective in accordance with the terms and conditions of the Withdrawal Agreement. Until the date on which all of the foregoing conditions have been satisfied, the Withdrawing Member shall remain a Member of the Corporation with all of the duties, rights, responsibilities and obligations attendant to membership in the Corporation. (2) As to those Members who have not executed an Amended and Restated Wholesale Power Contract dated as of August 1, 1996, as amended from time to time, a Member may withdraw on the terms set forth in Article l, Section 7, of the Corporation's Bylaws. (3) Notwithstanding anything to the contrary contained in these Bylaws, any amendment to or revocation of this Article l Section 7a shall not be effective as to any Member who, within thirty (30) days after receiving written notification of said amendment or -2- revocation, delivers to the Chairman of the Board of the Corporation a written notification that it does not concur with the amendment or the revocation. Section 8. Transfer of Membership. Upon consolidation, merger or sale of substantially all its assets, a Member may transfer its membership to its corporate successor or the purchaser of such assets if such successor or purchaser is otherwise eligible for membership and has met the requirements for membership set forth in this Article I, upon satisfying or making adequate provisions for the satisfaction of all its liabilities and obligations to the Corporation including, without limitation, its obligations under the Wholesale Power Contract between the Member and the Corporation, and upon satisfying any additional terms and conditions the Board of Directors may establish for such transfer, including, without limitation, the payment of a reasonable fee for the transfer. A membership in the Corporation shall not otherwise be transferable. Article II Meetings of Members Section 1. Annual Meeting of Members. The annual meeting of Members shall be held during the first quarter of each calendar year at a time and place within the service area of the Corporation designated by the Board of Directors; provided that failure to hold the annual meeting shall not work a forfeiture nor shall such failure affect otherwise valid corporate acts. Section 2. Special Meetings of Members. Special meetings of Members may be called by the Chairman of the Board, the President, or upon written request of at least ten percent of all the Members. Members shall request the call of a special meeting of Members by presenting to the Secretary of the Corporation resolutions of their boards of directors authorizing such action. Special meetings of the Members shall be held at the time specified by the person or persons calling the meeting, and at such place within the service area of the Corporation as the Board of Directors shall designate from time to time. In the case of any special meeting of Members called upon the request of less than twenty-five percent of the Members, a majority of the Members present at such meeting may assess all of the expenses of such meeting against the Members requesting the call of the meeting. Section 3. Notice of Meetings of Members. Written notice stating the place, the day and the hour of a meeting of Members and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be provided not less than five nor more than ninety days before the date of the meeting by any reasonable means, by or at the direction of the President. Reasonable means for providing such notice shall include, but not be limited to, United States mail, telecopier and personal delivery. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with adequate prepaid first class postage thereon addressed to the Member at its address as it appears on the record books of the Corporation. Notice of any meeting of Members need not be given to any Member who signs a waiver of notice, either before or after the meeting. -3- Attendance of a Member at a meeting shall constitute waiver of notice of such meeting and waiver of any and all objections to the place of the meeting, the time of the meeting or the manner in which it has been called or convened, except when a Member attends the meeting solely for the purpose of stating, at the beginning of the meeting, any such objection or objections to the transaction of business. Section 4. Quorum for Meetings of Members; Adjournment. A majority of the Members shall constitute a quorum for any meeting of Members. A majority of those present may adjourn the meeting from time to time, whether or not a quorum is present. When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken; and at the adjourned meeting, any business may be transacted that might have been transacted on the original date of the meeting. If, however, after the adjournment, the Board of Directors fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given to each Member in compliance with Section 3 of this Article II. Section 5. Voting, Member Action. Each Member shall be entitled to one vote upon each matter submitted to a vote at a meeting of Members. If a quorum is present at a meeting, the affirmative vote of a majority of the Members represented at the meeting shall be the act of the membership unless the vote of a greater number is required by law, the Articles of Incorporation or these Bylaws. Section 6. Member Representative and Alternate Representative. The board of directors of each Member shall appoint as its representative (the "Member Representative") a member of such board to represent and cast the vote of the Member at all meetings of Members and of the Nominating Committee, and may appoint as its alternate representative (the "Alternate Representative") the General Manager (which for purposes of these Bylaws shall include the person having the duties of a general manager) of such Member. Except in connection with the first election of Directors pursuant to this Section 6, no person who is a Director of the Corporation, Georgia Transmission Corporation ("GTC') or Georgia System Operations Corporation ("GSOC") may serve as a Member Representative or an Alternate Representative. If a person who is a Member Representative or Alternate Representative shall become disqualified from serving as such, such person shall immediately be deemed to have been removed as Member Representative or Alternate Representative and the board of directors of the Member shall appoint a new Member Representative and may appoint a new Alternate Representative, as the case may be. If the General Manager of a Member shall become disqualified from serving as Alternate Representative, the board of directors of the Member may appoint as its Alternate Representative an employee or a member of its board. Each Member shall be entitled to have its Member Representative and Alternate Representative present at each meeting of Members, the Advisory Board and the Nominating Committee. If the Member Representative shall be absent from any meeting, die, resign or be removed, then the Alternate Representative may represent and cast the vote of the Member at -4- such meeting or until a new Member Representative is appointed if a Member has no Member Representative and no Alternate Representative, an officer of the Member may represent and cast the vote of the Member. In case of conflicting representation by the officers of a Member, the Member shall be deemed to be represented by its senior officer in the order specified in Section 46-3-266(c) of the Georgia Electric Membership Corporation Act. The person authorized to cast the vote of a Member in accordance with this Section 6 shall be conclusively presumed to be authorized to vote as he sees fit on all matters submitted to a vote of the Members unless such Member shall specifically limit the voting power of its Member Representative, Alternate Representative or officers, as the case may be, by a written statement executed by the president or vice president and the secretary of the Member under its corporate seal pursuant to a resolution duly adopted by its board of directors, and delivered to the Secretary of the Corporation. The Member Representatives shall elect from among themselves a Chairman, who shall preside at all meetings of the Members, the Advisory Board and the Nominating Committee. Section 7. Notification of Corporation of Identity of Member Representative and Alternate Representative. Each Member shall file with the Secretary of the Corporation a written statement executed by the President or Vice President and the Secretary of the Member under its corporate seal, stating the name of its Member Representative and Alternate Representative and, where applicable, the dates of expiration of their respective terms as directors of the Member. The statement shall contain a certification that the Member Representative and Alternate Representative have been appointed in accordance with a resolution duly adopted by the board of directors of the Member. A Member may at any time by resolution of its board of directors and notice to the Corporation terminate the appointment of its Member Representative or Alternate Representative. Notice to the Corporation of such action shall be by a written statement executed by the President or Vice President and the Secretary of such Member under its corporate seal. Section 8. Written Consent of Members. Any action required or permitted to be taken at a meeting of the Members may be taken without a meeting if a written consent setting forth the action so taken shall be signed by persons duly authorized to cast the vote of each Member. Section 9. Compensation of Member Representatives and Alternate Representatives. The compensation of the Member Representatives and Alternate Representatives for service as such and in connection with the Advisory Board and the Nominating Committee shall be fixed from time to time by action of the Members in accordance with Section 5 of this Article II. Member Representatives and Alternate Representatives also shall be reimbursed for expenses actually and necessarily incurred by them in the performance of their duties. -5- Article III Advisory Board and Nominating Committee Section 1. Advisory Board. The Corporation shall have an Advisory Board, the members of which shall be the Member Representatives. The Advisory Board shall convene at three quarterly meetings annually for the purpose of receiving reports from the Board of Directors and management of the Corporation and acting in an advisory capacity. The Advisory Board shall have no authority to take any official action on behalf of the Corporation or any Member. When acting in the capacity of a member of the Advisory Board, a Member Representative shall have no fiduciary or other responsibility to the Corporation or any Member, and no Member Representative shall be personally liable to the Corporation or any Member on account of any action taken or not taken as a Member of the Advisory Board. Section 2. Nominating Committee. The Corporation shall have a Nominating Committee, the members of which shall be the Member Representatives. The Nominating Committee shall be responsible for nominating all Directors as provided in Article IV, Section 4 of these Bylaws and shall have exclusive authority with respect to all such nominations. The Nominating Committee shall also have exclusive authority to investigate the accuracy of any affidavit filed by a Member pursuant to this Section 2. No action taken by the Nominating Committee may be amended, repealed or in any way overruled by the Board of Directors, any committee thereof, or the Members. Actions taken by the Nominating Committee shall be by votes cast by members of the Nominating Committee, weighted in accordance with the number of customers served through facilities served by the Corporation that are entitled to vote as members of the Member whose Member Representative is casting the vote as a member of the Nominating Committee. No later than February 15 of each year, each Member shall file with the Secretary of the Corporation an affidavit in such form as may be prescribed by the Board of Directors from time to time sworn to and executed by the chairperson of the Board of Directors of such Member and the General Manager of such Member, stating the number of customers served through facilities served by the Corporation that are entitled to vote as members of such Member as of the immediately preceding December 31. With respect to any action taken by the Nominating Committee, the number of customers entitled to vote as members of each Member shall be as set forth in the last such affidavit filed with the Secretary of the Corporation by such Member. Upon a determination by the Nominating Committee that any such affidavit filed by a Member is inaccurate, the Nominating Committee shall determine the number of customers served through facilities served by the Corporation that are entitled to vote as members of such Member. Such number as determined by the Nominating Committee shall for purposes of any action taken by the Nominating committee thereafter be deemed to be substituted for the number reflected in such inaccurate affidavit. Either (i) a majority of the members of the Nominating Committee or (ii) a number of members of the Nominating Committee whose votes collectively constitute a majority of the votes of all members of the Nominating Committee shall constitute a quorum for any meeting -6- of the Nominating Committee. If a quorum is present at a meeting, except as provided in Section 4 of Article IV, the affirmative majority vote of the members of the Nominating Committee present at such meeting shall be the act of the Nominating Committee. The Nominating Committee may appoint from time to time one or more sub-committees for the purpose of researching, identifying or interviewing candidates for Director or such other purposes related to the function of the Nominating Committee as the Nominating Committee shall specify. Article IV Directors Section 1. General Powers of Board of Directors. The business and affairs of the Corporation shall be managed by a Board of Directors which shall be elected by the Members. Section 2. Term of Directors. Each Director other than the President shall serve for a term ending on the date of the third annual meeting of the Members following the annual meeting at which such Director is elected; provided, however, that in connection with the first election of Directors pursuant to this Article IV, the Members may specify shorter terms for any Director for the purpose of providing staggered terms for the Directors. Each Director shall serve until his successor is appointed or elected and qualified or until his earlier death, resignation or removal. Section 3. Number and Qualifications of Directors. The Board of Directors shall consist of a total of eleven Directors, one of whom shall be the Member At-Large Director, five of whom shall be Member Regional Directors, four of whom shall be Outside Directors and one of whom shall be the Inside Director; provided, however, that prior to the annual meeting of Members in 1997, the Board of Directors shall consist of not less than seven nor more than eleven Directors, including the Member At-Large Director, five Member Directors, the Inside Director and such number of Outside Directors as have been elected from time to time pursuant to the schedule for election of Outside Directors established by the Board of Directors from time to time. The Member At-Large Director and Member Regional Directors are referred to collectively in these Bylaws as "Member Directors." The Member Directors must be a Director or General Manager of one of the Members. One Member Regional Director shall come from each of the five regions described in this Section 3. The President of the Corporation shall be the Inside Director. An Outside Director shall have experience in one or more matters pertinent to the Corporation's business, including, without limitation, operations, marketing, finance or legal matters. No Outside Director may be a current or former officer of the Corporation, a current employee of the Corporation, a former employee of the Corporation who is receiving compensation for prior services (other than benefits under a tax-qualified retirement plan) -7- or a director, officer or employee of GTC, GSOC or any Member. In addition, no person receiving any remuneration from the Corporation in any capacity other than as an Outside Director, either directly or indirectly and whether in the form of payment for any good or service or otherwise, shall be qualified to serve as an Outside Director. No person other than the President may serve as a Director of more than one of the Corporation, GTC or GSOC. While a Director or General Manager of any Member serves as a Director of the Corporation, GTC or GSOC, then no other person from such Member may serve as a Director of any of such corporations. The five regions and the Members located in such regions are as follows: Region 1: Amicalola EMC Region 4: Colquitt EMC Carroll EMC Grady EMC Cobb EMC Irwin EMC Coweta-Fayette EMC Middle Georgia EMC GreyStone Power Corporation Mitchell EMC Troup EMC Ocmulgee EMC Pataula EMC Region 2: Habersham EMC Sumter EMC Hart EMC Three Notch EMC Jackson EMC Rayle EMC Region 5: Altamaha EMC Sawnee EMC Canoochee EMC Walton EMC Coastal EMC Excelsior EMC Region 3: Central Georgia EMC Little Ocmulgee EMC Flint EMC Okefenoke REMC Jefferson EMC Planters EMC Lamar EMC Satilla REMC Oconee EMC Slash Pine EMC Snapping Shoals EMC Tri-County EMC Upson County EMC Washington EMC Upon admission of a new Member, the Board of Directors shall assign such new Member to one of the five regions. Section 4. Nomination and Election of Directors. Any qualified person desiring to be considered as a candidate for nomination as a Member Director may file an application for nomination with the Secretary of the Corporation no later than 60 days prior to the date set for the annual meeting of Members at which such Member Director is to be elected; provided, however, that the period during which such applications -8- may be filed in connection with the first election of Directors pursuant to this Section 4 shall be as established by the Members. No person may file an application for nomination for more than one Member Director position. After applications for nomination for Member Director positions have been filed, members of the Nominating Committee may also designate one or more qualified persons as candidates for nomination whether or not any such person filed an application. Candidates for nomination as Outside Directors shall be recommended to the Nominating Committee by any Member or the staff of the Corporation no later than 60 days prior to the date set for the annual meeting of Members. All nominations of Directors by the Nominating Committee shall be made by voice roll call vote, by group, in accordance with the following procedures, applied first to the Member At-Large Director candidates, then to the Member Regional Director candidates as a group and then to the Outside Director candidates as a group. Once all nominating votes, or abstentions (which shall be considered a vote), for each of (i) the Member At-Large Director candidates, (ii) the group of Member Regional Director candidates and (iii) the group of Outside Director candidates, respectively, have been voiced, the Chairman shall announce at the end of each such group of votes an opportunity for votes to be changed. After such opportunity, if there are no vote changes, the votes shall be final and effective. If there are any vote changes, the Chairman shall announce another opportunity for votes to be changed. This process shall continue until either (a) there are no further vote changes, or (b) all members of the Nominating Committee have changed their vote twice. No member of the Nominating Committee may change his vote more than twice. At the end of such process, the votes as previously changed shall be final and effective. Except as provided in the last sentence of this paragraph, the candidate for each Director position receiving a majority vote of the Nominating Committee shall be the nominee. If more than two persons apply or are designated by a member of the Nominating Committee as a candidate for nomination for a Director position and no one candidate receives a majority vote of the Nominating Committee, the Nominating Committee shall conduct a second round of voting between the two candidates that received the most votes in the first round of voting, and the candidate receiving a majority vote in such second round shall be the nominee. If neither candidate receives a majority vote of the Nominating Committee in such second round, the Nominating Committee shall conduct a third round of voting between such candidates. If neither candidate receives a majority vote of the Nominating Committee in such third round, the candidate receiving the most votes in such third round shall be the nominee. Any attempted "write-in" vote cast by a Member for any person who has not been selected by majority vote of the Nominating Committee as a Director nominee (regardless of whether such person did or did not apply as a candidate or was or was not designated by a member of the Nominating Committee as a candidate) shall be void, and for purposes of counting votes shall be deemed an abstention. Directors shall be nominated and elected at each annual meeting of the Members in the following order: -9- O First, the Nominating Committee shall vote to select the nominee for Member. At-Large Director. The Members shall then vote for the election of such nominee. If such nominee does not receive a majority of such votes, the Nominating Committee shall vote to select another nominee for Member At-Large Director, and the Members shall vote for the election of such nominee. This nomination and election process shall be repeated as many times as necessary until a nominated candidate has been elected. O Second, the Nominating Committee shall vote to select one nominee for each Member Regional Director position to be elected at such annual meeting of the Members. The Members shall then vote separately for the election of each such nominee for Member Regional Director. If any such nominee does not receive a majority of such votes, the Nominating Committee shall vote to select another nominee, and the Members shall vote for the election of such nominee. This nomination and election process shall be repeated as many times as necessary until a nominated candidate has been elected. O Third, the Nominating Committee shall vote to select a nominee for each Outside Director position to be elected at such annual meeting. The Members shall then vote separately for the election of each such nominee. If any such nominee does not receive a majority of such votes, the Nominating Committee shall vote to select another nominee and the Members shall vote for the election of such nominee. This nomination and election process shall be repeated as many times as necessary until a nominated candidate has been elected. Section 5. Filling Vacancies on Board of Directors. Vacancies (other than a vacancy in the office of President) occurring among the incumbent Directors may be filled temporarily by the Board of Directors at its next meeting held thirty (30) days or more after the occurrence of the vacancy. Any Director so appointed shall serve until the next annual meeting of the Members or any special meeting of the Members called for the purpose of filling such position. At such annual or special meeting of the Members the Nominating Committee shall nominate and the Members shall elect, in accordance with Section 4 of this Article IV, a Director to serve for the unexpired term of the Director whose position was vacated. Vacancies occurring among the Directors due to an increase in the number of Directors shall be filled in accordance with the nomination and election process provided for in Section 4 of this Article IV at the meeting of the Members at which the action to increase the number of Directors was taken. A vacancy occurring in the office of President shall be filled only by the Board of Directors. Section 6. Resignation and Removal of Directors. If any Member Director or any Outside Director ceases to be qualified to hold such position, he shall immediately be deemed to be removed as a Director of the Corporation. Resignation -10- or removal of the President from the office of President shall operate as a resignation as Inside Director. Any Member or Director may bring charges against a Director for neglect or breach of duty or other action or inaction which is or may be injurious to the Corporation by filing them in writing with the Secretary, together with a petition signed by twenty-five percent of the Members, requesting that the matter be brought before a meeting of Members. The removal shall be voted upon at the next regular or special meeting of the Members. A majority vote of the Members present at the meeting shall determine such removal. The Director against whom such charges have been brought shall be informed in writing of the charges at least fifteen days prior to the meeting and shall have an opportunity at the meeting to be heard in person or by counsel and to present evidence; and the person or persons bringing the charges against him shall have the same opportunity. At any meeting at which a Director is removed by the Members, the Nominating Committee shall nominate, and the Members shall elect, in accordance with Section 4 of this Article IV, a Director to serve for the unexpired term of such removed Director. Any Director removed pursuant to this Section 6 shall be eligible to again be nominated to serve as a Director of the Corporation only with the consent of a majority of the Members present and voting at a meeting at which the question is presented. Section 7. Compensation of Directors. The compensation of the Directors shall be fixed by the Board of Directors from time to time. Directors also shall be reimbursed for expenses actually and necessarily incurred by them in the performance of their duties. Section 8. Power of Directors to Adopt Rules and Regulations and Policies. The Board of Directors shall have the power to adopt policies, rules and regulations for the management, administration and regulation of the business and affairs of the Corporation, provided that they are not inconsistent with law, the Articles of Incorporation or these Bylaws. Section 9. Power to Appoint Committees. Except where the composition of a committee is established by these Bylaws, the Chairman of the Board may establish (and abolish) committees comprised of Directors and others. Such committees shall not have any of the powers of the Board of Directors, and shall perform such functions as are assigned specifically to them for the purpose of advising or making recommendations to the Board of Directors. When establishing (and abolishing) such committees, the Chairman of the Board shall comply with such policies, rules and regulations, if any, as may from time to time be adopted by the Board of Directors with respect to such committees. A majority of the full Board of Directors may also establish (and abolish) committees of the Board pursuant to Section 46 3-297 of the Georgia Electric Membership Corporation Act. Article V Meetings of Directors Section 1. Regular Meetings of Directors. -11- A regular meeting of the Board of Directors shall be held quarterly or more often at such time and place as the Board of Directors may designate. Such regular meetings may be held without notice. Section 2. Special Meetings of Directors. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President or by twenty-five percent of the Directors then in office. The persons calling a special meeting may fix the time and place for the meeting. Section 3. Notice of Special Meetings of Directors. Notice of the time, place and purpose of any special meeting of the Board of Directors shall be given by or at the direction of the Chairman of the Board. The notice shall be given to each Director, at least five days prior to the meeting, by written notice delivered personally or mailed to each Director at their respective last known addresses. If mailed, such notice shall be deemed delivered when deposited in the United States mail so addressed, with first-class postage thereon prepaid. Notice of a meeting of the Board of Directors need not be given to any Director who signs a waiver of notice either before or after the meeting. Attendance of a Director at a meeting shall constitute waiver of notice of such meeting and waiver of any and all objections to the place of the meeting, the time of the meeting or the manner in which it has been called or convened, except when the Director attends the meeting solely for the purpose of stating, at the beginning of the meeting, any such objection or objections to the transaction of business. Section 4. Quorum for Meeting of Directors. A majority of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors. A majority of the Directors present may adjourn the meeting to another time and place without further notice, whether or not a quorum is present. Section 5. Action of Board of Directors. (a) The vote of a majority of Directors present and voting at the time of the vote, if a quorum is present at such time, shall be the act of the Board of Directors unless the vote of a greater number is required by law, the Articles of Incorporation or these Bylaws. (b) Notwithstanding the provisions of Subsection (a) of this Section 5, the affirmative vote of two-thirds of the Directors shall be required to (i) modify, amend or rescind any Member Rate Policy then in effect or (ii) revise any rate for electric power and energy furnished under the Wholesale Power Contracts between each Member and the Corporation. Notwithstanding the provisions of Article X hereof, the provisions of this Subsection (b) may not be altered, amended or repealed by the Directors except by the affirmative vote of two-thirds of the Directors. Section 6. Written Consent of Directors. -12- Any action required or permitted to be taken at a meeting of the Board of Directors may be taken without a meeting if a written consent, setting forth the action so taken, is signed by all the Directors and filed with the minutes of the proceedings of the Board of Directors. Article VI Officers Section 1. Officers; Qualifications. The officers of the Corporation shall be a Chairman of the Board, a President, a Secretary, and a Treasurer. The Chairman of the Board and the President must be members of the Board of Directors. Any two or more offices may be held by the same person, except that one person may not hold both the offices of Chairman of the Board and President and, pursuant to the Georgia Electric Membership Corporation Act, one person may not hold both the offices of President and Secretary. Section 2. Appointment and Term of Office of Officers. The Chairman of the Board shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after the annual meeting of the Members or as soon thereafter as practicable. The Chairman of the Board shall hold office as such until the first meeting of the Board of Directors following the next succeeding annual meeting of the Members and until his successor shall have been elected or appointed and shall have qualified, or until his earlier resignation, removal from office, or death. Each of the President, Secretary and Treasurer shall be appointed by the Board of Directors and shall hold office until his successor shall have been appointed and shall have qualified, or until his earlier resignation, removal from office, or death. Section 3. Removal of Officers. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interest of the Corporation will be served thereby. Section 4. Chairman of the Board. The Chairman of the Board shall: (a) preside at meetings of the Board of Directors; and (b) have such other duties and powers as are incident to his office and such other duties and powers as may be prescribed by the Board of Directors from time to time. Section 5. President. The President shall: (a) manage the day-to-day operations and activities of the Corporation; -13- (b) have the power to enter into and execute contracts on behalf of the Corporation and to sign certificates, contracts or other instruments on behalf of the Corporation; and (c) have such other duties and powers as are incident to his office and such other duties and powers as may be prescribed by the Board of Directors from time to time. At the determination of the Board of Directors, the President may be designated as chief executive officer of the Corporation, in which case such designation may be added to the title of the office of President. Section 6. Secretary. The Secretary shall be responsible for seeing that minutes of all meetings of the Members and the Board of Directors are kept and shall have authority to certify as to the corporate books and records, and shall keep a register of the address of each Member and Director. The Secretary shall perform such other duties and have such other powers as may from time to time be delegated to him by the President or the Board of Directors. Section 7. Treasurer. The Treasurer shall oversee the management of the financial affairs of the Corporation by the staff, and shall perform the other duties incident to the office of Treasurer and have such other duties as from time to time may be assigned to him by the President or the Board of Directors. Section 8. Appointment of Officers and Agents. The Board of Directors may appoint from time to time one or more Executive or Senior Vice Presidents, Vice Presidents, other officers, assistant officers and agents as the Board of Directors may determine. Each such Executive or Senior Vice President, Vice President, other officer, assistant officer and agent shall perform such duties as the action appointing him provides and, unless the action otherwise provides, shall perform such duties as may from time to time be delegated to him by the President and the duties which are generally performed by the elected officers or assistant officers having the same title. Section 9. Bonds of Officers. The Board of Directors shall require all officers and employees of the Corporation to give bond in such sum and with such surety as the Board of Directors shall determine. Section 10. Compensation of Officers. The compensation of all officers shall be determined by the Board of Directors, or by a person or persons designated by the Board of Directors. Article VII Cooperative Operation Section 1. Interest or Dividends on Capital Prohibited. -14- The Corporation shall at all times be operated on a cooperative basis for the mutual benefit of its Members. No interest or dividends shall be paid or payable by the Corporation on any capital furnished by Members. Section 2. Patronage Capital in Connection with Furnishing Electric Energy. In the furnishing of electric energy, the Corporation's operation shall be so conducted that all Members will through their patronage furnish capital for the Corporation. The Corporation is obligated to account on a patronage basis to all Members for all amounts received and receivable from the furnishing of electric energy in excess of operating costs and expenses properly chargeable against the furnishing of electric energy. All such amounts in excess of operating costs and expenses at the moment of receipt by the Corporation are received with the understanding that they are furnished by Members as capital. The Corporation is obligated to credit to one or more capital accounts for each Member all such amounts in excess of operating costs and expenses. The books and records of the Corporation shall be set up and kept in such a manner that at the end of each fiscal year the amount of capital, if any, so furnished by each Member is clearly reflected and credited in an appropriate record to one or more capital accounts for each Member, and the Corporation shall within a reasonable time after the close of the fiscal year notify each Member of the amount of capital so credited to its account or accounts. All such amounts credited to a capital account of any Member shall have the same status as though they had been paid to the Member in cash in pursuance of a legal obligation to do so and the Member had then furnished the Corporation corresponding amounts for capital. All other amounts received by the Corporation from its operations in excess of costs and expenses shall, insofar as permitted by law, be (a) used to offset any losses incurred during the current or any prior fiscal year and (b) to the extent not needed for that purpose, allocated to the Members on a patronage basis and any amounts so allocated shall be a part of the capital credited to an appropriate account for each Member. In the event of dissolution or liquidation of the Corporation, after all its outstanding indebtedness shall have been paid, outstanding capital credits shall be retired without priority on a pro rata basis before any payments are made on account of property rights of Members. If, at any time prior to dissolution or liquidation, the Board of Directors shall determine that the financial condition of the Corporation will not be impaired thereby, capital then credited to Members' accounts and the accounts of former Members may be retired in full or in part. Any such retirements of capital from a particular type account shall be made in order of priority according to the year in which the capital was furnished and credited, the capital first received by the Corporation being first retired. Notwithstanding the preceding sentence, retirements of each Member's capital credits made pursuant to the First Amended and Restated Restructuring Agreement, dated as of August 1, 1996, by and among the Corporation, Georgia Transmission Corporations and Georgia System Operations Corporation, as such agreement may be amended, shall be allocated among and charged to the Members' capital accounts as provided therein. Capital credited to the accounts of Members shall be assignable only on the books of the Corporation to a transferee of a Member's membership, pursuant to written instruction from -15- the Member and then only upon satisfaction of all requirements for a transfer of membership established by or pursuant to these Bylaws. Section 3. Accounting System and Reports. The Board of Directors shall cause to be established and maintained a complete accounting system which shall conform to applicable law and to the requirements of the Corporation's lenders. After the close of each fiscal year, the Board of Directors shall also cause to be made a full and complete audit of the accounts, books and financial condition of the Corporation as of the end of such fiscal year. A report on the audit for the fiscal year immediately preceding each annual meeting of Members shall be submitted to the Members at such annual meeting. Article VIII Indemnification and Insurance Section 1. Indemnification. The Corporation shall indemnify each person who is or was a Director, officer, employee or agent of the Corporation (including the heirs, executors, administrators or estate of such person) or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise to the full extent permitted under Sections 46-3-306(b), (c) and (d) of the Georgia Electric Membership Corporation Act or any successor provisions of the laws of the State of Georgia. If any such indemnification is requested pursuant to Sections 46-3-306(b) or (c) of said Act or laws, the Board of Directors shall cause a determination to be made (unless a court has ordered the indemnification) in one of the manners prescribed in Section 46-3-306(e) of said Act or laws as to whether indemnification of the party requesting indemnification is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 46-3-306(b) or (c) of said Act or laws. Upon any such determination that such indemnification is proper, the Corporation shall make indemnification payments of liability, cost, payment or expense asserted against, or paid or incurred by, him in his capacity as such a director, officer, employee or agent to the maximum extent permitted by said Sections of said Act or laws. The indemnification obligation of the Corporation set forth herein shall not be deemed exclusive of any other rights, in respect of indemnification or otherwise, to which any party may be entitled under any other bylaw provision or resolution approved by the Members pursuant to Section 46-3-306(g) of said Act or laws. Section 2. Insurance. The Corporation may purchase and maintain insurance at its expense, to protect itself and any Director, officer, employee or agent of the Corporation (including the heirs, executors, administrators or estate of any such person) against any liability, cost, payment or expense described in Section 1 of this Article VII, whether or not the Corporation would have the power to indemnify such person against such liability. Article IX Seal -16- The seal of the Corporation shall be in such form as the Board of Directors may from time to time determine. In the event it is inconvenient to use such a seal at any time, the words "Corporate Seal" or the word "Seal" accompanying the signature of an officer signing for and on behalf of the Corporation shall be the seal of the Corporation. Article X Amendment These Bylaws may be amended at any meeting of the Board of Directors by the affirmative vote of not less than a majority of the Directors present at a meeting at which a quorum is present provided notice of such meeting containing a copy of the proposed amendment shall have been given not less than five nor more than ninety days prior thereto; provided, however, that the provisions of Section 6 of Article II, Article III, Sections 1 through 6 of Article IV and Article X of these Bylaws may not be altered, amended or repealed except by the affirmative vote of three-fourths of the Members. Any bylaw provision adopted by the Board of Directors may be altered, amended or repealed and new provisions adopted by the Members by the affirmative vote of not less than a majority of the Members present at a meeting at which a quorum is present, provided notice of such meeting containing a copy of the proposed amendment shall have been given. The Members may prescribe that any bylaw provisions adopted by them shall not be altered, amended or repealed by the Board of Directors -17- EX-4.7 6 EXHIBIT 4.7 Exhibit 4.7 AMENDED AND CONSOLIDATED LOAN CONTRACT (No Future Advances) Dated as of March 1, 1997 between OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) and UNITED STATES OF AMERICA RUS Project Designation: Georgia 109 OPC TABLE OF CONTENTS Page RECITALS.......................................................................1 ARTICLE I -- DEFINITIONS.......................................................2 ARTICLE II -- REPRESENTATIONS AND WARRANTIES ..................................6 ARTICLE III -- THE LOANS.......................................................8 Section 3.1 The Loans................................................8 Section 3.2 No Further Advances......................................8 Section 3.3 Interest Rates and Payment...............................8 Section 3.4 Prepayment...............................................9 ARTICLE IV -- AFFIRMATIVE COVENANTS............................................9 Section 4.1 Generally................................................9 Section 4.2 Annual Certificates......................................9 Section 4.3 Simultaneous Prepayment of Contemporaneous Loans.........9 Section 4.4 Rates and Coverage Ratios...............................10 Section 4.5 Financial Books.........................................10 Section 4.6 Rights of Inspection....................................10 Section 4.7 Real Property Acquisition...............................10 Section 4.8 Power Requirements Studies..............................11 Section 4.9 Long Range Engineering Plans and Construction Work Plans..............................................11 Section 4.10 Design Standards, Construction Standards and List of Materials............................................11 Section 4.11 Financial Reports.......................................11 Section 4.12 Miscellaneous Reports and Notices.......................11 Section 4.13 Variable Rate Indebtedness..............................12 Section 4.14 Special Construction Account............................12 Section 4.15 Compliance with Laws....................................13 Section 4.16 Plant Agreements........................................13 Section 4.17 Separate Accounts.......................................13 Section 4.18 Nuclear Fuel............................................13 Section 4.19 Additional Affirmative Covenants........................14 ARTICLE V -- NEGATIVE COVENANTS...............................................14 Section 5.1 General ................................................14 Section 5.2 Limitations on System Extensions, Additions and Dispositions........................................14 Section 5.3 Limitations on Employment and Retention of General Manager.........................................15 (i) Section 5.4 Limitations on Certain Types of Contracts...............15 Section 5.5 Limitations on Loans, Investments and Other Obligations.............................................17 Section 5.6 Depreciation Rates......................................17 Section 5.7 Rate Reductions.........................................17 Section 5.8 Indenture Restrictions..................................17 Section 5.9 Negative Pledge.........................................19 Section 5.10 Emissions Allowances....................................21 Section 5.11 Changes to Plant Agreements.............................21 Section 5.12 Fiscal Year.............................................21 Section 5.13 Limits on Variable Rate Indebtedness....................21 Section 5.14 Additional Negative Covenants...........................21 ARTICLE VI -- EVENTS OF DEFAULT...............................................21 ARTICLE VII -- REMEDIES.......................................................23 ARTICLE VIII -- MISCELLANEOUS.................................................23 Section 8.1 Notice to RUS; Objection of RUS .......................23 Section 8.2 Notices.................................................24 Section 8.3 Expenses................................................25 Section 8.4 Late Payments...........................................25 Section 8.5 Filing Fees.............................................25 Section 8.6 No Waiver...............................................25 Section 8.7 Governing Law...........................................25 Section 8.8 Holiday Payments........................................26 Section 8.9 Successors and Assigns..................................26 Section 8.10 Complete Agreement; Amendments..........................26 Section 8.11 Headings................................................26 Section 8.12 Severability............................................26 Section 8.13 Right of Set off........................................27 Section 8.14 Schedules and Exhibits..................................27 Section 8.15 Sole Benefit ...........................................27 Section 8.16 Existing Loan Contract..................................27 Section 8.17 Authority of RUS Representatives........................27 Section 8.18 Relation to RUS Regulations.............................28 Section 8.19 Term....................................................28 (ii) Schedules Schedule 1 Existing Loan Contract; Etc. Schedule 2 Additional Covenants Exhibit A Form of Lock Box Agreement (iii) AMENDED AND CONSOLIDATED LOAN CONTRACT THIS AMENDED AND CONSOLIDATED LOAN CONTRACT, dated as of March 1, 1997, is between OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) (together with any successors and assigns, the "Borrower"), a corporation organized and existing under the laws of the State of Georgia (the "State"), and the UNITED STATES OF AMERICA (the "Government"), acting by and through the Administrator (together with any person succeeding to the powers and rights of the Administrator with respect to this Agreement, the "Administrator") of the Rural Utilities Service (together with any agency succeeding to the powers and rights of the Rural Utilities Service with respect to this Agreement, the "RUS"); RECITALS WHEREAS, the Borrower has incurred, pursuant to the Act (as defined in Article I) and under the Existing Loan Contract (as defined below), certain indebtedness and other obligations to, or guaranteed by, the Government, acting by and through the Administrator of the RUS, which indebtedness and other obligations are evidenced by the Prior Notes (as defined in Article I); and WHEREAS, in connection with the loans and other obligations evidenced by the Prior Notes, the Borrower and the Government, acting by and through the Administrator of the RUS, have entered into that certain Amended and Consolidated Loan Contract, dated as of June 1, 1984, which has been supplemented and amended by the documents identified in Schedule 1 (the "Existing Loan Contract"); and WHEREAS, to secure the indebtedness and other obligations evidenced by the Prior Notes and to secure certain other indebtedness, the Borrower has entered into that certain Consolidated Mortgage and Security Agreement, dated as of September 1, 1994, by and among the Borrower, as mortgagee, and the Government, acting through the Administrator of the RUS, CoBank, ACB, formerly known as National Bank for Cooperatives, Credit Suisse First Boston, formerly known as Credit Suisse, acting by and through its New York Branch, and SunTrust Bank, Atlanta, formerly known as Trust Company Bank (as Trustee under certain pollution control bond indentures), as mortgagees (together with the predecessor instruments thereto and identified therein, collectively, the "RUS Mortgage"); and WHEREAS, pursuant to the Second Amended and Restated Restructuring Agreement (as it may be amended, the "Restructuring Agreement"), dated as of February 24, 1997, by and among the Borrower, Georgia Transmission Corporation (An Electric Membership Corporation) ("GTC") and Georgia System Operations Corporation ("GSOC"): (i) the Borrower has transferred its transmission business to GTC and its system operations business to GSOC; (ii) GTC has assumed, and the Borrower has been released as to, a portion of the indebtedness and other obligations evidenced by the Prior Notes; and (iii) the Borrower has executed and delivered the Outstanding Notes (as defined in Article I) to evidence that portion of the indebtedness and other liabilities evidenced by the Prior Notes as to which it remains liable; and WHEREAS, the Borrower, the Government, acting by and through the Administrator of the RUS, and the other mortgagees have replaced the RUS Mortgage with the Indenture (as defined in Article I), pursuant to which the Borrower has granted security title to and a security interest in substantially all of its real and personal property to secure the Outstanding Notes and the other obligations secured under the RUS Mortgage as to which it remains liable; and WHEREAS, in connection with the restructuring transactions contemplated by the Restructuring Agreement and the substitution of the Indenture as a replacement for the RUS Mortgage, the Borrower and the Government intend to amend and consolidate the Existing Loan Contract as herein set forth; NOW, THEREFORE, for and in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto amend and consolidate the Existing Loan Contract to read in its entirety, and agree and bind themselves, as follows: ARTICLE I -- DEFINITIONS Capitalized terms that are not defined herein shall have the meanings set forth in the Indenture. The terms defined herein include both the plural and the singular. Unless otherwise specifically provided, all accounting terms not otherwise defined herein shall have the meanings assigned to them, and all determinations and computations herein provided for shall be made, in accordance with Accounting Requirements. "Accounting Requirements" shall have the meaning given such term in the Indenture. "Act" shall mean the Rural Electrification Act of 1936, as amended. "Agreement" shall mean this Loan Contract, together with all schedules, and also any subsequent supplements or amendments hereto. "Business Day" shall mean any day that the RUS and FFB are both open for business. "Contemporaneous Loans" shall mean those loans identified as such on Schedule 1. "Current Refunding" shall mean any refinancing or refunding of indebtedness that occurs not more than ninety (90) days following the Stated Maturity of such indebtedness. "Equity" shall mean the Borrower's total margins and equities computed in accordance with Accounting Requirements. -2- "Event of Default" shall have the meaning as defined in Article VI. "FERC" shall mean the Federal Energy Regulatory Commission, or any agency or other governmental body succeeding to the functions thereof. "FFB" shall mean the Federal Financing Bank, an instrumentality and wholly-owned corporation of the Government, and any successor to the powers and rights thereof with respect to the Outstanding Notes. "Fitch" shall mean Fitch Investors Service, Inc., and any successor thereto. "General Manager" shall mean the President and Chief Executive Officer of the Borrower or the person performing the duties of a chief executive officer if no person holds such title and, in the event of any dispute between the Borrower and the Government as to who is the General Manager, the Administrator may designate a person or position that shall be the General Manager for purposes of this Agreement. "Highest Oversight Period" shall mean any period commencing on the date the Borrower receives written notice from the Administrator that any of the following events has occurred (which notice shall set forth the basis for concluding that such event has occurred), and ending on the date the Borrower receives written notice from the Administrator that such period has ended: (i) all of the long-term indebtedness that is not subject to credit enhancement issued by or for the benefit of the Borrower (including, without limitation, indebtedness issued by development authorities or any other governmental authority with respect to which the Borrower is an obligor) and secured directly or indirectly under the Indenture is assigned a rating of less than "Ba3" (or its then current equivalent) in the case of Moody's, "BB-" (or its then current equivalent) in the case of S&P, "BB-" (or its then current equivalent) in the case of Fitch, or the then current equivalent by any other Rating Agency; (ii) the Administrator determines that the System is incapable of providing reliable service to the members of the Borrower pursuant to the terms of the Wholesale Power Contracts; (iii) the Administrator determines that, as a consequence of any change in the condition, financial or otherwise, operations, properties or business of the Borrower, the Borrower will be unable to perform its material obligations under (a) this Agreement, (b) the Wholesale Power Contracts, (c) the Outstanding Notes, or (d) the Indenture; or -3- (iv) the occurrence of an Event of Default under the Indenture, or any event which with the passage of time or giving of notice, or both, would constitute an Event of Default under the Indenture. "Increased Oversight Period" shall mean any period (other than a Highest Oversight Period) during which any of the long-term indebtedness that is not subject to credit enhancement issued by or for the benefit of the Borrower (including, without limitation, indebtedness issued by development authorities or any other governmental authority with respect to which the Borrower is an obligor) and secured directly or indirectly under the Indenture is not then assigned investment grade ratings by at least two (2) Rating Agencies. For purposes of this definition, an investment grade rating shall mean, in the case of Moody's, a rating of "Baa3" or higher, in the case of S&P, a rating of "BBB-" or higher, in the case of Fitch, a rating of "BBB-" or higher, and in the case of any other Rating Agency, the current equivalent thereof. "Indenture" shall mean the Indenture, dated as of March 1, 1997, entered into by the Borrower and SunTrust Bank, Atlanta, as trustee, and all amendments and supplements thereto. "Investment" shall mean any loan or advance to, or any investment in, or purchase or commitment to purchase any stock, bonds, notes or other securities of, or guaranty, assumption or other obligation or liability with respect to the obligations of, any other person, firm or corporation, except investments in securities or deposits issued, guaranteed or fully insured as to payment by the Government or any agency thereof and except any other investments set forth in the RUS Regulations (7 C.F.R. ss. 1717.655) as excluded from computations of the amounts and types of investments for which RUS approval is required. "Laws" shall have the meaning as defined in Section (e) of Article II. "Loans" shall mean the loans and other obligations described in Article III. "Loan Documents" shall mean this Agreement, the Indenture and the Outstanding Notes. "Material Adverse Effect" shall mean a material adverse effect on the condition, financial or otherwise, operations, properties, margins or business of the Borrower or on the ability of the Borrower to perform its obligations under the Loan Documents. "Moody's" shall mean Moody's Investor Service, Inc., and any successor thereto. "Outstanding Notes" shall mean those notes of the Borrower outstanding on the date hereof payable to the order of FFB, the payment of which is guaranteed by the Government pursuant to the Act, and those notes of the Borrower outstanding on the date hereof payable to the order of the Government evidencing loans made by the Government, acting by and through the Administrator of the RUS, pursuant to the Act, or evidencing reimbursement obligations of the Borrower to the Government with respect to the Government's guarantee of the payment of certain notes payable to -4- the order of FFB, all as specifically identified on Schedule 1 hereto, and all amendments, supplements, extensions and replacements to, of or for such notes. "Plant Agreements" shall mean those agreements relating to the joint ownership and operation of generating facilities described on Schedule 1 hereto. "Prior Notes" shall mean those notes of the Borrower payable to the order of FFB, the payment of which is guaranteed by the Government pursuant to the Act, and those notes of the Borrower payable to the order of the Government evidencing loans made by, or evidencing reimbursement obligations of the Borrower to, the Government, acting by and through the Administrator of the RUS, pursuant to the Act, which have been satisfied and replaced by delivery of the Outstanding Notes. "Prudent Utility Practice" shall mean any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry in the region during the relevant time period, or any of the practices, methods and acts that, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at lowest reasonable cost consistent with good business practices, reliability, safety and expedition. "Prudent Utility Practice" is not intended to be limited to the optimum practice, method or act, to the exclusion of all others, but rather to include a spectrum of possible practices, methods or acts generally in acceptance in the region in light of the circumstances. "Rates" shall have the meaning given such term in the Indenture. "Rating Agency" shall mean any nationally recognized statistical rating organization (within the meaning of the rules of the United States Securities and Exchange Commission) that at the applicable time has assigned, at the request of the Borrower, a rating to any long-term indebtedness (that is not subject to credit enhancement) issued by or on behalf of the Borrower (including, without limitation, indebtedness issued by development authorities or any other governmental authority with respect to which the Borrower is an obligor) and secured directly or indirectly under the Indenture. "RUS Regulations" shall mean the rules and regulations of general applicability published by the RUS from time to time in 7 C.F.R. Chapter XVII and any replacement chapter, as such rules and regulations exist at the date of applicability thereof, and, unless the context clearly demonstrates a contrary intent, shall also include such rules and regulations of other Federal entities which the RUS is required by law to implement. "S&P" shall mean Standard & Poor's Rating Service, A Division of The McGraw-Hill Companies, Inc., and any successor thereto. "Special Construction Account" shall have the meaning as defined in Section 4.14. -5- "Subsidiary" shall mean a corporation that is a subsidiary of the Borrower and subject to the Borrower's control, as defined by Accounting Requirements. "System" shall mean all electric properties and interest in electric properties of the Borrower, it being the intent that "System" be broadly construed to encompass and include the Borrower's interests in all electric production, transmission, distribution, conservation, load management, general plant and other related facilities, equipment or property and in any mine, well, pipeline, plant, structure or other facility for the development, production, manufacture, storage, fabrication or processing of fossil, nuclear or other fuel of any kind or in any facility or rights with respect to the supply of water, in each case for use, in whole or in major part, in any of the Borrower's generating plants, now existing or hereafter acquired by lease, contract, purchase or otherwise or constructed by the Borrower, including any interest or participation of the Borrower in any such facilities or any rights to the output or capacity thereof, together with all additions, betterments, extensions and improvements to said System or any part thereof hereafter made and together with all lands, easements and rights-of-way of the Borrower and all other works, property or structures of the Borrower and contract rights and other tangible and intangible assets of the Borrower used or useful in connection with or related to said System, including, without limitation, a contract right or other contractual arrangement for the long-term or short-term interconnection, interchange, exchange, pooling, wheeling, transmission, purchase or sale of electric power and energy and other similar arrangements with entities having generation or transmission capabilities; provided, however, that "System" shall not include any property constituting Excepted Property or Excludable Property. "Total Utility Plant" shall mean the amount constituting the total utility plant (gross) of the Borrower computed in accordance with Accounting Requirements. "Wholesale Power Contracts" shall mean the Amended and Restated Wholesale Power Contracts, each dated as of August 1, 1996, by and between the Borrower and its members, and all amendments, supplements or replacements thereto or thereof. ARTICLE II -- REPRESENTATIONS AND WARRANTIES Recognizing that the RUS is relying hereon, the Borrower represents and warrants, as of the date of this Agreement, as follows: (a) Organization; Power, Etc. The Borrower: (i) is duly organized, validly existing, and in good standing under the laws of the State; (ii) is duly qualified to do business and is in good standing in each jurisdiction in which the transaction of its business makes such qualification necessary; (iii) has all requisite corporate and legal power to own and operate its assets and to carry on its business and to enter into and perform the Loan Documents; and (iv) has duly and lawfully obtained and maintained all material licenses, certificates, permits, authorizations and approvals which are necessary to the conduct of its business or required by applicable Laws. -6- (b) Authority. The execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents and the performance of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action and do not violate any provision of law or of the Articles of Incorporation or By-Laws of the Borrower or result in a breach of, or constitute a default under, any agreement, indenture or other instrument to which the Borrower is a party or by which it may be bound. (c) Consents. No consent, permission, authorization, order or license of any governmental authority is necessary in connection with the execution, delivery or performance of the Loan Documents, except such as have been obtained and are in full force and effect. (d) Binding Agreement. Each of the Loan Documents is, or when executed and delivered will be, the legal, valid, and binding obligation of the Borrower, enforceable in accordance with its terms, subject only to limitations on enforceability imposed in equity or by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally. (e) Compliance With Laws. The Borrower is in compliance in all material respects with all federal, state and local laws, rules, regulations, ordinances, codes and orders (collectively, "Laws"), the failure to comply with which could reasonably be expected to have a Material Adverse Effect. (f) Litigation. There are no pending legal, arbitration or governmental actions or proceedings to which the Borrower is a party or to which any of its property is subject which, if adversely determined, could reasonably be expected to have a Material Adverse Effect, and to the best of the Borrower's knowledge, no such actions or proceedings are threatened or contemplated, except as the Borrower has disclosed to the RUS in writing. (g) Financial Statements; No Material Adverse Change; Etc. The financial statements of the Borrower as of December 31, 1996, and for the year then ended, present fairly, in all material respects, the financial position of the Borrower and the results of its operations in conformity with Accounting Requirements. Since December 31, 1996, there has been no material adverse change in the financial condition or operations of the Borrower. (h) Budgets; Projections; Etc. All budgets, projections, appraisals, feasibility studies and other financial information submitted by the Borrower to the RUS or to any Rating Agency, as updated by the Borrower from time to time and submitted to the RUS and to the Rating Agencies, in connection with the restructuring transactions contemplated by the Restructuring Agreement were reasonable at the time so submitted; and, as of the date hereof, no fact has come to light, and no event or transaction has occurred, which would cause such information, as so updated, to be unreasonable. (i) Location of Properties. All real property and interests therein of the Borrower located in the State is located in the counties identified in the Indenture. -7- (j) Principal Place of Business; Records. The principal place of business and chief executive office of the Borrower is at the address of the Borrower specified in Section 8.2. (k) Subsidiaries. The Borrower has no Subsidiary, except as the Borrower has disclosed to the RUS in writing. (l) Defaults Under Other Agreements. The Borrower is not in default under any agreement or instrument to which it is a party or to which any of its property is subject that could reasonably be expected to have a Material Adverse Effect. ARTICLE III -- THE LOANS Section 3.1 The Loans To finance, pursuant to the provisions of the Act, the construction and operation of the System for the purpose of furnishing electric energy to persons in rural areas not receiving central station electric service, (i) the Borrower has borrowed funds from the Government, acting by and through the Administrator of the RUS, evidenced by the Outstanding Notes payable to the Government, (ii) the Borrower has borrowed funds from FFB, evidenced by the Outstanding Notes payable to FFB, and the Government, acting by and through the Administrator of the RUS, has guaranteed the repayment of such funds, and (iii) the Borrower has agreed to reimburse the Government, acting by and through the Administrator of the RUS, for amounts paid by the Government on account of its guarantee of funds borrowed by the Borrower from FFB, which reimbursement obligations are evidenced by the Outstanding Notes payable to the Government in respect of such reimbursement obligations. Section 3.2 No Further Advances The Borrower acknowledges and agrees that all amounts to be advanced to the Borrower under the Outstanding Notes have been advanced and neither FFB nor the Government, acting by or through the Administrator of the RUS, is under any obligation to make any further advances to the Borrower under the Outstanding Notes (other than with respect to payments by the Government on account of its guarantees of certain Outstanding Notes payable to FFB). Section 3.3 Interest Rates and Payment (a) Interest Rates. The Outstanding Notes shall be payable and bear interest as therein provided. (b) Application of Payments. All payments which the Borrower sends to the RUS on any Outstanding Note shall be applied in the manner provided in the Loan Documents to which such -8- payments relate and in a manner consistent with RUS policies, practices and procedures for obligations that have been similarly classified by the RUS. (c) Electronic Funds Transfer. Except as otherwise prescribed by the RUS, the Borrower shall make all payments on the Outstanding Notes utilizing electronic funds transfer procedures as specified by the RUS. Section 3.4 Prepayment The Borrower has no right to prepay any Outstanding Note in whole or in part except such rights, if any, as are expressly provided for in each Outstanding Note or as may be provided by Law. However, prepayment of any Outstanding Note (and any penalties) relating to a Contemporaneous Loan shall be mandatory under Section 4.3. ARTICLE IV -- AFFIRMATIVE COVENANTS Section 4.1 Generally Unless otherwise agreed to in writing by the RUS, while this Agreement is in effect, the Borrower shall duly observe each of the affirmative covenants contained in this Article IV. Section 4.2 Annual Certificates (a) Performance under Indenture. The Borrower shall duly observe and perform all of its obligations under the Indenture. (b) Annual Certification. Within one hundred twenty (120) days after the close of each fiscal year, the Borrower shall deliver to the RUS a written statement signed by its General Manager, stating that, to the knowledge of the General Manager, during such year the Borrower has fulfilled all of its obligations under the Loan Documents throughout such year in all material respects or, if there has been a material default in the fulfillment of any such obligations, specifying each such default known to the General Manager and the nature and status thereof. Section 4.3 Simultaneous Prepayment of Contemporaneous Loans If the Borrower shall at any time prepay in whole or in part any Contemporaneous Loan, the Borrower shall prepay the related Outstanding Note to the Government in the ratio that the unpaid principal balance of such Outstanding Note to the Government bears to the aggregate unpaid principal amount of both such Outstanding Note and the Outstanding Note evidencing the Contemporaneous Loan. If either such Outstanding Note calls for a prepayment penalty or premium, such amount shall be paid but shall not be used in computing the amount needed to be paid to the Government under this Section 4.3 to maintain such ratio. Prepayments associated with refinancing -9- or refunding a Contemporaneous Loan are not considered to be prepayments for purposes of this Agreement if (i) the principal amount of such refinancing or refunding loan is not less than the amount of loan principal being refinanced and (ii) the weighted average life of the refinancing or refunding loan is not less than the weighted average remaining life of the loan being refinanced. Section 4.4 Rates and Coverage Ratios (a) Prospective Notice of Change in Rates. The Borrower shall give the RUS sixty (60) days' prior written notice of any proposed change in the Borrower's general rate structure. (b) Routine Reporting Coverage Ratios. In connection with the furnishing of its annual report to the RUS pursuant to Section 4.11, the Borrower shall report to the RUS, in such written format as RUS may require, the Margins for Interest level which was achieved during such fiscal year. (c) Corrective Plans. Within thirty (30) days of (i) sending a notice to the RUS under subsection (b) above that shows the Margins for Interest level required by Section 13.14 of the Indenture was not met for any fiscal year, or (ii) being notified by the RUS that the Margins for Interest level required by Section 13.14 of the Indenture was not met for any fiscal year, whichever is earlier, the Borrower in consultation with the RUS shall provide a written plan satisfactory to the RUS setting forth the actions that shall be taken to achieve the required Margins for Interest level on a timely basis. Section 4.5 Financial Books The Borrower shall at all times keep, and safely preserve, proper books, records and accounts in which full and true entries shall be made of all of the dealings, business and affairs of the Borrower and its Subsidiaries, in accordance with any applicable Accounting Requirements. Section 4.6 Rights of Inspection The Borrower shall afford the RUS, through its representatives, reasonable opportunity, at all times during business hours and upon prior notice, to have access to and the right to inspect the System, any other property encumbered by the Indenture, and any or all books, records, accounts, invoices, contracts, leases, payrolls, canceled checks, statements and other documents and papers of every kind belonging to or in the possession of the Borrower or in any way pertaining to its property or business, including its Subsidiaries, if any, and to make copies or extracts therefrom. Section 4.7 Real Property Acquisition In acquiring real property, the Borrower shall comply in all material respects with the provisions of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of -10- 1970, as amended by the Uniform Relocation Act Amendments of 1987, and 49 C.F.R. part 24, referenced by 7 C.F.R. part 21, to the extent applicable to such acquisition. Section 4.8 Power Requirements Studies The Borrower shall prepare and use power requirements studies of its electric loads and future energy and capacity requirements in conformance with Prudent Utility Practice and an RUS approved plan for preparation of such power requirements studies, taking into account the limited obligation of the Borrower under the Wholesale Power Contracts; provided, however, that during a Highest Oversight Period, the Borrower shall prepare and use such studies in conformance with RUS Regulations. The Borrower shall provide the RUS with copies of such studies. Section 4.9 Long Range Engineering Plans and Construction Work Plans The Borrower shall develop, maintain and use up-to-date long-range engineering plans and construction work plans in conformance with Prudent Utility Practice; provided, however, that during a Highest Oversight Period, the Borrower shall develop, maintain and use such plans in conformance with RUS Regulations. Section 4.10 Design Standards, Construction Standards and List of Materials The Borrower shall use design standards, construction standards and lists of acceptable materials in conformance with Prudent Utility Practice; provided, however, that during a Highest Oversight Period, the Borrower shall use such standards and lists in conformance with RUS Regulations. Section 4.11 Financial Reports The Borrower shall cause to be prepared and furnished to the RUS a full and complete annual report of its financial condition and of its operations in form and substance satisfactory to the RUS, audited and certified by an independent certified public accountant satisfactory to the RUS and accompanied by a report of such audit in form and substance reasonably satisfactory to the RUS. The Borrower shall also furnish to the RUS from time to time such other reports concerning the financial condition or operations of the Borrower, including its Subsidiaries, as the RUS may reasonably request or RUS Regulations require. Section 4.12 Miscellaneous Reports and Notices The Borrower shall furnish to the RUS: (a) Notice of Default. Promptly after becoming aware thereof, notice of: (i) the occurrence of any Event of Default or event which with the giving of notice or the passage of time, or both, would become an Event of Default; and (ii) the receipt of any notice given pursuant to the -11- Indenture with respect to the occurrence of any event which with the giving of notice or the passage of time, or both, could become an "Event of Default" under the Indenture. (b) Notice of Litigation. Promptly after the commencement thereof, notice of the commencement of all actions, suits or proceedings before any court, arbitrator, or governmental department, commission, board, bureau, agency or instrumentality affecting the Borrower which, if adversely determined, could reasonably be expected to have a Material Adverse Effect. (c) Notice of Change of Place of Business. Promptly in writing, notice of any change in location of its principal place of business or the office where its records concerning accounts and contract rights are kept. (d) Regulatory and Other Notices. Promptly after receipt thereof, copies of any notices or other communications received from any governmental authority with respect to any matter or proceeding which could reasonably be expected to have a Material Adverse Effect. (e) Ratings. Promptly after receipt thereof, copies of any reports or ratings on the Borrower issued by any Rating Agency. (f) Other Information. Such other information regarding the condition, financial or otherwise, operations, properties or business of the Borrower as the RUS may, from time to time, reasonably request. Section 4.13 Variable Rate Indebtedness In connection with the furnishing of its annual report to the RUS pursuant to Section 4.11, the Borrower shall report to the RUS, in such written format as may be acceptable to the RUS, the specific maturities of all of the Borrower's outstanding indebtedness and the interest rates applicable thereto, including, without limitation, with respect to any indebtedness not bearing a fixed rate through the maturity of such indebtedness the method and timing for adjustment and readjustment of the applicable interest rate. Section 4.14 Special Construction Account The Borrower shall continue to maintain the "Special Construction Account" maintained under the Existing Loan Contract and continue to hold therein all moneys currently held therein, subject to this Section 4.14. The Borrower shall withdraw moneys from the Special Construction Account only as permitted from time to time by the RUS. Moneys in the Special Construction Account are held in trust for the RUS. The Special Construction Account shall be insured to the extent insurable by the Federal Deposit Insurance Corporation or other federal agency acceptable to the RUS and shall be designated by the corporate name of the Borrower followed by the words "Trustee, Special Construction Account." The Borrower shall close the Special Construction Account when all moneys therein have been withdrawn in accordance with this Section 4.14. -12- Section 4.15 Compliance with Laws The Borrower shall operate and maintain the System and its properties in compliance in all material respects with all applicable Laws the failure to comply with which could reasonably be expected to have a Material Adverse Effect. Section 4.16 Plant Agreements (a) Enforcement. If the RUS, in its absolute discretion, shall determine it appropriate or necessary to preserve the security for the Loans, subject to the provisions of the Indenture, the RUS may require in writing the Borrower to authorize and empower the Government to enforce any Plant Agreement, with the form of such written authorization to be prescribed by the RUS. (b) Appointment of Agent. If the appointment of Georgia Power Company as agent under any Plant Agreement is terminated in whole or in part, and if the Borrower is not qualified to serve as agent, then the RUS may require the Borrower to take all action that the Borrower is entitled to take to cause the appointment of the Government or such agency of the Government as the RUS shall designate in writing, as agent under any such Plant Agreement, to the extent and with such duties, rights, power and authority as the RUS shall prescribe in writing, not inconsistent with the provisions of such Plant Agreement. Section 4.17 Separate Accounts The Borrower shall execute and deliver, with a financial institution approved by the RUS, a lockbox agreement or agreements substantially in the form of Exhibit A attached hereto ("Lockbox Agreement") and shall at all times maintain a Lockbox Agreement in full force and effect, except as the RUS may otherwise permit. During a Highest Oversight Period, the Borrower shall, if so directed in writing by the RUS, (a) deposit, pursuant to a Lockbox Agreement, all cash proceeds of the Trust Estate, including, without limitation, checks, money and the like (other than cash proceeds deposited or required to be deposited with the Trustee pursuant to the Indenture), which cash proceeds shall include, without limitation, all payments by members of the Borrower on account of the Wholesale Power Contracts, in separate deposit or other accounts, segregated from all other monies, revenues and investments of the Borrower, and (b) take all such other actions as the RUS shall request to continue perfection of the lien of the Indenture in such proceeds for the benefit of all Holders of the Outstanding Secured Obligations. Section 4.18 Nuclear Fuel Upon the written request of the RUS, to the extent the Borrower owns nuclear fuel located outside the State of Georgia as to which a security interest can be created under the Uniform Commercial Code and perfected solely by the filing of a financing statement under the Uniform Commercial Code, the Borrower shall cause such nuclear fuel to be subjected to the lien of the Indenture. -13- Section 4.19 Additional Affirmative Covenants The Borrower also shall comply with the additional covenants identified in Schedule 2 hereto. ARTICLE V -- NEGATIVE COVENANTS Section 5.1 General Unless otherwise agreed to in writing by the RUS, while this Agreement is in effect, the Borrower shall duly observe each of the negative covenants set forth in this Article V. Section 5.2 Limitations on System Extensions, Additions and Dispositions (a) Additions to Capacity. The Borrower shall not, without first complying with the requirements of Section 8.1, purchase, construct, lease or otherwise acquire Special Assets (as defined below) if the aggregate amount expended for purchase, construction, lease or other acquisition of all Special Assets (i) in the current fiscal year of the Borrower is greater than 5% of the Borrower's Total Utility Plant or (ii) in the current and two immediately preceding fiscal years of the Borrower is greater than 10% of the Borrower's Total Utility Plant. For the purposes of this Subsection (a), "Special Assets" means capital assets (other than capital assets acquired with at least 85% of the acquisition cost paid from the proceeds of "Non-Recourse Obligations" (as defined in the Wholesale Power Contracts)) that constitute utility or non-utility plant and that: (1) taking into account any substantially contemporaneous or otherwise related sale, transfer, lease or other disposition, increase the generating capacity of the System or any generating plant of the Borrower by more than 5%; (2) are not subject to the lien of the Indenture and are not nuclear fuel; or (3) are not used or useful as a part of the System. (b) Dispositions of System Assets. The Borrower shall not, without first complying with the requirements of Section 8.1, request the release of capital assets that constitute utility plant from the lien of the Indenture pursuant to Section 5.2 of the Indenture if (taking into account any substantially contemporaneous or otherwise related purchase, construction, lease or other acquisition of similar property that is subject to the lien of the Indenture) there will result a decrease in the generating capacity of the System or any generating plant by more than 5% if the aggregate net book value of all such assets released from the lien of the Indenture (i) in the current fiscal year of the Borrower is greater than 5% of the Borrower's Total Utility Plant or (ii) in the current and two immediately preceding fiscal years of the Borrower is greater than 10% of the Borrower's Total Utility Plant. (c) Legal Requirements. The requirements of this Section 5.2 shall not apply to any purchase, construction, lease or other acquisition, or any sale, transfer, lease or other disposition, of -14- capital assets to the extent that any of the foregoing is required to comply with "Legal Requirements" (as defined in the Wholesale Power Contract). No such purchase, construction, lease or other acquisition and no such sale, transfer, lease or other disposition shall be considered in calculating the aggregate limitations specified in Subsections (a) or (b) hereof. (d) Highest Oversight Period. During a Highest Oversight Period, the Borrower shall not, without the prior written approval of the RUS, purchase, construct, lease or otherwise acquire, or sell, transfer, lease or otherwise dispose, of any capital asset, or enter into any agreement therefor. Section 5.3 Limitations on Employment and Retention of General Manager At any time an Event of Default, or an event which with the passage of time or the giving of notice, or both, would become an Event of Default, occurs and is continuing, the Borrower shall not, without the prior written approval of the RUS, enter into an employment relationship with any person to serve as General Manager unless such employment shall first have been approved by the RUS. If an Event of Default, or an event which with the passage of time or the giving of notice, or both, would become an Event of Default, occurs and is continuing and the RUS requests the Borrower to terminate the employment of its General Manager, the Borrower shall do so within thirty (30) days after the date of such request. All contracts in respect of the employment of the General Manager hereafter entered into shall contain provisions to permit compliance with this Section 5.3. Section 5.4 Limitations on Certain Types of Contracts (a) Approval of Certain Contracts. The Borrower shall not, without first complying with the requirements of Section 8.1, enter into any of the following: (i) any contract for the management or operation of all or substantially all of the System; (ii) any contract for the purchase or sale of electric power and energy that has a term exceeding three (3) years and under which committed purchases or sales exceed ten percent (10%) of the peak demand of the System for the most recently completed fiscal year; (iii) any pooling or similar power supply agreement that has a term exceeding three (3) years; or (iv) any amendment or modification to any of the Wholesale Power Contracts, including the Schedules thereto, except that the Borrower may amend or modify any of (A) Exhibits 1 and 2 to "Rate Schedule A" thereto; (B) the Exhibits to Appendix 1 to "Rate Schedule A" thereto in the manner expressly provided in the Wholesale Power Contracts; (C) Sections I and II of -15- Appendix 3 (Control Area Services) to "Rate Schedule A" thereto; (D) Appendix 4 (General Terms and Conditions) to "Rate Schedule A" thereto; (E) Schedule B - Planning and Management of Power Supply Resources for Members in the manner expressly provided in Section 13.3.1 of the Wholesale Power Contracts; and (F) the Wholesale Power Contracts in the manner expressly provided in any "Withdrawal Agreement" (as defined in the Wholesale Power Contracts) entered into in connection with such Wholesale Power Contracts. (b) Terminations. The Borrower shall not, without first complying with the requirements of Section 8.1, exercise any option to terminate any contract, including, without limitation, any Wholesale Power Contract, if such contract, based upon its nature, remaining term (not taking into account any option of the Borrower to terminate) and size, would be required to be approved by the RUS pursuant to Subsection (a) above if the Borrower were to have entered into such contract on the proposed termination date. The Borrower further agrees at the written direction of the RUS to exercise any option to terminate a contract if the exercise by the Borrower of that option would require compliance with Section 8.1 pursuant to the immediately preceding sentence; provided, however, the Borrower shall not be required to exercise any such option to terminate if such exercise could reasonably be expected to have a Material Adverse Effect. For the purpose of illustration only, and not by way of limitation, the Borrower shall be required to comply with Section 8.1 before terminating, and the RUS can require the Borrower to terminate, in any year before year seven (7) thereof, a ten (10) year contract for the sale of electric power and energy that exceeds ten percent (10%) of the Borrower's peak demand because the portion of the contract to be terminated meets the standards of Subsection (a)(ii) above (i.e., a term greater than three (3) years for the committed sale of electric power and energy that exceeds ten percent (10%) of the Borrower's peak demand). The Borrower can terminate without first complying with Section 8.1, and the RUS cannot require the Borrower to terminate, that same contract after year seven (7) thereof. (c) Highest Oversight Period. During a Highest Oversight Period, the Borrower shall not, without the prior written approval of the RUS, enter into or amend or modify any of the contracts of the type described in this Section 5.4, regardless of duration or size. (d) Determination of Term. The term of any contract shall be determined for purposes of this Section 5.4 based solely upon the period prior to the first date upon which the Borrower could, at its option, terminate the contract (taking into account any notice period required for termination), unless the exercise of such termination right could reasonably be expected to have a Material Adverse Effect. (e) Amendments; Extensions. Any amendment or modification to an existing contract (including an extension thereof) shall be governed by this Section 5.4 only to the extent of the specific amendment or modification and not the contract as a whole. -16- Section 5.5 Limitations on Loans, Investments and Other Obligations The Borrower shall not, without first complying with the requirements of Section 8.1, make any Investment, except (i) Investments made for the purpose of funds management that are made pursuant to an investment policy approved by the Borrower's Board of Directors, a copy of which has been provided to the RUS, (ii) Investments specifically approved by the RUS in writing under this clause (ii), and (iii) other Investments that do not in the aggregate with all other Investments other than Investments described in clauses (i) and (ii) above exceed fifteen percent (15%) of the Borrower's Total Utility Plant; provided, however, that during an Increased Oversight Period, the Borrower shall not, without the prior written approval of the RUS, make any additional Investments, except as permitted by the Act and the RUS Regulations; provided, further, however, that during a Highest Oversight Period, the Borrower shall not, without the prior written approval of the RUS, make any additional Investments of any kind. Section 5.6 Depreciation Rates The Borrower shall not, without first complying with the requirements of Section 8.1, adopt any depreciation rate not previously approved for the Borrower by the RUS. Section 5.7 Rate Reductions The Borrower shall not, without first complying with the requirements of Section 8.1, decrease its Rates if it has failed to comply with the provisions of Section 13.14 of the Indenture for the fiscal year prior to such reduction. Section 5.8 Indenture Restrictions Notwithstanding the provisions of the Indenture, the Borrower shall not, without first complying with the requirements of Section 8.1: (i) issue Additional Obligations under the Indenture on the basis of the $200,000,000 carry forward amount described in Section 4.2B(1) of the Indenture, unless the proceeds of such Additional Obligations are used (a) to pay premiums and other penalties and charges in respect of any Existing Obligation held by FFB or the RUS, (b) to fund the acquisition or construction of additions or extensions to the System that are subject to the lien of the Indenture, or (c) to pay premiums and other penalties, charges and other costs of issuance incurred in connection with a Current Refunding in an aggregate amount not to exceed five percent (5%) of the principal amount of the Obligations subject to the Current Refunding; (ii) issue Additional Obligations under the Indenture while any amounts are outstanding under any RUS Reimbursement Obligation or during an Increased Oversight Period or a Highest Oversight Period; -17- (iii) except in connection with a Current Refunding, certify pursuant to Section 4.3D(1) of the Indenture any retired Obligation or any principal payment on an Obligation as the basis for taking any action under the Indenture, if such retirement or payment is pursuant to a regularly scheduled sinking fund or principal installment or made at the Stated Maturity of such Obligation; (iv) consolidate or merge with any other corporation or convey or transfer the Trust Estate under the Indenture substantially as an entirety unless the aggregate amount of the Borrower's Equity is not reduced as a result of such transaction and the Borrower provides the RUS with evidence reasonably satisfactory to the RUS that the consummation of such transaction will not result in the commencement of an Increased Oversight Period; provided, however, that during an Increased Oversight Period or a Highest Oversight Period, the Borrower shall not consolidate or merge with any corporation or convey or transfer the Trust Estate substantially as an entirety; (v) elect pursuant to Section 1.1D of the Indenture to apply Accounting Requirements in effect as of the date of execution and delivery of the Indenture; (vi) include as Property Additions, under any provision of the Indenture, any property that would not qualify as Property Additions but for paragraph C of the definition of Property Additions, or sell, lease or sublease any portion of the Trust Estate pursuant to paragraph H of Section 5.1 of the Indenture; (vii) submit an Available Margins Certificate under Article IV of the Indenture for the purpose of issuing Additional Obligations unless such Certificate is accompanied by an Independent Accountant's Certificate stating in substance that nothing came to the attention of such Accountant in connection with its unaudited review of such period that would lead such Accountant to believe that there was any incorrect or inaccurate statement in such Certificate; (viii) enter into a Supplemental Indenture pursuant to Section 12.1H of the Indenture; (ix) enter into a Supplemental Indenture pursuant to Section 12.1B or 12.1C of the Indenture if (a) the Holders of the Obligations issued under such Supplemental Indenture are granted greater security rights in and to the Trust Estate than those security rights enjoyed by the Government in its capacity as a Holder of Obligations under the Indenture, provided, however, that neither (I) the existence of Credit Enhancement nor (II) the creation and maintenance of debt service or similar funds for the payment of the principal and interest on Obligations issued under such Supplemental Indenture (to the extent such debt service or other similar funds are funded from the proceeds of the issuance of such Obligations or funded in connection with the refinancing of other debt by such Obligations), shall constitute greater -18- security rights in and to the Trust Estate requiring the Borrower to comply with Section 8.1; (b) the Supplemental Indenture provides for covenants, restrictions, limitations, conditions, events of defaults or remedies not applicable to all Obligations then Outstanding or not equally available to all Holders of Obligations then Outstanding, provided, however, that provisions for covenants and events of default that relate solely to assuring that the interest on such Obligations (or other indebtedness secured by such Obligations) is excludable from the gross income of the holder thereof pursuant to the Internal Revenue Code, as amended, shall not constitute the providing of covenants or events of default requiring the Borrower to comply with Section 8.1; or (c) the Obligations issued under such Supplemental Indenture, or the indebtedness secured by such Obligations, can be accelerated, or effectively accelerated through a mandatory purchase or similar mechanism, as a consequence of a breach or default by the Borrower under the related loan agreement or similar agreement entered into in connection with such Obligation or indebtedness, provided, however, that acceleration and similar rights may be granted to development authorities and trustees without first complying with Section 8.1 in connection with the issuance of Obligations (or other indebtedness secured by such Obligations) the interest on which is excludable from the gross income of the holder thereof pursuant to the Internal Revenue Code, as amended, if such acceleration and similar rights are substantially similar to those currently granted to development authorities and trustees in connection with the Existing Obligations; (x) create or incur or suffer or permit to be created or incurred or to exist any pledge of current assets secured under the Indenture to secure current liabilities; or (xi) provide any Certificate of an Appraiser under the Indenture, unless such Appraiser is Independent, if the amount of the property or securities as to which the Appraiser's Certificate applies is greater than $25,000; provide any Certificate of an Engineer under the Indenture, unless such Engineer is a licensed professional, if the amount of the property as to which the Engineer's Certificate applies is greater than $100,000; or provide any Certificate of an Engineer under the Indenture, unless such Engineer is Independent, if the amount of the property as to which the Engineer's Certificate applies is greater than $10,000,000. Section 5.9 Negative Pledge The Borrower shall not, without first complying with the requirements of Section 8.1, directly or indirectly create, incur, assume or permit to exist any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any other agreement to give any security interest) on or with respect to any of the Excepted Property (other than the Excepted Property described in paragraph P of the definition of Excepted Property, which property shall not be subject to this Section 5.9) except for: -19- (i) Permitted Exceptions (other than the Permitted Exception described in paragraph Y of the definition of Permitted Exceptions); (ii) as to the Excepted Property described in paragraphs B through E, inclusive, and paragraph K of the definition of Excepted Property, liens, mortgages, pledges, security interests, charges and encumbrances in connection with purchase money, construction or acquisition indebtedness (or renewals or extensions thereof) that encumber only the asset or assets so purchased, constructed or acquired or property improved through such purchase, construction or acquisition, and the proceeds upon a sale, transfer or exchange thereof; (iii) liens, mortgages, pledges, security interests, charges and encumbrances (a) for the benefit of all Holders of the Obligations issued under the Indenture, (b) in connection with any bond or similar fund established by the Borrower with respect to any debt securities, the interest on which is excludable from gross income of the holder thereof pursuant to the Internal Revenue Code, as amended, to the extent of amounts deposited in such funds in the ordinary course to make regularly scheduled payments on such debt securities, or (c) in connection with any debt service or similar fund established by the Borrower for the payment of principal or interest on debt securities, the interest on which is excludable from gross income of the holder thereof pursuant to the Internal Revenue Code, as amended, if such fund is funded solely from the proceeds of the issuance of such debt securities (or funded in connection with the refinancing of other debt by such debt securities); (iv) liens, pledges, security interests, charges and encumbrances with respect to any interest, debt or equity, of the Borrower in the National Rural Utilities Cooperative Finance Corporation or CoBank, ACB purchased or otherwise acquired by the Borrower in connection with membership in any such entity or any borrowing from any such entity; (v) liens, pledges, security interests, charges and encumbrances arising in connection with any legal or economic defeasance of indebtedness, unless the funding of the defeasance is during an Increased Oversight Period or a Highest Oversight Period and more than 20% of the defeasance is funded other than with the proceeds of the issuance of new indebtedness (in which case the Borrower shall first comply with the requirements of Section 8.1 before permitting or creating any such lien, pledge, security interest, charge or encumbrance); or (vi) liens, pledges, security interests, charges and encumbrances with respect to deposit, brokerage, commodity and other similar accounts to the extent such liens, pledges, security interests, charges and encumbrances do not secure indebtedness for borrowed money other than indebtedness incurred in connection with acquiring securities or other investments deposited in any such account. -20- Section 5.10 Emissions Allowances The Borrower shall not, without first complying with the requirements of Section 8.1, sell, assign or otherwise dispose of (or enter into any agreement therefor) any allowances for emissions or similar rights granted by any governmental authority, except allowances or similar rights that exceed those necessary in any particular calendar year for the Borrower to operate its generating facilities during such year, as evidenced by a written certification by the Borrower and provided to the RUS at the time of such sale, assignment or other disposition. Section 5.11 Changes to Plant Agreements The Borrower shall not, without first complying with the requirements of Section 8.1, amend, supplement, waive, extend, terminate or assign the Plant Agreements or agree to do so. Section 5.12 Fiscal Year The Borrower shall not, without first complying with the requirements of Section 8.1, change its fiscal year. Section 5.13 Limits on Variable Rate Indebtedness During an Increased Oversight Period or a Highest Oversight Period, the Borrower shall not, if so directed in writing by the RUS, increase the outstanding principal amount of indebtedness of the Borrower, the interest rate with respect to which is adjusted or readjusted at intervals of less than two (2) years, including, without limitation, Additional Obligations issued as a Periodic Offering the interest rate on which is subject to such adjustment or readjustment, to an amount exceeding the amount thereof outstanding on the date of such notice from the RUS. Section 5.14 Additional Negative Covenants The Borrower also shall comply with the additional negative covenants identified in Schedule 2 hereto. ARTICLE VI -- EVENTS OF DEFAULT The following shall be "Events of Default" under this Agreement: (a) Representations and Warranties. Any representation or warranty made by the Borrower in Article II hereof, in any certificate furnished to the RUS hereunder or in the Indenture shall be incorrect in any material respect at the time made; -21- (b) Payment. Default shall be made in the payment of or on account of interest on or principal of any Outstanding Note when and as the same shall be due and payable, whether by acceleration or otherwise, which shall remain unsatisfied for five (5) Business Days; (c) Borrowing Under the Indenture in Violation of the Loan Contract. Default by the Borrower in the observance or performance of any covenant or agreement contained in Subsection (a), (b) or (c) of Section 5.8; (d) Other Covenants. Default by the Borrower in the observance or performance of any other covenant or agreement contained in any of the Loan Documents, which shall remain unremedied for thirty (30) calendar days after written notice thereof shall have been given to the Borrower by the RUS; (e) Corporate Existence. The Borrower shall forfeit or otherwise be deprived of its corporate charter or any franchises, permits, easements, consents or licenses required to carry on any material portion of its business; (f) Other Obligations. Default by the Borrower in the payment of any obligation, whether direct or contingent, for borrowed money in excess of $10,000,000 or in the performance or observance of the terms of any instrument pursuant to which such obligation was created or securing such obligation; (g) Bankruptcy. A court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Borrower in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official, or ordering the winding up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for a period of ninety (90) consecutive days or the Borrower shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian or trustee, of a substantial part of its property, or make any general assignment for the benefit of creditors; and (h) Dissolution or Liquidation. Other than as provided in the immediately preceding subsection, the dissolution or liquidation of the Borrower, or failure by the Borrower promptly to forestall or remove any execution, garnishment or attachment of such consequence as shall impair its ability to continue its business or fulfill its obligations and such execution, garnishment or attachment shall not be vacated within thirty (30) days. The term "dissolution or liquidation of the Borrower," as used in this Subsection (h), shall not be construed to include the cessation of the corporate existence of the Borrower resulting either from a merger or consolidation of the Borrower into or with another corporation following a transfer of all or substantially all its assets as an entirety, under the conditions permitting such actions. -22- ARTICLE VII -- REMEDIES Upon the occurrence of an Event of Default, then the RUS may pursue all rights and remedies available to the RUS that are contemplated by this Agreement in the manner, upon the conditions and with the effect provided in this Agreement, including, but not limited to, a suit for specific performance, injunctive relief or damages. The RUS is hereby authorized, to the maximum extent permitted by applicable law, to demand specific performance of this Agreement at any time when the Borrower shall have failed to comply with any provision of this Agreement applicable to it. The Borrower hereby irrevocably waives, to the maximum extent permitted by applicable law, any defense based on the adequacy of a remedy at law that might be asserted as a bar to such remedy of specific performance. Nothing herein shall limit the right of the RUS to pursue all rights and remedies available to a creditor at law or in equity following the occurrence of an Event of Default, or any right or remedy available to the RUS as a Holder of an Obligation under the Indenture. Each right, power and remedy of the RUS shall be cumulative and concurrent, and recourse to one or more rights or remedies shall not constitute a waiver of any other right, power or remedy. ARTICLE VIII -- MISCELLANEOUS Section 8.1 Notice to RUS; Objection of RUS Before undertaking any transaction described in Article V that requires compliance with this Section 8.1, the Borrower shall give to the RUS (i) notice in writing describing in reasonable detail the proposed transaction and expressly stating that the transaction is covered by this Section 8.1 and (ii) drafts of any documents to effect such transaction. If the RUS delivers to the Borrower written notice that it objects to the proposed transaction after (I) 60 days (or such shorter period as the parties shall agree to in writing) in the case of any transaction of the nature described in paragraph (a) below, or (II) 30 days (or such shorter period as the parties shall agree to in writing) in the case of any transaction of the nature described in paragraph (b) below, the Borrower shall not complete the transaction without RUS approval. (a) Transactions requiring compliance with this Section 8.1 pursuant to Sections 5.2, 5.4, 5.6, 5.8 (i), 5.8 (ii), 5.8 (iv), 5.8 (vi), 5.8 (viii), 5.8 (ix), 5.9, 5.11 and 5.12 shall be subject to a 60-day review and objection period (or such shorter period as the parties shall agree to in writing); and (b) Transactions requiring compliance with this Section 8.1 pursuant to Sections 5.5, 5.7, 5.8 (iii), 5.8 (v), 5.8 (vii), 5.8 (x), 5.8 (xi) and 5.10 shall be subject to a 30-day review and objection period (or such shorter period as the parties shall agree to in writing). -23- Section 8.2 Notices All notices, requests and other communications provided for herein, including, without limitation, any modifications of, or waivers, requests or consents under, this Agreement, shall be given or made in writing (including, without limitation, by telecopy) and delivered to the intended recipient at the "Address for Notices" specified below; or, as to any party, at such other address as shall be designated by such party in a notice to the other party. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telecopier or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as provided for herein. The Address for Notices of the respective parties are as follows: The Government: Rural Utilities Service United States Department of Agriculture 1400 Independence Avenue, S.W. Washington, DC 20250-1500 Fax: (202) 720-1725 Attention: Administrator With a copy to: Rural Utilities Service United States Department of Agriculture 1400 Independence Avenue, S.W. Stop: 1568 Washington, DC 20250-1500 Fax: (202) 720-1401 Attention: Power Supply Division The Borrower: Oglethorpe Power Corporation 2100 East Exchange Place Post Office Box 1349 Tucker, Georgia 30085-1349 Fax: (770) 270-7872 Attention: President and Chief Executive Officer With a copy to: Vice President, Finance -24- Section 8.3 Expenses To the extent allowed by law, the Borrower shall pay all costs and expenses of the RUS, including reasonable fees of counsel, incurred in connection with the enforcement of the Loan Documents or with the preparation for such enforcement if the RUS has reasonable grounds to believe that such enforcement may be necessary. Section 8.4 Late Payments If payment of any amount due hereunder is not received at the United States Treasury in Washington, DC, or such other location as the RUS may designate to the Borrower, within five (5) Business Days after the due date thereof or such other longer time period as the RUS may prescribe from time to time in its policies of general application in connection with any late payment charge (such unpaid amount being herein called the "delinquent amount," and the period beginning after such due date until payment of the delinquent amount being herein called the "late-payment period"), the Borrower shall pay to the RUS, in addition to all other amounts due under the terms of the Outstanding Notes and this Agreement, any late-payment charge as may be fixed by RUS Regulations from time to time on the delinquent amount for the late-payment period. Section 8.5 Filing Fees To the extent permitted by Law, the Borrower agrees to pay all expenses of the RUS (including the fees and expenses of its counsel) in connection with the filing or recordation of all financing statements and instruments as may be required by the RUS in connection with this Agreement, including, without limitation, all documentary stamps, recordation and transfer taxes and other costs and taxes incident to recordation of any document or instrument in connection herewith. The Borrower agrees to save harmless and indemnify the RUS from and against any liability resulting from the failure to pay any required documentary stamps, recordation and transfer taxes, recording costs, or any other expenses incurred by the RUS in connection with this Agreement. The provisions of this Section 8.5 shall survive the execution and delivery of this Agreement and the payment of all other amounts due hereunder or due on the Outstanding Notes. Section 8.6 No Waiver No failure on the part of the RUS to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the RUS of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. Section 8.7 Governing Law EXCEPT TO THE EXTENT GOVERNED BY APPLICABLE FEDERAL LAW, THE LOAN DOCUMENTS SHALL BE DEEMED TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. -25- Section 8.8 Holiday Payments If any payment to be made by the Borrower hereunder shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing any interest in respect of such payment. Section 8.9 Successors and Assigns This Agreement shall be binding upon and inure to the benefit of the Borrower and the RUS and their respective successors and assigns, except that the Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of the RUS. Section 8.10 Complete Agreement; Amendments This Agreement and the other Loan Documents are intended by the parties to be a complete and final expression of their agreement. However, the RUS reserves the right to waive its rights to compliance with any provision of this Agreement, the RUS Regulations and the other Loan Documents. No amendment, modification, or waiver of any provision hereof or thereof, and no consent to any departure of the Borrower herefrom or therefrom, shall be effective unless approved in writing by the RUS in the form of either RUS Regulations or other writing signed by or on behalf of the RUS, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Any Schedule to this Agreement may be amended and replaced by attaching a revised Schedule hereto, which revised Schedule shall have been signed by both parties hereto. Section 8.11 Headings The headings and sub-headings contained in the titling of this Agreement are intended to be used for convenience only and do not constitute part of this Agreement. Section 8.12 Severability If any term, provision or condition, or any part thereof, of this Agreement shall for any reason be found or held invalid or unenforceable by any governmental agency or court of competent jurisdiction, such invalidity or unenforceability shall not affect the remainder of such term, provision or condition nor any other term, provision or condition, and this Agreement, the Outstanding Notes, and the Indenture shall survive and be construed as if such invalid or unenforceable term, provision or condition had not been contained herein. -26- Section 8.13 Right of Set off Upon the occurrence and during the continuance of any Event of Default, the RUS is hereby authorized at any time and from time to time, without prior notice to the Borrower, to exercise rights of set off or recoupment and apply any and all amounts held or hereafter held, by the RUS or owed to the Borrower or for the credit or account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing hereunder or under the Outstanding Notes. The RUS agrees to notify the Borrower promptly after any such set off or recoupment and the application thereof, provided that the failure to give such notice shall not affect the validity of such set off, recoupment or application. The rights of the RUS under this Section 8.13 are in addition to any other rights and remedies (including other rights of set off or recoupment) which the RUS may have. The Borrower waives all rights of set off, deduction, recoupment or counterclaim. Section 8.14 Schedules and Exhibits Each Schedule and Exhibit attached hereto and referred to herein is each an integral part of this Agreement. Section 8.15 Sole Benefit The rights and benefits set forth in this Agreement are for the sole benefit of the parties thereto and may be relied upon only by them. Section 8.16 Existing Loan Contract This Agreement consolidates all the documents constituting the Existing Loan Contract and amends the Existing Loan Contract so that, as of the date of this Agreement, it reads in its entirety as herein provided. As of the date hereof, this Agreement replaces and supersedes the Existing Loan Contract. Section 8.17 Authority of RUS Representatives In the case of any consent, approval or waiver from the RUS that is required under this Agreement or any other Loan Document, such consent, approval or waiver must be in writing and signed by an authorized RUS representative to be effective. As used in this Section 8.17, "authorized RUS representative" means the Administrator, and also means a person to whom the Administrator has officially delegated specific or general authority to take the action in question. -27- Section 8.18 Relation to RUS Regulations (a) In case of any conflict between the terms of this Agreement or the Indenture and the provisions of the RUS Regulations, the terms of this Agreement and the Indenture shall control. (b) The RUS Regulations shall apply to the Borrower to the extent and under the conditions expressly set forth in this Agreement (other than in Section 4.15). (c) The Borrower recognizes that some RUS Regulations implement Federal statutes or regulatory policies that are not limited to rural electrification but apply to many types of Federal assistance. Nothing herein is intended to, or shall be deemed to, waive the requirements of any Federal statute or regulation that is applicable to the Borrower independently of any requirement made applicable solely by the RUS Regulations. (d) Subject to Subsections (b) and (c) above, if on the date of this Agreement, any RUS Regulation conflicts with the terms of this Agreement or the Indenture or imposes additional or different requirements: (i) the Borrower is hereby deemed to have complied with, or otherwise satisfied the requirements of, or received approval under, such RUS Regulation; and (ii) pursuant to 7 C.F.R. ss. 1710.4 (1996), the RUS hereby waives compliance by the Borrower with such RUS Regulation. Section 8.19 Term This Agreement shall remain in effect until one of the following two events has occurred: (a) The Borrower and the RUS replace this Agreement with another written agreement; or (b) All of the Borrower's obligations under this Agreement and the Outstanding Notes have been discharged and paid. (Signatures begin on next page.) -28- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, the Borrower's execution to be attested under seal, as of the day and year first above written. OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) By: /s/ T.D. Kilgore -------------------------------------- T. D. Kilgore President and Chief Executive Officer Attest: /s/ Patricia N. Nash ---------------------------------- Patricia N. Nash Assistant Secretary [CORPORATE SEAL] (Signatures continued on next page.) -29- (Signatures continued from previous page.) UNITED STATES OF AMERICA, acting by and through the Administrator of the Rural Utilities Service By: /s/ Wally Beyer ------------------------------------ Administrator -30- SCHEDULE 1 to the Amended and Consolidated Loan Contract, dated as of March 1, 1997, between Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) and the United States of America 1. Letter Agreements amending and supplementing the Existing Contract: (a) "H13" Amendment to Amended and Consolidated Loan Contract between the Borrower and United States of America, dated as of September 14, 1984; (b) "H13" Letter, dated September 28, 1984, from Harold V. Hunter, Administrator of REA to Hubert Hancock, President of the Borrower; (c) "PCB III" Letter, dated December 18, 1984, from Harold V. Hunter, Administrator of REA to Hubert Hancock, President of the Borrower; (d) "PCB IV" Letter, dated November 12, 1985, from Harold V. Hunter, Administrator of REA to Hubert Hancock, President of the Borrower; (e) "Sale-Leaseback" Letter, dated December 27, 1985, from Harold V. Hunter, Administrator of REA to Hubert Hancock, President of the Borrower; (f) "Vogtle K8" Letter, dated March 3, 1986, from Jack Van Mark, Acting Administrator of REA to Hubert Hancock, President of the Borrower; (g) Reply Letter to "Vogtle K8", dated August 11, 1986, from Hubert Hancock, President of the Borrower, to Harold V. Hunter, Administrator of REA; (h) "Scherer Refinancing" Letter, dated October 17, 1986, from Harold V. Hunter, Administrator of REA, to Hubert Hancock, Chairman of the Board of the Borrower; (i) "Vogtle K8" Letter, dated January 9, 1987, from Jack Van Mark, Acting Administrator of REA, to F. F. Stacy, President and CEO of the Borrower; (j) "Rocky Mountain L8" Letter, dated September 30, 1988, from Harold V. Hunter, Administrator of REA, to Hubert Hancock, Chairman of the Board of the Borrower; (k) "Pollution Control Revenue Bonds" Letter, dated March 20, 1990, from Jack Van Mark, Acting Administrator of REA, to J. Calvin Earwood, Chairman of the Board of the Borrower; (l) "Bulk Power Agreements" Loan Contract Amendment, dated as of July 1, 1991, between the Borrower and the United States of America; (m) "Pollution Control Revenue Bonds" Letter, dated April 6, 1992, from Michael M.F. Liu, Acting Administrator of REA, to J. Calvin Earwood, Chairman of the Board of the Borrower; (n) Amendment to Amended and Consolidated Loan Contract between the Borrower and the United States of America, dated as of June 12, 1992; (o) "Pollution Control Revenue Bonds" Letter, dated October 20, 1992, from James B. Huff, Sr., Administrator of REA, to Tom D. Kilgore, President/CEO of the Borrower; (p) "Pollution Control Revenue Bonds" Letter, dated February 25, 1993, from James B. Huff, Sr., Administrator of REA, to Tom D. Kilgore, President/CEO of the Borrower; (q) "Pollution Control Revenue Bonds" Letter, dated August 26, 1993 from James B. Huff, Sr., Administrator of REA, to Tom D. Kilgore, President/CEO of the Borrower; (r) "Pollution Control Revenue Bonds" Letter, dated August 31, 1994, from Wally Beyer, Administrator of REA, to Tom Kilgore, President/CEO of the Borrower; and (s) "Pollution Control Revenue Bonds" Letter, dated January 8, 1997, from Wally Beyer, Administrator of RUS, to T.D. Kilgore, President/CEO of the Borrower, as supplemented by that certain letter, dated February 21, 1997, from Wally Beyer, Administrator of RUS, to T. D. Kilgore, President/CEO of the Borrower. 2. "Contemporaneous Loans" shall mean the loans evidenced by the following: (a) Promissory Note, dated March 1, 1997, made by the Borrower to the order of CoBank, ACB, in the original face principal amount of $1,856,475.12; and (b) Promissory Note, dated March 1, 1997, made by the Borrower to the order of CoBank, ACB, in the original face principal amount of $7,102,740.26. 3. "Outstanding Notes" shall mean the following notes: (a) Retained Indebtedness Note, dated as of March 1, 1997, from the Borrower to FFB, in the original face principal amount not to exceed $2,637,782,327.56; (b) Reimbursement Note, dated as of March 1, 1997, from the Borrower to the Government, acting through the Administrator of the RUS; -2- (c) Mortgage Note, dated as of March 1, 1997, from the Borrower to the Government, acting through the Administrator of the RUS, in the original face principal amount of $3,820,352.89; and (d) Mortgage Note, dated as of March 1, 1997, from the Borrower to the Government, acting through the Administrator of the RUS, in the original face principal amount of $14,786,985.70. 4. "Plant Agreements" shall mean, collectively, the following agreements relating to the ownership and operation of generating facilities: (a) Plant Robert W. Scherer Units Numbers One and Two Purchase and Ownership Participation Agreement among Georgia Power Company, the Borrower, Municipal Electric Authority of Georgia and City of Dalton, Georgia (the "Co-Owners"), dated as of May 15, 1980, as amended by that certain Amendment, among the Co-Owners, dated as of December 30, 1985; and as amended by that certain Amendment Number Two, among the Co- Owners, dated as of July 1, 1986; and as amended by that certain Amendment Number Three, among the Co-Owners, dated as of August 1, 1988; and as amended by that certain Amendment Number Four, among the Co-Owners, dated as of December 31, 1990; (b) Plant Robert W. Scherer Units Numbers One and Two Operating Agreement among the Co-Owners, dated as of May 15, 1980, as amended by that certain Amendment, among the Co-Owners, dated as of December 30, 1985; and as amended by that certain Amendment Number Two, among the Co-Owners, dated as of December 31, 1990; (c) Plant Scherer Managing Board Agreement, among the Co-Owners, Gulf Power Company, Florida Power & Light Company and Jacksonville Electric Authority, dated as of December 31, 1990; (d) Alvin W. Vogtle Nuclear Units Numbers One and Two Purchase and Ownership Participation Agreement, among the Co-Owners, dated as of August 27, 1976, as amended by that certain Amendment Number One, among the Co-Owners dated as of January 18, 1977; and as amended by that certain Amendment Number Two, among the Co-Owners, dated as of February 24, 1977; (e) Alvin W. Vogtle Nuclear Units Numbers One and Two Operating Agreement among, the Co-Owners, dated as of August 27, 1976; -3- (f) Plant Hal Wansley Purchase and Ownership Participation Agreement, between Georgia Power Company and the Borrower, dated as of March 26, 1976, as amended by that certain Amendment, dated as of January 15, 1995; (g) Plant Hal Wansley Operating Agreement, between Georgia Power Company and Borrower, dated as of March 26, 1976; (h) Plant Hal Wansley Combustion Turbine Agreement, between Georgia Power Company and the Borrower, dated as of August 2, 1982, and Amendment No. 1, dated as of October 20, 1982; (i) Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement, between Georgia Power Company and the Borrower, dated as of January 6, 1975; (j) Edwin I. Hatch Nuclear Plant Operating Agreement, between Georgia Power Company and the Borrower, dated as of January 6, 1975; (k) The Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement, dated as of November 18, 1988, between the Borrower and Georgia Power Company; and (l) The Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement, dated as of November 18, 1988, between the Borrower and Georgia Power Company. -4- SCHEDULE 2 to the Amended and Consolidated Loan Contract (the "Agreement"), dated as of March 1, 1997, between Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) and the United States of America ADDITIONAL AFFIRMATIVE AND NEGATIVE COVENANTS Section 1 Definitions Capitalized terms that are not defined in this Schedule 2 shall have the meanings set forth in the Agreement. The terms defined herein include both the plural and the singular. "Affiliates" shall have the meaning given such term in the Purchase Agreement. "Alternative Floating Amount" shall have the meaning given such term in the Interest Rate Swap Agreements. "Base Capacity Price" shall have the meaning given such term in the Purchase Agreement. "BPSA" shall mean the Block Power Sale Agreement, dated as of November 12, 1990. "Contract" shall mean any one of the NMBA, the BPSA, the CSA, and the Umbrella Agreement, including any schedules or exhibits thereto other than Appendix A to the NMBA and Schedule A to the BPSA, and including any executed Nuclear Services Agreement or other contract described at Section 2.3.2 of the NMBA. "CSA" shall mean the Coordination Services Agreement, dated as of November 12, 1990. "Equity Transfer Interest" shall have the meaning given such term in the Purchase Agreement. "Facility" shall have the meaning given such term in the Purchase Agreement. "General Partner" shall have the meaning given such term in the Purchase Agreement. "General Partner Holding Company" shall have the meaning given such term in the Purchase Agreement. "Intercreditor Agreement" shall have the meaning given such term in the Rocky Mountain Participation Agreements. "Interest Rate Swap Agreements" shall mean the Interest Rate Swap Agreements, each dated as of December 1, 1992, between the Borrower and AIG Financial Products Corp. "Monthly Energy Payment" shall have the meaning given such term in the Purchase Agreement. "NMBA" shall mean the Nuclear Managing Board Agreement, dated as of November 12, 1990. "Operating Agent" shall have the meaning given such term in the Purchase Agreement. "PCB Documents" shall mean the indentures, loan agreements, notes, letters of representation, insurance policies, tender agent agreements, remarketing agreements and liquidity and standby bond purchase agreements entered into in connection with the Pollution Control Bonds and the Interest Rate Swap Agreements. "Pollution Control Bonds" shall mean those pollution control revenue bonds issued for the benefit of the Borrower between January 1, 1992 and the "Closing Date" as defined in the Restructuring Agreement, for which security was provided, on the date of their respective issuances, under the RUS Mortgage. "Purchase Agreement" shall mean the Power Purchase Agreement, dated as of June 12, 1992, between the Borrower and Seller, as amended from time to time. "Rocky Mountain Lease Transaction" shall mean the lease and leaseback arrangements of the Borrower's undivided interest in the Rocky Mountain Pumped Storage Hydroelectric Project, as contemplated by the Rocky Mountain Participation Agreements. "Rocky Mountain Participation Agreements" shall mean those certain four (4) Participation Agreements, dated as of December 30, 1996 and those certain two (2) Participation Agreements, dated as of January 3, 1997, between the Borrower, Rocky Mountain Leasing Corporation and certain other parties identified therein, including Philip Morris Capital Corporation, NationsBanc Leasing and R. E. Corporation and First Chicago Leasing Corporation, as Owner Participants, as such agreements may hereafter be amended or supplemented from time to time. "Rocky Mountain Transaction Documents" shall be as defined in the Rocky Mountain Participation Agreements. "Scherer Participation Agreements" shall mean the Participation Agreements, dated as of December 30, 1985, between the Borrower and each of IBM Credit Finance Corporation, HEI -2- Investment Corp., Ford Motor Credit Corporation and Chrysler Capital Corporation, as such agreements have been or may hereafter be amended or supplemented from time to time. "Scherer Transaction" shall mean the sale and leaseback arrangements of the Borrower's 60% undivided interest in Unit No. 2 of Plant Robert W. Scherer, as contemplated by the Scherer Participation Agreements. "Scherer Transaction Documents" shall be as defined in the Scherer Participation Agreements. "Seller" shall mean the Hartwell Energy Limited Partnership. "Senior Creditors" shall have the meaning given such term in the Intercreditor Agreement. "Senior Financing Agreements" shall have the meaning given such term in the Intercreditor Agreement. "Senior Secured Parties" shall have the meaning given such term in the Intercreditor Agreement. "Settlement Price" shall have the meaning given such term in the Purchase Agreement. "Termination Event" shall have the meaning given such term in the Interest Rate Swap Agreements. "Transco Energy" shall have the meaning given such term in the Purchase Agreement. "Umbrella Agreement" shall mean the ITSA, Power Sale and Coordination Umbrella Agreement, dated as of November 12, 1990. Section 2 Notices The Borrower shall promptly furnish to the RUS, or notify the RUS of, any of the following as soon as practical after receipt thereof or after it has obtained actual knowledge thereof: (i) Copies of: (a) All notices, certificates and opinions which the Borrower receives in connection with the transaction under the terms of the Scherer Transaction Documents; (b) Any executed "Nuclear Services Agreement" (as defined by the NMBA); -3- (c) Any and all "Strategic Plans" (as defined in the NMBA) approved under the NMBA; (d) Any amendment to Appendix A of the NMBA or Schedule A to the BPSA; (e) Any agreement entered into between the Seller and the Operating Agent; or (f) All notices or other communications given to or received by the Borrower with respect to any "Event of Default," "Loan Event of Default" or "Subordinated Deed to Secure Debt and Security Agreement Event of Default" under any "Operative Document" (all as defined in the Rocky Mountain Participation Agreements). (ii) Any attempt to remove the Borrower as agent under Article IV of the Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement, dated as of November 18, 1988, between the Borrower and Georgia Power Company (the "Ownership Agreement"), or Article VIII of the Ownership Agreement; or the occurrence of any default under the Ownership Agreement or the Rocky Mountain Pumped Storage Hydroelectric Project Ownership Agreement, dated as of November 18, 1988, between the Borrower and Georgia Power Company, which is material and is continuing; or (iii) Any of the following and, if the RUS so requests in writing, the Borrower shall provide information concerning any of the following in form and substance satisfactory to the RUS: (c) That a default or event of default has occurred under any of the PCB Documents; (d) That a default or event of default under any of the PCB Documents has been cured; (e) That the Borrower has been called upon to protect, indemnify or otherwise hold harmless any person or entity pursuant to any of the PCB Documents; (f) That an event has occurred which causes the Alternative Floating Amount to become effective under any of the Interest Rate Swap Agreements; (g) That any trustee under any PCB Document has resigned, been removed or has become incapable of acting; (h) That a Termination Event has occurred under any of the Interest Rate Swap Agreements; -4- (i) That any of the PCB Documents have been terminated or partially terminated; (h) That any of the Contracts have expired or have been terminated, extended or assigned either by any of the parties thereto or by a "Governmental Authority" (as defined in the applicable Contract) or that the parties to such Contract have executed an amendment to such Contract or any Governmental Authority has amended such Contract; (i) That a party to the NMBA, including the Borrower, has referred a dispute to arbitration pursuant to Section 9.14 of the NMBA, and thereafter, the results of such arbitration; or that a party to the BPSA or CSA has referred a dispute to the Chief Executive Officers for resolution pursuant to Sections 5.3(c) of the BPSA or 19.3(c) or 19.4(b) of the CSA, as the case may be, and such dispute remains unresolved for 90 days after referral; (j) That a party to any Contract, including the Borrower, has commenced a legal proceeding either before a court or governmental agency with respect to such Contract (including, but not limited to, applications to FERC); (k) The President and Chief Executive Officer of the Borrower has concluded, or any other party to a Contract has given the Borrower written notice alleging, that a party to such Contract has failed to act in accordance with Prudent Utility Practices (as defined in the applicable Contract) or has engaged in willful misconduct; provided, however, that Borrower shall not be obligated to notify the RUS of any action which could not reasonably be expected to have a Material Adverse Effect; (l) That a person or entity has made a claim against any party to a Contract (including the Borrower); provided, however, that the Borrower need not provide notice of any claim the payment of which could not reasonably be expected to have a Material Adverse Effect; (m) That any member of the Borrower has sought service from Georgia Power Company pursuant to the "Antitrust Conditions" (as defined in the Umbrella Agreement); (n) That any representation or warranty of Georgia Power Company under Section 7.2 of the Umbrella Agreement or any matter in the legal opinion furnished to Borrower under Section 7.4 of the Umbrella Agreement is incorrect or in dispute; -5- (o) That as the result of any audit conducted pursuant to a party's rights under any Contract, such party has made a claim or reserved the right to make a claim for an adjustment in an amount in excess of $10,000,000 for any charge made by Georgia Power Company under such contract; provided however, that the dollar amount stated in this condition is in January 1, 1991 dollars and shall be escalated annually for inflation using the Handy-Whitman Index of Public Utility Construction Costs (South Atlantic Region); (p) That a Governmental Authority (as defined in the NMBA) has assessed against the Operating Agent (as defined in the NMBA) a criminal penalty of any kind or a civil penalty of more than $110,000 or, when added to any other civil penalty assessed within the previous 12 months, is in the aggregate in excess of $440,000; (q) That a management audit is being conducted pursuant to Section 5.3 of the NMBA and, when applicable, that such audit has been concluded; (r) That the Borrower has received notice pursuant to Section 4.B of the NSA that a proceeding has been initiated in which "SONOPCO" (as defined in the NSA) is a party; (s) That Georgia Power Company has given notice pursuant to the BPSA that it will fully or partially retire a "Unit" (as defined in the BPSA) as the result of a "Force Majeure Event" (as defined in the BPSA); (t) That the Borrower has failed to make a payment when due under the BPSA or CSA, received notice that it is delinquent or in default in its payments under the PSA or CSA, or intends to delay or withhold any payment claimed by Georgia Power Company to be due under the BPSA or CSA; (u) That the Borrower has given notice to Georgia Power Company pursuant to Section 15.9 of the CSA that it desires to stop purchasing load regulation services; (v) That the Purchase Agreement has expired or has been terminated or amended, or that the Seller has assigned or otherwise transferred the Facility or its rights and obligations under the Purchase Agreement to any other entity; (w) That a notice of termination of the Purchase Agreement has been either delivered or received by the Borrower; (x) That, pursuant to Section 5.5 of the Purchase Agreement, the Seller has -6- obtained an increase in the Base Capacity Price or the Monthly Energy Payment and the amount of such increase; (y) That a filing has been made with the FERC for approval, or that FERC on its own motion has proposed a change to any charge, rate or tariff under the Purchase Agreement, and, thereafter, the action taken by FERC; (z) That (i) the Borrower has provided written notice to the Seller that the Seller has defaulted under the Purchase Agreement and whether the Borrower is considering terminating the Purchase Agreement and exercising its option to purchase the Facility if the default is not cured, or (ii) the Seller has defaulted under the Purchase Agreement, even though the Borrower has not yet provided written notice to the Seller to that effect, except that the Borrower shall not be obligated to provide notice of defaults if the Borrower reasonably believes that the default will be satisfactorily cured within two (2) days following the default; provided, however, that the Borrower shall provide notice to the RUS after such two day period if the default has not been cured; (aa) That the Borrower has received notice that it is in default under the Purchase Agreement; (ab) That a default under the Purchase Agreement has not been cured within the period provided in the Purchase Agreement; (ac) That Transco Energy or any of its Affiliates has transferred an Equity Transfer Interest; (ad) That Transco Energy or any of its Affiliates has sold more than fifty percent of the outstanding stock of a General Partner Holding Company; (ae) That as a result of an audit conducted by the Borrower pursuant to Section 14.3 of the Purchase Agreement, the Borrower has requested an adjustment to the payments made by the Borrower in an amount in excess of $5 million, or has requested to reserve the right to request such an adjustment; provided, however, that the dollar amount stated in this subsection is in January 1, 1992 dollars and shall be escalated annually for inflation using the Handy-Whitman Index of Public Utility Construction Costs (South Atlantic Region); or (af) That any insurance coverage required under the Purchase Agreement has lapsed, been canceled or, for any other reason, is not in effect. -7- Section 3 Amendments The Borrower shall not, without first complying with the requirements of Section 8.1 of the Agreement, amend, supplement, waive, terminate, extend or assign any of the agreements set forth below or agree to do so (except to the extent specifically governed by Sections 5 or 6 of this Schedule 2): (a) Section 168 Agreement and Election dated as of April 7, 1982, between Continental Telephone Corporation and the Borrower; (b) Section 168 Agreement and Election dated as of April 9, 1982, between National Service Industries, Inc. and the Borrower; (c) Section 168 Agreement and Election dated as of April 9, 1982, between Rollins, Inc. and the Borrower; (d) The PCB Documents; (e) The Scherer Transaction Documents; (f) The Contracts; (g) The Purchase Agreement; or (h) The Rocky Mountain Transaction Documents. Each of the foregoing actions shall be considered described in paragraph (a) of Section 8.1 of the Agreement and shall be subject to the review and objection period set forth in such paragraph. Section 4 1985 -- Plant Scherer Leveraged Lease 4.1 Direction of the RUS. Whenever requested in writing to do so by the RUS, such requests to be made for good cause as determined solely in the absolute discretion of the RUS, the Borrower shall exercise such rights and powers as may be vested in the Borrower and make such elections and requests as may be available to the Borrower, under the terms of the Scherer Transaction Documents in such manner and at such times as the RUS may so specify. 4.2 Options to Purchase; Assignment; Etc. The Borrower shall not, with the prior written approval of the RUS, exercise any of its options to purchase or renew its lease of an "Undivided Interest" as defined in the Scherer Participation Agreements; or assign, sublease, transfer or encumber its leasehold interest in the Undivided Interest. -8- Section 5 GPC Agreements 5.1 Actions Requiring Consent of the RUS. The Borrower shall not, without the prior written consent of the RUS, take any of the following actions: (a) Execute any conforming amendment to the "Joint Committee Agreements" (as defined in the NMBA); or (b) Enter into any agreement pursuant to Section 15.10 of the CSA. 5.2 Notice of Approval or Rejection of any Contract Subject to SEC Approval. The Borrower shall not, without the prior written approval of the RUS, vote as a member of the "Nuclear Managing Board" (as defined in the NMBA) to approve or reject any Contract as described in Section 2.3.2 of the NMBA that is subject to the prior approval of the Securities and Exchange Commission unless and until the Borrower shall have first given the RUS written notice of the proposed vote not less than 60 days prior to such vote. If, upon receipt of such notice, the RUS shall notify the Borrower within the 60-day period preceding the vote of an objection to the proposed vote, then the Borrower shall not vote until it has obtained RUS approval of such vote. 5.3 Reduction Notices. Subject to subsections (a) and (b) of this Section 5.3, the Borrower shall not deliver notice pursuant to Section 2.3 of the BPSA of its desire to eliminate one or more "Component Block(s)" (as defined in the BPSA) from the "Master Block" (as defined in the BPSA) (such notice hereinafter referred to as a "Reduction Notice") until the RUS has received from the Borrower written notice of its intent to give such Reduction Notice not less than 60 days prior to the date such notice is to be delivered under Section 2.3 of the BPSA. The Borrower shall provide to its Board of Directors any written comments RUS provides to the Borrower with respect to the Reduction Notice proposed by the Borrower. (a) If the Component Block(s) which the Borrower desires to eliminate from the Master Block pursuant to a Reduction Notice, together with any other Component Block(s) previously eliminated from the Master Block pursuant to prior Reduction Notice(s) exceed 500 MW, then the Borrower shall not deliver such Reduction Notice without the prior written consent of the RUS. (b) The Borrower shall provide such information as the RUS may reasonably request with respect to the Borrower's decision to deliver a Reduction Notice. 5.4 Audits. Upon the request of the RUS, the Borrower shall conduct, to the satisfaction of the RUS, either a management audit or a cost audit, as provided in Sections 5.2 or 5.3, respectively, of the NMBA. If the RUS requests in writing, the Borrower shall appoint the United States Department of Agriculture and the employees and representatives thereof as its duly authorized representative for the purpose of conducting any such management audit or cost audit, whether or not such audit is initiated at the direction of the RUS. -9- Section 6 Hartwell Power Purchase Agreement 6.1 Actions Requiring Consent of RUS. The Borrower shall not, without the prior written consent of RUS, take any of the following actions: (a) Pursuant to Section 3.3 of the Purchase Agreement, exercise its option to take title to the Facility by paying Seller the Settlement Price; or (b) Pursuant to Article XIII of the Purchase Agreement, exercise its option to purchase all or any part of the Facility. 6.2 Termination Provisions. The following provisions shall apply to a termination of the Purchase Agreement by the Borrower: (a) The Borrower shall not give notice of termination to the Seller unless the RUS has received written notice from the Borrower of its intent to terminate (a "Default Termination Notice") not less than 30 days prior to the date that the termination notice is delivered to the Seller. The Borrower may deliver the termination notice to the Seller so long as the RUS has not notified the Borrower within the later of 29 days of receipt of the Default Termination Notice or one business day prior to the Borrower's delivery of a notice of termination to Seller that the RUS objects to the Borrower terminating the Purchase Agreement. The Borrower shall provide to its Board of Directors any written comments which the RUS provides to the Borrower with respect to the termination; and (b) If the termination is pursuant to any other provision of the Purchase Agreement, including Section 3.4 thereof, the Borrower shall not, without the prior written consent of the RUS, exercise its right to terminate the Purchase Agreement. 6.3 Option to Purchase Equity of Transco or Affiliates. The Borrower shall not exercise its option, pursuant to Section 13.2.2 of the Purchase Agreement, to purchase equity held by Transco Energy or any Affiliate in any General Partner (i) unless the Borrower has promptly provided the RUS with a copy of the written notice received from Seller and (ii) until the RUS has received from the Borrower written notice of its intent to exercise such option not less than 30 days prior to the date the Borrower is to exercise its option or be deemed to have waived said option. The Borrower shall provide the RUS with such information available to the Borrower with respect to its option as the RUS may request. The Borrower shall also provide the RUS with a report analyzing the economic and business feasibility of the proposed acquisition no less than 60 days prior to the date the Borrower is to exercise its option. The Borrower shall promptly provide the RUS with any information which affects the information or report it has previously provided to the RUS pursuant to this Section 6.3. The Borrower shall provide to its Board of Directors any written comments which the RUS provides to the Borrower with respect to the exercise of its option under Section 13.2.2 of the Purchase Agreement. The Borrower may exercise its option under said Section 13.2.2 -10- so long as the RUS has not notified the Borrower within 29 days of receipt by the RUS of notice from the Borrower that the RUS objects to the Borrower's exercising such option. 6.4 Option to Purchase Equity Transfer Interest. The Borrower shall not exercise its option, pursuant to Section 13.3 of the Purchase Agreement, to purchase any Equity Transfer Interest (i) unless the Borrower has promptly provided the RUS with a copy of the written notice received from Seller and (ii) until the RUS has received from the Borrower written notice of its intent to exercise such option not less than 60 days prior to the date the Borrower is to exercise its option or be deemed to have waived said option. The Borrower shall provide the RUS with such information available to the Borrower with respect to its option as the RUS may request. The Borrower shall provide the RUS with a report analyzing the economic and business feasibility of the proposed acquisition no less than 90 days prior to the date the Borrower is to exercise its option. The Borrower shall promptly provide the RUS with any information which affects any information or report it has previously provided to the RUS pursuant to this Section. The Borrower shall provide to its Board of Directors any written comments which the RUS provides to the Borrower with respect to the exercise of its option under Section 13.3 of the Purchase Agreement. The Borrower may exercise its option under said Section 13.3 so long as the RUS has not notified the Borrower within 59 days of receipt by the RUS of notice from the Borrower that the RUS objects to the Borrower's exercising such option. 6.5 Consent Provision. The Borrower shall not give its written consent to any agreement between the Seller and the Operating Agent until 14 days after the Borrower has provided the RUS with a copy of the proposed agreement substantially in the form it is to be executed. 6.6 Audit. Upon the written request of the RUS, the Borrower shall take any of the following actions: (a) Conduct, to the satisfaction of the RUS, an audit pursuant to Section 14.3 of the Purchase Agreement; (b) Appoint the United States Department of Agriculture and the employees and representatives thereof as its duly authorized agent for the purpose of conducting an audit pursuant to Section 14.3 of the Purchase Agreement; or (c) Promptly take such actions as may be required to terminate the Purchase Agreement pursuant to its terms if the RUS determines that the failure of the Borrower to do so would have a Material Adverse Effect. Section 7 Rocky Mountain Lease Transaction The Borrower will not enter into or consent to any amendments or modifications of, or accept any waivers with respect to, any of the "Operative Documents" (as defined in the Rocky Mountain Participation Agreements) which would adversely affect the rights or remedies of the Senior Secured -11- Parties and Senior Creditors with respect to the "Undivided Interest," the "Ground Interest" or the "Rocky Mountain Agreements" (as such terms are defined in the Rocky Mountain Participation Agreements) under the Intercreditor Agreement or under the Senior Financing Agreements without the consent of the Government (which consent may be given or withheld in the sole and absolute discretion of the Government). Section 8 Application of GTC Sale Proceeds The Borrower shall apply, within ninety (90) days following receipt thereof, an amount equal to the net cash proceeds, if any, received from GTC pursuant to Section 2.4(g) of the Restructuring Agreement, to the prepayment, redemption or defeasance of Existing Obligations. Section 9 Waiver Any of the requirements contained in this Schedule 2 may be waived by the RUS upon written notice provided to the Borrower; provided, however, that such waiver may be rescinded by the RUS, in the sole discretion of the RUS, upon written notice of such rescission provided to the Borrower. In the event written notice is provided to the Borrower that a waiver has been rescinded, then the requirements to which the notice relates shall be fully binding upon and enforceable against the Borrower 30 days after such notice is received by the Borrower, and such rescission shall not affect any action taken pursuant to any such waiver during the period of its effectiveness. -12- EXHIBIT A LOCKBOX AGREEMENT This LOCKBOX AGREEMENT (this "Agreement") is entered into as of March 1, 1997, by and among SunTrust Bank, Atlanta, a Georgia banking corporation (the "Bank"), Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation), a Georgia electric membership corporation (the "Company"), and SunTrust Bank, Atlanta, a Georgia banking corporation, not individually or personally but solely in its capacity as trustee (the "Trustee") under the Indenture (defined below). WHEREAS, the Company, as grantor, and the Trustee have entered into an Indenture, dated as of March 1, 1997 (such indenture, as from time to time amended, supplemented or restated, the "Indenture"), whereby, among other things, the Company has granted a security interest in all contracts of the Company for the purchase or sale of electric power and energy by or on behalf of the Company and having an original term in excess of one year; WHEREAS, the Company, as debtor, and the Trustee have also entered into a Security Agreement, dated as of March 1, 1997 (such security agreement, as from time to time amended, supplemented or restated, the "Security Agreement"; the Security Agreement and the Indenture, collectively, the "Security Documents"), whereby, among other things, the Company has granted a security interest in all contracts of the Company for the purchase or sale of electric power and energy by or on behalf of the Company and having an original term in excess of one year; WHEREAS, the Company has entered into contracts, dated as of August 1, 1996, for the sale of electric power and energy to each of its members for original terms exceeding one year (such contracts, as from time to time amended, supplemented or restated, collectively, the "Wholesale Power Contracts"); WHEREAS, under the Security Documents, the Company has also granted a security interest in the proceeds of the "Trust Estate" (as defined in the Indenture) and the "Collateral" (as defined in the Security Agreement; the Trust Estate and the Collateral being collectively referred to herein as the "Trust Estate"), including all proceeds of the Wholesale Power Contracts; WHEREAS, the Company and the United States of America, acting by and through the Administrator of the Rural Utilities Service (the "RUS"), have entered into an Amended and Consolidated Loan Contract, dated as of March 1, 1997 (such loan contract, as from time to time amended, supplemented or restated, the "Loan Contract") in which the Company has agreed, upon the occurrence of certain conditions and at the request of the RUS, to deposit cash proceeds of the Trust Estate as provided in the Security Documents, the Loan Contract and this Agreement. NOW, THEREFORE, the parties hereto agree as follows: Section 1. Definitions. Terms used in this Agreement with initial letters capitalized that are defined in the Indenture and are not otherwise defined herein have the meanings assigned to them in the Indenture. In addition, the following terms have the meanings assigned to them below: (a) "Applicable Period" shall mean any period commencing on the date the Company receives notice from the RUS in writing that a Highest Oversight Period (as defined in the Loan Contract) exists, and ending on the date the Company receives notice from the RUS in writing that such Highest Oversight Period no longer exists; and (b) "Pledged Revenues" shall mean all cash proceeds (as defined in the Uniform Commercial Code) of the Trust Estate received or receivable by the Company in which the Security Documents create a security interest pursuant to the Uniform Commercial Code, in each case that are not deposited pursuant to the Indenture or required to be deposited with the Trustee pursuant to the Indenture. Section 2. Lockbox Account. There is hereby created and established with the Bank a special account to be titled the "Oglethorpe Power Corporation Special Cash Account" (the "Lockbox Account"), account number 10630500. The money deposited into the Lockbox Account, together with all investments thereof and investment income therefrom, shall be applied solely as provided in this Agreement. Section 3. Account Subject to Pledge of the Security Documents. Amounts deposited into the Lockbox Account shall constitute a portion of the Trust Estate pledged pursuant to the Security Documents for the equal and ratable security of all the Outstanding Secured Obligations in accordance with and as provided by the terms of the Outstanding Secured Obligations and the Security Documents. The Bank shall hold all such amounts deposited in the Lockbox Account pursuant to this Agreement as agent of the Trustee. The Lockbox Account shall not be closed without the written consent of the RUS. Section 4. Partial Waiver of Right of Set Off. Except to the extent of any amounts due to the Bank on account of items credited to the Lockbox Account prior to collection that are not subsequently collected, the Bank hereby waives, and agrees that it shall not exercise, any right of set off or any banker's lien with respect to the Lockbox Account; provided, however, that nothing in this Agreement shall be deemed to constitute a waiver by the Bank of its right of set off or any banker's lien with respect to any other account of the Company. Section 5. Payments to Be Made to Account. During any Applicable Period, the Company shall direct each of its members and each other Person obligated to make any payment to the Company of Pledged Revenues to make such payments to the Bank at the address or in such other manner as specified in Section 6 for deposit into the Lockbox Account. The Company agrees not to make, cause or permit to be made any deposits of moneys other than Pledged Revenues into the Lockbox Account. The Company shall use its best efforts to cause its members and each other Person obligated to make any payment of Pledged Revenues to make such payments in accordance with the provisions of this Agreement. A-2 Section 6. Manner of Payment. (a) During any Applicable Period, payments of Pledged Revenues made by mail shall be mailed to: SunTrust Bank, Atlanta, Attention: Corporate Trust Department P. O. Box 4625 Atlanta, GA 30302 Reference: Oglethorpe Power Corporation Special Cash Account or to such other address as may be specified by the Bank to the Company at least thirty (30) days before the effective date of such change. During any Applicable Period, electronic payments of Pledged Revenues shall be made in the following manner: SunTrust Bank, Atlanta, Corporate Trust Department Center 008 ABA #061000104 A/C 970100000000008 Attention: Bryan Echols Ref: Oglethorpe Power Corporation Special Cash Account All such payments of Pledged Revenues shall be accompanied by such references or other instructions to the Bank to deposit such payments in the Lockbox Account. The Bank shall have no responsibility or liability for failing to deposit any moneys in the Lockbox Account which are not accompanied by such references or other instructions to deposit such moneys in such account. (b) All such payments received by the Bank shall be deposited into the Lockbox Account and held subject to the provisions hereof. The Bank is hereby authorized, empowered and directed by the Company to deposit all funds received as described in Section 6(a) into the Lockbox Account and to make all necessary endorsements and to take all other necessary actions to carry out the purposes of this Agreement. The Company hereby waives notice of presentment, protest and non-payment of any instrument so endorsed. (c) During any Applicable Period, the Company shall promptly, and no event later than the Business Day following the receipt thereof, remit to the Bank in accordance with Section 6(a) for deposit into the Lockbox Account any Pledged Revenue that is received by the Company. Section 7. Accounting. No less frequently than once each month, the Bank shall deliver by mail a statement to the Company, with copies to the Trustee, the RUS and such other A-3 Persons as may be designated by the Company, which shall identify the date, maker and amount of each deposit to the Lockbox Account, and the date, payee and amount of each withdrawal or other debit to the Lockbox Account. Section 8. Disbursements. (a) Upon written demand of the Trustee, accompanied by a statement that there has occurred and is continuing under the Indenture an Event of Default, and continuing until such demand is rescinded, the Bank shall pay to the Trustee all amounts then or thereafter on deposit in the Lockbox Account, to be applied by the Trustee as provided under the Security Documents. (b) So long as the Bank shall not have received a written demand from the Trustee under paragraph (a), on the fifth (5th) Business Day preceding the end of each month during the Applicable Period, the Bank shall withdraw and pay (or deposit in another, unrestricted account, at the direction of the appropriate party listed below) from the amounts on deposit in the Lockbox Account the following amounts in the order indicated to the extent funds are available in the Lockbox Account: (1) to the Bank, the amount of fees and expenses that are then payable to the Bank under Section 9; (2) to the Trustee, the amount certified by the Trustee as the amount of any fees or expenses that are then payable to the Trustee under the Security Documents; (3) to the Company, the amount specified in a Company Request as the amount of ordinary and necessary payments due from the Company for the following month, including, without limitation, payments for operations and regularly scheduled debt service; (4) to the Trustee, the amount certified by the Trustee as the amount necessary to provide for the payment of the principal and interest then due or (based on receipt by the Trustee on a monthly basis of a proportional amount of principal and accrued interest) becoming due on the Outstanding Secured Obligations during the following month, for deposit as Trust Moneys under the Indenture; (5) to the Company, the amount specified in a Company Request as the amount of expenditures approved for the following month in accordance with a capital expenditure budget approved by the RUS; A-4 (6) to the Company, the amount specified in a Company Request as the amount of expenditures for the following month approved in writing by the RUS for other purposes; and (7) to the payment of any amounts due under Obligations to maintain the value of reserve funds established and maintained in connection with debt securities (A) secured by a pledge of certain Obligations, (B) issued on behalf of the Company and (C) with respect to which and opinion was delivered on the date of the issuance of such securities to the effect that the interest on such securities is excluded from the gross income of the holder of such securities pursuant to the Internal Revenue Code, as amended. (c) Any amounts remaining on deposit in the Lockbox Account on the day following the end of the month in which (i) a Highest Oversight Period no longer exists (as evidenced by an Officers' Certificate and a notice from the RUS to such effect) or (ii) this Agreement terminates pursuant to Section 13, shall be paid to the Company in accordance with, and upon receipt of, a Company Request, to be used for any lawful purpose. (d) Pending disbursements of the amounts on deposit in the Lockbox Account, the Bank shall promptly invest and reinvest such amounts in the Defeasance Securities specified in any Company Order or in such other investments as may be approved in writing by the RUS. (e) Any amounts deposited in the Lockbox Account that do not constitute Pledged Revenues, as identified to the Bank in writing by either of the RUS or the Trustee, shall be promptly paid to the Company (unless such error is identified during any period described in paragraph (a), in which case such amounts so identified shall be paid to the Trustee). The Company agrees to promptly notify both of the Trustee and the RUS of any deposits into the Lockbox Account of any amounts not constituting Pledged Revenues. Section 9. Fees and Expenses of Bank. The Company agrees (a) to pay to the Bank from time to time such compensation as may be specifically agreed upon with the Bank and, absent specific agreement, reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Bank upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bank in accordance with any provision of this Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to the Bank's negligence or bad faith; and A-5 (c) to indemnify the Bank for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. All such payments and reimbursements shall be made with interest at the rate of 10% per annum. Section 10. Certain Rights of Bank. (a) The Bank undertakes to perform such duties and only such duties as are specifically set forth in this Agreement and no implied covenants or obligations shall be read into this Agreement against the Bank. The Bank makes no representation or warranty as to the priority of any claim or the status, in the event of any insolvency, bankruptcy or other similar proceeding affecting the Company, of amounts held in the Lockbox Account or paid therefrom. (b) In the absence of bad faith on its part, the Bank may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Bank and appearing to conform to the requirements of this Agreement. The Bank shall have no liability for actions taken pursuant to this Agreement other than as a result of its gross negligence or willful misconduct. (c) The Bank may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order approval or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties and shall not be required to verify the accuracy of any information or calculations required to be included therein or attached thereto. Any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution (d) Whenever in the administration of this Agreement, the Bank shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Bank (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate. (e) The Bank may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (f) The Bank may execute any of the powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and shall not be liable for the negligence or misconduct of such Persons appointed by the Bank with due care hereunder. A-6 (g) The Bank shall not be liable for any errors of judgment made in good faith by it, unless it shall be proved that the Bank was grossly negligent or reckless in ascertaining the pertinent facts. (h) The Bank shall not be required to give any bond or suety in respect of the execution of the obligations and trusts set forth in this Agreement or otherwise in respect hereof or of the Lockbox Account. Section 11. Trustee's Rights, Obligations, Etc. The rights, duties, responsibilities and fees of the Trustee hereunder shall be governed by the provisions of Article IX of the Indenture relating to the Trustee and the indemnities provided for in the Indenture shall include all action by the Trustee taken hereunder. Section 12. Removal, Resignation, Etc. The Bank may resign at any time upon thirty (30) days written notice to the Company, the Trustee and the RUS. The Company may remove the Bank, with the written consent of the RUS, upon thirty (30) days written notice to the Bank, the Trustee and the RUS. The RUS may remove the Bank upon thirty (30) days written notice to the Bank, the Company and the Trustee. Upon any such resignation or removal, the Company shall select another financial institution, with the approval of the RUS, with which to enter into a lockbox agreement substantially upon the terms contained in this Agreement and otherwise upon such terms as shall be permitted or required by the RUS. In the event the Company does not select a financial institution approved by the RUS, the RUS shall select such financial institution. Section 13. Amendments with Consent of the RUS. Even though this Agreement establishes rights for the benefit of Holders of the Outstanding Secured Obligations, the terms, conditions and requirements of this Agreement are in addition to those found in the Indenture and have been required solely by the RUS. Accordingly, this Agreement can be terminated, amended, modified or supplemented in any way by the Company with the consent of only the RUS and without the consent of the Bank, the Trustee or the Holders of the Outstanding Secured Obligations; provided, however, that no amendment, modification or supplement to the obligations or rights of the Bank or the Trustee, or otherwise adversely affecting the Bank or the Trustee, shall be effective as to the Bank or the Trustee without the prior written consent of the Bank or the Trustee, or both, as the case may be. This Agreement shall automatically terminate on the date on which the RUS is no longer a Holder of any Outstanding Secured Obligation. Section 14. Exculpation of the RUS. The RUS shall have no obligation or liability to any party to this Agreement, any other Holder of an Outstanding Secured Obligation or to any other Person for any action taken by it pursuant to the terms of this Agreement or any failure to take action permitted to be taken by it pursuant to this Agreement. Section 15. Notices, etc., to Bank, Trustee, Company and RUS. Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted by this Agreement to be made upon, given or furnished to, or filed with A-7 (a) the Trustee by the Company or the Bank shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its principal corporate trust office, or (b) the Company by the Trustee or the Bank shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid, to the Company addressed to it at 2100 East Exchange Place, P.O. Box 1349, Tucker, Georgia 30085-1349, Attention: President and Chief Executive Officer, with a copy to Vice President, Finance, or at any other address furnished in writing to the Trustee, the Bank and RUS by the Company, or (c) the RUS by the Bank or the Company shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid, to the RUS addressed to it at Rural Utilities Service, United States Department of Agriculture, 1400 Independence Avenue, SW., Washington, D.C. 20250-1500, Attention: Administrator or at any other address furnished in writing to the Trustee, the Bank and the Company by the RUS, or (d) the Bank by the Trustee, the RUS or the Company shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage pre-paid, to the Bank addressed to it at: Street Address: Mailing Address: --------------- ---------------- SunTrust Bank, Atlanta SunTrust Bank, Atlanta Corporate Trust Department Corporate Trust Department 58 Edgewood Avenue P. O. Box 4625 Room 400 Atlanta, Georgia 30302 Atlanta, Georgia 30303 or at any other address furnished in writing to the Trustee, the RUS and the Company by the Bank. Section 16. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. Section 17. Successors and Assigns. All covenants and agreements in this Agreement by the parties hereto shall bind their respective successors and assigns, whether so expressed or not. Section 18. Severability Clause. In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 19. Benefits of Agreement. The RUS is an express third-party beneficiary of the Company's and the Bank's obligations under this Agreement. Nothing in this Agreement, express or implied, shall give to any Person, other than the parties hereto, the RUS and their A-8 successors hereunder and any separate trustee or co-trustee appointed under Section 9.14 of the Indenture, any benefit or any legal or equitable right, remedy or claim under this Agreement. Section 20. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. Section 21. Counterparts. This Agreement may be executed in any number of counterparts, each of which so executed to be an original, but all such counterparts shall together constitute but one and the same instrument. Section 22. Specific Performance. Each of the Trustee and the RUS is hereby, to the maximum extent permitted by applicable law, to demand specific performance of this Agreement at any time when the Company shall have failed to comply with any provision of this Agreement applicable to it. The Company hereby irrevocably waives, to the maximum extent permitted by applicable law, any defense based on the adequacy of a remedy at law that might be asserted as a bar to such remedy of specific performance. Section 23. Waiver. No failure on the part of the Trustee, the Bank or the RUS to exercise, and no delay in exercising, any right hereunder, under the Security Documents or under the Loan Contract, shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder or thereunder preclude any other or further exercise thereof. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 24. Further Assurances. The Company agrees, at the cost and expense of the Company, to execute and deliver and file and record such further documents or instruments as the Trustee, the RUS or the Bank may reasonably request in order to carry out or confirm the respective rights of the Trustee, the RUS and the Bank under this Agreement. Section 25. Entire Agreement. This written Agreement represents the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties. There are no unwritten oral agreements between parties. [Signatures on next page.] A-9 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. SUNTRUST BANK, ATLANTA, as Lockbox Bank By:_______________________________________ Name:__________________________________ Title:_________________________________ By:_______________________________________ Name:__________________________________ Title:_________________________________ OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) By:_______________________________________ Name: T. D. Kilgore Title: President and Chief Executive Officer SUNTRUST BANK, ATLANTA, as Trustee under the Indenture identified herein By:_______________________________________ Name:__________________________________ Title:_________________________________ By:_______________________________________ Name:__________________________________ Title:_________________________________ A-10 FFB RETAINED INDEBTEDNESS NOTE FOR FFB USE ONLY: RUS Note No._________________________ Note Identifier: Dated as of March 1, 1997 ------------- OGLETHRP 0012 Principal amount $2,637,781,327.45 (subject to increases, as provided Acceptance Date: in Part I, paragraph 13, of this Note) Latest maturity date of any debt under this Note January 2, 2024 Executed at Tucker, Georgia Security Instrument (referred to in Part IV, paragraph 7, of this Note): Indenture and Security Agreement, each dated as of March 1, 1997, and each made by Oglethorpe Power Corporation (An Electric Membership Generation and Transmission Corporation), Grantor, to SunTrust Bank, Atlanta, Trustee. RETAINED INDEBTEDNESS NOTE PART I DESCRIPTION OF RETAINED INDEBTEDNESS NOTE 1. Retained Indebtedness Note to Evidence Indebtedness for which Oglethorpe Power Corporation Remains Liable after Georgia Transmission Corporation's Assumption of a 16.864 Percent Portion of Indebtedness Evidenced by Oglethorpe Power Corporation's Outstanding Notes. This Retained Indebtedness Note is executed and delivered to evidence (a) the present obligations of OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION AND TRANSMISSION CORPORATION) (the "Borrower"), a corporation organized and existing under the laws of the State of Georgia, to the FEDERAL FINANCING BANK ("FFB") remaining after the assumption by Georgia Transmission Corporation (An Electric Membership Corporation) ("GTC"), a corporation organized and existing under the laws of the State of Georgia, of a 16.864 percent portion of the indebtedness that is presently owed by the Borrower to FFB on account of certain advances of funds previously made by FFB that are outstanding on the date hereof and evidenced on the date hereof by those certain promissory notes payable to FFB OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 1 Part I previously executed and delivered by the Borrower, which notes are more particularly described on the list of notes attached hereto as Annex 1 (each note listed on Annex 1, as such note may have been amended, being an "Outstanding Note," all such notes being, collectively, the "Outstanding Notes", the indebtedness of the Borrower presently owed to FFB on account of each advance of funds previously made by FFB that is outstanding on the date hereof and evidenced on the date hereof by an outstanding Note being an "Outstanding Note Advance", and the indebtedness of the Borrower presently owed to FFB on account of more than one such advance of funds being, collectively, "Outstanding Note Advances"), and (b) certain obligations of the Borrower to the Administrator of the Rural Utilities Service ("RUS"), successor to the Administrator of the Rural Electrification Administration ("REA"), remaining after the assumption by the GTC of a 16.864 percent portion of the obligations of the Borrower to the Administrator of RUS relating to such assumed indebtedness. 2. Advance Portions Governed by Part IIA ("Retained Old Form Note Advance Portions"). (a) Five of the Outstanding Notes were purchased by FFB under an agreement dated as of August 14, 1974, between FFB and REA, as such agreement was amended from time to time prior to January 28, 1983 (each such Outstanding Note being an "Old Form Note", and all five of such Outstanding Notes being, collectively, the "Old Form Notes"). Each of these Old Form Notes has previously been modified, respectively, by an agreement among the Borrower, FFB, and REA which established the procedures for the Borrower to elect to have a new interest rate apply to any Outstanding Note Advance that was evidenced on the date of such modification agreement by an Old Form Note and was outstanding more than 12 years after the end of the calendar year in which such Outstanding Note Advance was made (any election to have a new interest rate apply to any such Outstanding Note Advance being a "repricing" of such outstanding Note Advance, and any modification agreement establishing the procedures for repricing any such outstanding Note Advances being a "Repricing Agreement"). Certain of the Outstanding Note Advances that are evidenced on the date hereof by an Old Form Note that has been modified by a Repricing Agreement have not been repriced as of the date hereof under such Repricing Agreement (each such outstanding Note Advance being an "Old Form Note Advance", and more than one such Outstanding Note Advance being, collectively, "Old Form Note Advances"). Effective as of the date of this Retained Indebtedness Note, GTC assumes a 16.864 percent portion OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 2 Part I of each Old Form Note Advance (the 16.864 percent portion of each Old Form Note Advance, which portion is assumed by GTC as of the date hereof, being an "Assumed Old Form Note Advance Portion"), leaving the residual 83.136 percent portion of each Old Form Note Advance remaining owed by the Borrower to FFB (the 83.136 percent portion of each Old Form Note Advance, which portion remains owed by the Borrower to FFB, being a "Retained Old Form Note Advance Portion", and all of such percent portions remaining owed by the Borrower to FFB being, collectively, the "Retained Old Form Note Advance Portions"). Upon execution by RUS of the guarantee set forth at the end of this Retained Indebtedness Note, the Borrower shall be released from any and all liability for each Assumed Old Form Note Advance Portion, and each Retained Old Form Note Advance Portion shall be evidenced by this Retained Indebtedness Note. Subject to the exercise of the refinancing election provided in paragraph 6 of this Part I, the terms of Part IIA of this Retained Indebtedness Note shall govern each Retained Old Form Note Advance Portion. The Retained Old Form Note Advance Portions are more particularly described in the advance schedules collectively attached hereto as Annex 2A (any advance schedule constituting a part of Annex 2A being a "Retained Old Form Note Advance Portion Schedule," and all of such advance schedules being, collectively, the "Retained Old Form Note Advance Portion Schedules"). (b) The Refinancing Note dated as of March 31, 1994, is one of the Outstanding Notes and was accepted by FFB in substitution for a promissory note payable to FFB that was previously executed and delivered by the Borrower, purchased by FFB under an agreement dated as of August 14, 1974, between FFB and REA, as such agreement was amended from time to time prior to January 28, 1983, and modified by a Repricing Agreement among the Borrower, FFB, and REA (the Outstanding Note so accepted being the "Refinancing Note"). The Refinancing Note established the procedures for the Borrower to elect to refinance under section 306C of the Rural Electrification Act of 1936, as amended (7 U.S.C. ss. 936c) (the "Refinancing Authority"), any Outstanding Note Advance that was evidenced on the date of the Refinancing Note by the Refinancing Note. Certain Outstanding Note Advances that are evidenced on the date hereof by the Refinancing Note and identified in the Refinancing Note as being "Old Form Note Advances" have not been refinanced as of the date hereof under the Refinancing Authority (each such Outstanding Note Advance being included within the term "Old Form Note Advance", and all of such Outstanding Note Advances being collectively included within the term "Old Form Note Advances"). Effective as of the OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 3 Part I date of this Retained Indebtedness Note, GTC assumes a 16.864 percent portion of each such Old Form Note Advance (the 16.864 percent portion of each such Old Form Note Advance, which portion is assumed by GTC as of the date hereof, being included within the term "Assumed Old Form Note Advance Portion"), leaving the residual 83.136 percent portion of each such Old Form Note Advance remaining owed by the Borrower to FFB (the 83.136 percent portion of each such Old Form Note Advance, which portion remains owed by the Borrower to FFB, being included within the term "Retained Old Form Note Advance Portion", and all of such percent portions remaining owed by the Borrower to FFB being collectively included within the term "Retained Old Form Note Advance Portions"). Upon execution by RUS of the guarantee set forth at the end of this Retained Indebtedness Note, the Borrower shall be released from any and all liability for each such Assumed Old Form Note Advance Portion, and each such Retained Old Form Note Portion shall be evidenced by this Retained Indebtedness Note. Subject to the exercise of the refinancing election provided in paragraph 6 of this Part I, the terms of Part IIA of this Retained Indebtedness Note shall also govern each such Retained Old Form Note Advance Portion. Such Retained Old Form Note Advance Portions are more particularly described in advance schedules that are included among the Retained Old Form Note Advance Portion Schedules attached hereto as Annex 2A. 3. Advance Portions Governed by Part IIB ("Retained Repriced Old Form Note Advance Portions"). Certain of the Outstanding Note Advances that are evidenced on the date hereof by an Old Form Note that has been modified by a Repricing Agreement have been repriced prior to the date hereof under a Repricing Agreement (each such Outstanding Note Advance being a "Repriced Old Form Note Advance", and more than one such Outstanding the Borrower Advance being, collectively, "Repriced Old Form Note Advances"). Effective as of the date of this Retained Indebtedness Note, GTC assumes a 16.864 percent portion of each Repriced Old Form Note Advance (the 16.864 percent portion of each Repriced Old Form Note Advance, which portion is assumed by GTC as of the date hereof, being an "Assumed Repriced Old Form Note Advance Portion"), leaving the residual 83.136 percent portion of each Repriced Old Form Note Advance remaining owed by the Borrower to FFB (the 83.136 percent portion of each Repriced Old Form Note Advance, which portion remains owed by the Borrower to FFB, being a "Retained Repriced Old Form Note Advance Portion", and all of such percent portions remaining owed by the Borrower to FFB being, collectively, the "Retained Repriced Old OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 4 Part I Form Note Advance Portions"). Upon execution by RUS of the guarantee set forth at the end of this Retained Indebtedness Note, the Borrower shall be released from any and all liability for each Assumed Repriced Old Form Note Advance Portion, and each Retained Repriced Old Form Note Advance Portion shall be evidenced by this Retained Indebtedness Note. Subject to the exercise of the refinancing election provided in paragraph 6 of this Part I, the terms of Part IIB of this Retained Indebtedness Note shall govern each Retained Repriced Old Form Note Advance Portion. The Retained Repriced Old Form Note Advance Portions are more particularly described in the advance schedules collectively attached hereto as Annex 2B (any advance schedule constituting a part of Annex 2B being a "Retained Repriced Old Form Note Advance Portion Schedule," and all of such advance schedules being, collectively, the "Retained Repriced Old Form Note Advance Portion Schedules"). 4. Advance Portions Governed by Part IIC ("Retained New Form Note Advance Portions"). (a) Four of the Outstanding Notes were purchased by FFB under an agreement dated as of January 28, 1983, between FFB and REA, as such agreement was amended and restated from time to time prior to January 1, 1992 (each such Outstanding Note being an "New Form Note", and all four of such Outstanding Notes being, collectively, the "New Form Notes"). Certain of the Outstanding Note Advances are evidenced on the date hereof by the New Form Notes (each such Outstanding Note Advance being a "New Form Note Advance", and more than one such Outstanding Note Advance being, collectively, "New Form Note Advances"). Effective as of the date of this Retained Indebtedness Note, GTC assumes a 16.864 percent portion of each New Form Note Advance (the 16.864 percent portion of each New Form Note Advance, which portion is assumed by GTC as of the date hereof, being an "Assumed New Form Note Advance Portion"), leaving the residual 83.136 percent portion of each New Form Note Advance remaining owed by the Borrower to FFB (the 83.136 percent portion of each New Form Note Advance, which portion remains owed by the Borrower to FFB, being a "Retained New Form Note Advance Portion", and all of such percent portions remaining owed by the Borrower to FFB being, collectively, the "Retained New Form Note Advance Portions"). Upon execution by RUS of the guarantee set forth at the end of this Retained Indebtedness Note, the Borrower shall be released from any and all liability for each Assumed New Form Note Advance Portion, and each Retained New Form Note Advance Portion shall be evidenced by this Retained Indebtedness Note. Subject to the exercise of the OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 5 Part I refinancing election provided in paragraph 6 of this Part I, the terms of Part IIC of this Retained Indebtedness Note shall govern each Retained New Form Note Advance Portion. The Retained New Form Note Advance Portions are more particularly described in the advance schedules collectively attached hereto as Annex 2C (any advance schedule constituting a part of Annex 2C being a "Retained New Form Note Advance Portion Schedule," and all of such advance schedules being, collectively, the "Retained New Form Note Advance Portion Schedules"). (b) Certain of the Outstanding Note Advances that are evidenced on the date hereof by the Refinancing Note and identified in the Refinancing Note as being "Substitute Note Advances" have not been refinanced as of the date hereof under the Refinancing Authority (each such Outstanding Note Advance being included within the term "New Form Note Advance", and all of such Outstanding Note Advances being collectively included within the term "New Form Note Advances"). Effective as of the date of this Retained Indebtedness Note, GTC assumes a 16.864 percent portion of each such New Form Note Advance (the 16.864 percent portion of each such New Form Note Advance, which portion is assumed by GTC as of the date hereof, being included within the term "Assumed New Form Note Advance Portion"), leaving the residual 83.136 percent portion of each such New Form Note Advance remaining owed by the Borrower to FFB (the 83.136 percent portion of each such New Form Note Advance, which portion remains owed by the Borrower to FFB, being included within the term "Retained New Form Note Advance Portion", and all of such percent portions remaining owed by the Borrower to FFB being collectively included within the term "Retained New Form Note Advance Portions"). Upon execution by RUS of the guarantee set forth at the end of this Retained Indebtedness Note, the Borrower shall be released from any and all liability for each such Assumed New Form Note Advance Portion, and each such Retained New Form Note Portion shall be evidenced by this Retained Indebtedness Note. Subject to the exercise of the refinancing election provided in paragraph 6 of this Part I, the terms of Part IIC of this Retained Indebtedness Note shall also govern each such Retained New Form Note Advance Portion. Such Retained New Form Note Advance Portions are more particularly described in advance schedules that are included among the Retained New Form Note Advance Portion Schedules attached hereto as Annex 2C. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 6 Part I 5. Advance Portions Governed by Part IID ("Retained Refinanced Refinancing Note Advance Portions"). Certain of the Outstanding Note Advances that are evidenced on the date hereof by the Refinancing Note have been refinanced prior to the date hereof under the Refinancing Authority (each such Outstanding Note Advance being a "Refinanced Refinancing Note Advance", and all of such Outstanding Note Advances being, collectively, the "Refinanced Refinancing Note Advances"). Effective as of the date of this Retained Indebtedness Note, GTC assumes a 16.864 percent portion of each Refinanced Refinancing Note Advance (the 16.864 percent portion of each Refinanced Refinancing Note Advance, which portion is assumed by GTC as of the date hereof, being an "Assumed Refinanced Refinancing Note Advance Portion"), leaving the residual 83.136 percent portion of each Refinanced Refinancing Note Advance remaining owed by the Borrower to FFB (the 83.136 percent portion of each Refinanced Refinancing Note Advance, which portion remains owed by the Borrower to FFB, being a "Retained Refinanced Refinancing Note Advance Portion", and all of such percent portions remaining owed by the Borrower to FFB being, collectively, the "Retained Refinanced Refinancing Note Advance Portions"). Upon execution by RUS of the guarantee set forth at the end of this Retained Indebtedness Note, the Borrower shall be released from any and all liability for each Assumed Refinanced Refinancing Note Advance Portion, and each Retained Refinanced Refinancing Note Advance Portion shall be evidenced by this Retained Indebtedness Note. Subject to the exercise of the refinancing election provided in paragraph 6 of this Part I, the terms of Part IID of this Retained Indebtedness Note shall govern each Retained Refinanced Refinancing Note Advance Portion. The Retained Refinanced Refinancing Note Advance Portions are more particularly described in the advance schedules collectively attached hereto as Annex 2D (any advance schedule constituting a part of Annex 2D being a "Retained Refinanced Refinancing Note Advance Portion Schedule," and all of such advance schedules being, collectively, the "Retained Refinanced Refinancing Note Advance Portion Schedules"). 6. Refinancing Election. For so long as the Refinancing Authority shall be in effect, and subject to the terms and conditions of this Part I, the Borrower may elect to refinance the unpaid principal balance of any Retained Old Form Note Advance Portion, the unpaid principal balance of any Retained Repriced Old Form Note Advance Portion, OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 7 Part I the unpaid principal balance of any Retained New Form Note Advance Portion or the unpaid principal balance of any Retained Refinanced Refinancing Note Advance Portion (any such Retained Old Form Note Advance Portion, Retained Repriced Old Form Note Advance Portion, Retained New Form Note Advance Portion or Retained Refinanced Refinancing Note Advance Portion being a "Retained Advance Portion," and more than one such Retained Old Form Advance Portion, Retained Repriced Old Form Note Advance Portion, Retained New Form Note Advance Portion or Retained Refinanced Refinancing Note Advance Portion being, collectively, "Retained Advance Portions"), and have the terms of Part III of this Retained Indebtedness Note govern such Retained Advance Portion (any such an election being a "Refinancing Election"). 7. Refinancing Premium. In connection with a Refinancing Election made with respect to any Retained Advance Portion, the Borrower shall pay to FFB a premium (a "Refinancing Premium") in the amount required by the terms of the Refinancing Authority. Such Refinancing Premium shall be calculated by the Secretary of the Treasury as of the close of business 2 "Business Days" (as that term is defined in the next succeeding sentence) prior to the "Refinancing Effective Date" (as that term is defined in paragraph 14 of this Part I) using standard calculation methods of the United States Department of the Treasury. For purposes of this Retained Indebtedness Note, the term "Business Day" means any day on which both FFB and the Federal Reserve Bank of New York are open for business. 8. Election to Finance the Premium. For so long as the Refinancing Authority shall be in effect, and subject to the terms and conditions of this Part I, the Borrower may, in connection with a Refinancing Election made with respect to any Retained Advance Portion, elect to pay the applicable Refinancing Premium to FFB by increasing the outstanding principal balance of the respective Retained Advance Portion by the amount of the applicable Refinancing Premium, as calculated by the Secretary of the Treasury (any such election being an "Election to Finance the Premium"). The new indebtedness incurred by the Borrower in connection with an Election to Finance the Premium made with respect to any Retained Advance Portion shall have the same maturity date, principal payment schedule, and interest rates as the respective Retained Advance Portion shall have after it has been refinanced. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 8 Part I 9. Conditions to Refinancing Election. The terms of Part III of this Retained Indebtedness Note shall begin to govern a Retained Advance Portion if and when all of the following conditions shall have been satisfied: (a) the Borrower shall have delivered to RUS a notice, in the form of notice attached hereto as Annex 3, that the Borrower makes a Refinancing Election with respect to a Retained Advance Portion (each such notice being an "Election Notice"), which notice shall: (1) identify the Retained Advance Portion with respect to which the Borrower makes a Refinancing Election; (2) specify the date on which the Borrower requests that the refinancing of the unpaid principal balance of such Retained Advance Portion become effective, being also the date on which the terms of Part III of this Retained Indebtedness Note shall begin to govern such Retained Advance Portion (such date being the "Requested Effective Date"), which date: (A) in the case of every Election Notice, may be either any Business Day occurring during the first 2 months of any calendar quarter or the last day of any calendar quarter (the last day of each calendar quarter being a "Payment Date"); and (B) in the case of the first Election Notice, shall also be not earlier than 5 Business Days after FFB has delivered notice to RUS that this Retained Indebtedness Note has been accepted by FFB; (3) specify the new maturity date for such Retained Advance Portion, selected in accordance with the principles of paragraph 3 of Part III of this Retained Indebtedness Note; (4) specify the method for the payment of the principal of such Retained Advance Portion, selected from among the options provided in paragraph 6 of Part III of this Retained Indebtedness Note; and OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 9 Part I (5) state whether the Borrower makes an Election to Finance the Premium with respect to such Retained Advance Portion; (b) RUS shall have completed processing the Borrower's Refinancing Election and, if made, the Borrower's Election to Finance the Premium; (c) FFB shall have received from RUS not less than 5 Business Days prior to the respective Requested Effective Date a notice, in the form of notice prescribed by FFB, that RUS has completed processing of the Borrower's Refinancing Election and, if made, the Borrower's Election to Finance the Premium (any such notice being an "Election Processing Completion Notice"); and (d) the Borrower shall have tendered to FFB, not later than 3:00 p.m. (Washington, D.C., time) on the respective Requested Effective Date: (1) for each Retained Advance Portion with respect to which the Borrower does not make an Election to Finance the Premium, the sum of: (A) the amount of the Refinancing Premium that is required by the terms of the Refinancing Authority in connection with refinancing such Retained Advance Portion; plus (B) the accrued interest through the Requested Effective Date; and (2) for each Retained Advance Portion with respect to which the Borrower makes an Election to Finance the Premium, the accrued interest through the Requested Effective Date. 10. Condition to Election to Finance the Premium. For each Retained Advance Portion with respect to which the Borrower makes an Election to Finance the Premium, the Borrower shall be permitted to pay the applicable Refinancing Premium to FFB by increasing the outstanding principal balance of such Retained Advance Portion if the Borrower tenders to RUS, not later than 3:00 p.m. (Washington, D.C., time) on the Requested Effective Date, an amount equal to 2.5 percent of the applicable Refinancing Premium. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 10 Part I 11. Borrower's Agreement Regarding Election Process Completion Notices. The Borrower hereby agrees that FFB, for its purposes, may consider any Election Processing Completion Notice delivered by RUS to FFB in accordance with Part I of this Retained Indebtedness Note to be an accurate representation that the Borrower has made a Refinancing Election with respect to the particular Retained Advance Portion identified therein and evidence that RUS has completed processing that Refinancing Election. 12. Retained Advance Portions Governed by Part III. If the Borrower makes a Refinancing Election with respect to any Retained Advance Portion, and all of the conditions that apply to making such Refinancing Election are satisfied, then the terms of Part III of this Retained Indebtedness Note shall govern such Retained Advance Portion from and after the Refinancing Effective Date, and a new interest rate and fee, established in accordance with the principles of paragraph 4 of Part III of this Retained Indebtedness Note, shall apply to such Retained Advance Portion from and after such Refinancing Effective Date. 13. Increases in the Principal Amount of Retained Advance Portions Governed by Part III due to Elections to Finance the Premium. If, in connection with a Refinancing Election made with respect to any Retained Advance Portion, the Borrower makes an Election to Finance the Premium, and the condition that applies to making such Election to Finance the Premium is satisfied, then the outstanding principal balance of the respective Retained Advance Portion shall be increased, as of the Refinancing Effective Date, by the amount of the applicable Refinancing Premium, by operation of the Refinancing Authority. 14. Refinancing Effective Date. If an Election Processing Completion Notice is received by FFB at least 5 Business Days prior to the Requested Effective Date specified by the Borrower in the respective Election Notice, and all of the other conditions that apply to making such Refinancing Election are satisfied, then the refinancing shall become effective, and the terms of Part III of this Retained Indebtedness Note shall begin to govern the respective Retained OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 11 Part I Advance Portion, on such Requested Effective Date (in such event, the Requested Effective Date being the "Refinancing Effective Date"). If an Election Processing Completion Notice is not received by FFB at least 5 Business Days prior to the respective Requested Effective Date, but all of the other conditions that apply to making such Refinancing Election are satisfied, then the refinancing shall become effective, and the terms of Part III of this Retained Indebtedness Note shall begin to govern the respective Retained Advance Portion, on the fifth Business Day after the day on which FFB receives such Election Processing Completion Notice (in such event, the fifth Business Day after the day on which FFB receives such Election Processing Completion Notice being the "Refinancing Effective Date"); provided that the Borrower shall have tendered to FFB, in addition to the payment required under subparagraph (d) of paragraph 9 of this Part I, the interest accrued from the Requested Effective Date through such Refinancing Effective Date. 15. Rescissions of Refinancing Elections. The Borrower may rescind a Refinancing Election made with respect to any Retained Advance Portion only in accordance with the provisions of this paragraph 15. For a rescission of a Refinancing Election to be effective, both FFB and RUS must have received from the Borrower, not later than 3:30 p.m. (Washington, D.C., time) 2 Business Days prior to the respective Requested Effective Date, a written notice specifying the Retained Advance with respect to which the Borrower wishes to rescind a Refinancing Election. The written rescission notice may be delivered by facsimile transmission to FFB at (202) 622-0707, and to RUS at (202) 720-1401, or at such other facsimile number or numbers as FFB and RUS may from time to time communicate to the Borrower. In specifying a Retained Advance Portion with respect to which the Borrower wishes to rescind a Refinancing Election, the Borrower must recite in the written rescission notice both the FFB identifier for such Retained Advance Portion (as set out in the respective advance schedule for such Retained Advance Portion attached hereto) and the RUS account number for such Retained Advance Portion. 16. Late Charges for Late Tenders of Payments Required in connection with Refinancing Elections. If the Borrower makes a Refinancing Election with respect to any Retained Advance Portion, does not rescind such Refinancing Election in accordance paragraph 15 of this Part I, and does not OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 12 Part I tender, before 3:00 p.m. (Washington, D.C., time) on the respective Refinancing Effective Date: (a) to FFB, the applicable amount prescribed by subparagraph (d) of paragraph 9 of this Part I; (b) to FFB, if applicable, the amount prescribed by the last sentence of paragraph 14 of this Part I; and (c) to RUS, if the Borrower makes an Election to Finance the Premium, the amount prescribed by paragraph 10 of this Part I; then interest shall accrue on such unpaid amounts from the Refinancing Effective Date to the actual date on which payment is made, computed in accordance with the principles of paragraph 8 of Part III of this Retained Indebtedness Note. 17. Amount Due on First Payment Date After Effective Date. For each Retained Advance Portion with respect to which the Borrower makes a Refinancing Election, the amount that is due and payable on the first Payment Date to occur after the Refinancing Effective Date for such Retained Advance Portion shall be an amount that is equal to a full quarterly payment, as such quarterly payments shall have been recalculated to take into account the method of payment of principal selected by the Borrower from among the options provided in paragraph 6 of Part III of this Retained Indebtedness Note and the new interest rate and the applicable fee that shall apply to such Retained Advance Portion determined in accordance with the principles of paragraph 4 of Part III of this Retained Indebtedness Note. The Borrower acknowledges that if the Borrower makes a Refinancing Election with respect to any Retained Advance Portion and elects the level debt service method for the payment of the principal of such Retained Advance Portion, the quarterly payment due on the first Payment Date to occur after the Refinancing Effective Date for such Retained Advance Portion may be comprised substantially of principal, since the Borrower shall have paid, on the Refinancing Effective Date for such Retained Advance Portion, the interest accrued on such Retained Advance Portion through such Refinancing Effective Date. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 13 PART IIA TERMS APPLICABLE TO RETAINED OLD FORM NOTE ADVANCE PORTIONS 1. Promise to Pay. FOR VALUE RECEIVED, the Borrower (which term includes any successors or assigns) promises to pay FFB (which term includes any successors or assigns) at the time, in the manner, and with interest at the rates hereinafter provided, the principal amount of the Retained Old Form Note Advance Portions more particularly described in the Retained Old Form Note Advance Portion Schedules attached hereto as Annex 2A. 2. Principal Amount of Retained Old Form Note Advance Portions. The principal amount of each Retained Old Form Note Advance Portion shall be the amount specified on the respective Retained Old Form Note Advance Portion Schedule as being the principal amount of such Retained Old Form Note Advance Portion. 3. Maturity Dates. Each Retained Old Form Note Advance Portion shall mature on the date specified on the respective Retained Old Form Note Advance Portion Schedule as being the maturity date for such Retained Old Form Note Advance Portion (such date being the "Final Maturity Date" for such Retained Old Form Note Advance Portion). 4. Applicable Interest Rate; Computation of Interest. The interest rate applicable to each Retained Old Form Note Advance Portion shall be the rate specified on the respective Retained Old Form Note Advance Portion Schedule as being the interest rate for such Retained Old Form Note Advance Portion. Interest on each Retained Old Form Note Advance Portion shall accrue from December 31, 1996, to the date on which the principal amount of such Retained Old Form Note Advance Portion is paid. Interest on each Retained Old Form Note Advance Portion shall be computed on the basis of (a) actual days elapsed from (but not including) December 31, 1996, to (and including) the date on which payment is due, and (b) a year of 365 days (except in calendar years including February 29, when the basis shall be a 366-day year). OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 14 Part IIA (Retained Old Form Note Advance Portions) 5. Payment Of Interest. The interest accrued on each Retained Old Form Note Advance Portion shall be due and payable on each Payment Date, commencing on the first Payment Date to occur after the effective date of this Retained Indebtedness Note up through and including the Final Maturity Date for such Retained Old Form Note Advance Portion. The amount of accrued interest on each Retained Old Form Note Advance Portion that shall be due and payable on each such Payment Date shall be the amount specified on the respective Retained Old Form Note Advance Portion Schedule as being the amount of accrued interest due and payable on such Payment Date. 6. Payment of Principal. The principal amount of each Retained Old Form Note Advance Portion shall be payable in installments on each Payment Date, commencing on the first Payment Date to occur after the effective date of this Retained Indebtedness Note up through and including the Final Maturity Date for such Retained Old Form Note Advance Portion. The amount of principal of each Retained Old Form Note Advance Portion that shall be due and payable on each such Payment Date shall be the amount of principal specified on the respective Retained Old Form Note Advance Portion Schedule as being the amount of principal due and payable on such Payment Date. 7. Business Days. Whenever any Payment Date or the respective Final Maturity Date for any Retained Old Form Note Advance Portion shall fall on a day which is not a Business Day, the payment that would otherwise be due on such Payment Date or Final Maturity Date shall be due on the first Business Day thereafter. 8. Final Due Date. Notwithstanding anything in this Retained Indebtedness Note to the contrary, all amounts outstanding under this Retained Indebtedness Note on account of each Retained Old Form Note Advance Portion, which amounts remain unpaid as of the Final Maturity Date for such Retained Old Form Note Advance Portion, shall be due and payable on the Final Maturity Date for such Retained Old Form Note Advance Portion. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 15 Part IIA (Retained Old Form Note Advance Portions) 9. Application of Payments. Each payment made on any Retained Old Form Note Advance Portion shall be applied first to the payment of interest and then on account of principal. 10. Prepayments. (a) For so long as the Refinancing Authority shall be in effect, the Borrower may elect to prepay all or any portion of the unpaid principal balance of any Retained Old Form Note Advance Portion in accordance with the terms of the Refinancing Authority, in the manner, at the price, and subject to the limitations as next described: (1) The Borrower shall deliver to FFB written notification of such prepayment election not less than 5 Business Days prior to the proposed date of prepayment and, if less than the total outstanding principal amount of such Retained Old Form Note Advance Portion is to be prepaid, the Borrower shall specify in such notification the amount that is proposed to be prepaid (any amount of any Retained Advance Portion that is less than the total outstanding principal amount of the respective Retained Advance Portion being a "Portion"). (2) The Borrower shall pay to FFB, at the time of prepayment of all or any Portion of any Retained Old Form Note Advance Portion, the outstanding principal amount of such Retained Old Form Note Advance Portion or the Portion thereof to be prepaid, all accrued interest thereon through the date of prepayment, plus the prepayment premium required by the terms of the Refinancing Authority. The amount of each such prepayment premium shall be calculated by the Secretary of the Treasury as of the close of business 2 Business Days prior to the date of the proposed prepayment, using standard calculation methods of the United States Department of the Treasury. (3) If the Borrower elects to prepay a Portion of a Retained Old Form Note Advance Portion, the prepayment price paid shall be applied, first, to interest accrued on such Portion of the Retained Old Form Note Advance Portion to the date of prepayment and, then, to principal installments in the inverse order of maturity. Following the prepayment of a Portion of a Retained Old Form Note Advance Portion, OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 16 Part IIA (Retained Old Form Note Advance Portions) subsequent payments shall continue to be made in the amounts specified in the respective Retained Old Form Note Advance Portion Schedule, and such payments shall be allocated by FFB between outstanding principal and accrued interest, as appropriate, until the entire principal amount of such Retained Old Form Note Advance Portion, and all interest accrued thereon, is paid. (4) Any prepayment of a Portion of a Retained Old Form Note Advance Portion shall, as to the principal amount of such Portion, be subject to a minimum amount equal to $100,000.00 of principal. (b) In the event that the Refinancing Authority shall no longer be in effect, the Borrower may pay all or any Portion of any Retained Old Form Note Advance Portion at any time later than (but not before) 12 years after the end of the year in which the respective Retained Old Form Note Advance Portion was made, upon payment of a prepayment premium determined in accordance with this subparagraph (b), but so long as there shall be any unpaid principal balance, the Borrower shall be obligated to make the quarterly payments in the amounts specified in the respective Retained Old Form Note Advance Portion Schedule. The prepayment premium shall be an amount equal to 100 percent of the amount of interest for 1 year on the unpaid principal balance of the respective Retained Old Form Note Advance Portion or Portion thereof proposed to be prepaid, multiplied by the ratio which the number of Payment Dates between the proposed prepayment date and the Final Maturity Date for the respective Retained Old Form Note Advance Portion bears to the number of Payment Dates between the first prepayment date permitted by this paragraph 10 and such Final Maturity Date. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 17 PART IIB TERMS APPLICABLE TO RETAINED REPRICED OLD FORM NOTE ADVANCE PORTIONS 1. Promise to Pay. FOR VALUE RECEIVED, the Borrower (which term includes any successors or assigns) promises to pay FFB (which term includes any successors or assigns) at the time, in the manner, and with interest at the rates hereinafter provided, the principal amount of the Retained Repriced Old Form Note Advance Portions more particularly described in the Retained Repriced Old Form Note Advance Portion Schedules attached hereto as Annex 2B. 2. Principal Amount of Retained Repriced Old Form Note Advance Portions. The principal amount of each Retained Repriced Old Form Note Advance Portion shall be the amount specified on the respective Retained Repriced Old Form Note Advance Portion Schedule as being the principal amount of such Retained Repriced Old Form Note Advance Portion. 3. Maturity Dates. Each Retained Repriced Old Form Note Advance Portion shall mature on the date specified on the respective Retained Repriced Old Form Note Advance Portion Schedule as being the maturity date for such Retained Repriced Old Form Note Advance Portion (such date being the "Final Maturity Date" for such Retained Repriced Old Form Note Advance Portion). 4. Applicable Interest Rate; Computation of Interest. The interest rate applicable to each Retained Repriced Old Form Note Advance Portion shall be the rate specified on the respective Retained Repriced Old Form Note Advance Portion Schedule as being the interest rate for such Retained Repriced Old Form Note Advance Portion. Subject to paragraph 8 of this Part IIB, interest on each Retained Repriced Old Form Note Advance Portion shall accrue from December 31, 1996, to the date on which the principal amount of such Retained Repriced Old Form Note Advance Portion is paid. Interest on each Retained Repriced Old Form Note Advance Portion shall be computed on the basis of (a) actual days elapsed from (but not including) December 31, 1996, to (and including) the date on which payment is due, and OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 18 Part IIB (Retained Repriced Old Form Note Advance Portions) (b) a year of 365 days (except in calendar years including February 29, when the basis shall be a 366-day year). 5. Payment of Interest. The interest accrued on each Retained Repriced Old Form Note Advance Portion shall be due and payable on each Payment Date, commencing on the first Payment Date to occur after the effective date of this Retained Indebtedness Note up through and including the Final Maturity Date for such Retained Repriced Old Form Note Advance Portion. The amount of accrued interest on each Retained Repriced Old Form Note Advance Portion that shall be due and payable on each such Payment Date shall be the amount specified on the respective Retained Repriced Old Form Note Advance Portion Schedule as being the amount of accrued interest due and payable on such Payment Date. 6. Payment of Principal. The principal amount of each Retained Repriced Old Form Note Advance Portion shall be payable in installments on each Payment Date, commencing on the first Payment Date to occur after the effective date of this Retained Indebtedness Note up through and including the Final Maturity Date for such Retained Repriced Old Form Note Advance Portion. The amount of principal of each Retained Repriced Old Form Note Advance Portion that shall be due and payable on each such Payment Date shall be the amount of principal specified on the respective Retained Repriced Old Form Note Advance Portion Schedule as being the amount of principal due and payable on such Payment Date. 7. Business Days. Whenever any Payment Date or the respective Final Maturity Date for any Retained Repriced Old Form Note Advance Portion shall fall on a day which is not a Business Day, the payment that would otherwise be due on such Payment Date or Final Maturity Date shall be due on the first Business Day thereafter. 8. Late Charges. If any payment of any amount owing under any Retained Repriced Old Form Note Advance Portion is not made when and as due (any such amount being then an "Overdue Amount"), the amount payable shall be such Overdue Amount plus interest thereon (such interest being the "Late Charge") computed in accordance with OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 19 Part IIB (Retained Repriced Old Form Note Advance Portions) this paragraph 8. The Late Charge shall accrue from the scheduled date of payment for the Overdue Amount (taking into account paragraph 7 of this Part IIB) to the actual date on which payment is made. The Late Charge shall be computed on the basis of (a) actual days elapsed from (but not including) the scheduled date of payment for such Overdue Amount (taking into account paragraph 7 of this Part IIB) to (and including) the date on which payment is made, and (b) a year of 365 days (except in calendar years including February 29, when the basis shall be a 366-day year). The Late Charge shall accrue at a rate (the "Late Charge Rate") equal to one and one-half times the rate to be determined by the Secretary of the Treasury taking into consideration the prevailing market yield on the remaining maturity of the most recently auctioned 13-week United States Treasury bills. The initial Late Charge Rate shall be in effect until either the actual date of payment or the next succeeding Payment Date, whichever occurs first. If the Overdue Amount and the amount of accrued Late Charge are not paid on or before the next succeeding Payment Date, then an amount equal to the amount of accrued Late Charge shall be added to the Overdue Amount, and the amount then payable shall be the sum of the Overdue Amount and the amount of accrued Late Charge, plus a Late Charge on such sum accruing at a new Late Charge Rate to be then determined in accordance with the principles of the second preceding sentence. For so long as any overdue Amount remains unpaid, the Late Charge Rate shall be redetermined in accordance with the principles of the third preceding sentence on each succeeding Payment Date and shall be applied to the Overdue Amount and all amounts of accrued Late Charge to the actual date of payment. Nothing in this paragraph shall be construed as permitting or implying that the Borrower may, without the written consent of FFB, modify, extend, alter or affect in any manner whatsoever (except as explicitly provided herein) the right of FFB to receive any and all payments on account of Retained Repriced Old Form Note Advance Portions on the dates specified in this Part IIB. 9. Final Due Date. Notwithstanding anything in this Retained Indebtedness Note to the contrary, all amounts outstanding under this Retained Indebtedness Note on account of each Retained Repriced Old Form Note Advance Portion, which amounts remain unpaid as of the Final Maturity Date for such Retained Repriced Old Form Note Advance Portion, shall be due and payable on the Final Maturity Date for such Retained Repriced Old Form Note Advance Portion. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 20 Part IIB (Retained Repriced Old Form Note Advance Portions) 10. Application of Payments. Each payment made on any Retained Repriced Old Form Note Advance Portion shall be applied first to the payment of any Late Charge payable under paragraph 8 of this Part IIB, then to the payment of any premium payable under paragraph 11 of this Part IIB, then to the payment of accrued interest, then on account of outstanding principal, and then to the payment of the fee payable under paragraph 2 of Part IV of this Retained Indebtedness Note. 11. Prepayments. The Borrower may elect to prepay all or any Portion of any Retained Repriced Old Form Note Advance Portion in the manner, at the price, and subject to the limitations as next described: (a) The Borrower shall deliver to FFB written notification of such prepayment election not less than 5 Business Days prior to the proposed date of prepayment and, if less than the total outstanding principal amount of such Retained Repriced Old Form Note Advance Portion is to be prepaid, the Borrower shall specify in such notification the Portion thereof that is proposed to be prepaid. (b) The Borrower shall pay to FFB, at the time of prepayment of all or any Portion of any Retained Repriced Old Form Note Advance Portion: (1) for so long as the Refinancing Authority shall be in effect, the outstanding principal amount of such Retained Repriced Old Form Note Advance Portion or the Portion thereof to be prepaid, all accrued interest thereon through the date of prepayment, plus the prepayment premium required by the terms of the Refinancing Authority; and (2) in the event that the Refinancing Authority shall no longer be in effect, a price for such Retained Repriced Old Form Note Advance Portion, and all accrued interest thereon through the date of prepayment, that would, if such Retained Repriced Old Form Note Advance Portion were purchased and held to its maturity, produce a yield to the purchaser for the period from the date of purchase to the maturity of such Retained Repriced Old Form Note Advance Portion substantially equal to the interest rate that would be set on a loan from the Secretary of the Treasury to FFB to purchase an obligation having a payment schedule OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 21 Part IIB (Retained Repriced Old Form Note Advance Portions) identical to that of such Retained Repriced Old Form Note Advance Portion; and if the Borrower elects to repurchase a Portion of a Retained Repriced Old Form Note Advance Portion, the Borrower shall pay to FFB a price for such Portion that would equal such Portion's pro rata share of the price for a repurchase of the entire Retained Repriced Old Form Note Advance Portion, calculated in accordance with the principles of this sentence. The amount of each such prepayment premium or prepayment price, as the case may be, shall be calculated by the Secretary of the Treasury as of the close of business 2 Business Days prior to the date of the proposed prepayment, using standard calculation methods of the United States Department of the Treasury. (c) If the Borrower elects to prepay a Portion of a Retained Repriced Old Form Note Advance Portion, the prepayment price paid shall be applied, first, to interest accrued on such Portion of the Retained Repriced Old Form Note Advance Portion to the date of prepayment and, then, to principal installments in the inverse order of maturity. Following the prepayment of a Portion of a Retained Repriced Old Form Note Advance Portion, subsequent payments shall continue to be made in the amounts specified in the respective Retained Repriced Old Form Note Advance Portion Schedule, and such payments shall be allocated by FFB between outstanding principal and accrued interest, as appropriate, until the entire principal amount of such Retained Repriced Old Form Note Advance Portion, and all interest accrued thereon, is paid. (d) Any prepayment of a Portion of a Retained Repriced Old Form Note Advance Portion shall, as to the principal amount of such Portion, be subject to a minimum amount equal to $100,000.00 of principal. (e) The provisions of this paragraph 11 shall apply to all prepayments of any Retained Repriced Old Form Note Advance Portion, regardless whether such prepayments are made pursuant to the Refinancing Authority or otherwise. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 22 PART IIC TERMS APPLICABLE TO RETAINED NEW FORM NOTE ADVANCE PORTIONS 1. Promise to Pay. FOR VALUE RECEIVED, the Borrower (which term includes any successors or assigns) promises to pay FFB (which term includes any successors or assigns) at the time, in the manner, and with interest at the rates hereinafter provided, the principal amount of the Retained New Form Note Advance Portions more particularly described in the Retained New Form Note Advance Portion Schedules attached hereto as Annex 2C. 2. Principal Amount of Retained Now Form Note Advance Portions. The principal amount of each Retained New Form Note Advance Portion shall be the amount specified on the respective Retained New Form Note Advance Portion Schedule as being the principal amount of such Retained New Form Note Advance Portion. 3. Maturity Dates; Maturity Extensions; Early Extensions. Each Retained New Form Note Advance Portion shall mature in accordance with the following provisions: (a) Each Retained New Form Note Advance Portion shall mature on the date specified on the respective Retained New Form Note Advance Portion Schedule as being the maturity date for such Retained New Form Note Advance Portion (such date being the "Maturity Date" for such Retained New Form Note Advance Portion), except as hereinafter provided. (b) For each Retained New Form Note Advance Portion with respect to which the respective Maturity Date (as specified on the respective Retained New Form Note Advance Portion Schedule) occurs prior to the date specified on the respective Retained New Form Note Advance Portion Schedule as being the final maturity date for such Retained New Form Note Advance Portion (such date being the "Final Maturity Date" for such Retained New Form Note Advance Portion), the Borrower may, effective as of such Maturity Date, extend the Maturity Date for such Retained New Form Note Advance Portion to a new Maturity Date (any such extension, or any subsequent extension, being a "Maturity Extension"); provided that the new Maturity Date for each Maturity Extension shall meet the following criteria: OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 23 Part IIC (Retained New Form Note Advance Portions) (1) each Maturity Date for a Maturity Extension of a Retained New Form Note Advance Portion shall be a Payment Date; (2) no Maturity Date for a Maturity Extension of any Retained New Form Note Advance Portion shall be later than the Final Maturity Date for the respective Retained New Form Note Advance Portion; and (3) each Maturity Date for a Maturity Extension of a Retained New Form Note Advance Portion shall be at least 6 months from the effective date of such Maturity Extension; except that, in the case of a Maturity Date for a Maturity Extension of a Retained New Form Note Advance Portion that occurs on the third Payment Date preceding the Final Maturity Date for such Retained New Form Note Advance Portion, any extension of that new Maturity Date shall be to the Final Maturity Date for such Retained New Form Note Advance Portion. (c) For each Retained New Form Note Advance Portion with respect to which the respective Maturity Date occurs prior to the Final Maturity Date for such Retained New Form Note Advance Portion, the Borrower may, prior to such Maturity Date, extend the Maturity Date for such Retained New Form Note Advance Portion to a new Maturity Date, including the Final Maturity Date for such Retained New Form Note Advance Portion (any such extension being an "Early Extension"); provided that the Borrower shall (1) follow the procedures prescribed in subparagraph (a) of paragraph 11 of this Part IIC for prepaying Retained New Form Note Advance Portions, and (2) pay FFB, on the effective date of such Early Extension, an amount equal to the interest accrued on such Retained New Form Note Advance Portion through the effective date of such Early Extension and the premium, if any, that would be payable to FFB under subparagraph (b) of paragraph 11 of this Part IIC if the Borrower were to prepay such Retained New Form Note Advance Portion on the effective date of such Early Extension. If the application of the principles of paragraph 11 of this Part IIC to any Early Extension shall result in a discount on the respective Retained New Form Note Advance Portion, such discount will be applied by FFB in the manner requested in writing by the Borrower, with the written approval of RUS. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 24 Part IIC (Retained New Form Note Advance Portions) (d) Each selection by the Borrower of a new Maturity Date for a Maturity Extension of any Retained New Form Note Advance Portion must be approved by RUS in writing, and notification of each such Maturity Date, together with evidence of RUS approval thereof, must be delivered to FFB not less than 3 Business Days prior to the proposed date for such Maturity Extension in the form prescribed by FFB for such notification. 4. Applicable Interest Rate; Establishment of Interest Rate for Maturity Extensions; Computation of Interest. The interest rate applicable to each Retained New Form Note Advance Portion shall be the rate specified on the respective Retained New Form Note Advance Portion Schedule as being the interest rate for such Retained New Form Note Advance Portion. In the event of a Maturity Extension of any Retained New Form Note Advance Portion, the interest rate for such Retained New Form Note Advance Portion, from and after the effective date of such Maturity Extension, shall be the respective rate that is established by FFB at the time of such Maturity Extension on the basis of the determination made by the Secretary of the Treasury pursuant to section 6(b) (12 U.S.C. ss. 2285(b)) of the Federal Financing Bank Act of 1973, as amended (12 U.S.C. ss. 2281 et seq.) (the "FFB Act"); provided, however, that the shortest maturity used as the basis for any rate determination shall be the remaining maturity of the most recently auctioned 13-week United States Treasury bill. Subject to paragraph 8 of this Part IIC, interest on each Retained New Form Note Advance Portion shall accrue from December 31, 1996, to the date on which the principal amount of such Retained New Form Note Advance Portion is due. Interest on each Retained New Form Note Advance Portion shall be computed on the basis of (a) actual days elapsed from (but not including) December 31, 1996, to (and including) the date on which payment is due, and (b) a year of 365 days (except in calendar years including February 29, when the basis shall be a 366-day year). 5. Payment of Interest. The interest accrued on each Retained New Form Note Advance Portion shall be due and payable on each Payment Date, commencing on the first Payment Date to occur after the effective date of this Retained Indebtedness Note up through and including the Maturity Date for such Retained New Form Note Advance Portion. The amount of accrued interest on each Retained New Form Note Advance Portion that shall be due and payable on each such OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 25 Part IIC (Retained New Form Note Advance Portions) Payment Date shall be the amount specified on the respective Retained New Form Note Advance Portion Schedule as being the amount of accrued interest due and payable on such Payment Date. In the event of a Maturity Extension occurring after the date of this Retained Indebtedness Note with respect to any Retained New Form Note Advance Portion, the accrued interest on each such Maturity Extension shall be due and payable on each Payment Date occurring after the effective date of such Maturity Extension up through and including the Maturity Date for such Maturity Extension. The amount of accrued interest on each Maturity Extension that shall be due and payable on each such Payment Date shall be computed in accordance with the provisions of paragraph 4 of this Part IIC. 6. Payment of Principal; Principal Payment Options. The principal amount of each Retained New Form Note Advance Portion shall be payable in accordance with the following provisions: (a) Principal payments on each Retained New Form Note Advance Portion shall begin on the date specified on the respective Retained New Form Note Advance Portion Schedule as being the date for making the first payment of the principal of such Retained New Form Note Advance Portion (such date being the "First Principal Payment Date" for such Retained New Form Note Advance Portion) and shall be made on each subsequent Payment Date until such Retained New Form Note Advance Portion is paid in full on or before the Final Maturity Date for such Retained New Form Note Advance Portion; except that, for so long as (1) no schedule for the payment of the principal of any Retained New Form Note Advance Portion is specified on any of the Retained New Form Note Advance Portion Schedules, and (2) the Borrower has not selected a method for the payment of the principal of any of the Retained New Form Note Advance Portions from among any of the methods listed in subparagraph (b) of this paragraph 6, the First Principal Payment Date for such Retained New Form Note Advance Portion may be deferred by the mutual agreement of the Borrower, RUS, and FFB; provided that a written amendment to this Note reciting the new and later First Principal Payment Date shall have been executed by the Borrower and approved by RUS and delivered to FFB not less than 3 Business Days prior to the then current First Principal Payment Date. (b) If a schedule for the payment of the principal of any Retained New Form Note Advance Portion is specified on the OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 26 Part IIC (Retained New Form Note Advance Portions) respective Retained New Form Note Advance Portion Schedule, then the amount of principal due and payable on each such Payment Date shall be the amount specified on the respective Retained New Form Note Advance Portion Schedule as being the amount of principal due and payable on such Payment Date. If a schedule for the payment of the principal of any Retained New Form Note Advance Portion is not specified on any of the Retained New Form Note Advance Portion Schedules, then the Borrower must select, subject to RUS approval, a method for the payment of principal when the Borrower first selects a Maturity Date for a Retained New Form Note Advance Portion that occurs on or after the First Principal Payment Date for such Retained New Form Note Advance Portion. The Borrower shall select a method for the payment of principal from among the following options: (1) "equal principal payments" -- the amount of each quarterly principal payment shall substantially equal the amount of every other quarterly principal payment; (2) "graduated principal payments" -- the amount of each of the first one-third (or nearest number of payments that rounds to one-third) of the total number of quarterly principal payments shall substantially equal one-half of the amount of each of the remaining quarterly principal payments; (3) "level debt service" -- the amount of each quarterly payment of principal and accrued interest shall substantially equal the amount of every other quarterly payment. (c) In the event of a Maturity Extension occurring after the date of this Retained Indebtedness Note with respect to any Retained New Form Note Advance Portion not having a schedule for the payment of principal specified on the respective Retained New Form Note Advance Portion Schedule: (1) if the Borrower selects the "equal principal payments" method for the payment of the principal of such Retained New Form Note Advance Portion at the time of such Maturity Extension, then the level quarterly payments of principal, along with accrued interest on the unpaid principal balance, shall be paid on each Payment Date beginning on the First Principal Payment Date and ending on the Final Maturity Date for such Retained New Form Note Advance Portion; OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 27 Part IIC (Retained New Form Note Advance Portions) (2) if the Borrower selects the "graduated principal payments" method for the payment of the principal of such Retained New Form Note Advance Portion at the time of such Maturity Extension, then the graduated quarterly payments of principal, along with accrued interest on the unpaid principal balance, shall be paid on each Payment Date beginning on the First Principal Payment Date and ending on the Final Maturity Date for such Retained New Form Note Advance Portion; and (3) if the Borrower selects the "level debt service" method for the payment of the principal of such Retained New Form Note Advance Portion at the time of such Maturity Extension, then the level quarterly payments of principal and accrued interest (subject to adjustment in the event of any subsequent Maturity Extensions as hereinafter provided) shall be paid on each Payment Date beginning with the First Principal Payment Date and ending on the Final Maturity Date for such Retained New Form Note Advance Portion. (d) In the event of a Maturity Extension occurring after the date of this Retained Indebtedness Note with respect to any Retained New Form Note Advance Portion having a schedule for the payment of principal specified on the respective Retained New Form Note Advance Portion Schedule, or any Retained New Form Note Advance Portion with respect to which the Borrower has previously selected a method for the payment of the principal of such Retained New Form Note Advance Portion: (1) if the principal payment schedule specified was determined using the "equal principal payments" method, or if the method selected for the payment of principal was the "equal principal payments" method, then the level quarterly payments of principal that are due and payable on each Payment Date occurring after the effective date of such Maturity Extension shall be the same as the level quarterly payments of principal that were due and payable on each Payment Date occurring before the effective date of such Maturity Extension; (2) if the principal payment schedule specified was determined using the "graduated principal payments" method, or if the method selected for the payment of principal was the "graduated principal payments" method, then the graduated quarterly payments of principal that are due and OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 28 Part IIC (Retained New Form Note Advance Portions) payable on each Payment Date occurring after the effective date of such Maturity Extension shall be determined with reference to the date on which the first payment of principal was due and payable by the Borrower under the terms of the respective New Form Note, and not with reference to first Payment Date to occur after the effective date of the Maturity Extension; and (3) if the principal payment schedule specified was determined using the "level debt service" method, or if the method selected for the payment of principal was the "level debt service" method, then the level quarterly payments of principal and accrued interest that are due and payable on each Payment Date occurring after the effective date such Maturity Extension shall be newly determined taking into account the new interest rate that is applicable to such Retained New Form Note Advance Portion from and after the effective date of such Maturity Extension. (e) If a schedule for the payment of the principal of any Retained New Form Note Advance Portion is specified on the respective Retained New Form Note Advance Portion Schedule, the Borrower may not change such principal payment schedule, except as hereinafter provided. In the event of a Maturity Extension occurring after the date of this Retained Indebtedness Note with respect to any Retained New Form Note Advance Portion not having a schedule for the payment of principal through the Maturity Date thereof specified on the respective Retained New Form Note Advance Portion Schedule, and the Borrower selects a method for the payment of principal from among the methods listed in subparagraph (b) of this paragraph 6, the Borrower may not change the resulting principal payment schedule, except as hereinafter provided. The Borrower may change the method of payment of the principal of any Retained New Form Note Advance Portion having a Maturity Date that occurs prior to the Final Maturity Date for such Retained New Form Note Advance Portion from either the "equal principal payments" method or the "graduated principal payments" method to the "level debt service" method at the time, if ever, of a Maturity Extension of such Retained New Form Note Advance Portion, effective on the date of such Maturity Extension. After the Borrower selects the Final Maturity Date as being the Maturity Date for a Maturity Extension of any Retained New Form Note Advance Portion, no changes in the resulting principal payment schedule may be made and no more Maturity Extensions may occur for such Retained New Form Note Advance Portion. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 29 Part IIC (Retained New Form Note Advance Portions) (f) The entire unpaid principal amount of any Retained New Form Note Advance Portion having a Maturity Date that occurs prior to the Final Maturity Date for such Retained New Form Note Advance Portion shall be due and payable on such Maturity Date, subject to Maturity Extensions in accordance with paragraph 3 of this Part IIC. In the event of a Maturity Extension of any Retained New Form Note Advance Portion having a Maturity Date that occurs on or after the First Principal Payment Date but prior to the Final Maturity Date for such Retained New Form Note Advance Portion, the principal payment that is due according to the resulting principal payment schedule shall nevertheless be due and payable on the Maturity Date, notwithstanding such Maturity Extension. (g) Notwithstanding which of the 3 methods listed in subparagraph (b) of this paragraph 6 is selected for the payment of principal of any Retained New Form Note Advance Portion, the aggregate of all quarterly payments on such Retained New Form Note Advance Portion shall be such as will pay the entire principal amount of such Retained New Form Note Advance Portion, and all interest accrued thereon, on or before the Final Maturity Date for such Retained New Form Note Advance Portion. 7. Business Days. Whenever any Payment Date or the Maturity Date for any Retained New Form Note Advance Portion shall fall on a day which is not a Business Day, the payment that would otherwise be due on such Payment Date or Maturity Date shall be due on the first Business Day thereafter. In the case of a Payment Date for a Maturity Extension of any Retained New Form Note Advance Portion falling on a day other than a Business Day, the extension of time for making the payment that would otherwise be due on such Payment Date shall (a) be taken into account in establishing the interest rate for the respective Maturity Extension of the Retained New Form Note Advance Portion, and (b) be included in computing interest in connection with such payment and excluded in connection with the next payment. In the case of the Maturity Date for a maturity Extension of any Retained New Form Note Advance Portion falling on a day other than a Business Day, the extension of time for making the payment that would otherwise be due on such Maturity Date shall (a) be taken into account in establishing the interest rate for the respective Maturity Extension of the Retained New Form Note Advance Portion, and (b) OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 30 Part IIC (Retained New Form Note Advance Portions) be included in computing interest in connection with such payment. 8. Late Charges. If any payment of any amount owing under any Retained New Form Note Advance Portion is not made when and as due (any such amount being then an "Overdue Amount"), the amount payable shall be such Overdue Amount plus interest thereon (such interest being the "Late Charge") computed in accordance with this paragraph 8. The Late Charge shall accrue from the scheduled date of payment for the Overdue Amount (taking into account paragraph 7 of this Part IIC) to the actual date on which payment is made. The Late Charge shall be computed on the basis of (a) actual days elapsed from (but not including) the scheduled date of payment for such Overdue Amount (taking into account paragraph 7 of this Part IIC) to (and including) the date on which payment is made, and (b) a year of 365 days (except in calendar years including February 29, when the basis shall be a 366-day year). The Late Charge shall accrue at a rate (the "Late Charge Rate") equal to one and one-half times the rate to be determined by the Secretary of the Treasury taking into consideration the prevailing market yield on the remaining maturity of the most recently auctioned 13-week United States Treasury bills. The initial Late Charge Rate shall be in effect until either the actual date of payment or the next succeeding Payment Date, whichever occurs first. If the Overdue Amount and the amount of accrued Late Charge are not paid on or before the next succeeding Payment Date, then an amount equal to the amount of accrued Late Charge shall be added to the Overdue Amount, and the amount then payable shall be the sum of the Overdue Amount and the amount of accrued Late Charge, plus a Late Charge on such sum accruing at a new Late Charge Rate to be then determined in accordance with the principles of the second preceding sentence. For so long as any Overdue Amount remains unpaid, the Late Charge Rate shall be redetermined in accordance with the principles of the third preceding sentence on each succeeding Payment Date and shall be applied to the Overdue Amount and all amounts of accrued Late Charge to the actual date of payment. Nothing in this paragraph shall be construed as permitting or implying that the Borrower may, without the written consent of FFB, modify, extend, alter or affect in any manner whatsoever (except as explicitly provided herein) the right of FFB to receive any and all payments on account of Retained New Form Note Advance Portions on the dates specified in this Part IIC. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 31 Part IIC (Retained New Form Note Advance Portions) 9. Final Due Date. Notwithstanding anything in this Retained Indebtedness Note to the contrary, all amounts outstanding under this Retained Indebtedness Note on account of each Retained New Form Note Advance Portion, which amounts remain unpaid as of the Final Maturity Date for such Retained New Form Note Advance Portion, shall be due and payable on the Final Maturity Date for such Retained New Form Note Advance Portion. 10. Application of Payments. Each payment made on any Retained New Form Note Advance Portion shall be applied first to the payment of any Late Charge payable under paragraph 8 of this Part IIC, then to the payment of any premium payable under paragraph 11 of this Part IIC, then to the payment of accrued interest, then on account of outstanding principal, and then to the payment of the fee payable under paragraph 2 of Part IV of this Retained Indebtedness Note. 11. Prepayments. The Borrower may elect to prepay all or any Portion of the unpaid principal balance of any Retained New Form Note Advance Portion in the manner, at the price, and subject to the limitations as next described: (a) The Borrower shall deliver to FFB written notification of such prepayment election not less than 5 Business Days prior to the proposed date of prepayment and, if less than the total outstanding principal amount of such Retained New Form Note Advance Portion is to be prepaid, the Borrower shall specify in such notification the Portion thereof that is proposed to be prepaid. (b) The Borrower shall pay to FFB, at the time of prepayment of all or any Portion of any Retained New Form Note Advance Portion: (1) for so long as the Refinancing Authority shall be in effect, the outstanding principal amount of such Retained New Form Note Advance Portion or the Portion thereof to be prepaid, all accrued interest thereon through the date of prepayment, plus the prepayment premium required by the terms of the Refinancing Authority; and OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 32 Part IIC (Retained New Form Note Advance Portions) (2) in the event that the Refinancing Authority shall no longer be in effect, a price for such Retained New Form Note Advance Portion, and all accrued interest thereon through the date of prepayment, that would, if such Retained New Form Note Advance Portion were purchased and held to its maturity, produce a yield to the purchaser for the period from the date of purchase to the maturity of such Retained New Form Note Advance Portion substantially equal to the interest rate that would be set on a loan from the Secretary of the Treasury to FFB to purchase an obligation having a payment schedule identical to that of such Retained New Form Note Advance Portion; and if the Borrower elects to repurchase a Portion of a Retained New Form Note Advance Portion, the Borrower shall pay to FFB a price for such Portion that would equal such Portion's pro rata share of the price for a repurchase of the entire Retained New Form Note Advance Portion, calculated in accordance with the principles of this sentence. The amount of each such prepayment premium or prepayment price, as the case may be, shall be calculated by the Secretary of the Treasury as of the close of business 2 Business Days prior to the date of the proposed prepayment, using standard calculation methods of the United States Department of the Treasury. (c) If the Borrower elects to prepay a Portion of a Retained New Form Note Advance Portion, the prepayment price paid shall be applied, first, to interest accrued on such Portion of the Retained New Form Note Advance Portion to the date of prepayment and, then, to principal installments in the inverse order of maturity. Following the prepayment of a Portion of a Retained New Form Note Advance Portion, subsequent payments shall continue to be made in the amounts specified in the respective Retained New Form Note Advance Portion Schedule, if a schedule for the payment of principal is specified on such Retained New Form Note Advance Portion Schedule, or, if not, then in accordance with the payment schedule resulting from the method for the payment of principal selected under subparagraph (b) of paragraph 6 of this Part IIC, until the entire principal amount of such Retained New Form Note Advance Portion, and all accrued interest thereon, is paid; except that, with respect to any Retained New Form Note Advance Portion for which the Borrower has selected the "level debt service" method under subparagraph (b) of paragraph (6) of this Part IIC, payments shall continue to be made in accordance with the level debt service payment schedule that resulted when the Borrower first selected the level debt OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 33 Part IIC (Retained New Form Note Advance Portions) service method, and such payments shall be allocated by FFB between outstanding principal and accrued interest, as appropriate, until the entire principal amount of such Retained New Form Note Advance Portion, and all interest accrued thereon, is paid. (d) Any prepayment of a Portion of a Retained New Form Note Advance Portion shall, as to the principal amount of such Portion, be subject to a minimum amount equal to $100,000.00 of principal. (e) The provisions of this paragraph 11 shall apply to all prepayments of any Retained New Form Note Advance Portion, regardless whether such prepayments are made pursuant to the refinancing Authority or otherwise. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 34 PART IID TERMS APPLICABLE TO RETAINED REFINANCED REFINANCING NOTE ADVANCE PORTIONS 1. Promise to Pay. FOR VALUE RECEIVED, the Borrower (which term includes any successors or assigns) promises to pay FFB (which term includes any successors or assigns) at the time, in the manner, and with interest at the rates hereinafter provided, the principal amount of the Retained Refinanced Refinancing Note Advance Portions more particularly described in the Retained Refinanced Refinancing Note Advance Portion Schedules attached hereto as Annex 2D. 2. Principal Amount of Retained Refinanced Refinancing Note Advance Portions. The principal amount of each Retained Refinanced Refinancing Note Advance Portion shall be the amount specified on the respective Retained Refinanced Refinancing Note Advance Portion Schedule as being the principal amount of such Retained Refinanced Refinancing Note Advance Portion. 3. Maturity Dates; Maturity Extensions; Early Extensions. Each Retained Refinanced Refinancing Note Advance Portion shall mature in accordance with the following provisions: (a) Each Retained Refinance Refinancing Note Advance Portion shall mature on the date specified on the respective Retained Refinanced Refinancing Note Advance Portion Schedule as being the maturity date for such Retained Refinanced Refinancing Note Advance Portion (such date being the "Maturity Date" for such Retained Refinanced Refinancing Note Advance Portion), except as hereinafter provided. (b) For each Retained Refinanced Refinancing Note Advance Portion with respect to which the respective Maturity Date (as specified on the respective Retained Refinanced Refinancing Note Advance Portion Schedule) occurs prior to the date specified on the respective Retained Refinanced Refinancing Note Advance Portion Schedule as being the final maturity date for such Retained Refinanced Refinancing Note Advance Portion (such date being the "Final Maturity Date" for such Retained Refinanced Refinancing Note Advance Portion), the Borrower may, effective as of such Maturity Date, extend the Maturity Date for such Retained OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 35 Part IID (Retained Refinanced Refinancing Note Advance Portions) Refinanced Refinancing Note Advance Portion to a new Maturity Date (any such extension, or any subsequent extension, being a "Maturity Extension"); provided that the new Maturity Date for each Maturity Extension shall meet the following criteria: (1) each Maturity Date for a Maturity Extension of a Retained Refinanced Refinancing Note Advance Portion shall be a Payment Date; (2) no Maturity Date for a Maturity Extension of any Retained Refinanced Refinancing Note Advance Portion shall be later than the Final Maturity Date for the respective Retained Refinanced Refinancing Note Advance Portion; and (3) each Maturity Date for a Maturity Extension of a Retained Refinanced Refinancing Note Advance Portion shall be at least one calendar quarter from the effective date of such Maturity Extension. (c) For each Retained Refinanced Refinancing Note Advance Portion with respect to which the respective Maturity Date occurs prior to the Final Maturity Date for such Retained Refinanced Refinancing Note Advance Portion, the Borrower may, prior to such Maturity Date, extend the Maturity Date for such Retained Refinanced Refinancing Note Advance Portion to a new Maturity Date, including the Final Maturity Date for such Retained Refinanced Refinancing Note Advance Portion (any such extension being an "Early Extension"); provided that the Borrower shall (1) follow the procedures prescribed in subparagraph (a) of paragraph 11 of this Part IID for prepaying Retained Refinanced Refinancing Note Advance Portions, and (2) pay FFB, on the effective date of such Early Extension, an amount equal to the interest accrued on such Retained Refinanced Refinancing Note Advance Portion through the effective date of such Early Extension and the premium, if any, that would be payable to FFB under subparagraph (b) of paragraph 11 of this Part IID if the Borrower were to prepay such Retained Refinanced Refinancing Note Advance Portion on the effective date of such Early Extension. If the application of the principles of paragraph 11 of this Part IID to any Early Extension shall result in a discount on the respective Retained Refinanced Refinancing Note Advance Portion, such discount will be applied by FFB in the manner requested in writing by the Borrower, with the written approval of RUS. (d) Each selection by the Borrower of a new Maturity Date for a Maturity Extension of any Retained Refinanced Refinancing OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 36 Part IID (Retained Refinanced Refinancing Note Advance Portions) Note Advance Portion must be approved by RUS in writing, and notification of each such Maturity Date, together with evidence of RUS approval thereof, must be delivered to FFB not less than 3 Business Days prior to the proposed date for such Maturity Extension in the form prescribed by FFB for such notification. 4. Applicable Interest Rate; Establishment of Interest Rate for Maturity Extensions; Computation of Interest; Applicable Fee. (a) The interest rate applicable to each Retained Refinanced Refinancing Note Advance Portion shall be the rate specified on the respective Retained Refinanced Refinancing Note Advance Portion Schedule as being the interest rate for such Retained Refinanced Refinancing Note Advance Portion. In the event of a Maturity Extension of any Retained Refinanced Refinancing Note Advance Portion, the interest rate for such Retained Refinanced Refinancing Note Advance Portion, from and after the effective date of such Maturity Extension, shall be the respective rate that is established by FFB at the time of such Maturity Extension on the basis of the determination made by the Secretary of the Treasury pursuant to section 6(b) of the FFB Act (12 U.S.C. ss. 2285(b)); provided, however, that the shortest maturity used as the basis for any rate determination shall be the remaining maturity of the most recently auctioned 13-week United States Treasury bill. Subject to paragraph 8 of this Part IID, interest on each Retained Refinanced Refinancing Note Advance Portion shall accrue from December 31, 1996, to the date on which the principal amount of such Retained Refinanced Refinancing Note Advance Portion is due. Interest on each Retained Refinanced Refinancing Note Advance Portion shall be computed on the basis of (a) actual days elapsed from (but not including) December 31, 1996, to (and including) the date on which payment is due, and (b) a year of 365 days (except in calendar years including February 29, when the basis shall be a 366-day year). (b) In addition to the interest that accrues at a rate determined in accordance with the preceding subparagraph, a fee to cover all administrative expenses of FFB and to provide for the accumulation by FFB of reasonable contingency reserves, assessed by FFB pursuant to section 6(c) of the FFB Act (12 U.S.C. ss. 2285(c)), shall accrue on each Retained Refinanced Refinancing Note Advance Portion from December 31, 1996, to the date on which the principal amount of such Retained Refinanced Refinancing Note Advance Portion is due. The fee for each OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 37 Part IID (Retained Refinanced Refinancing Note Advance Portions) Retained Refinanced Refinancing Note Advance Portion shall be equal to one-eighth of one percent (0.125%) per annum of the unpaid principal balance of such Retained Refinanced Refinancing Note Advance Portion. The fee on each Retained Refinanced Refinancing Note Advance Portion shall be computed on the basis of (1) actual days elapsed from (but not including) December 31, 1996, to (and including) the date on which payment is due, and (2) a year of 365 days (except in calendar years including February 29, when the basis shall be a 366-day year). 5. Payment of interest and Fee. The interest accrued on each Retained Refinanced Refinancing Note Advance Portion and the applicable fee shall be due and payable on each Payment Date, commencing on the first Payment Date to occur after the effective date of this Retained Indebtedness Note up through and including the Maturity Date for such Retained Refinanced Refinancing Note Advance Portion. The amount of accrued interest on each Retained Refinanced Refinancing Note Advance Portion and the amount of the applicable fee that shall be due and payable on each such Payment Date shall be the respective amounts specified on the respective Retained Refinanced Refinancing Note Advance Portion Schedule as being the amount of accrued interest and the amount of the applicable fee due and payable on such Payment Date. In the event of a Maturity Extension occurring after the date of this Retained Indebtedness Note with respect to any Retained Refinanced Refinancing Note Advance Portion, the accrued interest on each such Maturity Extension and the applicable fee shall be due and payable on each Payment Date occurring after the effective date of such Maturity Extension up through and including the Maturity Date for such Maturity Extension. The amount of accrued interest on each Maturity Extension and the amount of the applicable fee that shall be due and payable on each such Payment Date shall be computed in accordance with the provisions of paragraph 4 of this Part IID. 6. Payment of Principal; Principal Payment Options. The principal amount of each Retained Refinanced Refinancing Note Advance Portion shall be payable in accordance with the following provisions: (a) Principal payments on each Retained Refinanced Refinancing Note Advance Portion shall begin on the date specified on the respective Retained Refinanced Refinancing Note OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 38 Part IID (Retained Refinanced Refinancing Note Advance Portions) Advance Portion Schedule as being the date for making the first payment of the principal of such Retained Refinanced Refinancing Note Advance Portion (such date being the "First Principal Payment Date" for such Retained Refinanced Refinancing Note Advance Portion) and shall be made on each subsequent Payment Date until such Retained Refinanced Refinancing Note Advance Portion is paid in full on or before the Final Maturity Date for such Retained Refinanced Refinancing Note Advance Portion; except that, for so long as (1) no schedule for the payment of the principal of any Retained Refinanced Refinancing Note Advance Portion is specified on any of the Retained Refinanced Refinancing Note Advance Portion Schedules, and (2) the Borrower has not selected a method for the payment of the principal of any of the Retained Refinanced Refinancing Note Advance Portions from among any of the methods listed in subparagraph (b) of this paragraph 6, the First Principal Payment Date for such Retained Refinanced Refinancing Note Advance Portion may be deferred by the mutual agreement of the Borrower, RUS, and FFB; provided that a written amendment to this Note reciting the new and later First Principal Payment Date shall have been executed by the Borrower and approved by RUS and delivered to FFB not less than 3 Business Days prior to the then current First Principal Payment Date. (b) If a schedule for the payment of the principal of any Retained Refinanced Refinancing Note Advance Portion is specified on the respective Retained Refinanced Refinancing Note Advance Portion Schedule, then the amount of principal due and payable on each such Payment Date shall be the amount specified on the respective Retained Refinanced Refinancing Note Advance Portion Schedule as being the amount of principal due and payable on such Payment Date. If a schedule for the payment of the principal of any Retained Refinanced Refinancing Note Advance Portion is not specified on any of the Retained Refinanced Refinancing Note Advance Portion Schedules, then the Borrower must select, subject to RUS approval, a method for the payment of principal when the Borrower first selects a Maturity Date for a Retained Refinanced Refinancing Note Advance Portion that occurs on or after the First Principal Payment Date for such Retained Refinanced Refinancing Note Advance Portion. The Borrower shall select a method for the payment of principal from among the following options: (1) "equal principal payments" -- the amount of each quarterly principal payment shall substantially equal the amount of every other quarterly principal payment; OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 39 Part IID (Retained Refinanced Refinancing Note Advance Portions) (2) "graduated principal payments" -- the amount of each of the first one-third (or nearest number of payments that rounds to one-third) of the total number of quarterly principal payments shall substantially equal one-half of the amount of each of the remaining quarterly principal payments; (3) "level debt service" -- the amount of each quarterly payment of principal, accrued interest, and the applicable fee shall substantially equal the amount of every other quarterly payment. (c) In the event of a Maturity Extension occurring after the date of this Retained Indebtedness Note with respect to any Retained Refinanced Refinancing Note Advance Portion not having a schedule for the payment of principal specified on the respective Retained Refinanced Refinancing Note Advance Portion Schedule: (1) if the Borrower selects the "equal principal payments" method for the payment of the principal of such Retained Refinanced Refinancing Note Advance Portion at the time of such Maturity Extension, then the level quarterly payments of principal, along with accrued interest on the unpaid principal balance and the applicable fee, shall be paid on each Payment Date beginning on the First Principal Payment Date and ending on the Final Maturity Date for such Retained Refinanced Refinancing Note Advance Portion; (2) if the Borrower selects the "graduated principal payments" method for the payment of the principal of such Retained Refinanced Refinancing Note Advance Portion at the time of such Maturity Extension, then the graduated quarterly payments of principal, along with accrued interest on the unpaid principal balance and the applicable fee, shall be paid on each Payment Date beginning on the First Principal Payment Date and ending on the Final Maturity Date for such Retained Refinanced Refinancing Note Advance Portion; and (3) if the Borrower selects the "level debt service" method for the payment of the principal of such Retained Refinanced Refinancing Note Advance Portion at the time of such Maturity Extension, then the level quarterly payments of principal, accrued interest, and the applicable fee (subject to adjustment in the event of any subsequent Maturity Extensions as hereinafter provided) shall be paid OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 40 Part IID (Retained Refinanced Refinancing Note Advance Portions) on each Payment Date beginning with the First Principal Payment Date and ending on the Final Maturity Date for such Retained Refinanced Refinancing Note Advance Portion. (d) In the event of a Maturity Extension occurring after the date of this Retained Indebtedness Note with respect to any Retained Refinanced Refinancing Note Advance Portion having a schedule for the payment of principal specified on the respective Retained Refinanced Refinancing Note Advance Portion Schedule, or any Retained Refinanced Refinancing Note Advance Portion with respect to which the Borrower has previously selected a method for the payment of the principal of such Retained Refinanced Refinancing Note Advance Portion: (1) if the principal payment schedule specified was determined using the "equal principal payments" method, or if the method selected for the payment of principal was the "equal principal payments" method, then the level quarterly payments of principal that are due and payable on each Payment Date occurring after the effective date of such Maturity Extension shall be the same as the level quarterly payments of principal that were due and payable on each Payment Date occurring before the effective date of such Maturity Extension; (2) if the principal payment schedule specified was determined using the "graduated principal payments" method, or if the method selected for the payment of principal was the "graduated principal payments" method, then the graduated quarterly payments of principal that are due and payable on each Payment Date occurring after the effective date of such Maturity Extension shall be determined with reference to the date on which the first payment of principal was due and payable by the Borrower under the terms of the respective Refinanced Refinancing Note, and not with reference to first Payment Date to occur after the effective date of the Maturity Extension; and (3) if the principal payment schedule specified was determined using the "level debt service" method, or if the method selected for the payment of principal was the "level debt service" method, then the level quarterly payments of principal, accrued interest, and the applicable fee that are due and payable on each Payment Date occurring after the effective date such Maturity Extension shall be newly determined taking into account the new interest rate that is OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 41 Part IID (Retained Refinanced Refinancing Note Advance Portions) applicable to such Retained Refinanced Refinancing Note Advance Portion from and after the effective date of such Maturity Extension. (e) If a schedule for the payment of the principal of any Retained Refinanced Refinancing Note Advance Portion is specified on the respective Retained Refinanced Refinancing Note Advance Portion Schedule, the Borrower may not change such principal payment schedule, except as hereinafter provided. In the event of a Maturity Extension occurring after the date of this Retained Indebtedness Note with respect to any Retained Refinanced Refinancing Note Advance Portion not having a schedule for the payment of principal through the Maturity Date thereof specified on the respective Retained Refinanced Refinancing Note Advance Portion Schedule, and the Borrower selects a method for the payment of principal from among the methods listed in subparagraph (b) of this paragraph 6, the Borrower may not change the resulting principal payment schedule, except as hereinafter provided. The Borrower may change the method of payment of the principal of any Retained Refinanced Refinancing Note Advance Portion having a Maturity Date that occurs prior to the Final Maturity Date for such Retained Refinanced Refinancing Note Advance Portion from either the "equal principal payments" method or the "graduated principal payments" method to the "level debt service" method at the time, if ever, of a Maturity Extension of such Retained Refinanced Refinancing Note Advance Portion, effective on the date of such Maturity Extension. After the Borrower selects the Final Maturity Date as being the Maturity Date for a Maturity Extension of any Retained Refinanced Refinancing Note Advance Portion, no changes in the resulting principal payment schedule may be made and no more Maturity Extensions may occur for Such Retained Refinanced Refinancing Note Advance Portion. (f) The entire unpaid principal amount of any Retained Refinanced Refinancing Note Advance Portion having a Maturity Date that occurs prior to the Final Maturity Date for such Retained Refinanced Refinancing Note Advance Portion shall be due and payable on such Maturity Date, subject to Maturity Extensions in accordance with paragraph 3 of this Part IID. In the event of a Maturity Extension of any Retained Refinanced Refinancing Note Advance Portion having a Maturity Date that occurs on or after the First Principal Payment Date but prior to the Final Maturity Date for such Retained Refinanced Refinancing Note Advance Portion, the principal payment that is due according to the resulting principal payment schedule shall nevertheless be due OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 42 Part IID (Retained Refinanced Refinancing Note Advance Portions) and payable on the Maturity Date, notwithstanding such Maturity Extension. (g) Notwithstanding which of the 3 methods listed in subparagraph (b) of this paragraph 6 is selected for the payment of principal of any Retained Refinanced Refinancing Note Advance Portion, the aggregate of all quarterly payments on such Retained Refinanced Refinancing Note Advance Portion shall be such as will pay the entire principal amount of such Retained Refinanced Refinancing Note Advance Portion, and all interest accrued thereon and the applicable fee, on or before the Final Maturity Date for such Retained Refinanced Refinancing Note Advance Portion. 7. Business Days. Whenever any Payment Date or the Maturity Date for any Retained Refinanced Refinancing Note Advance Portion shall fall on a day which is not a Business Day, the payment that would otherwise be due on such Payment Date or Maturity Date shall be due on the first Business Day thereafter. In the case of a Payment Date for a Maturity Extension of any Retained Refinanced Refinancing Note Advance Portion falling on a day other than a Business Day, the extension of time for making the payment that would otherwise be due on such Payment Date shall (a) be taken into account in establishing the interest rate for the respective Maturity Extension of the Retained Refinanced Refinancing Note Advance Portion, and (b) be included in computing interest and the applicable fee in connection with such payment and excluded in connection with the next payment. In the case of the Maturity Date for a Maturity Extension of any Retained Refinanced Refinancing Note Advance Portion falling on a day other than a Business Day, the extension of time for making the payment that would otherwise be due on such Maturity Date shall (a) be taken into account in establishing the interest rate and the applicable fee for the respective Maturity Extension of the Retained Refinanced Refinancing Note Advance portion, and (b) be included in computing interest in connection with such payment. 8. Late Charges. If any payment of any amount owing under any Retained Refinanced Refinancing Note Advance Portion is not made when and as due (any such amount being then an "Overdue Amount"), the amount payable shall be such Overdue Amount plus interest thereon (such interest being the "Late Charge") computed in accordance OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 43 Part IID (Retained Refinanced Refinancing Note Advance Portions) with this paragraph 8. The Late Charge shall accrue from the scheduled date of payment for the Overdue Amount (taking into account paragraph 7 of this Part IID) to the actual date on which payment is made. The Late Charge shall be computed on the basis of (a) actual days elapsed from (but not including) the scheduled date of payment for such Overdue Amount (taking into account paragraph 7 of this Part IID) to (and including) the date on which payment is made, and (b) a year of 365 days (except in calendar years including February 29, when the basis shall be a 366-day year). The Late Charge shall accrue at a rate (the "Late Charge Rate") equal to one and one-half times the rate to be determined by the Secretary of the Treasury taking into consideration the prevailing market yield on the remaining maturity of the most recently auctioned 13-week United States Treasury bills. The initial Late Charge Rate shall be in effect until either the actual date of payment or the next succeeding Payment Date, whichever occurs first. If the Overdue Amount and the amount of accrued Late Charge are not paid on or before the next succeeding Payment Date, then an amount equal to the amount of accrued Late Charge shall be added to the Overdue Amount, and the amount then payable shall be the sum of the Overdue Amount and the amount of accrued Late Charge, plus a Late Charge on such sum accruing at a new Late Charge Rate to be then determined in accordance with the principles of the second preceding sentence. For so long as any Overdue Amount remains unpaid, the Late Charge Rate shall be redetermined in accordance with the principles of the third preceding sentence on each succeeding Payment Date and shall be applied to the Overdue Amount and all amounts of accrued Late Charge to the actual date of payment. Nothing in this paragraph shall be construed as permitting or implying that the Borrower may, without the written consent of FFB, modify, extend, alter or affect in any manner whatsoever (except as explicitly provided herein) the right of FFB to receive any and all payments on account of Retained Refinanced Refinancing Note Advance Portions on the dates specified in this Part IID. 9. Final Due Date. Notwithstanding anything in this Retained Indebtedness Note to the contrary, all amounts outstanding under this Retained Indebtedness Note on account of each Retained Refinanced Refinancing Note Advance Portion, which amounts remain unpaid as of the Final Maturity Date for such Retained Refinanced Refinancing Note Advance Portion, shall be due and payable on the Final Maturity Date for such Retained Refinanced Refinancing Note Advance Portion. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 44 Part IID (Retained Refinanced Refinancing Note Advance Portions) 10. Application of Payments. Each payment made on any Retained Refinanced Refinancing Note Advance Portion shall be applied first to the payment of any Late Charge payable under paragraph 8 of this Part IID, then to the payment of any premium payable under paragraph 11 of this Part IID, then to the payment of accrued interest and the amount of the applicable fee payable under paragraph 4 of this Part IID, then on account of outstanding principal, and then to the payment of the fee payable under paragraph 2 of Part IV of this Retained Indebtedness Note. 11. Prepayments. The Borrower may elect to prepay all or any Portion of the unpaid principal balance of any Retained Refinanced Refinancing Note Advance Portion in the manner, at the price, and subject to the limitations as next described: (a) The Borrower shall deliver to FFB written notification of such prepayment election not less than 5 Business Days prior to the proposed date of prepayment and, if less than the total outstanding principal amount of such Retained Refinanced Refinancing Note Advance Portion is to be prepaid, the Borrower shall specify in such notification the Portion thereof that is proposed to be prepaid. (b) The Borrower shall pay to FFB, at the time of prepayment of all or any Portion of any Retained Refinanced Refinancing Note Advance Portion: (1) for so long as the Refinancing Authority shall be in effect, the outstanding principal amount of the Retained Refinanced Refinancing Note Advance Portion or the Portion thereof to be prepaid, all accrued interest thereon through the date of prepayment, the applicable fee through the date of prepayment, plus the prepayment premium required by the terms of the Refinancing Authority; and (2) in the event that the Refinancing Authority shall no longer be in effect, a price for such Retained Refinanced Refinancing Note Advance Portion, and all accrued interest thereon through the date of prepayment and the applicable fee through the date of prepayment, that would, if such Retained Refinanced Refinancing Note Advance Portion were purchased and held to its maturity, produce a yield to the OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 45 Part IID (Retained Refinanced Refinancing Note Advance Portions) purchaser for the period from the date of purchase to the maturity of such Retained Refinanced Refinancing Note Advance Portion substantially equal to the interest rate that would be set on a loan from the Secretary of the Treasury to FFB to purchase an obligation having a payment schedule identical to that of such Retained Refinanced Refinancing Note Advance Portion; and if the Borrower elects to repurchase a Portion of a Retained Refinanced Refinancing Note Advance Portion, the Borrower shall pay to FFB a price for such Portion that would equal such Portion's pro rata share of the price for a repurchase of the entire Retained Refinanced Refinancing Note Advance Portion, calculated in accordance with the principles of this sentence. The amount of each such prepayment premium or prepayment price, as the case may be, shall be calculated by the Secretary of the Treasury as of the close of business 2 Business Days prior to the date of the proposed prepayment, using standard calculation methods of the United States Department of the Treasury. (c) If the Borrower elects to prepay a Portion of a Retained Refinanced Refinancing Note Advance Portion, the prepayment price paid shall be applied, first, to accrued interest on such Portion of the Retained Refinanced Refinancing Note Advance Portion to the date of prepayment and the applicable fee to the date of prepayment and, then, to principal installments in the inverse order of maturity. Following the prepayment of a Portion of a Retained Refinanced Refinancing Note Advance Portion, subsequent payments shall continue to be made in the amounts specified in the respective Retained Refinanced Refinancing Note Advance Portion Schedule, if a schedule for the payment of principal is specified on such Retained Refinanced Refinancing Note Advance Portion Schedule, or, if not, then in accordance with the payment schedule resulting from the method for the payment of principal selected under subparagraph (b) of paragraph 6 of this Part IID, until the entire principal amount of the Retained Refinanced Refinancing Note Advance Portion, and all interest accrued thereon and the applicable fee, is paid; except that, with respect to any Retained Refinanced Refinancing Note Advance Portion for which the Borrower has selected the "level debt service" method under subparagraph (b) of paragraph 6 of this Part IID, payments shall continue to be made in accordance with the level debt service payment schedule that resulted when the Borrower first selected the level debt service method, and such payments shall be allocated by FFB among outstanding principal, accrued interest, and the applicable fee, OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 46 Part IID (Retained Refinanced Refinancing Note Advance Portions) as appropriate, until the entire principal amount of such Retained Refinanced Refinancing Note Advance Portion, and all interest accrued thereon and the applicable fee, is paid. (d) Any prepayment of a Portion of a Retained Refinanced Refinancing Note Advance Portion shall, as to the principal amount of such Portion, be subject to a minimum amount equal to $100,000.00 of principal. (e) The provisions of this paragraph 11 shall apply to all prepayments of any Retained Refinanced Refinancing Note Advance Portion, regardless whether such prepayments are made pursuant to the Refinancing Authority or otherwise. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 47 PART III TERMS APPLICABLE TO REFINANCED RETAINED ADVANCE PORTIONS 1. Promise to Pay. FOR VALUE RECEIVED, the Borrower (which term includes any successors or assigns) promises to pay FFB (which term includes any successors or assigns) at the time, in the manner, and with interest at the rates hereinafter provided, the principal amount of those certain Retained Advance Portions with respect to which the Borrower makes a Refinancing Election, as provided in paragraph 6 of Part I of this Retained Indebtedness Note (each Retained Advance Portion with respect to which the Borrower makes a Refinancing Election being, from and after the Refinancing Effective Date for such Refinancing Election, a "Refinanced Retained Advance Portion," and more than one such Retained Advance Portion being, collectively, "Refinanced Retained Advances Portions"). 2. Principal Amount of Refinanced Retained Advance Portions. The principal amount of each Refinanced Retained Advance Portion shall be (a) the unpaid principal balance of the respective Retained Advance Portion, as determined by FFB as of the respective Refinancing Effective Date, plus (b) if the Borrower has made an Election to Finance the Premium with respect to such Refinanced Retained Advance Portion, and the condition that applies to making such Election to Finance the Premium has been satisfied, the amount of the applicable Refinancing Premium, as provided in the Refinancing Authority. 3. Maturity Dates; Maturity Extensions; Early Extensions. Each Refinanced Retained Advance Portion shall mature on the date specified in the respective Election Approval Notice (such date being the "Maturity Date" for such Refinanced Retained Advance Portion), which shall be the date selected by the Borrower in accordance with the following provisions: (a) Each Maturity Date for a Refinanced Retained Advance Portion shall be a Payment Date. (b) No Maturity Date for any Refinanced Retained Advance Portion shall be later than the date specified on the respective Retained Old Form Note Advance Portion Schedule, Retained OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 48 Part III (Refinanced Retained Advance Portions) Repriced Old Form Note Advance Portion Schedule, Retained New Form Note Advance Portion Schedule or Retained Refinanced Refinancing Note Advance Portion Schedule, as the case may be, for the respective Retained Advance Portion as being the final maturity date for such Retained Advance portion (such date being the "Final Maturity Date" for such Refinanced Retained Advance Portion under the terras of this Part III). (c) Each Maturity Date for a Refinanced Retained Advance Portion shall be at least one calendar quarter from the Refinancing Effective Date for such Refinanced Retained Advance Portion. (d) For each Refinanced Retained Advance Portion with respect to which the Borrower selects a Maturity Date that occurs prior to the Final Maturity Date for such Refinanced Retained Advance Portion, the Borrower may, effective as of such Maturity Date, extend the Maturity Date for such Refinanced Retained Advance Portion to a new Maturity Date (any such extension, or any subsequent extension, being a "Maturity Extension"); provided that the new Maturity Date for each Maturity Extension shall meet the criteria for Maturity Dates prescribed in subparagraphs (a), (b), and (c) (being at least one calendar quarter from the effective date of the Maturity Extension) of this paragraph 3. (e) For each Refinanced Retained Advance Portion with respect to which the Borrower selects a Maturity Date that occurs prior to the Final Maturity Date for such Refinanced Retained Advance Portion, the Borrower may, on any Payment Date prior to such Maturity Date, extend the Maturity Date for such Refinanced Retained Advance Portion to a new Maturity Date, including the Final Maturity Date (any such extension being an "Early Extension"); provided that the Borrower shall (1) follow the procedures prescribed in subparagraph (a) of paragraph 11 of this Part III for prepaying Refinanced Retained Advance Portions, and (2) pay FFB, on the effective date of such Early Extension, an amount equal to the interest accrued on such Refinanced Retained Advance Portion through the effective date of such Early Extension and the premium, if any, that would be payable to FFB under subparagraph (b) of paragraph 11 of this Part III if the Borrower were to prepay such Refinanced Retained Advance Portion on the effective date of such Early Extension. If the application of the principles of paragraph 11 of this Part III to any Early Extension shall result in a discount on the respective Retained New Form Note Advance Portion, such discount will be OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 49 Part III (Refinanced Retained Advance Portions) applied by FFB in the manner requested in writing by the Borrower, with the written approval of RUS. (f) Each selection by the Borrower of a Maturity Date for any Maturity Extension governed by this Part III must be approved by RUS in writing, and notification of each such Maturity Date, together with evidence of RUS approval thereof, must be delivered to FFB not less than 5 Business Days prior to the proposed date for such Maturity Extension, in the form prescribed by FFB for such notification. 4. Establishment of Interest Rate for Refinanced Retained Advance Portions and Maturity Extensions; Computation of Interest; Applicable Fee. (a) The interest rate for each Refinanced Retained Advance Portion shall be established by FFB as of the Refinancing Effective Date for such Refinanced Retained Advance Portion on the basis of a determination made by the secretary of the Treasury pursuant to the Refinancing Authority; provided, however, that the shortest maturity used as the basis for any rate determination shall be the remaining maturity of the most recently auctioned 13-week United States Treasury bills. In the event of a Maturity Extension of any Refinanced Retained Advance Portion, the interest rate for such Refinanced Retained Advance Portion, from and after the effective date of such Maturity Extension, shall be the respective rate that is established by FFB at the time of such Maturity Extension in accordance with the principles of the preceding sentences of this paragraph 4. Subject to paragraph 8 of this Part III, interest on each Refinanced Retained Advance Portion shall accrue from the Refinancing Effective Date for such Refinanced Retained Advance Portion to the date on which the principal amount of such Refinanced Retained Advance Portion is due. Interest on each Refinanced Retained Advance Portion shall be computed on the basis of (1) actual days elapsed from (but not including) the Refinancing Effective Date for such Refinanced Retained Advance Portion to (and including) the date on which payment is due, and (2) a year of 365 days (except in calendar years including February 29, when the basis shall be a 366-day year). (b) In addition to the interest that accrues at a rate determined in accordance with the preceding subparagraph, a fee to cover all administrative expenses of FFB and to provide for the accumulation by FFB of reasonable contingency reserves, assessed by FFB pursuant to section 6(c) of the FFB Act (12 OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 50 Part III (Refinanced Retained Advance Portions) U.S.C. ss. 2285(c)), shall accrue on each Refinanced Retained Advance Portion from the Refinancing Effective Date for such Refinanced Retained Advance Portion to the date on which the principal amount of such Refinanced Retained Advance Portion is due. The fee for each Refinanced Retained Advance Portion shall be equal to one-eighth of one percent (0.125%) per annum of the unpaid principal balance of such Refinanced Retained Advance Portion. The fee on each Refinanced Retained Advance Portion shall be computed on the basis of (1) actual days elapsed from (but not including) the Refinancing Effective Date for such Refinanced Retained Advance Portion to (and including) the date on which payment is due, and (2) a year of 365 days (except in calendar years including February 29, when the basis shall be a 366-day year). 5. Payment of Interest and Fee. Interest accrued on the outstanding principal amount of each Refinanced Retained Advance Portion and the applicable fee shall be due and payable on each Payment Date, commencing on the first Payment Date to occur after the Refinancing Effective Date for such Refinanced Retained Advance Portion up through and including the Maturity Date for such Refinanced Retained Advance Portion. In the event of a Maturity Extension occurring after the Refinancing Effective Date for any Refinanced Retained Advance Portion, the accrued interest on each such Maturity Extension and the applicable fee shall be due and payable on each Payment Date occurring after the effective date of such Maturity Extension up through and including the Maturity Date for such Maturity Extension. The amount of accrued interest on each such Maturity Extension and the applicable fee that shall be due and payable on each such Payment Date shall be computed in accordance with the provisions of paragraph 4 of this Part III. 6. Payment of Principal; Principal Payment Options. The principal amount of each Refinanced Retained Advance Portion shall be payable in accordance with the following provisions: (a) Principal payments on each Refinanced Retained Advance Portion shall begin on the first Payment Date to occur after the Refinancing Effective Date for such Refinanced Retained Advance Portion and shall be made on each subsequent Payment Date until such Refinanced Retained Advance Portion is paid in full on or before the Final Maturity Date. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 51 Part III (Refinanced Retained Advance Portions) (b) When the Borrower selects a Maturity Date for any Refinanced Retained Advance Portion, the Borrower must also select, subject to RUS approval, a method for the payment of principal from among the following options: (1) "equal principal payments" -- the amount of each quarterly principal payment shall substantially equal the amount of every other quarterly principal payment; (2) "graduated principal payments" -- the amount of each of the first one-third (or nearest number of payments that rounds to one-third) of the total number of quarterly principal payments shall substantially equal one-half of the amount of each of the remaining quarterly principal payments; (3) "level debt service" -- the amount of each quarterly payment of principal, accrued interest, and the applicable fee shall substantially equal the amount of every other quarterly payment. Approval of the Borrower's selection of a method for the payment of principal may be withheld by RUS if RUS determines, in its sole discretion, that the method selected by the Borrower would increase RUS's risk under its guarantee of this Retained Indebtedness Note. (c) With respect to each Refinanced Retained Advance Portion for which the Borrower selects the "equal principal payments" method for the payment of principal, the level quarterly payments of principal, along with accrued interest on the unpaid principal balance and the applicable fee, shall be paid on each Payment Date occurring after the Refinancing Effective Date for such Refinanced Retained Advance Portion and ending on the Final Maturity Date for such Refinanced Retained Advance Portion. With respect to each Refinanced Retained Advance Portion for which the Borrower selects the "graduated principal payments" method for the payment of principal, the graduated quarterly payments of principal, along with accrued interest on the unpaid principal balance and the applicable fee, shall be paid on each Payment Date occurring after the Refinancing Effective Date for such Refinanced Retained Advance Portion and ending on the Final Maturity Date for such Refinanced Retained Advance Portion. With respect to each Refinanced Retained Advance Portion for which the Borrower selects the OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 52 Part III (Refinanced Retained Advance Portions) "level debt service" method for the payment of principal, the level quarterly payments of principal, accrued interest, and the applicable fee shall be paid on each Payment Date occurring after the Refinancing Effective Date (or the first Payment Date to occur after a Maturity Extension) for such Refinanced Retained Advance Portion and ending on the Final Maturity Date for such Refinanced Retained Advance Portion. (d) After the Borrower selects one of the 3 methods listed in subparagraph (b) of this paragraph 6 for the payment of principal of any Refinanced Retained Advance Portion, the resulting principal payment schedule for that Refinanced Retained Advance Portion may not be changed; except that the Borrower may change the method of payment of the principal of any Refinanced Retained Advance Portion with respect to which the Borrower selects a Maturity Date that occurs prior to the Final Maturity Date for such Refinanced Retained Advance Portion from either the "equal principal payments" method or the "graduated principal payments" method to the "level debt service" method at the time, if ever, of a Maturity Extension of such Refinanced Retained Advance Portion, effective on the date of such Maturity Extension. After the Borrower selects the Final Maturity Date as being the Maturity Date for any Refinanced Retained Advance Portion or a Maturity Extension of any Refinanced Retained Advance Portion, no changes in the resulting principal repayment schedule may be made and no more Maturity Extensions may occur for such Refinanced Retained Advance Portion. (e) The entire unpaid principal amount of any Refinanced Retained Advance Portion with respect to which the Borrower selects a Maturity Date that occurs prior to the Final Maturity Date for such Refinanced Retained Advance Portion shall be due and payable on such Maturity Date, subject to Maturity Extensions in accordance with paragraph 3 of this Part III. In the event of a Maturity Extension of any Refinanced Retained Advance Portion with respect to which the Borrower selects a Maturity Date that occurs prior to the Final Maturity Date for such Refinanced Retained Advance Portion, the principal payment that is due according to the resulting principal payment schedule shall nevertheless be due and payable on the Maturity Date, notwithstanding such Maturity Extension. (f) Notwithstanding which of the 3 methods listed in subparagraph (b) of this paragraph 6 is selected for the payment of principal of any Refinanced Retained Advance Portion, the aggregate of all quarterly payments on such Refinanced Retained OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 53 Part III (Refinanced Retained Advance Portions) Advance Portion shall be such as will pay the entire principal amount of such Refinanced Retained Advance Portion, and all interest and the applicable fee accrued thereon, on or before the Final Maturity Date for such Refinanced Retained Advance Portion. 7. Business Days. Whenever any Payment Date or the Maturity Date for any Refinanced Retained Advance Portion shall fall on a day which is not a Business Day, the payment that would otherwise be due on such Payment Date or Maturity Date shall be due on the first Business Day thereafter. In the case of a Payment Date for any Refinanced Retained Advance Portion falling on a day other than a Business Day, the extension of time for making the payment that would otherwise be due on such Payment Date shall (a) be taken into account in establishing the interest rate for the respective Refinanced Retained Advance Portion, and (b) be included in computing interest and the applicable fee in connection with such payment and excluded in connection with the next payment. In the case of the Maturity Date for any Refinanced Retained Advance Portion falling on a day other than a Business Day, the extension of time for making the payment that would otherwise be due on such Maturity Date shall (a) be taken into account in establishing the interest rate for the respective Refinanced Retained Advance Portion, and (b) be included in computing interest and the applicable fee in connection with such payment. 8. Late Charges. If any payment of any amount owing on account of any Refinanced Retained Advance Portion is not made when and as due (any such amount being then an "Overdue Amount"), the amount payable shall be such Overdue Amount plus interest thereon (such interest being the "Late Charge") computed in accordance with this paragraph 8. The Late Charge shall accrue from the scheduled date of payment for the Overdue Amount (taking into account paragraph 7 of this Part III) to the actual date on which payment is made. The Late Charge shall be computed on the basis of (a) actual days elapsed from (but not including) the scheduled date of payment for such Overdue Amount (taking into account paragraph 7 of this Part III) to (and including) the date on which payment is made, and (b) a year of 365 days (except in calendar years including February 29, when the basis shall be a 366-day year). The Late Charge shall accrue at a rate (the "Late Charge Rate") equal to one and one-half times the rate to be determined by the Secretary of the Treasury taking into consideration the OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 54 Part III (Refinanced Retained Advance Portions) prevailing market yield on the remaining maturity of the most recently auctioned 13-week United States Treasury bills. The initial Late Charge Rate shall be in effect until either the actual date of payment or the next succeeding Payment Date, whichever occurs first. If the Overdue Amount and the amount of accrued Late Charge are not paid on or before the next succeeding Payment Date, then an amount equal to the amount of accrued Late Charge shall be added to the Overdue Amount, and the amount then payable shall be the sum of the Overdue Amount and the amount of accrued Late Charge, plus a Late Charge on such sum accruing at a new Late Charge Rate to be then determined in accordance with the principles of the second preceding sentence. For so long as any Overdue Amount remains unpaid, the Late Charge Rate shall be redetermined in accordance with the principles of the third preceding sentence on each succeeding Payment Date, and shall be applied to the Overdue Amount and all amounts of accrued Late Charge to the actual date of payment. Nothing in this paragraph shall be construed as permitting or implying that the Borrower may, without the written consent of FFB, modify, extend, alter or affect in any manner whatsoever (except as explicitly provided herein) the right of FFB to receive any and all payments on account of all Refinanced Retained Advance Portions on the dates specified in this Part III. 9. Final Due Date. Notwithstanding anything in this Retained Indebtedness Note to the contrary, all amounts outstanding under this Retained Indebtedness Note on account of each Refinanced Retained Advance Portion, which amounts remain unpaid as of the Final Maturity Date for such Refinanced Retained Advance Portion, shall be due and payable on the Final Maturity Date for such Refinanced Retained Advance Portion. 10. Application of Payments. Each payment made on any Refinanced Retained Advance Portion shall be applied first to the payment of any Late Charge payable under paragraph 8 of this Part III, then to the payment of any premium payable under paragraph 11 of this Part III, then to the payment of accrued interest and the applicable fee payable under paragraph 4 of this Part III, then on account of outstanding principal, and then to the payment of the fee payable under paragraph 2 of Part IV of this Retained Indebtedness Note. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 55 Part III (Refinanced Retained Advance Portions) 11. Prepayments. The Borrower may elect to prepay all or any portion of the unpaid principal balance of any Refinanced Retained Advance Portion in the manner, at the price, and subject to the limitations as next described: (a) The Borrower shall deliver to FFB written notification of such prepayment election not less than 5 Business Days prior to the proposed date of prepayment and, if less than the total outstanding principal amount of such Refinanced Retained Advance Portion is to be prepaid, the Borrower shall specify in such notification the amount that is proposed to be prepaid (any amount of a Refinanced Retained Advance Portion which is less than the total outstanding principal amount of the respective Refinanced Retained Advance Portion being a "Portion"). (b) The Borrower shall pay to FFB, at the time of prepayment of all or any Portion of any Refinanced Retained Advance Portion: (1) for so long as the Refinancing Authority shall be in effect, the outstanding principal amount of the Refinanced Retained Advance Portion, or Portion thereof, to be prepaid, all accrued interest thereon through the date of prepayment, the applicable fee through the date of prepayment, plus the prepayment premium required by the terms of the Refinancing Authority; and (2) in the event that the Refinancing Authority shall no longer be in effect, a price for such Refinanced Retained Advance Portion, and all accrued interest thereon through the date of prepayment and the applicable fee through the date of prepayment, that would, if such Refinanced Retained Advance Portion were purchased and held to its maturity, produce a yield to the purchaser for the period from the date of purchase to the maturity of such Refinanced Retained Advance Portion substantially equal to the interest rate that would be set on a loan from the Secretary of the Treasury to FFB to purchase an obligation having a payment schedule identical to that of such Refinanced Retained Advance Portion; and if the Borrower elects to repurchase a Portion of a Refinanced Retained Advance Portion, the Borrower shall pay to FFB a price for such Portion that would equal such Portion's pro rata share of the price for a repurchase of the entire Refinanced Retained Advance OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 56 Part III (Refinanced Retained Advance Portions) Portion, calculated in accordance with the principles of this sentence. The amount of each such prepayment premium or prepayment price, as the case may be, shall be calculated by the Secretary of the Treasury as of the close of business 2 Business Days prior to the date of the proposed prepayment, using standard calculation methods of the United States Department of the Treasury. (c) If the Borrower elects to prepay a Portion of a Refinanced Retained Advance Portion, the prepayment price paid shall be applied, first, to accrued interest on such Portion and the applicable fee to the date of prepayment and, then, to principal installments in the inverse order of maturity. Following the prepayment of a Portion of a Refinanced Retained Advance Portion, subsequent payments shall continue to be made in accordance with the payment schedule resulting from the method for the payment of principal selected under subparagraph (b) of paragraph 6 of this Part III, until the entire principal amount of the Refinanced Retained Advance Portion, and all accrued interest thereon and the applicable fee, is paid; except that, with respect to any Refinanced Retained Advance Portion for which the Borrower has selected the "level debt service" method under subparagraph (b) of paragraph 6 of this Part III, payments shall continue to be made in accordance with the level debt service payment schedule that resulted when the Borrower first selected the level debt service method, and such payments shall be allocated by FFB among outstanding principal, accrued interest, and the applicable fee, as appropriate, until the entire principal amount of such Refinanced Retained Advance Portion, and all accrued interest thereon and the applicable fee, is paid. (d) Any prepayment of a Portion of a Refinanced Retained Advance Portion shall, as to the principal amount of such Portion, be subject to a minimum amount equal to $100,000.00 of principal. (e) The provisions of this paragraph 11 shall apply to all prepayments of any Refinanced Retained Advance Portion, regardless whether such prepayment is made pursuant to the Refinancing Authority or otherwise. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 57 PART IV GENERAL 1. Payment by Wire Transfer. For so long as FFB is the holder of this Retained Indebtedness Note and RUS is the loan servicing agent for FFB, each payment on this Retained Indebtedness Note shall be paid in immediately available funds by electronic funds transfer to the account specified from time to time by RUS in a written notice delivered by RUS to the Borrower. In the event that FFB is the holder of this Retained Indebtedness Note but RUS is not the loan servicing agent for FFB, then each payment under this Note shall be made in immediately available funds by electronic funds transfer to the account specified from time to time by FFB in a written notice delivered by FFB to the Borrower. 2. Loan Servicing Expense Fee. For so long as FFB is the holder of this Retained Indebtedness Note and RUS is the loan servicing agent for FFB, the Borrower agrees to pay FFB an annual loan servicing expense fee, assessed by FFB pursuant to section 6(c) of the FFB Act (12 U.S.C. ss. 2285(c)), in the amount of one one-thousandth of one percent (0.00001) of the aggregate unpaid principal balance of all Assumed Repriced Old Form Note Advance Portions, all Assumed New Form Note Advance Portions, all Assumed Refinanced Refinancing Note Advance Portions, and all Refinanced Assumed Advance Portions on December 31 of each year. The loan servicing expense fee for each year shall be due and payable by the Borrower on the March 31 Payment Date of the immediately following year, after taking into account any payment made on the December 31 Payment Date of the respective year. 3. Amendments to Retained Indebtedness Note. To the extent not inconsistent with applicable law, this Retained Indebtedness Note, for so long as FFB is the holder thereof, shall be subject to modification by such amendments, extensions, and renewals as may be agreed upon from time to time by FFB and the Borrower, with the approval of RUS. 4. Certain Waivers. The Borrower hereby waives any requirement for presentment, protest, or other demand or notice with respect to this Retained Indebtedness Note. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 58 Part IV 5. Effective Until Paid. This Retained Indebtedness Note shall continue in full force and effect until all amounts due and payable hereunder have been paid in full. 6. RUS Guarantee of Note. Upon execution of the guarantee set forth at the end of this Retained Indebtedness Note (the "Guarantee"), the payment by the Borrower of all amounts due and payable under this Retained Indebtedness Note, when and as due, shall be guaranteed by the United States of America, acting through RUS, pursuant to the Rural Electrification Act of 1936, as amended (7 U.S.C. ss. 901 et seq.). In consideration of the Guarantee, the Borrower promises to RUS to make all payments due under this Retained Indebtedness Note when and as due. 7. Security Instrument; RUS as Holder of Note for Purposes of the Security Instrument. This Retained Indebtedness Note is one of several notes permitted to be executed and delivered by, and is entitled to the benefits and security of, the particular security instrument or instruments specified on page 1 of this Retained Indebtedness Note (such security instrument or instruments, as it or they may have heretofore been, and as it or they may hereafter be, amended, supplemented, restated, or consolidated from time to time in accordance with its or their terms, being, collectively, the "Security Instrument"), whereby the Borrower pledged and granted a security interest in certain property of the Borrower, described therein, to secure the payment of and performance of certain obligations owed to REA, predecessor to RUS, or to RUS, as the case may be, as set forth in the Security Instrument. For purposes of the Security Instrument, RUS shall be considered to be, and shall have the rights, powers, privileges, and remedies of, the holder of this Retained Indebtedness Note. 8. Guarantee Payments; Reimbursement. If RUS makes any payment, pursuant to the Guarantee, of any amount due and payable under this Retained Indebtedness Note, when and as due, each and every such payment so made shall be deemed to be a payment hereunder; provided, however, that no payment by RUS pursuant to the Guarantee shall be considered a payment for purposes of determining the existence of a failure by OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 59 Part IV the Borrower to perform its obligation to RUS to make all payments under this Retained Indebtedness Note when and as due. RUS shall have any rights by way of subrogation, agreement or otherwise which arise as a result of such payment pursuant to the Guarantee and as provided in the reimbursement note executed and delivered by the Borrower to the United States of America, acting through RUS, to evidence the Borrower's obligation to reimburse RUS for payment made by RUS pursuant to the Guarantee. 9. Default and Enforcement. In case of a default by the Borrower under this Retained Indebtedness Note or a the occurrence of an event of default under the Security Instrument, then, in consideration of the obligation of RUS under the Guarantee, in that event, to make payments to FFB as provided in this Retained Indebtedness Note, RUS, in its own name, shall have all rights, powers, privileges, and remedies of the holder of this Retained Indebtedness Note, in accordance with the terms of this Retained Indebtedness Note and the Security Instrument, including, without limitation, the right to enforce or collect all or any part of the obligation of the Borrower under this Retained Indebtedness Note or arising as a result of the Guarantee, to file proofs of claim or any other document in any bankruptcy, insolvency, or other judicial proceeding, and to vote such proofs of claim. 10. Acceleration. The entire unpaid principal amount of this Retained Indebtedness Note, and all interest thereon, plus the applicable fee, if any, may be declared, and upon such declaration shall become, due and payable to RUS, under the circumstances described, and in the manner and with the effect provided, in the Security Instrument. 11. Incorporation of Annexes. Annex 1 (the "Outstanding Notes") attached hereto, Annex 2A (the "Retained Old Form Note Advance Portion Schedules") attached hereto, Annex 2B (the "Retained Repriced Old Form Note Advance Portion Schedules") attached hereto, Annex 2C (the "Retained New Form Note Advance Portion Schedules") attached hereto, Annex 2D (the "Retained Refinanced Refinancing Note Advance Portion Schedules") attached hereto, and Annex 3 (the form of Election Notice), collectively form an integral part of this Retained Indebtedness Note, and are incorporated herein by reference. OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 60 Part IV IN WITNESS WHEREOF, the Borrower has caused this Retained Indebtedness Note to be signed in its corporate name and its corporate seal to be hereunder affixed and attested by its officers thereunto duly authorized, all as of the day and year first above written. OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION AND TRANSMISSION CORPORATION) By: Signature: /s/ T. D. Kilgore -------------------------- Print Name: T. D. Kilgore ------------------------- Title: President ATTEST: Signature: /s/ Gary M. Bullock -------------------------- Print Name: Gary M. Bullock ------------------------- Title: Secretary OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 61 SCHEDULE TO FFB RETAINED INDEBTEDNESS NOTE The Amortization Schedule to the FFB Retained Indebtedness Note is not filed herewith; however, the Registrant hereby agrees that such Schedule will be provided to the Commission upon request. RUS GUARANTEE The United States of America, acting through the Administrator of the Rural Utilities Service ("RUS"), successor to the Administrator of the Rural Electrification Administration, hereby guarantees to the Federal Financing Bank, its successors and assigns ("FFB"), all payments of principal, interest, premium (if any), and late charges (if any), when and as due in accordance with the terms of the note dated March 1, 1997, made by OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION AND TRANSMISSION CORPORATION) (the "Borrower") payable to FFB, to which this Guarantee is attached (such note being the "Note"), with interest on the principal until paid, irrespective of (i) acceleration of such payments under the terms of the Note, or (ii) receipt by RUS of any sums or property from its enforcement of its remedies for the Borrower's default. This Guarantee is issued pursuant to section 306 and 306C of the Rural Electrification Act of 1936, as amended (7 U.S.C. ss.ss. 936, 936c), and section 6 of the Federal Financing Bank of 1973 (12 U.S.C. ss. 2285). UNITED STATES OF AMERICA By: /s/ Wally Beyer ------------------------------ Name: Wally Beyer ---------------------------- Title: Administrator of the Rural Utilities Service, successor to the Administrator of the Rural Electrification Administration Date: March 11, 1997 OGLETHORPE POWER CORPORATION RETAINED INDEBTEDNESS NOTE - page 539 REIMBURSEMENT NOTE FFB Note Identifier: RUS Note Identifier: ( ) OGLETHRP 0012 Tucker, Georgia March 1, 1997 REIMBURSEMENT NOTE Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) (the "Borrower," which term includes any successors or assigns), a corporation organized and existing under the laws of the State of Georgia, for value received, promises to pay on demand to the order of the UNITED STATES OF AMERICA (the "Government"), acting through the Administrator of the Rural Utilities Service ("RUS"), at the United States Treasury, Washington, D.C., a sum equal to: (1) all amounts, including, without limitation, principal and interest (the "Reimbursed Amount"), paid by the Government from time to time pursuant to that certain guarantee made by RUS (the "RUS Guarantee") to the Federal Financing Bank Act ("FFB") of amounts payable to FFB under that certain Retained Indebtedness Note, dated as of March 1, 1997, made by the Borrower payable to FFB, in the principal amount of $2,637,781,327.45, and guaranteed by RUS (the "FFB Note") pursuant to the Rural Electrification Act of 1936 as amended (7 U.S.C. 901 et seq.), Section 6 of the Federal Financing Bank of 1973 (12 U.S.C. ss. 2285), and the Note Purchase Commitment and Servicing Agreement, as amended and as it may be amended, supplemented, or restated from time to time, dated as of January 1, 1992, between FFB and RUS; plus (2) interest on the Reimbursed Amount from the respective date of such payment by RUS to FFB, at the Late Charge Rate as that term is defined in the FFB Note; plus (3) administrative costs and penalty charges assessed in accordance with applicable regulations; and plus (4) any and all costs and expenses incurred in connection with the exercise of rights or the enforcement of (i) this Note, (ii) that certain Amended and Consolidated Loan Contract by and between the Borrower and the Government, dated as of March 1, 1997, as it may be amended, supplemented or restated from time to time (the "Loan Contract"), and (iii) the Security Documents, as hereinafter defined. The obligations of the Borrower hereunder are absolute and unconditional, irrespective of any defense or any right to set off, recoupment or counterclaim it might otherwise have against the Government. So long as RUS pays to FFB all amounts then due to it under the RUS Guarantee, the Borrower agrees to pay all amounts due on this Note directly to RUS. Nothing herein shall limit the Government's rights of subrogation which may arise as a result of payments made by RUS pursuant to the RUS Guarantee. This Note has been executed, delivered and authenticated pursuant to, and is secured by, the Indenture, dated as of March 1, 1997, from Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation), Grantor, to SunTrust Bank, Atlanta, Trustee, as it may from time to time be supplemented, modified or amended by one or more indentures or other instruments supplemental thereto (including Supplemental Indentures as defined therein) entered into pursuant to the applicable provisions of such Indenture (the "Indenture") and the Security Agreement, dated as of March 1, 1997, made by OPC to SunTrust Bank, Atlanta, Trustee, as it may from time to time be supplemented, modified or amended (the "Security Agreement"; the Indenture and the Security Agreement, collectively, the "Security Documents"). This Note is an "Existing Obligation," a "RUS Reimbursement Note" and an "Obligation" (all as defined in the Security Documents) and is entitled to all of the benefits of the Security Documents. Among other things, the Security Documents provide that all Obligations shall be equally and ratably secured thereby and reference is hereby made to the Security Documents for a description of the property pledged, the nature and extent of the security and the rights of the holders of Obligations with respect thereto. Neither the execution and delivery of this Note by the Borrower to the Government, nor the failure of the Government to exercise its rights under the Security Documents or the Loan Contract shall be deemed to be a waiver of any right or remedy of the Government under the Security Documents or the Loan Contract. Neither the acceptance nor the enforcement of this Note by the Government shall relieve the Borrower of its obligation to repay the FFB Note in accordance with its terms or deprive the holder of the FFB Note, which may be the Government, of any benefit, right or privilege such holder may otherwise enjoy as the "Holder" (as defined in the Security Documents) of an Obligation secured by the Security Documents. [Signatures Appear on Next Page] 2 IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its corporate name and its corporate seal to be hereunto affixed and attested by its officers thereunto duly authorized, all as of the day and year first above written. OGLETHORPE POWER CORPORATION (AN (CORPORATE SEAL) ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) Attest /s/ Patricia N. Nash ------------------------- By: /s/ T. D. Kilgore ------------------------------------ T. D. Kilgore, President and Chief Executive Officer This is one of the Existing Obligations referred to in the Indenture, dated as of March 1, 1997, by Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) to SunTrust Bank, Atlanta. SUNTRUST BANK, ATLANTA, as Trustee By: /s/ Bryan Echols ------------------------------------ Authorized Signatory 3 MORTGAGE NOTE (G7) PROJECT DESIGNATION: GEORGIA 109-G7 OPC MORTGAGE NOTE made by OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) to UNITED STATES OF AMERICA MORTGAGE NOTE Tucker, Georgia March 1, 1997 OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) (hereinafter called the "Corporation"), a corporation organized and existing under the laws of the State of Georgia, for value received, promises to pay to the order of UNITED STATES OF AMERICA (hereinafter called the "Government"), acting through the Administrator of the Rural Utilities Service, at the United States Treasury, Washington, D.C., at the times and in the manner hereinafter provided, the principal sum of Three Million Eight Hundred Twenty Thousand Three Hundred Fifty-Two and 89/100 Dollars ($3,820,352.89), with interest on the unpaid balance thereof from time to time, at the rate of five (5) per centum per annum. From and after the date hereof, the Corporation shall make consecutive monthly payments on the last day of each month (each, a "Payment Date") each in the amount of $23,824.54 until the earlier of May 31, 2019 or such time as all principal hereof, and interest thereon, shall have been paid in full. Each payment made on this Note shall be applied first to the payment of interest on principal and then on account of principal. On May 31, 2019, the principal hereof remaining unpaid, if any, and unpaid interest thereon, if any, shall become due and payable. The Corporation on any Payment Date, as hereinabove provided, may pay all or any part of the principal hereof then outstanding, but so long as any of the principal hereof shall remain unpaid, the Corporation shall be obligated to make the monthly payment on account of principal and interest, in the amount hereinabove provided, unless the Corporation and the holder of this Note shall otherwise agree. This Note has been executed, delivered and authenticated pursuant to, and is secured by, the Indenture, dated as of March 1, 1997, from the Corporation, as Grantor, to SunTrust Bank, Atlanta, as Trustee, as it may be supplemented, modified or amended by one or more indentures or other instruments supplemental thereto (including Supplemental Indentures as defined therein) entered into pursuant to the applicable provisions of such Indenture (the "Indenture"). This Note is an "Existing Obligation" and an "Obligation" (all as defined in the Indenture) and is entitled to the benefits of the Indenture. Among other things, the Indenture provides that all Obligations shall be equally and ratably secured thereby and reference is hereby made to the Indenture for a description of the property pledged, the nature and extent of the security and the rights of the holders of Obligations with respect thereto. In case of default by the Corporation, as provided in the Indenture, all principal remaining unpaid on this Note, and all interest thereon, may be declared or may become due and payable in the manner and with the effect provided in the Indenture. This Note evidences indebtedness created by a loan made under the Rural Electrification Act of 1936, as amended, including Public Law 93-32. If the Government shall at any time assign this Note and insure the payment hereof, the Corporation shall continue to make payments hereunder to the Government as collection agent for the insured holder, and, for purposes of the Indenture, the Government, and not such insured holder, shall be considered to be, and shall have the rights of, the noteholder. This Note is given to evidence a portion of the indebtedness heretofore evidenced by that certain Mortgage Note, made by the Corporation to the Government, in the original face amount of $5,543,000, dated June 1, 1984 (the "Original Note"). In connection with the execution and delivery of this Note, Georgia Transmission Corporation (An Electric Membership Corporation) has assumed liability for $774,952.26 of the indebtedness originally evidenced by the Original Note, and the Government has released the Corporation from liability for such assumed principal amount of the Original Note. From the date of this Note, the Corporation's liability with respect to the indebtedness evidenced by the Original Note shall be governed solely by this Note. IN WITNESS WHEREOF, the Corporation has caused this Note to be signed in its corporate name and its corporate seal to be hereunto affixed and attested by its officers thereunto duly authorized, all as of the day and year first above written. OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) By: /s/ T. D. Kilgore ---------------------------------------- T. D. Kilgore, President and Chief Executive Officer Attest /s/ Patricia N. Nash ------------------------- This is one of the Existing Obligations (CORPORATE SEAL) referred to in the Indenture, dated as of March 1, 1997, by Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) to SunTrust Bank, Atlanta. SUNTRUST BANK, ATLANTA, as Trustee By: /s/ Bryan Echols -------------------------------------- Authorized Signatory 2 MORTGAGE NOTE (H13) PROJECT DESIGNATION: GEORGIA 109-H13 OPC MORTGAGE NOTE made by OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) to UNITED STATES OF AMERICA MORTGAGE NOTE Tucker, Georgia March 1, 1997 OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) (hereinafter called the "Corporation"), a corporation organized and existing under the laws of the State of Georgia, for value received, promises to pay to the order of UNITED STATES OF AMERICA (hereinafter called the "Government"), acting through the Administrator of the Rural Utilities Service, at the United States Treasury, Washington, D.C., at the times and in the manner hereinafter provided, the principal sum of Fourteen Million Seven Hundred Eighty-Six Thousand Nine Hundred Eighty-Five and 70/100 Dollars ($14,786,985.70), with interest on the unpaid balance thereof from time to time, at the rate of five (5) per centum per annum. From and after the date hereof, the Corporation shall make consecutive monthly payments on the last day of each month (each, a "Payment Date"), each in the amount of $90,204.88 until the earlier of October 31, 2019 or such time as $10,710,001.73 of the principal hereof, and interest thereon, shall have been paid in full. Thereafter, the Corporation shall make consecutive monthly payments on each Payment Date, each in the amount of $24,073.83 until the earlier of October 31, 2021 or such time as all principal hereof, and interest thereon, shall have been paid in full. Each payment made on this Note shall be applied first to the payment of interest on principal and then on account of principal. On October 31, 2019, $10,710,001.73 of the principal hereof remaining unpaid, if any, and unpaid interest thereon, if any, shall become due and payable. On October 31, 2021, the principal hereof remaining unpaid, if any, and unpaid interest thereon, if any, shall become due and payable. The Corporation on any Payment Date, as hereinabove provided, may pay all or any part of the principal hereof then outstanding, but so long as any of the principal hereof shall remain unpaid, the Corporation shall be obligated to make the monthly payment on account of principal and interest, in the amount hereinabove provided, unless the Corporation and the holder of this Note shall otherwise agree. This Note has been executed, delivered and authenticated pursuant to, and is secured by, the Indenture, dated as of March 1, 1997, from the Corporation, as Grantor, to SunTrust Bank, Atlanta, as Trustee, as it may be supplemented, modified or amended by one or more indentures or other instruments supplemental thereto (including Supplemental Indentures as defined therein) entered into pursuant to the applicable provisions of such Indenture (the "Indenture"). This Note is an "Existing Obligation" and an "Obligation" (all as defined in the Indenture) and is entitled to the benefits of the Indenture. Among other things, the Indenture provides that all Obligations shall be equally and ratably secured thereby and reference is hereby made to the Indenture for a description of the property pledged, the nature and extent of the security and the rights of the holders of Obligations with respect thereto. In case of default by the Corporation, as provided in the Indenture, all principal remaining unpaid on this Note, and all interest thereon, may be declared or may become due and payable in the manner and with the effect provided in the Indenture. This Note evidences indebtedness created by a loan made under the Rural Electrification Act of 1936, as amended, including Public Law 93-32. If the Government shall at any time assign this Note and insure the payment hereof, the Corporation shall continue to make payments hereunder to the Government as collection agent for the insured holder, and, for purposes of the Indenture, the Government, and not such insured holder, shall be considered to be, and shall have the rights of, the noteholder. This Note is given to evidence a portion of the indebtedness heretofore evidenced by that certain Mortgage Note, made by the Corporation to the Government, in the original face amount of $20,987,000, dated November 1, 1984, as amended by that certain Agreement, dated as of November 3, 1986, by and between the Government and the Corporation (as so amended, the "Original Note"). In connection with the execution and delivery of this Note, Georgia Transmission Corporation (An Electric Membership Corporation) has assumed liability for $2,999,515.57 of the indebtedness originally evidenced by the Original Note, and the Government has released the Corporation from liability for such assumed principal amount of the Original Note. From the date of this Note, the Corporation's liability with respect to the indebtedness evidenced by the Original Note shall be governed solely by this Note. IN WITNESS WHEREOF, the Corporation has caused this Note to be signed in its corporate name and its corporate seal to be hereunto affixed and attested by its officers thereunto duly authorized, all as of the day and year first above written. OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) By: /s/ T. D. Kilgore ---------------------------------------- T. D. Kilgore, President and Chief Executive Officer Attest /s/ Patricia N. Nash ------------------------- This is one of the Existing Obligations (CORPORATE SEAL) referred to in the Indenture, dated as of March 1, 1997, by Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) to SunTrust Bank, Atlanta. SUNTRUST BANK, ATLANTA, as Trustee By: /s/ Bryan Echols -------------------------------------- Authorized Signatory 2 EX-4.8-1 7 EXHIBIT 4.8.1 Exhibit 4.8.1 Upon recording, return to: Ms. Lizbeth F. Henderson Sutherland, Asbill & Brennan, L.L.P. 999 Peachtree Street, N.E. Atlanta, Georgia 30309-3996 PURSUANT TO ss.44-14-35.1 OF OFFICIAL CODE OF GEORGIA ANNOTATED, THIS INSTRUMENT EMBRACES, COVERS AND CONVEYS SECURITY TITLE TO AFTER-ACQUIRED PROPERTY OF THE GRANTOR ================================================================================ ================================================================================ OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), GRANTOR, to SUNTRUST BANK, ATLANTA, TRUSTEE INDENTURE Dated as of March 1, 1997 FIRST MORTGAGE OBLIGATIONS ================================================================================ ================================================================================ THIS INSTRUMENT CONSTITUTES A DEED TO SECURE DEBT AND SECURITY AGREEMENT COVERING BOTH REAL AND PERSONAL PROPERTY OF A CORPORATION ENGAGED IN THE PRODUCTION OF ELECTRICITY AND IS TO BE RECORDED AS PROVIDED BY LAW AND CROSS-INDEXED PURSUANT TO ss.ss.44-14-36 AND 11-9-302(3)(c) OF OFFICIAL CODE OF GEORGIA ANNOTATED IN ALL INDICES IN WHICH ARE RECORDED LIENS, MORTGAGES OR OTHER ENCUMBRANCES ON PERSONAL PROPERTY TABLE OF CONTENTS Page ---- RECITALS OF THE COMPANY........................................................1 GRANTING CLAUSES...............................................................1 GRANTING CLAUSE FIRST..........................................................2 GRANTING CLAUSE SECOND.........................................................2 GRANTING CLAUSE THIRD..........................................................3 GRANTING CLAUSE FOURTH.........................................................3 EXCEPTED PROPERTY..............................................................3 EXCLUDABLE PROPERTY............................................................6 ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.1 Definitions......................................................7 Section 1.2 Acts of Holders.................................................28 Section 1.3 Notices, etc., to Trustee and Company...........................28 Section 1.4 Notices to Holders; Waiver......................................29 Section 1.5 Form and Contents of Documents Delivered to Trustee.............29 Section 1.6 Compliance Certificates and Opinions............................31 Section 1.7 Conflict with Trust Indenture Act...............................31 Section 1.8 Effect of Headings and Table of Contents........................31 Section 1.9 Successors and Assigns..........................................32 Section 1.10 Severability Clause.............................................32 Section 1.11 Benefits of Indenture...........................................32 Section 1.12 Governing Law...................................................32 Section 1.13 Action by Credit Enhancer When Action by Holders Required.......32 Section 1.14 Bank Holidays...................................................32 Section 1.15 Security Agreement and Deed to Secure Debt......................33 Section 1.16 Maturity of Secured Indebtedness................................33 Section 1.17 Acceptance of Trust by Trustee..................................33 Section 1.18 Investment of Cash Held by Trustee..............................34 Section 1.19 Principal Amount of Obligations Other than Bonds................34 Section 1.20 RUS as Holder...................................................34 (ii) ARTICLE II OBLIGATION FORMS Section 2.1 Forms of Additional Obligations Generally.......................35 Section 2.2 Form of Trustee's Certificate of Authentication for Existing Obligations............................................35 Section 2.3 Form of Trustee's Certificate of Authentication for Additional Obligations..........................................36 ARTICLE III THE OBLIGATIONS Section 3.1 Terms and Forms of Existing Obligations.........................36 Section 3.2 General Title; General Limitations; Issuable in Series..........37 Section 3.3 Terms of Particular Series......................................37 Section 3.4 Denominations...................................................38 Section 3.5 Execution, Authentication, Delivery and Dating..................39 Section 3.6 Temporary Obligations...........................................39 Section 3.7 Registration; Registration of Transfer and Exchange.............40 Section 3.8 Mutilated, Destroyed, Lost and Stolen Obligations...............41 Section 3.9 Payment of Interest; Interest Rights Preserved..................41 Section 3.10 Persons Deemed Owners...........................................43 Section 3.11 Cancellation....................................................43 ARTICLE IV AUTHENTICATION AND DELIVERY OF ADDITIONAL OBLIGATIONS Section 4.1 General Provisions..............................................43 Section 4.2 Authentication and Delivery of Additional Obligations Upon Basis of Bondable Additions....................................45 Section 4.3 Authentication and Delivery of Additional Obligations Upon Basis of Retirement or Defeasance of Obligations or Payments on Obligations..................................................53 Section 4.4 Authentication and Delivery of Additional Obligations Upon Basis of Designated Qualifying Securities.......................55 Section 4.5 Authentication and Delivery of Additional Obligations Upon Deposit of Cash with Trustee....................................57 Section 4.6 Withdrawal of Deposited Cash....................................58 Section 4.7 Credit Obligations..............................................59 Section 4.8 Conditional Obligations.........................................60 Section 4.9 RUS Reimbursement Obligations...................................60 Section 4.10 Certain Additional Obligations.................................61 (iii) ARTICLE V RELEASES Section 5.1 Right of Company to Possess and Operate Trust Estate; Dispositions without Release....................................62 Section 5.2 Releases........................................................64 Section 5.3 Eminent Domain..................................................69 Section 5.4 Written Disclaimer of Trustee...................................70 Section 5.5 Powers Exercisable Notwithstanding Event of Default.............70 Section 5.6 Powers Exercisable by Trustee or Receiver.......................70 Section 5.7 Purchaser Protected.............................................71 Section 5.8 Disposition of Collateral on Discharge of Prior Liens...........71 Section 5.9 Disposition of Obligations Received.............................71 ARTICLE VI APPLICATION OF TRUST MONEYS Section 6.1 "Trust Moneys" Defined..........................................72 Section 6.2 Withdrawal on Basis of Bondable Additions.......................72 Section 6.3 Withdrawal on Basis of Retirement or Defeasance of Obligations or Payments on Obligations..........................73 Section 6.4 Withdrawal on Basis of Designated Qualifying Securities.........73 Section 6.5 Retirement of Obligations or Payments on Obligations............74 Section 6.6 Withdrawal of Insurance Proceeds................................75 Section 6.7 Amounts under $25,000...........................................78 Section 6.8 Powers Exercisable Notwithstanding Default......................78 Section 6.9 Powers Exercisable by Trustee or Receiver.......................79 Section 6.10 Disposition of Obligations Retired..............................79 ARTICLE VII DEFEASANCE Section 7.1 Termination of Company's Obligations............................79 Section 7.2 Application of Deposited Money and Money From Defeasance Securities...........................................82 Section 7.3 Repayment to Company............................................82 Section 7.4 Reinstatement...................................................83 (iv) ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES Section 8.1 Events of Default...............................................83 Section 8.2 Acceleration of Maturity; Rescission and Annulment..............85 Section 8.3 Entry...........................................................86 Section 8.4 Power of Sale; Suits for Enforcement............................86 Section 8.5 Incidents of Sale...............................................87 Section 8.6 Covenant to Pay Trustee Amounts Due on Obligations and Right of Trustee to Judgment..........................................88 Section 8.7 Application of Money Collected..................................88 Section 8.8 Receiver........................................................90 Section 8.9 Trustee May File Proofs of Claim................................90 Section 8.10 Trustee May Enforce Claims Without Possession of Obligations....91 Section 8.11 Limitation on Suits.............................................91 Section 8.12 Unconditional Right of Holders to Receive Principal, Premium and Interest....................................................92 Section 8.13 Restoration of Positions........................................92 Section 8.14 Rights and Remedies Cumulative..................................92 Section 8.15 Delay or Omission Not Waiver....................................92 Section 8.16 Control by Holders..............................................93 Section 8.17 Waiver of Past Defaults.........................................93 Section 8.18 Undertaking for Costs...........................................94 Section 8.19 Waiver of Appraisement and Other Laws...........................94 Section 8.20 Suits to Protect the Trust Estate...............................94 Section 8.21 Remedies Subject to Applicable Law..............................95 Section 8.22 Principal Amount of Original Issue Discount Obligation..........95 Section 8.23 Default Not Affecting All Series of Obligations.................95 Section 8.24 Defaults Under Qualifying Securities Indentures.................95 ARTICLE IX THE TRUSTEE Section 9.1 Certain Duties and Responsibilities.............................96 Section 9.2 Notice of Defaults..............................................97 Section 9.3 Certain Rights of Trustee.......................................97 Section 9.4 Not Responsible for Recitals or Issuance of Obligations or Application of Proceeds......................................98 Section 9.5 May Hold Obligations............................................99 Section 9.6 Money Held in Trust.............................................99 Section 9.7 Compensation and Reimbursement..................................99 (v) Section 9.8 Disqualification; Conflicting Interests........................100 Section 9.9 Corporate Trustee Required; Eligibility........................105 Section 9.10 Resignation and Removal; Appointment of Successor..............105 Section 9.11 Acceptance of Appointment by Successor.........................106 Section 9.12 Merger, Conversion, Consolidation or Succession to Business....107 Section 9.13 Preferential Collection of Claims against Company..............107 Section 9.14 Co-trustees and Separate Trustees..............................111 Section 9.15 Authenticating Agent...........................................112 ARTICLE X HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 10.1 Company to Furnish Trustee Semi-Annual Lists of Holders........113 Section 10.2 Preservation of Information; Communications to Holders.........114 Section 10.3 Reports by Trustee.............................................115 Section 10.4 Reports by Company.............................................117 ARTICLE XI CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER Section 11.1 Consolidation, Merger, Conveyance or Transfer only on Certain Terms..........................................118 Section 11.2 Successor Person Substituted...................................118 ARTICLE XII SUPPLEMENTAL INDENTURES Section 12.1 Supplemental Indentures Without Consent of Holders.............120 Section 12.2 Supplemental Indentures With Consent of Holders................122 Section 12.3 Execution of Supplemental Indentures...........................123 Section 12.4 Effect of Supplemental Indentures..............................123 Section 12.5 Conformity with Trust Indenture Act............................124 Section 12.6 Reference in Obligations to Supplemental Indentures............124 (vi) ARTICLE XIII COVENANTS Section 13.1 Payment of Principal, Premium and Interest.....................124 Section 13.2 Maintenance of Office or Agency................................124 Section 13.3 Money for Obligation Payments to be Held in Trust; Repayment of Unclaimed Money...................................124 Section 13.4 Ownership of Property..........................................126 Section 13.5 After-Acquired Property; Further Assurances; Recording.........126 Section 13.6 Limitations on Liens; Payment of Taxes.........................127 Section 13.7 Maintenance of Properties......................................129 Section 13.8 To Insure......................................................129 Section 13.9 Corporate Existence............................................130 Section 13.10 To Keep Books; Inspection by Trustee...........................130 Section 13.11 Use of Trust Moneys and Advances by Trustee....................130 Section 13.12 Statement as to Compliance.....................................130 Section 13.13 Waiver of Certain Covenants....................................131 Section 13.14 Rate Covenant..................................................131 Section 13.15 Distributions to Members.......................................131 Section 13.16 Restriction on Short-Term Indebtedness.........................132 Section 13.17 Limitation on Certain Cash Investments.........................132 ARTICLE XIV REDEMPTION OF OBLIGATIONS; SINKING FUNDS Section 14.1 Applicability of Sections 14.1 Through 14.7....................133 Section 14.2 Election to Redeem; Notice to Trustee..........................133 Section 14.3 Selection by Trustee of Obligations to be Redeemed.............133 Section 14.4 Notice of Redemption...........................................134 Section 14.5 Deposit of Redemption Price....................................135 Section 14.6 Obligations Payable on Redemption Date.........................135 Section 14.7 Obligations Redeemed in Part...................................135 Section 14.8 Applicability of Sections 14.8 Through 14.10...................136 Section 14.9 Satisfaction of Sinking Fund Payments with Obligations.........136 Section 14.10 Redemption of Obligations for Sinking Fund.....................136 (vii) ARTICLE XV CONTROL OF PLEDGED SECURITIES Section 15.1 Pledged Securities Deposited with Trustee......................137 Section 15.2 Form of Holding................................................137 Section 15.3 Right of Trustee to Preserve Issuers; Directors' Qualifying Shares..............................................138 Section 15.4 Income Before Event of Default.................................138 Section 15.5 Income After Event of Default..................................138 Section 15.6 Principal and Other Payments...................................139 Section 15.7 Voting.........................................................139 Section 15.8 Limitations on Issue of Voting Stock or Grant of Membership Interests of Pledged Subsidiaries...................140 Section 15.9 Increase, Reduction or Reclassification of Stock; Dissolution; Consolidation, etc................................140 Section 15.10 Enforcement....................................................141 Section 15.11 Acquisition of Property of Issuers of Pledged Securities. .....142 Section 15.12 Reorganization.................................................142 Section 15.13 Renewal and Refunding..........................................143 Section 15.14 Expenses.......................................................143 Section 15.15 Opinion of Counsel.............................................143 ARTICLE XVI QUALIFYING SECURITIES; QUALIFYING SECURITIES INDENTURES Section 16.1 Registration and Ownership of Designated Qualifying Securities.....................................................144 Section 16.2 Payments on Qualifying Securities..............................144 Section 16.3 Surrender or Redesignation of Designated Qualifying Securities.....................................................145 Section 16.4 No Transfer of Qualifying Securities...........................146 Section 16.5 Voting of Qualifying Securities................................146 Section 16.6. Reorganization.................................................146 Exhibit A Schedule of Conveyed Property Exhibit B Schedule of Certain Excepted Properties Exhibit C Schedule of Existing Obligations Exhibit D Schedule of Certain Pledged Contracts (viii) THIS INDENTURE, dated as of March 1, 1997, is between OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized and existing under the laws of the State of Georgia, as Grantor (hereinafter called the "Company"), and SUNTRUST BANK, ATLANTA, a banking corporation organized and existing under the laws of the State of Georgia, as Trustee (hereinafter called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized and issued the Existing Obligations (as hereinafter defined) and has duly authorized the creation, execution and delivery from time to time after the date hereof of its notes, bonds and other obligations of substantially the tenor hereinafter provided, issuable in one or more series (hereinafter called the "Additional Obligations"; the Existing Obligations and the Additional Obligations hereinafter called, collectively, the "Obligations"); and to secure the Obligations and provide for the authentication of the Existing Obligations by the Trustee on the date hereof and the authentication and delivery of the Additional Obligations by the Trustee from time to time, the Company has duly authorized the execution and delivery of this Indenture. All things have been done which are necessary to make the Existing Obligations and, when duly executed and issued by the Company and authenticated and delivered by the Trustee hereunder, the Additional Obligations the valid obligations of the Company, and to constitute this Indenture a valid deed to secure debt and a security agreement and contract for the security of the Obligations, in accordance with the terms of the Obligations and this Indenture. GRANTING CLAUSES NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, to secure the payment of the principal of (and premium, if any) and interest on the Outstanding Secured Obligations (as hereinafter defined) and the performance of the covenants therein and herein contained and to declare the terms and conditions on which the Outstanding Secured Obligations are secured, and in consideration of the premises and of the purchase of, or loans and other obligations evidenced by, the Obligations, the Company by these presents does grant, bargain, sell, alienate, remise, release, convey, assign, transfer, mortgage, hypothecate, pledge, set over and confirm to the Trustee, and its successors and assigns in the trust created hereby, in trust, all property, rights, privileges and franchises of the Company (except any Excepted Property (as hereinafter defined) and any Excludable Property (as hereinafter defined)) of every kind and description, real, personal or mixed, tangible or intangible, whether now owned or hereafter acquired by the Company, wherever located, and including all and singular the following described property, and does grant a security interest therein for the purposes herein expressed, subject in all cases to Sections 5.2 and 11.2B and to the rights of the Company under this Indenture, including the rights set forth in Article V: 1 GRANTING CLAUSE FIRST A. All fee, leasehold and other interests in real property described in Exhibit A attached hereto, subject in each case to the restrictions, exceptions, reservations, terms, conditions, agreements, covenants, limitations, interests and other matters of record on the date hereof; B. All fixtures, easements, permits, licenses and rights-of-way comprising real property and all other interests in real property comprising any portion of the System (as hereinafter defined), but excluding any such property relating solely to Excludable Property; and C. All contracts of the Company (i) that relate to the ownership, operation or maintenance of any electric generation, transmission or distribution facility owned, whether solely or jointly, by the Company, (ii) for the management or operation of all or substantially all of the System; (iii) for the purchase or sale of electric power and energy by the Company and having an original term in excess of one (1) year, including, without limitation, all rights of the Company in and to the contracts listed on Exhibit D attached hereto, (iv) for the transmission of electric power and energy by or on behalf of the Company and having an original term in excess of one (1) year, and (v) for pooling or other power supply arrangements and having an original term in excess of one (1) year, including in respect of any of the foregoing, any amendments, supplements, restatements, consolidations and replacements thereto, but excluding any of such contracts (a) that relate substantially to a facility or other property that constitutes Excludable Property or the output of such Excludable Property, or (b) for the purchase of electric power and energy by the Company for which the seller has no recourse, directly or indirectly, to the general credit of the Company, or (c) for the resale of the electric power and energy purchased pursuant to a contract described in the immediately preceding clause (b). GRANTING CLAUSE SECOND All other property, rights, privileges and franchises of the Company of every kind and description, real, personal or mixed, tangible or intangible, whether now owned or hereafter acquired by the Company, wherever located, including, without limitation, goods (including equipment, fuel, materials and supplies, but excluding electricity), accounts, contracts of the type and duration set forth in Subdivision C of Granting Clause First, Trust Moneys (as hereinafter defined), Designated Qualifying Securities (as hereinafter defined), general intangibles, and real property and interests in real property located in any of the counties in which any property described in Subdivision A or B of Granting Clause First is located, but excluding Excepted Property and Excludable Property, it being the intention hereof that all of such property, rights, privileges and franchises now owned by the Company or acquired by the Company after the date hereof (other than Excepted Property and Excludable Property) shall be as fully embraced within and subjected to the lien hereof as if such property were specifically described herein. 2 GRANTING CLAUSE THIRD Also any Excepted Property or Excludable Property that may, from time to time hereafter, by delivery or by writing of any kind, be subjected to the lien hereof by the Company or by anyone in its behalf; and the Trustee is hereby authorized to receive the same at any time as additional security hereunder. Such subjection to the lien hereof of any Excepted Property or Excludable Property as additional security may be made subject to any reservation, limitation or condition which shall be set forth in a written instrument executed by the Company or the person so acting in its behalf or by the Trustee respecting the ownership, use and disposition of such property or the proceeds thereof. GRANTING CLAUSE FOURTH Together with (other than Excepted Property and Excludable Property) all and singular the tenements, hereditaments and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and all the rents, issues, profits, revenues and other income, products and proceeds of the property subjected or required to be subjected to the lien of this Indenture, all buildings, improvements, plants, systems, works, structures, electric power plants, stations and substations, powerhouses, electric transmission and distribution lines and systems, conduits, towers, poles, wires, cables, meters, office buildings, warehouses, garages, sheds, shops, and all other structures and buildings, machinery, engines, boilers, dynamos, generators, turbines, fuel handling and transportation facilities and devices, air and water pollution control and sewage and solid waste disposal facilities, transformers, electric and mechanical appliances, tools and other equipment, apparatus, appurtenances, and all other property of any nature appertaining to any of the electric utility plants, systems, business or operations of the Company, whether or not affixed to the realty, used in the operation of any of the premises or plants or the System, or otherwise, which are now owned or hereafter acquired by the Company, and all the estate, right, title and interest of every nature whatsoever, at law as well as in equity, of the Company in and to the same and every part thereof. EXCEPTED PROPERTY There is, however, expressly excepted and excluded from the lien and operation of this Indenture the following described property of the Company, now owned or hereafter acquired (herein sometimes referred to as "Excepted Property"): A. all cash on hand or in banks or other financial institutions (excluding proceeds of the Trust Estate in which the security interest created by the Indenture continues to be perfected pursuant to the Uniform Commercial Code, for so long as such perfection continues, and also excluding amounts deposited or required to be deposited with the Trustee pursuant to the Indenture) claims, choses in action and judgments, contracts and contract rights (except to the extent set forth in Granting Clause First), shares, stocks, interests, participations or other equivalents (including, without limitation, any interest of the Company in the National Rural Utilities Cooperative Finance 3 Corporation or in CoBank, ACB, but excluding shares of stock or other ownership interests of the Company in any Subsidiary then issuing Designated Qualifying Securities), Undesignated Qualifying Securities (as hereinafter defined), allowances for emissions or similar rights granted by any governmental authority, bonds, notes, repurchase agreements, evidences of indebtedness and other securities and instruments, bills, patents, patent licenses and other patent rights, patent applications, service marks, trade names and trademarks, other than (i) Pledged Securities (as hereinafter defined), (ii) Designated Qualifying Securities and (iii) any other property referred to in this paragraph which is specifically described in Granting Clause First or is by the express provisions of this Indenture subjected or required to be subjected to the lien hereof; B. all automobiles, buses, trucks, truck cranes, tractors, trailers, rolling stock, railcars and similar vehicles and movable equipment, and all parts, tools, accessories and supplies used in connection with any of the foregoing; C. all vessels, boats, barges and other marine equipment, all airplanes, airplane engines and other flight equipment, and all parts, tools, accessories and supplies used in connection with any of the foregoing; D. all goods, inventory, wares and merchandise acquired or produced for the purpose of resale in the ordinary course of business, all materials and supplies and other personal property, other than fuel, which are consumable (otherwise than by ordinary wear and tear) in their use in the operation of the business of the Company, and all hand and other portable tools and equipment; E. all office furniture, equipment and supplies and all data processing, accounting and other computer equipment, software and supplies; F. all leasehold interests of the Company (for other than office purposes) under leases for an original term (including any period for which the Company shall have a right of renewal) of less than five (5) years; G. all leasehold interests for office purposes; H. all timber separated from the land included in the Trust Estate (as hereinafter defined) and all coal, ore, gas (natural or otherwise), oil and other minerals, mined, extracted or otherwise separated from the land included in the Trust Estate and all electric energy, gas, steam, water and other products generated, produced or purchased; I. the last day of the term of each leasehold estate (oral or written) and any agreement therefor, now or hereafter enjoyed by the Company and whether falling within a general or specific description of property herein; PROVIDED, HOWEVER, that the Company covenants and agrees that it will hold each such last day in trust for the use and benefit of the Holders; J. all permits, licenses, franchises, leases, contracts, agreements, contract rights and other rights not specifically subjected or required to be subjected to the lien hereof by the express provisions of this Indenture, whether now owned or hereafter acquired by the Company, which by 4 their terms or by reason of applicable law would become void or voidable if granted, conveyed, mortgaged, transferred, assigned or pledged hereunder by the Company or which cannot be granted, conveyed, mortgaged, transferred, assigned or pledged by this Indenture without the consent of other parties whose consent is not secured, or without subjecting the Trustee to a liability not otherwise contemplated by the provisions of this Indenture, or the granting, conveying, mortgaging, transferring or assigning of which would result in a breach or a default thereof or would permit the termination or cancellation thereof, or which otherwise may not be hereby lawfully and effectively granted, conveyed, mortgaged, transferred and assigned by the Company; K. all property, real, personal and mixed, which is: (i) located outside the State of Georgia; (ii) not specifically described in the Granting Clauses; (iii) not specifically subjected or required to be subjected to the lien of this Indenture by any provision hereof; and (iv) not part of or used or for use in connection with any property specifically subjected or required to be subjected to the lien hereof by the express provisions of this Indenture; L. all personal property located outside the State of Georgia in which a security interest cannot be perfected solely by the filing of a financing statement under the Uniform Commercial Code; M. any personal property in which a security interest cannot be lawfully perfected under the laws of the United States or of any state or in which the grant of a security interest would in the Opinion of Counsel be prohibited by applicable law; N. all property released pursuant to the last paragraph of Section 5.2; O. all nuclear fuel located outside the State of Georgia; and P. the property described on Exhibit B; PROVIDED, HOWEVER, that if, upon the occurrence of an Event of Default (as hereinafter defined), the Trustee, or any separate trustee or co-trustee appointed under Section 9.14 or any receiver appointed pursuant to statutory provision or order of court, shall have entered into possession of all or substantially all of the Trust Estate, all the Excepted Property described or referred to in the foregoing paragraphs A through H, inclusive, then owned or thereafter acquired by the Company, shall immediately, and, in the case of any Excepted Property described or referred to in paragraphs I, J, L, N and O, upon demand of the Trustee or such other trustee or receiver, become subject to the lien hereof to the extent permitted by law, and the Trustee or such other trustee or receiver may, to the extent permitted by law, at the same time likewise take possession thereof, and whenever all Events of Default shall have been cured and the possession of all or substantially all of 5 the Trust Estate shall have been restored to the Company, such Excepted Property shall again be excepted and excluded from the lien hereof to the extent and otherwise as hereinabove set forth. EXCLUDABLE PROPERTY There is also, however, expressly excepted and excluded from the lien and operation of this Indenture all Excludable Property, now owned or hereafter acquired. The Company may, however, pursuant to Granting Clause Third, subject to the lien of this Indenture any Excepted Property or Excludable Property, whereupon the same shall cease to be Excepted Property or Excludable Property. TO HAVE AND TO HOLD all such property, rights, privileges and franchises hereby and hereafter (by Supplemental Indenture (as hereinafter defined) or otherwise) granted, bargained, sold, alienated, remised, released, conveyed, assigned, transferred, mortgaged, hypothecated, pledged, set over or confirmed as aforesaid, or intended, agreed or covenanted so to be, together with all the tenements, hereditaments and appurtenances thereto appertaining (said properties, rights, privileges and franchises, including any cash and securities hereafter deposited or required to be deposited with the Trustee (other than any such cash which is specifically stated herein not to be deemed part of the Trust Estate) being herein collectively called the "Trust Estate"), unto the Trustee, and its successors and assigns in the trust herein created, forever. SUBJECT, HOWEVER, to (i) Permitted Exceptions (as hereinafter defined) and (ii) to the extent permitted by Section 13.6 as to property hereafter acquired (a) any duly recorded or perfected prior mortgage or other lien that may exist thereon at the date of the acquisition thereof by the Company and (b) purchase money mortgages, other purchase money liens, chattel mortgages, conditional sales agreements or other title retention agreements created by the Company at the time of acquisition thereof. BUT IN TRUST, NEVERTHELESS, with power of sale, for the equal and proportionate benefit and security of the Holders (as hereinafter defined) from time to time of all the Outstanding Secured Obligations without any priority of any such Obligation over any other such Obligation and for the enforcement of the payment of such Obligations in accordance with their terms. UPON CONDITION that, until the happening of an Event of Default and subject to the provisions of Article V, and not in limitation of the rights elsewhere provided in this Indenture, including the rights set forth in Article V, the Company shall be permitted to (i) possess and use the Trust Estate, except cash, securities, Designated Qualifying Securities and other personal property deposited, or required to be deposited, with the Trustee, (ii) explore for, mine, extract, separate and dispose of coal, ore, gas, oil and other minerals, and harvest standing timber, and (iii) receive and use the rents, issues, profits, revenues and other income, products and proceeds of the Trust Estate. THIS INDENTURE is intended to operate and is to be construed as a deed passing title to the Trust Estate and is made under the provisions of the existing laws of the State of Georgia relating to deeds to secure debt, and not as a mortgage or deed of trust, and is given to secure the 6 Outstanding Secured Obligations. Should the indebtedness secured by this Indenture be paid according to the tenor and effect thereof when the same shall become due and payable and should the Company perform all covenants herein contained in a timely manner, then this Indenture shall be canceled and surrendered. AND IT IS HEREBY COVENANTED AND DECLARED that all the Existing Obligations are to be authenticated, the Additional Obligations are to be authenticated and delivered, the Outstanding Secured Obligations are to be secured and the Trust Estate is to be held and applied by the Trustee, subject to the further covenants, conditions and trusts hereinafter set forth, and the Company does hereby covenant and agree to and with the Trustee, for the equal and proportionate benefit of all Holders of the Outstanding Secured Obligations, as follows: ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.1 Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: A. The terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular. B. At any time at which this Indenture is qualified or required to be qualified under the TIA (as hereinafter defined), all other terms used herein which are defined in the TIA either directly or by reference therein, have the meanings assigned to them therein. C. All accounting terms not otherwise defined herein have the meanings assigned to them, and all determinations and computations herein provided for shall be made, in accordance with Accounting Requirements (as hereinafter defined), and the express reference to "Accounting Requirements" with respect to certain terms, determinations or computations shall not imply that other terms, determinations and computations shall not be defined or made in accordance with "Accounting Requirements." D. All references herein to "Accounting Requirements" refer to such requirements as of the date of such determination or computation or, at the election of the Company from time to time, as of the date of the execution and delivery of this Indenture. E. The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. 7 F. The words "include" and "including" shall not be terms of limitation, and shall in all cases, whether or not expressly provided, be read to be "include, without limitation," and "including, without limitation," respectively. Certain terms used principally in Article IX are defined in that Article. "Accountant" means a Person engaged in the practice of accounting who (except as otherwise expressly provided in this Indenture) may be employed by or affiliated with the Company and who need not be independent, certified, licensed or public. "Accounting Requirements" means the requirements of the system of accounts prescribed by RUS so long as RUS is the Holder of any Obligation; PROVIDED, HOWEVER, that if the Company is specifically required by FERC to employ the system of accounts prescribed by FERC, then "Accounting Requirements" means the system of accounts prescribed by FERC; PROVIDED, FURTHER, HOWEVER, that if RUS is not a Holder of any Obligation or, if a Holder, RUS does not prescribe a system of accounts applicable to the Company, and the Company is not specifically required by FERC to employ the system of accounts prescribed by FERC, or FERC does not prescribe a system of accounts applicable to the Company, then "Accounting Requirements" means the requirements of generally accepted accounting principles applicable to similar entities conducting business similar to that of the Company. Generally accepted accounting principles refers to a common set of accounting standards and procedures that are either promulgated by an authoritative accounting rulemaking body or accepted as appropriate due to wide-spread application in the United States. "acquired" means to acquire by purchase, exchange, construction, consolidation, conveyance, transfer or otherwise. The terms "acquired," "acquiring" and "acquisition" have meanings correlative to the foregoing. "Acquired Facility" means any property which, within six (6) months prior to the date of its acquisition by the Company, has been used or operated by a Person or Persons other than the Company for a purpose similar to that in which such property has been or is to be used or operated by the Company. "Act" when used with respect to any Holder or Holders has the meaning stated in Section 1.2. "Additional Obligations" has the meaning stated in the first recital of this Indenture and includes any Obligation authenticated and delivered hereunder after the date hereof. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" of any specified Person means the power to direct the management and policies of such specified Person, directly or indirectly, whether through the ownership of voting 8 securities or membership interests, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Amount of Property Additions" or "Amount" as applied to any Property Additions means the Cost to the Company of such Property Additions or the Fair Value to the Company of such Property Additions, whichever is less. "Application" means an application for the authentication and delivery of Additional Obligations, the advance or issuance of any unadvanced or unissued portion of any Conditional Obligation or series of Obligations, the release of property, the withdrawal of cash or the surrender or redesignation of Designated Qualifying Securities under any provision of this Indenture and shall consist of, and shall not be deemed complete until there shall have been delivered to the Trustee, such cash, Obligations, Designated Qualifying Securities, securities and documents as are required by such provision to establish the right of the Company to the action applied for. The date of a particular Application shall be deemed to be the date of completion of all such deliveries to the Trustee and not the date on any particular document so delivered. "Appraiser" means a Person regularly engaged in the business of appraising property who (except as otherwise expressly provided in this Indenture) may be employed by or affiliated with the Company. "Authenticating Agent" when used with respect to any particular series of Obligations means any Person named as Authenticating Agent for said series in the provisions of this Indenture creating said series until a successor Authenticating Agent therefor becomes such pursuant thereto, and thereafter "Authenticating Agent" shall mean such successor. "Available Margins Certificate" means an Officers' Certificate, dated not more than thirty (30) days prior to the date of the related Application, and signed by, in addition to the two Officers signing the same, a Person, who may be one of such Officers, signing as an Accountant, stating that: A. the Margins for Interest for either (i) the most recent fiscal year of the Company for which the Company is required (or would be required if this Indenture were required to be qualified under the TIA) to have provided to the Trustee, on or before the date of the related Application, financial statements pursuant to Section 10.4, or (ii) any twelve (12) consecutive calendar months during the period of eighteen (18) calendar months immediately preceding the first day of the calendar month in which the relevant Application is made, are not less than 1.10 times the Interest Charges during such fiscal year or other twelve (12) month period; PROVIDED, HOWEVER, that if such fiscal year is either the fiscal year ending December 31, 1995 or December 31, 1996, then, in lieu of Margins for Interest, stating that the Times Interest Earned Ratio (as defined in the Existing Mortgage) is not less than 1.05 for such fiscal year; and B. the Margins for Interest have been calculated in accordance with the definitions contained in this Section; PROVIDED, HOWEVER, that if the applicable certification in paragraph A above is of the Times Interest Earned Ratio and not Margins for 9 Interest, stating that the Times Interest Earned Ratio has been calculated in accordance with the definitions contained in the Existing Mortgage. If any period of twelve (12) months referred to in such Available Margins Certificate has been a period with respect to which an annual report is required (or would be required if this Indenture were required to be qualified under the TIA) to be provided by the Company pursuant to Section 10.4, such Certificate shall be accompanied by an Independent Accountant's Certificate stating in substance that nothing came to the attention of such Accountant in connection with the audit of such period which would lead such Accountant to believe that there was any incorrect or inaccurate statement in such Certificate. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of such board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Bondable Additions" means the excess of (i) the Amount of Property Additions over (ii) the amount of Retirements (less credits thereto), computed in accordance with Section 4.2 and certified as Bondable Additions in the Summary of Certificate as to Bondable Additions then being filed in accordance with Section 4.2. "Bondable Property" means all Property Additions, and all property owned by the Company on the Cut-Off Date which would constitute Property Additions if acquired after that date (except for the requirement to deliver Title Evidence with respect to such property). "Book-Entry System" means that system whereby the clearance and settlement of transactions in Obligations held in such system is made through electronic book-entry changes, thereby eliminating the need for physical movement of Obligations certificates or other instruments. "Capital Assets Lease" has the meaning stated in Section 6.6. "Cede & Co." means Cede & Co., as nominee for DTC, and any successor nominee of DTC. "Certificate as to Bondable Additions" means an Officers' Certificate, dated not more than thirty (30) days prior to the date of the related Application, complying with the requirements of Section 4.2 and signed, in addition to the two Officers signing the same as officers, by a Person, who may be one of such Officers, signing as an Engineer or an Appraiser and a Person, who may be one of such Officers, signing as an Accountant. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or if at any time after the execution of this instrument such Commission is not existing and performing the duties theretofore assigned to it under the TIA, then the body performing such duties at such time. 10 "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter, except to the extent otherwise contemplated by Section 11.2B, "Company" shall mean such successor Person. "Company Consent," "Company Order" and "Company Request" mean, respectively, a written consent, order or request signed in the name of the Company by an Officer of the Company, and delivered to the Trustee. "Conditional Obligations" has the meaning stated in Section 4.8. "Cost to the Company" of Property Additions means the actual cost of acquisition thereof by the Company determined in accordance with Accounting Requirements. Such cost of acquisition shall include capitalized interest and other expenses (including, without limitation, taxes, engineering costs and expenses, legal costs and expenses, allocated administrative charges, insurance, casualties and supervisory fees and expenses) relating to such acquisition and properly chargeable to the Company's property accounts in accordance with Accounting Requirements. When the consideration for Property Additions consists (in whole or in part) of property or securities, the fair market value of such consideration (as of the date of the transfer and delivery thereof) shall be deemed the equivalent of cash in the determination of cost. The Cost to the Company of any Property Additions acquired as an Acquired Facility shall include the cost to the Company of any franchises, contracts, operating agreements and other rights and Non-Bondable Property simultaneously acquired with, and related to, such Property Additions, for which no separate or distinct consideration shall have been paid or apportioned; and, except in such case, the Cost to the Company of any property, only part of which constitutes Property Additions and all of which is acquired for a single consideration, shall be properly allocated in the Certificate as to Bondable Additions in which such Property Additions are certified to the Trustee. In the case of Property Additions consisting of property owned by a successor corporation at the time it shall have become such by consolidation, merger, conveyance or transfer as provided in Article XI, or acquired by it by such consolidation, merger, conveyance or transfer, the Cost to the Company shall be the gross amount at which such property is recorded in the plant or property accounts (exclusive of any amounts carried in plant or property adjustment accounts) on the books of such successor corporation, or the constituent or predecessor corporation from which such property was acquired, immediately prior to such consolidation, merger, conveyance or transfer, less related reserves for depreciation, depletion, obsolescence, refinements and amortization as of that date. "Credit Enhancement" means, with respect to any Obligation, the provision of an insurance policy, letter of credit, surety bond or any other undertaking, whereby the provider thereof becomes unconditionally obligated to pay when due, to the extent not paid by the Company or otherwise, the principal of and interest on such Obligation or on another obligation the payment on which is (i) secured by such Obligation or (ii) credited against the principal and interest due on such Obligation. "Credit Enhancer" means any Person that, pursuant to this Indenture or a Supplemental Indenture, is designated as a Credit Enhancer and which provides Credit Enhancement. 11 "Credit Obligations" has the meaning stated in Section 4.7. "Cut-Off Date" means March 1, 1997. "Defaulted Interest" has the meaning stated in Section 3.9. "Defeasance Securities" means and includes any of the following securities, if and to the extent the same are not subject to redemption or call prior to maturity by anyone other than the holder thereof and are at the time legal for investment of the Company's funds: A. any bonds or other obligations which as to principal and interest constitute direct obligations of, or are unconditionally guaranteed by, the United States of America; and B. any certificates or any other evidences of an ownership interest in obligations or in specified portions thereof (which may consist of specified portions of the interest thereon) of the character described in paragraph A above. "Deposited Cash" has the meaning stated in Section 4.5. "Designated Qualifying Securities" means, as of the date of determination, such Qualifying Securities held by the Trustee which have been designated by the Company (i) pursuant to Section 4.4 as the basis for the issuance and delivery of Additional Obligations, (ii) pursuant to Section 4.6 as the basis for the withdrawal of Deposited Cash, (iii) pursuant to Section 4.8 as the basis for the advance or issuance of any unadvanced or unissued portion of any Conditional Obligation or series of Conditional Obligations, (iv) pursuant to Section 5.2 as the basis for the release of property, (v) pursuant to Section 6.4 as the basis for the withdrawal of Trust Moneys or (vi) pursuant to Section 16.3B as the basis for surrender or redesignation of other Designated Qualifying Securities; subject in all such cases to redesignation or surrender thereof pursuant to Section 16.3. "Distribution" has the meaning stated in Section 13.15. "DTC" means The Depository Trust Company, a limited purpose trust company organized under the laws of the State of New York, and its successors and assigns. "DTC Participant" means a broker-dealer, bank or other financial institution for which DTC holds Obligations. "Engineer" means a Person regularly engaged in the engineering profession who (except as otherwise expressly provided in this Indenture) may be employed by or affiliated with the Company and who need not be independent, certified or licensed. "Event of Default" has the meaning stated in Section 8.1 or in any Supplemental Indenture. An Event of Default shall "exist" if an Event of Default shall have occurred and be continuing. 12 "Excepted Property" has the meaning stated in the Granting Clauses hereof. "Excludable Property" means property with respect to which an Officers' Certificate has been delivered to the Trustee pursuant to paragraph (5) of the definition of "Property Additions" below, the output of such property, and all property rights, privileges and franchises of every kind and description, real, personal or mixed, tangible or intangible, whether now owned or hereafter acquired by the Company, wherever located, including, without limitation, goods (including equipment, fuel, materials and supplies), accounts and general intangibles, relating solely to such certified property or the output of such property. "Existing Mortgage" means that certain Consolidated Mortgage and Security Agreement, dated as of September 1, 1994, between the Company, as mortgagor, and United States of America, acting through the Administrator of RUS, as successor to the Rural Electrification Administration, CoBank, ACB, as successor to the National Bank for Cooperatives, Credit Suisse, acting by and through its New York Branch, and SunTrust Bank, Atlanta, as successor to Trust Company Bank, in its capacity as trustee under certain indentures identified therein, as mortgagees. "Existing Obligations" means the promissory notes and other obligations identified on Exhibit C attached hereto and authenticated by the Trustee, pursuant to Section 2.1, and any amendments, supplements, extensions, replacements or restatements thereof consistent with Section 3.2(a). "Fair Value to the Company" means, when used with respect to any particular Property Additions, the fair value thereof to the Company, determined as of the date of the Company's acquisition of such Property Additions and in accordance with the provisions of this Indenture; PROVIDED, HOWEVER, that the "Fair Value to the Company" of Property Additions that would not constitute Property Additions but for satisfaction of the conditions set forth in clauses (i) and (ii) of paragraph (4) of the definition of "Property Additions" set forth below shall not exceed the product obtained by multiplying the Fair Value to the Company of such Property Additions (determined as if the remaining term of the leasehold interest to which such property relates were equal to the useful economic life of such property) by a fraction, the numerator of which shall be the remaining term of the leasehold interest to which such property relates (including any periods for which the Company has the option to extend or renew such leasehold interest) as of the date of the Application and the denominator of which is the useful economic life of such Property Additions; and PROVIDED, FURTHER, that the "Fair Value to the Company" of Property Additions that would not constitute Property Additions but for satisfaction of the conditions set forth in clause (ii) of paragraph C of the definition of "Property Additions" shall take into account any irrevocable deposit by the Company of cash or securities (which securities must be rated by any nationally recognized statistical rating organization the higher of (1) "A" or (2) as high as any series of Obligations are rated) in a fund or funds for the exclusive purposes of discharging or securing the Company's obligations to make rental payments and payments of a fixed price purchase option under any such lease. The Fair Value to the Company of any particular Property Additions subject to a lien constituting a Permitted Encumbrance or permitted by the proviso to Section 5.2D(2), shall be determined as if such property were free of such lien. 13 "FERC" means the Federal Energy Regulatory Commission, or any agency or other governmental body succeeding to the functions thereof. "Holder" when used with respect to any Obligation means the Person in whose name such Obligation is registered in the Obligation Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented, modified or amended by one or more indentures or other instruments supplemental hereto (including Supplemental Indentures) entered into pursuant to the applicable provisions hereof. "Independent" when used with respect to any specified Person means such a Person who (i) is in fact independent, (ii) does not have any direct financial interest or any material indirect financial interest in the Company or in any other obligor upon the Obligations or in any Affiliate of the Company or of such other obligor and (iii) is not connected with the Company or such other obligor as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. Whenever it is herein provided that any Independent Person's opinion or certificate shall be furnished to the Trustee, such opinion or certificate shall state that the signer has read this definition and that the signer is Independent within the meaning thereof. "Interest Charges" for any period means the total interest charges (whether capitalized or expensed) of the Company for such period (determined in accordance with Accounting Requirements) with respect to interest accruing on (i) Outstanding Obligations the obligation for the payment of which is secured under this Indenture, or (ii) outstanding Prior Lien Obligations, in all cases including amortization of debt discount and premium on issuance, but excluding all interest charges with respect to interest accruing on (a) Obligations authenticated and delivered on the basis of Qualifying Securities issued by a wholly-owned Subsidiary of the Company if such Subsidiary is required under such Qualifying Securities Indenture to earn Margins for Interest of not less than 1.10 times Interest Charges under a rate covenant substantially identical in substance to Section 13.14, and (b) Obligations the payment of which has been assumed by, and which have been paid by, Georgia Transmission Corporation (An Electric Membership Transmission Corporation) or its successors and assigns; PROVIDED, HOWEVER, that with respect to any calculation of Interest Charges for any period prior to the date hereof, "Interest Charges" means the total interest charges (whether capitalized or expensed) of the Company for such period (determined as provided in the Existing Mortgage) with respect to interest accruing on indebtedness the obligation for the payment of which is secured under the Existing Mortgage or by a lien against property subject to the Existing Mortgage prior to or on a parity with the lien of the Existing Mortgage, other than "Permitted Encumbrances" (as defined in the Existing Mortgage), in all cases including amortization of debt discount and premium on issuance. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Obligations. "Leased Assets" has the meaning stated in Section 6.6. 14 "Margins for Interest" means, for any period, the sum of (i) net margins of the Company for such period (which, except as otherwise provided in this definition, shall be determined in accordance with Accounting Requirements), which shall include revenues of the Company, if any, subject to possible refund at a future date, but which shall exclude provisions for any (a) non-recurring charge to income, whether or not recorded as such on the Company's books, of whatever kind or nature (including, without limitation, the non-recoverability of assets or expenses), except to the extent the Board of Directors determines to recover such non-recurring charge in Rates (as hereinafter defined), and (b) refund of revenues collected or accrued by the Company in any prior year subject to possible refund; plus (ii) Interest Charges; plus (iii) the amount, if any, included in net margins for accruals for Federal and state income and other taxes imposed on income after deduction of interest expense for such period; plus (iv) the amount, if any, included in net margins for any losses incurred by any Subsidiary or Affiliate of the Company; plus (v) the amount, if any, the Company actually receives in such period as a dividend or other distribution of earnings of any Subsidiary or Affiliate (whether or not such earnings were for such period or any earlier period or periods); minus (vi) the amount, if any, included in net margins for any earnings or profits of any Subsidiary or Affiliate of the Company; and minus (vii) the amount, if any, the Company actually contributes to the capital of, or actually pays under a guarantee by the Company of an obligation of, any Subsidiary or Affiliate in such period to the extent of any accumulated losses incurred by such Subsidiary or Affiliate (whether or not such losses were for such period or any earlier periods), but only to the extent (x) such losses have not otherwise caused other contributions or payments to be included in net margins for purposes of computing Margins for Interest for a prior period and (y) such amount has not otherwise been included in net margins. "Maturity" means, when used with respect to any Obligation, the date on which the principal of such Obligation, or any installment thereof, becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration or call for redemption, purchase or prepayment or otherwise; PROVIDED, HOWEVER, any obligation to purchase or otherwise acquire any Additional Obligation from its Holder shall not constitute an undertaking to pay the principal of such Obligation if so provided in the Supplemental Indenture creating such Additional Obligation. "Non-Bondable Property" means any property owned by the Company other than Bondable Property. "Obligation Register" and "Obligation Registrar" have the respective meanings stated in Section 3.7. "Obligations" has the meaning stated in the first recital of this Indenture. "Officer" for purposes of any consent, order, certificate, opinion, request or other action hereunder means the Chairman, Vice Chairman, Secretary, Treasurer, Chief Executive Officer, President, any Senior Vice President or any Vice President of the Company or any other officer or employee of the Company authorized by a Board Resolution to give such consent, order, certificate or opinion, or make such request or perform such action. 15 "Officers' Certificate" means a certificate signed by any two Officers of the Company. Wherever this Indenture requires that an Officers' Certificate be signed also by an Engineer or an Accountant or other expert, such Engineer, Accountant or other expert may (except as otherwise expressly provided in this Indenture) be employed by the Company. "Opinion of Counsel" means a written opinion (or, in the case of matters relating to title or the existence or priority of liens, a written certificate) of counsel who may (except as otherwise expressly provided in this Indenture) be employed by, or be outside counsel to, the Company and who shall be reasonably acceptable to the Trustee. The acceptance by the Trustee of such opinion shall be sufficient evidence that such counsel is reasonably acceptable to the Trustee. "Original Issue Discount Obligation" means any Obligation declared to be an "Original Issue Discount Obligation" in the Supplemental Indenture establishing the series to which such Obligation belongs. "Outstanding" when used with respect to Obligations means, as of the date of determination, all Existing Obligations authenticated under this Indenture and all Additional Obligations authenticated and delivered under this Indenture, except: A. Obligations, or any portion thereof, theretofore canceled by the Trustee or delivered to the Trustee for cancellation or delivered to the Trustee marked canceled, satisfied or otherwise evidenced to the Trustee's satisfaction as paid (and which amount may not be readvanced); B. Obligations for whose payment or redemption money or Defeasance Securities in the necessary amount (such amount to be established by the opinion of a nationally recognized firm of Independent public accountants expressed in a certificate signed by such firm and delivered to the Trustee) has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust, for the Holders of such Obligations, PROVIDED that, if such Obligations are to be redeemed or prepaid, irrevocable notice of such redemption or prepayment has been duly given or other provision therefor satisfactory to the Trustee has been made; C. Obligations which have been paid pursuant to Section 3.8 or in exchange for or in lieu of which other Obligations have been authenticated and delivered pursuant to this Indenture, other than any such Obligations in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Obligations are held by a bona fide purchaser in whose hands such Obligations are valid obligations of the Company; and D. Additional Obligations which have not been sold, pledged or subjected to a security interest and have been surrendered to the Trustee, or which a portion thereof has not been advanced and with respect to such portion any commitment to advance thereunder has terminated, as provided in the last paragraph of Section 4.1; 16 PROVIDED, HOWEVER, that in determining whether the Holders of the requisite principal amount of Obligations Outstanding or the Obligations Outstanding of a series, as the case may be, have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Obligations owned by the Company or any other obligor upon the Obligations or any Affiliate of the Company or of such other obligor (unless the Company, such obligor and such Affiliate or Affiliates own all Obligations Outstanding under this Indenture, or as to matters relating solely to a particular series all Obligations Outstanding of such series, as the case may be, determined without regard to this proviso) shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Obligations which are registered in the name of the Company or an Affiliate of the Company of which the Trustee has been given written notice shall be so disregarded. Obligations so owned which have been pledged in good faith may be regarded as Outstanding for such purposes if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Obligations and that the pledgee is not the Company or any other obligor upon the Obligations or any Affiliate of the Company or of such other obligor. For purposes of the definition of "Outstanding," neither any Credit Enhancer nor RUS shall be an obligor upon the Obligations. "Outstanding" when used with respect to Qualifying Securities, has the meaning contained in the related Qualifying Securities Indenture. "Outstanding Secured Obligations" means, as of the date of determination, (i) all Obligations then Outstanding other than Obligations then owned by the Company or any wholly-owned Subsidiary and held in its treasury and (ii) all Obligations, if any, alleged to have been destroyed, lost or stolen which have been replaced or paid as provided in Section 3.8 but whose ownership and enforceability by the Holder thereof have been established by a court of competent jurisdiction or other competent tribunal or otherwise established to the satisfaction of the Company and the Trustee. "Paying Agent" means the Company and any Person authorized by the Company to pay the principal of (and premium, if any) or interest on any Obligations on behalf of the Company. "Periodic Offering" means an offering of Additional Obligations of a series from time to time any or all of the specific terms of which Additional Obligations, including the rate or rates of interest, if any, thereon, the Stated Maturity or Maturities thereof and the redemption provision, if any, with respect thereto, are to be determined by the Company or its agents at or about the time of the issuance of such Additional Obligations. 17 "Permitted Exceptions" means: A. as to the property described in subdivisions A and B of Granting Clause First, the restrictions, exceptions, reservations, terms, conditions, agreements, leases, subleases, covenants, limitations, interests and other matters which are of record on the date hereof, PROVIDED, that such matters do not materially impair the use of such property for the purposes for which it is held by the Company; B. as to property which the Company may hereafter acquire, any restriction, exception, reservation, term, condition, agreement, covenant, limitation, interest or other matter which is of record on the date of such acquisition or expressed or provided in the deeds or other instruments under which the Company shall acquire the same, PROVIDED, that such matters do not materially impair the use of such property for the purposes for which it is held by the Company; C. liens for taxes, assessments and other governmental charges not delinquent, and ordinances establishing assessments for sewer, lighting or other local improvement districts; D. liens for taxes, assessments and other governmental charges already delinquent which are currently being contested in good faith by appropriate proceedings and with respect to which the Company shall have set aside on its books adequate reserves; E. mechanics', workmen's, repairmen's, materialmen's, warehousemen's, contractors', subcontractors' and carriers' liens and other similar liens arising in the ordinary course of business or incident to current construction for charges which (i) are not delinquent or (ii) are being contested in good faith and have not proceeded to judgment and with respect to which the Company shall have set aside on its books adequate reserves; F. liens in respect of judgments or awards with respect to which there exists a stay of execution pending such appeal or proceedings for review and with respect to which the Company shall in good faith currently be prosecuting an appeal or proceedings for review and shall have set aside on its books adequate reserves; G. easements and rights granted by the Company under Section 5.1D and similar rights granted by any predecessor in title of the Company; H. easements, leases, restrictions, rights-of-way, exceptions, reservations or other rights of others in any property of the Company for streets, roads, expressways, bridges, pipes, pipe lines, railroads, towers, poles, wires, conduits, mains, metering stations, electric, electronic, optical, or other power or signal transmission and distribution lines, telecommunications and telephone lines, the removal of oil, gas, coal or other minerals, and other similar purposes, flood rights, river control and development rights, sewage and drainage rights, restrictions against pollution and zoning laws and defects and irregularities in the record evidence of title of any property of the Company, to the extent that such 18 easements, leases, restrictions, rights-of-way, exceptions, reservations, other rights, laws, defects and irregularities do not in the aggregate materially impair the use of the Trust Estate taken as a whole for the purposes for which it is held by the Company; I. liens upon lands over which easements, licenses or rights-of-way are acquired by the Company for any of the purposes specified in paragraph H of this definition, securing indebtedness neither created, assumed nor guaranteed by the Company nor on account of which it customarily pays interest; J. leases or permits for occupancy existing at the date of this instrument affecting property owned by the Company at said date (and future modifications, renewals and extensions thereof); K. leases and permits for occupancy affecting property acquired by the Company after the date of this instrument (i) for a term of not more than ten (10) years (including any extensions or renewals) or (ii) if for a term of more than ten (10) years which do not materially impair the Company's use of the property in the conduct of its business; L. any lien or privilege vested in any lessor, landlord, licensor, permittor or other person for rent to become due or for other obligations or acts to be performed, the payment of which rent or the performance of which other obligations or acts is required under leases, usufructs, subleases, licenses or permits, so long as the payment of such rent or the performance of such other obligations or acts is (i) not delinquent or (ii) being contested in good faith and has not proceeded to judgment and with respect to which the Company shall have set aside on its books adequate reserves; M. liens or privileges of any employees of the Company for salary or wages earned but not yet payable; N. the burdens of any law or governmental regulation, license or permit requiring the Company to maintain certain facilities or perform certain acts as a condition of the carrying on of the Company's business or the occupancy of or interference with any public lands or any river or stream or navigable waters; O. any restrictions, covenants, defects or irregularities in or other deficiencies of title to any easement or rights-of-way of or used by the Company for pipe lines, telephone lines, telecommunications lines, power lines, towers, poles, wires, conduits, mains, electric transmission lines and distribution lines, substations, metering stations, signal transmission and distribution lines or for similar purposes or appurtenances thereto, or other improvements thereon, and to any real estate of or used or to be used by the Company primarily for such easement or right-of-way purposes, if (i) the Company shall have obtained from the apparent owner of the lands or estates therein covered by any such easement or right-of-way a sufficient right, by the terms of the instrument granting such right-of-way, to the use thereof for the construction, operation or maintenance of the lines, appurtenances or improvements for which the same are used or are to be used, (ii) the Company has power under eminent 19 domain, or similar statutes, to remove such deficiencies, or (iii) such deficiencies may be otherwise remedied without undue effort or expense; P. rights reserved to, or vested in, any municipality or governmental or other public authority to control or regulate any property of the Company or the use thereof, or to use such property in any manner, which rights do not materially impair the use of such property for the purposes for which it is held by the Company; Q. any obligations or duties, affecting the property of the Company, to or established by any municipality or governmental or other public authority in connection with any franchise, grant, license or permit; R. any right which any municipal or governmental authority may have by virtue of any franchise, license, contract or statute; S. any restrictions, including restrictions on transfer, liens or other matters arising from, permitted by, or required by, any law or governmental regulation relating to environmental matters, so long as such restrictions, liens or other matters do not materially impair the use of such property for the purposes for which it is held and as to any liquidated liens, the Company shall have set aside on its books adequate reserves with respect thereto; T. reservations contained in U.S. patents; U. slope and drainage reservations; V. deposits to secure duties or public or statutory obligations, deposits to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or similar charges; W. any lien or other matter required by law or governmental regulation as a condition to the transaction of any business or the exercise of any privilege or license, or to enable the Company to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with worker's compensation, unemployment insurance, retirement pensions or other social security, or to share in the privileges or benefits required for companies participating in such arrangements; X. any lien or other encumbrance created or assumed by the Company in connection with the issuance of debt securities the interest on which is excludable from gross income of the holder of such security pursuant to the Internal Revenue Code, as amended, for the purposes of financing or refinancing, in whole or in part, the acquisition or construction of property used or to be used by the Company to the extent such lien covers only such acquired or constructed property and the proceeds upon the sale, transfer or exchange thereof; 20 Y. the pledge of current assets, in the ordinary course of business, to secure current liabilities; Z. liens or other encumbrances securing indebtedness for the payment of which money or Defeasance Securities, maturing as to principal and interest in such amounts and at such times, as are sufficient to provide for the full and timely payment of such indebtedness shall have been irrevocably deposited in trust or escrow with the trustee or other holder of such lien, and liens on such deposited money or Defeasance Securities, PROVIDED that if such indebtedness is to be redeemed or otherwise prepaid prior to the stated maturity thereof, any notice requisite to such redemption or prepayment shall have been irrevocably given in accordance with the mortgage or other instrument creating such lien or other encumbrance or irrevocable instructions to give such notice shall have been given to such trustee or other holder; AA. the undivided or other interest of other owners, and liens on such interest, in property owned in common or jointly with the Company or in which the Company has an executory or future interest, and all rights of such co-owners or joint owners in such property, including the rights of such owners to such property pursuant to ownership contracts; AB. any liens or other encumbrances of any person arising on account of the ownership in common or jointly with the Company of an undivided or other interest in property which relate to amounts which are not due and payable, or which are being contested by the Company in good faith, and with respect to which the Company shall have set aside on its books adequate reserves; and AC. liens which have been bonded for the full amount of the obligations secured by such lien or for the payment of which the Company has deposited with the Trustee or with an escrow agent cash or other property with a value equal to the full amount of the obligations secured by such lien. "Person" means any individual, corporation, cooperative, partnership, joint venture, association, joint-stock company, limited liability company or partnership, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment" when used with respect to the Obligations of any series means a city or any political subdivision thereof in which the Company is by this Indenture required to maintain an office or agency for the payment of the principal of or interest on the Obligations of such series. "Pledged Securities" has the meaning stated in Section 15.1. "Pledged Subsidiary" means a Subsidiary of the Company at least a majority of whose outstanding Voting Stock or whose outstanding membership interests shall at the time be deposited and pledged or required to be deposited and pledged with the Trustee. 21 "Pledged Wholly-Owned Subsidiary" means any Subsidiary of the Company all the shares of stock or membership interests of all classes of which (other than directors' qualifying shares required to be owned by directors under any applicable law) shall at the time be owned directly by the Company and deposited and pledged or required to be deposited and pledged with the Trustee. "Predecessor Obligations" of any particular Obligation means every previous Obligation evidencing all or a portion of the same debt as that evidenced by such particular Obligation; and, for purposes of this definition, any Obligation authenticated and delivered under Section 3.8 in lieu of a lost, destroyed or stolen Obligation shall be deemed to evidence the same debt as the lost, destroyed or stolen Obligation. "Prior Lien" means any mortgage, lien, security title, charge or encumbrance on or pledge of or security interest in any of the Trust Estate prior to or on a parity with the lien of this Indenture, other than Permitted Exceptions. "Prior Lien Obligation" means any indebtedness and the evidence thereof, if any, secured by a Prior Lien. "Property Additions" means property as to which the Company shall provide Title Evidence (which, as to Retired Property, may be dated as of immediately prior to the Retirement) and which shall be (or, if Retired, shall have been) subject to the lien of this Indenture, which shall be properly chargeable to the Company's fixed plant accounts under Accounting Requirements (including property acquired to replace property Retired and credited to such accounts) and which shall be acquired by the Company after the Cut-Off Date, including property in the process of construction, insofar as not reflected on the books of the Company with respect to periods on or prior to the Cut-Off Date. Property Additions need not consist of a specific or completed development, plan, betterment, addition, extension, improvement or enlargement, but may include construction work in progress and property in the process of purchase insofar as title has been vested in the Company. "Property Additions" shall also include: A. easements and rights-of-way that are useful for the conduct of the business of the Company; B. property located or constructed on, over or under public highways, rivers or other public property if the Company has the lawful right under permits, licenses or franchises granted by a governmental body having jurisdiction in the premises or by the law of the state in which such property is located to maintain and operate such property for an unlimited, indeterminate or indefinite period or for the period, if any, specified in such permit, license or franchise or law and to remove such property at the expiration of the period covered by such permit, license or franchise or law, or if the terms of such permit, license franchise or law require any public authority having the right to take over such property to pay fair consideration therefor; and 22 C. tangible property, which would be properly chargeable to the Company's fixed plant accounts under Accounting Requirements (including property acquired to replace property Retired and credited to such accounts) if title were vested in the Company, if (i) such property itself (in addition to the Company's leasehold interest in such property) is subject to the lien of this Indenture and (ii) such property is leased to the Company. "Property Additions" shall not include: (1) good will, going concern value, contracts, agreements, franchises, licenses or permits, whether acquired as such, separate and distinct from the property operated in connection therewith, or acquired as an incident thereto; (2) any shares of Stock, membership interests or indebtedness or certificates or evidences of interest therein or other securities; (3) any property that is to remain subject to a Prior Lien (except to the extent permitted by the proviso to Section 5.2D(2)) after the granting of the related Application or subject to the Permitted Exception described in paragraph X of the definition of "Permitted Exceptions"; (4) except as provided in paragraph C above any plant or system or other property in which the Company shall acquire only a leasehold interest, or any betterments, extensions, improvements or additions (other than movable physical personal property which the Company has the right to remove), of, upon or to any plant or system or other property in which the Company shall own only a leasehold interest unless (i) the term of the leasehold interest in the property to which such betterment, extension, improvement or addition relates shall extend for at least 75% of the estimated useful economic life of such betterment, extension, improvement or addition and (ii) the lessor shall have agreed to give the Trustee reasonable notice and opportunity to cure any default by the Company under such lease and not to disturb the Trustee's possession of such leasehold estate in the event the Trustee succeeds to the Company's interest in such lease upon the Trustee's exercise of any remedies under this Indenture so long as there is no default in the performance of the tenant's covenants contained therein; or (5) property otherwise constituting Property Additions, but with respect to which the Company has delivered to the Trustee, prior to the Company's acquisition of such property, an Officers' Certificate specifically identifying such property to be acquired and stating that (i) such property is not to be subject to the lien of this Indenture and (ii) if the Company does not have the use of such property, it would remain capable of complying with the requirements of Section 13.14. "Qualifying Securities Indenture" means any indenture, mortgage, deed to secure debt, deed of trust or similar instrument entered into by any Subsidiary of the Company (i) which contains provisions (and related definitions) substantially identical in substance to the provisions (and related definitions) contained in this Indenture (with such variations and omissions as are appropriate in view 23 of the fact that the Subsidiary and not the Company is a party thereto), except that it may omit or have different provisions (and related definitions) relating to (a) the need to deliver an Available Margins Certificate upon the authentication and delivery of Qualifying Securities issued thereunder, (b) the requirement to establish and collect the rates, rents, charges, fees and other compensation of such Subsidiary expected to yield any particular level of Margins for Interest, (c) limiting distributions or dividends, and (d) such other matters as the Trustee shall determine, in its sole discretion, do not, taken as a whole, materially impair the value of the Qualifying Securities issued thereunder as security for the Obligations; PROVIDED, HOWEVER, that in making any such determination, the Trustee may rely upon certificates of investment bankers or other financial professionals or consultants, and (ii) under which Qualifying Securities are issued. "Qualifying Securities" means bonds or other instruments evidencing indebtedness for borrowed money or purchase money indebtedness issued and Outstanding under a Qualifying Securities Indenture and on deposit with the Trustee. "RUS" means the Rural Utilities Service, or any agency or other governmental body succeeding to the functions thereof relating to this Indenture. "RUS Reimbursement Obligation" means any Obligation issued by the Company for the purpose of evidencing the Company's obligation to reimburse the United States of America, acting by and through the Administrator of RUS, for all amounts paid, or for any advances or loans made to or on behalf of the Company, on account of the guarantee or insuring by the United States of America, pursuant to the Rural Electrification Act of 1936, as amended, or any other federal statute, of any other Obligation, and related interest, fees, costs, penalties, charges and other amounts. "Rates" has the meaning stated in Section 13.14. "Redemption Date" when used with respect to any Obligation to be prepaid means the date of such prepayment and when used with respect to any Obligation to be redeemed means the date fixed for such redemption pursuant to this Indenture. "Redemption Price" when used with respect to any Obligation to be prepaid means the amount of the indebtedness to be prepaid and when used with respect to any Obligation to be redeemed means the price at which it is to be redeemed pursuant to this Indenture. It includes the applicable premium, if any, including any prepayment penalty, but does not include installments of interest whose Stated Maturity is on or before the Redemption Date. "Regular Record Date" for the interest payable on any Interest Payment Date on the Obligations of any series means the date immediately preceding the Interest Payment Date or, for any series of Additional Obligations, as may otherwise be set forth in a Supplemental Indenture. "Responsible Officer" when used with respect to the Trustee means the chairman or vice-chairman of the board of directors of the Trustee, the chairman or vice-chairman of the executive committee of such board, the president, any vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust 24 officer, the controller, any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer of the Trustee to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Retired" means, when used with respect to property, Bondable Property that, since the Cut-Off Date, has been retired, abandoned, destroyed, worn out, removed, permanently discontinued, lost through the enforcement of any liens or released, sold or otherwise disposed of free of the lien of this Indenture or taken by eminent domain or under the exercise of a right of a government authority to purchase or take the same or recorded as retired on the books of the Company or permanently retired from service for any reason, whether or not replaced, or shall have permanently ceased to be used or useful in the business of the Company, including as a consequence of the termination of any lease, whether or not recorded as retired on the books of the Company, except that, when a minor item of property has been replaced by other property of equal value and efficiency and the cost of such replacement has been charged to other than fixed property accounts such as maintenance, repairs or other similar account, the property replaced shall not be considered as Retired. "Retirements" means Bondable Property that has been Retired. The "amount" of Retirements shall be computed as follows: (a) as to property owned by the Company on the Cut-Off Date, the net book value of such property as recorded on the books of the Company as of the Cut-Off Date; and (b) as to Property Additions, the Cost to the Company thereof or the Fair Value to the Company thereof, whichever is less, as certified to the Trustee at the time such Property Additions were certified in a Certificate as to Bondable Additions filed in accordance with Section 4.2 (estimated, if necessary, as to particular property), or if not theretofore so certified, then the Cost to the Company of such Property Additions. In determining the amount of Retirements for any purpose under this Indenture, neither any reduction in book values of property recorded in the Company's fixed plant accounts nor the transfer of any amount appearing in any such accounts to intangible or adjustment accounts, required or arising from adjustments required to be made by any regulatory body or otherwise, nor the elimination of any amount so transferred, otherwise than in connection with the actual retirement of physical property, shall be taken into account. "Special Record Date" for the payment of any Defaulted Interest on Obligations means a date fixed by the Trustee pursuant to Section 3.9. "Stated Maturity" when used with respect to any Obligation, any installment of principal thereof, or any installment of interest thereon, means the date specified in such Obligation as the date on which the principal of such Obligation or any installment thereof, or such installment of interest, is due and payable (without regard to any provisions for redemption, prepayment, acceleration, purchase or extension). 25 "Stock" includes all shares, interests, participations or other equivalents (however designated) of or in corporate stock. "Subsidiary" of any specified corporation means any corporation at least a majority of whose outstanding Voting Stock or whose outstanding membership interests shall at the time be owned or held, directly or indirectly, by the specified corporation or by one or more of its Subsidiaries. "Supplemental Indenture" means any indenture supplemental hereto and duly authorized in the manner provided herein. "System" means all properties and interest in properties of the Company other than Excludable Property, it being the intent that "System" be broadly construed to encompass and include the Company's interests in all electric production, transmission, distribution, conservation, load management, general plant and other related facilities, equipment or property and in any mine, well, pipeline, plant, structure or other facility for the development, production, manufacture, storage, fabrication or processing of fossil, nuclear or other fuel of any kind or in any facility or rights with respect to the supply of water, in each case for use, in whole or in major part, in any of the Company's generating plants, now existing or hereafter acquired by lease, contract, purchase or otherwise or constructed by the Company, including any interest or participation of the Company in any such facilities or any rights to the output or capacity thereof, together with all additions, betterments, extensions and improvements to any of the foregoing or any part thereof hereafter made and together with all lands, easements and rights-of-way of the Company and all other works, property or structures of the Company and contract rights and other tangible and intangible assets of the Company used or useful in connection with or related to any of the foregoing, including, without limitation, a contract right or other contractual arrangement for the long-term or short-term interconnection, interchange, exchange, pooling, wheeling, transmission, purchase or sale of electric power and energy and other similar arrangements with entities having generation or transmission capabilities. "TIA" or "Trust Indenture Act" means, as of any time, the Trust Indenture Act of 1939, or any successor statute, as amended and in force at such time. "Title Evidence" means, with respect to any real property: A. an Opinion of Counsel or attorney's certificate of title to the effect that the Company or the owner-lessor of the property in the case of real property described in paragraph C of the definition of "Property Additions" has title, whether fairly deducible of record or based upon prescriptive rights, as in the opinion of Counsel is satisfactory for the use thereof in connection with the operations of the Company, and Counsel in giving such opinion may disregard any irregularity or deficiency in the record evidence of title which, in the opinion of such Counsel, can be cured by proceedings within the power of the Company or does not substantially impair the usefulness of such property for the purpose of the Company and may base such opinion upon his own investigation or upon affidavits, certificates, abstracts of title, statements or investigations made by Persons in whom such 26 Counsel has confidence or upon examination of a certificate or guaranty of title or policy of title insurance in which he has confidence, and, without limiting the foregoing, Counsel may rely solely upon an Officers' Certificate as to matters regarding the use or usefulness of such property for the purpose of, or in the operations of, the Company; or B. a mortgagee's policy of title insurance (or a commitment to issue a mortgagee's policy of title insurance containing only standard conditions to issuance or such other conditions to issuance as are satisfactory to the Trustee) in the amount of the Cost to the Company of the land on the date of acquisition and included in Property Additions, issued in favor of the Trustee by an entity authorized to insure title in the state in which the real property is located, showing the Company as the owner of the subject property and insuring the lien of this Indenture; and with respect to any personal property an Officers' Certificate that the Company lawfully owns such property and, with respect to real and personal property described in paragraph C of the definition of "Property Additions," an Officers' Certificate that the Company has a valid leasehold interest in, and is possessed of, such property. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Inden ture, and thereafter "Trustee" means such successor Trustee. "Trust Estate" has the meaning stated in the Habendum to the Granting Clauses. "Trust Moneys" has the meaning stated in Section 6.1. "Undesignated Qualifying Securities" means, as of the date of determination, all Qualifying Securities deposited with the Trustee and held by the Trustee which are not Designated Qualifying Securities. "Uniform Commercial Code" means, with respect to any particular part of the Trust Estate, the Uniform Commercial Code as enacted and in effect from time to time in the state whose laws are treated as applying to such part of the Trust Estate. "Vice President" means, when used with respect to the Company or the Trustee, any vice president, whether or not designated by a number or a word added to the title. "Voting Stock" means Stock of any class or classes (however designated) having ordinary voting power for the election of a majority of the members of the board of directors (or other governing body) of a corporation, other than Stock having such power only by reason of the happening of a contingency. 27 Section 1.2 Acts of Holders. A. Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Company and (subject to Section 9.1) in favor of the Trustee, if made in the manner provided in this Section. B. The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Whenever such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, and the authority of the Person executing the same, may also be proved in any manner which the Trustee deems sufficient. C. The ownership of Obligations shall be proved by the Obligation Register. D. Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Obligation shall bind every future Holder of the same Obligation and the Holder of every Obligation issued upon the transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Obligation. However, unless such Obligation is held in the Book-Entry System and the DTC letter of representations executed by the Company in connection therewith, as amended from time to time, does not permit such revocation, any such Holder or subsequent Holder may revoke by written instrument any such instrument as to his Obligation or portion of an Obligation until such time as written instruments have been received by the Trustee with respect to the requisite percentage of principal amount of Obligations for the action contemplated by such instruments; PROVIDED, HOWEVER, that such revocation shall be effective only if the Trustee receives written notice of revocation before the date the Trustee or the Company does or suffers to be done anything in reliance on such instrument. Section 1.3 Notices, etc., to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, 28 A. the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its principal corporate trust office, or B. the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (except as otherwise expressly provided in Sections 8.1C and 8.1E) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at 2100 East Exchange Place, P. O. Box 1349, Tucker, Georgia 30085-1349, or at any other address furnished in writing to the Trustee by the Company. Section 1.4 Notices to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder of such Obligations, at the address of such Holder as it appears in the Obligation Register not later than the latest date, and not earlier than the earliest date, prescribed for such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of mail service or by reason of any other cause, it shall be impossible to give such notice by mail, then such notification as shall be specified by the Company and satisfactory to the Trustee shall constitute a sufficient notification for every purpose hereunder. Section 1.5 Form and Contents of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, advice of or representations by, counsel, unless such Officer knows, or in the exercise of reasonable care should know, that the certificate, opinion, advice or representations with respect to the matters upon which his certificate or opinion is based are erroneous. 29 Any Opinion of Counsel may be based, insofar as it relates to factual matters or matters of business judgment, upon a certificate or opinion of, or representations by, an Officer or Officers of the Company stating that the information with respect to such factual matters is in the possession of the Officers, unless such counsel knows that the certificate, opinion or representations with respect to such matters are erroneous. Any Opinion of Counsel may be based upon such assumptions, be subject to such qualifications and may be stated in such language as at the time delivered is considered in the jurisdiction whose laws are covered by such opinion to be standard practice with respect to opinions relating to such matters. In addition, in giving any Opinion of Counsel, counsel may rely upon (i) prior opinions or certificates of counsel for the Company, (ii) opinions or certificates of special counsel for the Company, (iii) opinions or certificates of in-house counsel for the Company and (iv) title insurance policies, title insurance commitments and reports, lien search certificates and other similar evidences of the existence of liens. Whenever any Person is required to make, give or execute two or more Applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one document. Wherever in this Indenture, in connection with any Application, certificate or report to the Trustee, it is provided that the Company shall deliver any document as a condition of the granting of such Application, or as evidence of the Company's compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such Application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Company to have such Application granted or to the sufficiency of such certificate or report. Notwithstanding anything else herein to the contrary, the validity of any action taken or Obligation issued hereunder based upon any application, certificate or report shall not be affected by the truth and accuracy of such application, certification or report. Nothing in the immediately preceding sentence shall, however, limit any rights or remedies available to the Trustee or the Holders under this Indenture or at law or equity against the Company or any officer thereof with respect to a false or inaccurate application, certification or report other than any remedy seeking to invalidate the action so taken or Obligation issued. Whenever a clerical, typographical, inadvertent or unintentional error or omission shall be discovered in any instrument filed with the Trustee, a new instrument in corrected form, executed as prescribed herein for that originally filed and which may bear the same date as the instrument originally filed, may be substituted therefor with the same force and effect as if the instrument originally filed had been filed in the corrected form, or in lieu of such substitution an appropriate adjustment may be made in a like instrument filed with the Trustee after such discovery. To the extent that action has been taken hereunder which could not have been taken had the original instrument been filed in corrected form, such action shall be validated and rendered effective if the substituted or adjusting instrument shall indicate that any deficiency has been fully satisfied since the filing of the original instrument. 30 Section 1.6 Compliance Certificates and Opinions. Upon any Application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate identifying the relevant provisions of this Indenture and stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such Counsel all such conditions precedent, if any, have been complied with, except that in the case of any such Application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular Application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than certificates provided pursuant to Section 13.12 hereof) shall include: A. a statement that each individual signing such certificate or opinion has read such condition or covenant and the definitions herein relating thereto; B. a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; C. a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such condition or covenant has been complied with; and D. a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. The Trustee shall be entitled to rely conclusively on any such certificate or opinion as provided in Section 9.1. Section 1.7 Conflict with Trust Indenture Act. At any time at which this Indenture is qualified or required to be qualified under the TIA, if any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Indenture by any of the provisions of the TIA, such required provision shall control. Section 1.8 Effect of Headings and Table of Contents. The Article and Section headings herein and in the Table of Contents are for convenience only and shall not affect the construction hereof. 31 Section 1.9 Successors and Assigns. All covenants and agreements in this Indenture by the Company shall, subject to Section 11.2B, bind its successors and assigns, whether so expressed or not. Section 1.10 Severability Clause. In case any provision in this Indenture or in the Obligations shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 1.11 Benefits of Indenture. Nothing in this Indenture or in the Obligations, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any separate trustee or co-trustee appointed under Section 9.14 and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 1.12 Governing Law. This Indenture and the Obligations shall be governed by and construed in accordance with the laws of the State of Georgia; PROVIDED, HOWEVER, that any Obligation as to which RUS is the Holder shall be governed by and construed in accordance with federal laws. Section 1.13 Action by Credit Enhancer When Action by Holders Required. Notwithstanding anything herein to the contrary, except as otherwise provided in a Supplemental Indenture authorizing Obligations of any series or maturity within a series for which Credit Enhancement is being provided, if not in default in respect of any of its obligations with respect to Credit Enhancement for such Obligations, the Credit Enhancer for, and not the actual Holders of, such Obligations, shall be deemed to be the Holder of such Obligations at all times for the purpose of (i) giving any approval or consent to the effectiveness of any Supplemental Indenture or to any amendment, change or modification of this Indenture which requires the written approval or consent of Holders of such Obligations; PROVIDED, HOWEVER, that the provisions of this clause (i) shall not apply to any change which could not be made pursuant to Section 12.2 without the consent of each Holder of Obligations affected thereby, and (ii) giving any other approval or consent, giving any notice, effecting any waiver or authorization, exercising any remedies, giving any direction or taking any other action in accordance with the provisions of this Indenture. Section 1.14 Bank Holidays. Except as specified in an Existing Obligation or a Supplemental Indenture, if the specified date for the making of any payment or the last date for performance of any act or the exercising of any right, as provided in this Indenture, shall be a Saturday, Sunday or legal holiday or a day on which banking institutions in the city in which is located the office from which the Trustee performs the 32 functions to which such act or right relates are authorized by law to remain closed, such payment may be made or act performed or right exercised on the next succeeding day which is not one of the foregoing days without additional interest and with the same force and effect as if made, performed or exercised on the specified date for such payment. Section 1.15 Security Agreement and Deed to Secure Debt. To the extent permitted by applicable law, this Indenture shall be deemed to be a security agreement whereby the Company grants to the Trustee a security interest in all of the Trust Estate that is personal property or fixtures under the Uniform Commercial Code. The mailing address of 2100 East Exchange Place the Company is: P.O. Box 1349 Tucker, Georgia 30085-1349 The mailing address of Attention: Corporate Trust Department the Trustee is: P.O. Box 4625 Atlanta, Georgia 30302 This Indenture is intended to be a deed to secure debt in accordance with Georgia law conveying legal title to the Trust Estate and is not intended to constitute a mortgage. This Indenture shall be construed in accordance with the existing laws of the State of Georgia relating to deeds to secure debt. For all purposes of this Indenture, the following definitions shall apply: A. the word "Indenture" shall include "deed to secure debt"; B. the word "mortgage," when used as a noun, shall include "deed to secure debt," and, when used as a verb, shall include the words of conveyance utilized in the Granting Clauses hereof; and C. the word "lien" shall include "security title." Section 1.16 Maturity of Secured Indebtedness. The maturity of the indebtedness initially secured by this Indenture is set forth in the Existing Obligations. The maturity of additional indebtedness authorized pursuant to Article IV and secured by this Indenture shall be as provided in Supplemental Indentures adopted in accordance with and pursuant to Sections 3.3 and 12.1. Section 1.17 Acceptance of Trust by Trustee. The Trustee accepts the trusts in this Indenture declared and provided, upon the terms and conditions herein set forth. 33 Section 1.18 Investment of Cash Held by Trustee. Any cash held by the Trustee or any Paying Agent under any provision of this Indenture shall, except as otherwise provided in Article VII, and subject to the limitations set forth in Section 13.17, at the request of the Company evidenced by a Company Request be invested or reinvested as designated by the Company, and, unless an Event of Default shall exist, any interest on such investments shall be promptly paid over to the Company as received free and clear of any lien, including the lien of this Indenture. Such investments shall be held subject to the same provisions hereof as was the cash used to purchase the same, but upon a like request of the Company shall be sold, in whole or in designated part, and the proceeds of such sale shall be held subject to the same provisions hereof as was the cash used to purchase the investments so sold. If such sale shall produce a net sum less than the cost of the investments so sold, the Company shall pay to the Trustee or any such Paying Agent, as the case may be, such amount in cash as, together with the net proceeds from such sale, shall equal the cost of the investments so sold, and if such sale shall produce a net sum greater than the cost of the investments so sold, the Trustee or any such Paying Agent, as the case may be, shall promptly pay over to the Company an amount in cash equal to such excess, free and clear of any lien, including the lien of this Indenture, unless an Event of Default shall exist. Section 1.19 Principal Amount of Obligations Other than Bonds. At any point in time, the principal amount of an Obligation in any form other than a bond shall not include any amount not then advanced and outstanding thereunder. The principal amount of any Obligation evidencing an assumption by the Company of all or a part of another obligation shall be the principal amount of the other obligation, or the portion thereof, assumed pursuant to such Obligation. The principal amount of such an Obligation shall be reduced as the principal amount of such Obligation (or the obligation it evidences an assumption of) is paid or otherwise reduced. Such payment or reduction shall be treated as a payment or retirement pursuant to Sections 4.3, 4.6, 4.8, 5.2, 6.3 and 16.3 unless the Company retains the right to have such amount readvanced. If any such payment or reduction shall not be treated as a payment or retirement under such Sections because the Company retains the right to readvance such amount, once that right to readvance expires or is terminated, such payment or reduction may thereupon be treated as a payment or retirement under such Sections. The principal amount of such an Obligation may be evidenced from time to time by an Officers' Certificate delivered to the Trustee and the Holder of such Obligation. In the absence of any timely objection by the Holder to the principal amount of such an Obligation set forth in such Officers' Certificate, the Trustee may conclusively rely on such Officers' Certificate. Following any timely objection by the Holder, the Trustee may require such other evidence of the principal amount of such Obligation as shall be satisfactory to the Trustee in its sole discretion. Section 1.20 RUS as Holder. As to any Obligation guaranteed or insured by the United States of America, pursuant to the Rural Electrification Act of 1936, as amended, or any other federal statute, the United States of America, acting through the Administrator of RUS, and not the actual payee of such Obligation, shall be, and shall have the rights of, the Holder of such Obligation for all purposes under this Indenture 34 at all times at which such Obligation continues to be so guaranteed or insured. The rights of RUS pursuant to this Section with respect to any such Obligation shall not be affected by whether RUS possesses such Obligation, and the exercise of such rights shall not require the production of any such Obligation. With respect to any such Obligation, any Obligation as to which RUS is the actual payee and any RUS Reimbursement Obligation, the Obligation Register shall show the Holder of all such Obligations to be "United States of America, acting by and through the Administrator of the Rural Utilities Service" unless and until RUS requests that the Obligation Register show a different name (including, without limitation, in the event RUS transfers any such Obligation). RUS may hold Obligations, and be registered as the Holder thereof, in a number of different capacities, including, without limitations, as provided in this Section 1.20 as to Obligations guaranteed or insured by the United States of America, acting through the Administrator of RUS, and as the actual payee of Obligations evidencing loans or advances made or to be made to the Company. ARTICLE II OBLIGATION FORMS Section 2.1 Forms of Additional Obligations Generally. Additional Obligations of each series shall be in substantially the form set forth in the Supplemental Indenture creating such series, or in a Board Resolution establishing such series and delivered to the Trustee, or in an Officers' Certificate pursuant to a Supplemental Indenture or Board Resolution and delivered to the Trustee, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the Officers executing such Additional Obligations, as evidenced by their execution of such Additional Obligations. Any portion of the text of any Additional Obligation may be set forth on the reverse or subsequent pages thereof, with an appropriate reference thereto on the face of the Additional Obligation if desired. Such Additional Obligations may be printed, lithographed, typewritten, mimeographed or otherwise produced. Section 2.2 Form of Trustee's Certificate of Authentication for Existing Obligations. The Trustee's certificate of authentication for Existing Obligations shall be in substantially the following form: 35 This is one of the Existing Obligations referred to in the Indenture, dated as of March 1, 1997, by Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) to SunTrust Bank, Atlanta. ___________________________________________, as Trustee By:_________________________________________ Authorized Signatory Section 2.3 Form of Trustee's Certificate of Authentication for Additional Obligations. The Trustee's certificate of authentication for Additional Obligations shall be in substantially the following form: This is one of the Obligations of the series designated therein referred to in the within-mentioned Indenture. ___________________________________________, as Trustee By:_________________________________________ Authorized Signatory ARTICLE III THE OBLIGATIONS Section 3.1 Terms and Forms of Existing Obligations. There shall be an initial series of Obligations, which the Trustee upon delivery of a Company Request dated the date of this Indenture, shall authenticate. Such Obligations shall constitute Existing Obligations. Such authentication shall be in substantially the form set forth in Section 2.2 and may be either on the Existing Obligations or on an allonge to be affixed to such Existing Obligation. Only such Obligations authenticated by the Trustee pursuant to this Section shall constitute Existing Obligations and be entitled to the benefits of and security of this Indenture as Existing Obligations. For purposes of this Indenture, all Existing Obligations shall be treated a part of a single series of Obligations. The Existing Obligations shall be in the forms of such instruments as are delivered to the Trustee for authentication on or about the date of this Indenture. The terms and conditions of the 36 Existing Obligations, including the principal amounts, maturity dates, interest rates and payment and redemption provisions, shall be as provided for therein. The maximum aggregate principal amount of the Existing Obligations shall be as provided therein and as limited by paragraph (b) of Section 3.2. Section 3.2 General Title; General Limitations; Issuable in Series. (a) If specified by a Company Request, the general title of the Obligations of all series of Additional Obligations shall be "FIRST MORTGAGE OBLIGATIONS," "FIRST MORTGAGE NOTES" or "FIRST MORTGAGE BONDS," as so specified. (b) Any increase in the principal amount of any Existing Obligation (other than an advance under an Existing Obligation held by a Credit Enhancer or under a RUS Reimbursement Obligation) shall be deemed an issuance of an Additional Obligation and shall, therefore, be subject to satisfying the conditions for the issuance of Additional Obligations provided in Article IV. (c) The aggregate principal amount of Additional Obligations which may be authenticated and delivered and Outstanding under this Indenture is not limited, except as provided in Article IV and the provisions of any Supplemental Indenture creating any series of Obligations and except as may be limited by law. The Additional Obligations may be issued in series as from time to time authorized by the Board of Directors. With respect to the Additional Obligations of any particular series, the Company may incorporate in or add to the general title of such Additional Obligations any words, letters or figures designed to distinguish that series. Section 3.3 Terms of Particular Series. (a) The terms and conditions of the Existing Obligations, including, without limitation, the timing and amount of principal and interest payments due thereon and prepayment rights, shall be as provided in the Existing Obligations. (b) Each series of Additional Obligations shall be created by a Supplemental Indenture authorized by the Board of Directors and establishing the terms and provisions of such series of Additional Obligations or the method by which such terms and provisions shall be established. The several series of Additional Obligations may differ as between series and may differ from Existing Obligations in any respect not in conflict with the provisions of this Indenture and as may be prescribed in the Supplemental Indenture creating such series. The Company may, at the time of the creation of any series of Additional Obligations or at any time thereafter, make, and the Additional Obligations of such series may contain, provision for: A. the exchange or conversion of the Additional Obligations of such series, at the option of the Holders thereof, for or into new Additional Obligations of a different series; B. a sinking, amortization, improvement or other analogous fund or for other payment of principal by installments or otherwise; 37 C. limiting the aggregate principal amount of the Additional Obligations of such series; D. exchanging Additional Obligations of such series, at the option of the Holders thereof, for other Additional Obligations of the same series of the same aggregate principal amount of a different authorized kind or authorized denomination or denominations; E. the authentication of Additional Obligations of such series by the Authenticating Agent; F. providing for the issuance of Additional Obligations of such series in bearer or book-entry form; G. specifying redemption or prepayment terms and procedures with respect to such series; H. specifying business days, grace periods, other provisions and such covenants and/or events of default or remedies with respect to such series; and I. any other terms of the Additional Obligations of such series, or any maturity thereof, not inconsistent with the provisions of this Indenture; all upon such terms as the Board of Directors may determine as evidenced by a Board Resolution. All Additional Obligations of like maturity of the same series shall be substantially identical except that any series may have serial maturities and different interest rates for different maturities and except as may otherwise be provided in the Supplemental Indenture creating such series. (c) With respect to Additional Obligations of a series subject to a Periodic Offering, the Supplemental Indenture or the Board Resolution, or Officers' Certificate pursuant to the Supplemental Indenture or Board Resolution, as the case may be, which establishes such series may provide general terms or parameters for Additional Obligations of such series and specify procedures, acceptable to the Trustee, by which such specific terms are to be established (which procedures may provide for authentication and delivery pursuant to oral or electronic instructions from the Company or any agent or agents thereof, which oral instructions are to be promptly confirmed electronically or in writing). Section 3.4 Denominations. The Additional Obligations of each series shall be issuable in such denominations as shall be provided in the provisions of any Supplemental Indenture creating such series. In the absence of any such provision with respect to the Additional Obligations of any particular series, the Additional Obligations of such series shall be of the denomination of $1,000 or any integral multiple thereof. 38 Additional Obligations may be in the form of bonds, notes, guarantees or any other undertaking for the payment of borrowed money or purchase money indebtedness. Section 3.5 Execution, Authentication, Delivery and Dating. The Additional Obligations shall be executed on behalf of the Company by its Chairman, President or one of its Vice Presidents or its Secretary, or such other Officer who may be designated by a Board Resolution to execute the Additional Obligations, and attested by its Secretary or one of its Assistant Secretaries. The signature of any of these Officers on the Additional Obligations may be manual or facsimile. Additional Obligations bearing the manual or facsimile signatures of individuals who were at any time the proper Officers of the Company shall bind the Company, notwithstanding that such individuals or any of them shall have ceased to hold such offices prior to the authentication and delivery of such Additional Obligations or shall not have held such offices at the date of such Additional Obligations. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Additional Obligations executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Additional Obligations, and the Trustee shall authenticate and deliver such Additional Obligations as in this Indenture provided and not otherwise. All Additional Obligations shall be dated the date of their authentication. No Obligation shall be secured by, or be entitled to any lien, right or benefit under, this Indenture or be valid or obligatory for any purpose, unless there appears on such Obligation (or an allonge thereto) a certificate of authentication substantially in the form provided for herein, executed by the Trustee or the Authenticating Agent by manual signature, and such certificate upon any Obligation (or an allonge thereto) shall be conclusive evidence, and the only evidence, that such Obligation has been duly authenticated and delivered hereunder. Section 3.6 Temporary Obligations. Pending the preparation of definitive Additional Obligations, the Company may execute, and upon Company Request the Trustee shall authenticate and deliver, temporary Additional Obligations which are printed, lithographed, typewritten, photocopied or otherwise produced or reproduced, in any authorized denomination, substantially of the tenor of the definitive Additional Obligations in lieu of which they are issued, and with such appropriate insertions, omissions, substitutions and other variations as the Officers executing such Additional Obligations may determine, as evidenced by their execution of such Additional Obligations. If temporary Additional Obligations are issued, the Company will cause the definitive Additional Obligations to be prepared without unreasonable delay. After the preparation of definitive Additional Obligations, the temporary Additional Obligations shall be exchangeable for definitive Additional Obligations upon surrender of the temporary Additional Obligations at the office or agency of the Trustee in a Place of Payment therefor, without charge to the Holder. Upon surrender for 39 cancellation of any one or more temporary Additional Obligations, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Additional Obligations of authorized denominations. Until so exchanged, temporary Additional Obligations shall in all respects be entitled to the security and benefits of this Indenture. Section 3.7 Registration; Registration of Transfer and Exchange. The Company shall cause to be kept at one of the offices or agencies maintained by the Trustee as provided in Section 13.2 a register (herein sometimes referred to as the "Obligation Register") in which, subject to such reasonable regulations as it may prescribe, the Trustee shall provide for the registration of Obligations and registration of transfers of Obligations. The Trustee is hereby appointed "Obligation Registrar" for the purpose of registering Obligations and transfers of Obligations as herein provided. Upon surrender for registration of transfer of any Obligation at the office or agency of the Trustee in a Place of Payment therefor (or the delivery of other evidence satisfactory to the Trustee of the transfer of an Obligation), the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Obligations of the same series and maturity, of any authorized denomination and of a like aggregate principal amount (in the event such Obligation is not surrendered for transfer, upon delivery to the Trustee of such satisfactory evidence of a transfer, the Obligation Registrar shall register such transfer on the Obligations Register). All Obligations surrendered upon registration of any exchange or transfer provided for in this Indenture shall be promptly canceled by the Trustee and thereafter the Trustee shall retain such Obligations or destroy such Obligations and deliver a certificate of destruction to the Company. All Obligations issued upon any registration of transfer or exchange of Obligations shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Obligations surrendered upon such registration of transfer or exchange. Every Obligation presented or surrendered for registration of transfer or exchange shall (if so required by the Company or the Obligation Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Obligation Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration, discharge from registration, registration of transfer or exchange of Obligations, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Obligations, other than exchanges under Section 3.6, 12.6 or 14.7 not involving any transfer. Except as provided in a Supplemental Indenture and with respect to Existing Obligations, the Company shall not be required (i) to issue, register the transfer of or exchange any Obligation of any 40 series during a period beginning at the opening of business fifteen (15) days before the day of the mailing of a notice of redemption of Obligations of such series under Section 14.4 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Obligation so selected for redemption in whole or in part, except the unredeemed portion of an Obligation being redeemed in part. Section 3.8 Mutilated, Destroyed, Lost and Stolen Obligations. If (i) any mutilated Obligation is surrendered to the Trustee, or the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Obligation, and (ii) there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Obligation has been acquired by a bona fide purchaser, the Company shall execute and upon its written request the Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Obligation, a new Obligation of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Obligation has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Obligation, pay such Obligation. Upon the issuance of any new Obligation under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expense (including the fees and expenses of the Trustee) connected therewith. Every new Obligation issued pursuant to this Section in lieu of any destroyed, lost or stolen Obligation shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Obligation shall be at any time enforceable by anyone, and shall be entitled to all the security and benefits of this Indenture equally and ratably with all other Outstanding Secured Obligations. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Obligations. Section 3.9 Payment of Interest; Interest Rights Preserved. Interest on any Obligation of any series which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Obligation (or one or more Predecessor Obligations) is registered at the close of business on the Regular Record Date for such interest as specified herein or in the provisions of the Supplemental Indenture creating such series. 41 Any interest on any Obligation of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall be payable as provided in such Obligation, or if not so provided, shall forthwith cease to be payable to the Holder on the relevant Regular Record Date solely by virtue of such Holder having been such Holder, and such Defaulted Interest may be paid by the Company, at its election, as provided in paragraphs A or B below: A. The Company may elect to make payment of any Defaulted Interest on the Obligations of any series to the Persons in whose names such Obligations (or their respective Predecessor Obligations) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Obligation and the date of the proposed payment (which date shall be such as will enable the Trustee to comply with the next sentence hereof), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Subsection provided and not to be deemed part of the Trust Estate or Trust Moneys. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than fifteen (15) days nor less than ten (10) days prior to the date of the proposed payment and not less than ten (10) days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of an Obligation of such series at his address as it appears in the Obligation Register not less than ten (10) days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the Obligations of such series (or their respective Predecessor Obligations) are registered on such Special Record Date and shall no longer be payable pursuant to the following paragraph B. B. The Company may make payment of any Defaulted Interest on the Obligations of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Obligations may be listed and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Subsection, such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Obligation delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Obligation shall carry all the rights to interest accrued and unpaid, and to accrue, which were carried by such other 42 Obligation and each such Obligation shall bear interest from such date, that neither gain nor loss in interest shall result from such transfer, exchange or substitution. Section 3.10 Persons Deemed Owners. Subject to the provisions of Sections 1.13 and 1.20, prior to due presentment of such Obligation for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name any Obligation is registered as the owner of such Obligation for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 3.9) interest on such Obligation and for all other purposes whatsoever, whether or not such Obligation be overdue, and, to the extent permitted by law, neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. Section 3.11 Cancellation. All Obligations surrendered for payment, redemption, transfer, exchange or conversion, if surrendered to the Trustee, shall be promptly canceled by it, and, if surrendered to any Person other than the Trustee, shall be delivered to the Trustee and, if not already canceled, shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Obligations previously authenticated and delivered hereunder, which the Company may have acquired in any manner whatsoever, and all Obligations so delivered shall be promptly canceled by the Trustee. No Obligation shall be authenticated in lieu of or in exchange for any Obligation canceled as provided in this Section, except as expressly provided by this Indenture. All canceled Obligations held by the Trustee shall be destroyed and thereafter the Trustee shall deliver a certificate of destruction to the Company. ARTICLE IV AUTHENTICATION AND DELIVERY OF ADDITIONAL OBLIGATIONS Section 4.1 General Provisions. Additional Obligations of any one or more series, or within a series, may from time to time be executed by the Company and delivered to the Trustee for authentication and thereupon the same shall be authenticated and delivered by the Trustee upon Company Request, upon the basis permitted by, and upon compliance with the conditions of, Section 4.2 (upon the basis of Bondable Additions), Section 4.3 (upon the basis of retirement or defeasance of, or payments on, Obligations previously Outstanding), Section 4.4 (upon the basis of Designated Qualifying Securities), Section 4.5 (upon the basis of Deposited Cash), Section 4.7 (in connection with Credit Enhancement), Section 4.9 (in connection with RUS Reimbursement Obligations) and Section 4.10 (in connection with certain indebtedness issued to refinance indebtedness previously secured under the Existing Mortgage), upon receipt in each case by the Trustee of the following (as modified by such Sections) upon or prior to the date of the initial issuance of Additional Obligations of such series: 43 A. A Board Resolution authorizing and requesting the authentication and delivery under one or more designated Sections of this Article from time to time or at any time of a specified principal amount of Additional Obligations of a designated series. B. An Officers' Certificate, dated within thirty (30) days of the date of the relevant Application for the authentication and delivery of the initial issuance of such Additional Obligations and stating that no Event of Default exists and that none of the Trust Estate is subject to any Prior Lien other than Prior Liens permitted by Section 13.6, and that all conditions precedent provided for in this Indenture relating to the initial authentication and delivery of such Additional Obligations have been complied with (and, in the event such Additional Obligations are subject to a Periodic Offering, that the statements made in such Certificate shall be deemed remade at the time of each subsequent authentication and delivery of such Additional Obligations). C. An Opinion of Counsel (which may be based on opinions of other counsel believed by such counsel to be reliable): (1) specifying the certificate or other evidence that shows, or cash deposit that will provide for, compliance with the requirements, if any, of any tax or recording or filing law applicable to the initial issuance of the Additional Obligations then applied for, or stating that there is no such legal requirement; (2) specifying the certificate or other evidence that shows the authorization, approval or consent of or to the initial issuance by the Company of the Additional Obligations then applied for by any Federal, state or other governmental regulatory agency whose authorization, approval or consent is at the time required to be obtained by the Company having jurisdiction in the premises, or stating that no such authorization, approval or consent is required; (3) stating that none of the Trust Estate is subject to any Prior Lien other than Prior Liens permitted by Section 13.6, PROVIDED, that the opinion contained in this subparagraph (3) may be limited, with respect to personal property, to such portion of the Trust Estate in which a lien may be perfected by filing a financing statement under the Uniform Commercial Code; (4) stating that all conditions precedent provided for in this Indenture relating to the authentication and delivery of the initial issuance of such Additional Obligations have been complied with; and (5) stating that such Additional Obligations, when executed by the Company and authenticated and delivered by the Trustee and when issued by the Company (and, in the event of Additional Obligations subject to a Periodic Offering, when the terms of such Additional Obligations have been established as provided in the manner contemplated by this Indenture or the Supplemental Indenture under which such Additional Obligations are established), will be the legal, valid and binding 44 obligations of the Company enforceable in accordance with their terms and the terms of this Indenture and entitled to the benefits of and secured by the lien of this Indenture equally and ratably with all other Outstanding Secured Obligations. D. The documents and any cash deposit specified in such Opinion of Counsel, which cash deposit, if any, shall be held by the Trustee as part of the Trust Estate and applied by the Trustee for the purpose specified therein and, to the extent that such cash deposit ultimately proves to be excessive, returned to the Company upon Company Request. In addition, Additional Obligations of any one or more series, or within a series, may from time to time be executed by the Company and delivered to the Trustee for authentication and thereupon the same shall be authenticated and delivered by the Trustee upon Company Request, upon the basis permitted by, and upon compliance with the conditions of, Section 4.8 (Conditional Obligations). The Company will not apply for the authentication and delivery of Additional Obligations under this Article except for the purpose of their prompt sale, delivery or pledge or the creation of other security interests therein. In the event that the Company shall not have sold, delivered or pledged, or created some other security interest in, any Additional Obligations authenticated and delivered under this Article within three (3) months after the date of their authentication and delivery, or, as the case may be, upon the termination of such pledge of, or other security interest in, any such Additional Obligations initially pledged or subjected to a security interest, the Company will surrender such Additional Obligations to the Trustee, whereupon such Additional Obligations, if not previously canceled, shall be canceled by the Trustee. The Additional Obligations so surrendered shall thereafter be treated as though they had never been Outstanding. In addition, in the event that any portion of an Obligation or series of Obligations shall not be advanced or issued, and the Company's right to receive an advance or issue such portion is terminated to the satisfaction of the Trustee, such portion shall thereafter be treated as though it had never been Outstanding. Section 4.2 Authentication and Delivery of Additional Obligations Upon Basis of Bondable Additions. Additional Obligations may from time to time be executed by the Company and delivered to the Trustee for authentication, and the same shall be authenticated and delivered by the Trustee upon Company Request, in an aggregate principal amount up to but not exceeding 90.91% of the Bondable Additions (as determined below) available as a basis for such authentication and delivery as shown in item 7 of the "Summary of Certificate as to Bondable Additions" filed with the Trustee in accordance with this Section, upon receipt by the Trustee of the instruments and cash referred to in this Section. Whenever requesting the authentication and delivery of Additional Obligations under this Section or the withdrawal of Deposited Cash under Section 4.6 upon the basis of Bondable Additions or the withdrawal of Trust Moneys under Section 6.2 or the use of Bondable Additions as a basis, in whole or in part, for the release of any part of the Trust Estate under Section 5.2 or the use of Bondable Additions as a basis, in whole or in part, for the redesignation or surrender of Designated 45 Qualifying Securities under Section 16.3, the Company shall deliver to the Trustee the relevant instruments (comprising the related Application) specified in the following paragraphs A through H: A. In the case of a request for the authentication and delivery of Additional Obligations, the documents and any cash deposit required by Section 4.1 and an Available Margins Certificate; in the case of a request for the withdrawal of Deposited Cash under Section 4.6 upon the basis of Bondable Additions, the Company Request, Board Resolution and Officers' Certificate required by Section 4.6; in the case of a request for the withdrawal of Trust Moneys under Section 6.2, the Company Request, Board Resolution and Officers' Certificate required by Section 6.2; in the case of a request for the use of Bondable Additions as a basis for the release of any part of the Trust Estate under Section 5.2, the relevant documents required by Section 5.2 in addition to those specified in the following paragraphs B through H below, which documents may be modified under certain circumstances as stated in the proviso to Section 5.2D(2); and in the case of a request for the use of Bondable Additions as a basis for the redesignation or surrender of Designated Qualifying Securities under Section 16.3, the relevant documents required by Section 16.3. B. A Certificate as to Bondable Additions showing in substance: (1) In the case of the first Certificate as to Bondable Additions, $200,000,000 and, in the case of any subsequent Certificate as to Bondable Additions, the balance (item 1 in Summary of Certificate as to Bondable Additions set forth below), if any, of Bondable Additions stated in item 9 of the most recent Summary of Certificate as to Bondable Additions, if any, theretofore filed with the Trustee, as the balance of Bondable Additions to remain after the action applied for in such most recent Summary. (2) The Amount (item 2 in Summary) of Property Additions not described in any previous Certificate as to Bondable Additions (except that the Amount of Property Additions may include the Amount of Property Additions described in any previous Certificate as to Bondable Additions and used as a basis for the authentication and delivery of Additional Obligations surrendered to the Trustee pursuant to the last paragraph of Section 4.1 or as the basis for any portion of an Obligation or series of Obligations which has not been advanced or issued and for which the right to advance or issue has been terminated as provided in the last paragraph of Section 4.1). With respect to such Property Additions: (a) The Certificate shall describe in reasonable detail, and state the Cost to the Company of, such Property Additions, which may include Property Additions to be acquired concurrently with the granting of the related Application which shall be considered as already acquired for the purpose of computing the Amount of Property Additions. The Certificate shall state that none of such Property Additions has been described in any previous Certificate as to Bondable Additions (except Property Additions described in any previous Certificate as to Bondable Additions and used as the 46 basis for the authentication and delivery of Additional Obligations surrendered to the Trustee pursuant to the last paragraph of Section 4.1 or as the basis for any portion of an Obligation or series of Obligations which has not been advanced or issued and for which the right to advance or issue has been terminated as provided in the last paragraph of Section 4.1). Except for major items, such Property Additions may be grouped by major classifications then being used by the Company in the maintenance of its fixed plant accounts and may, in the case of tracts or parcels of land or easements or rights-of-way, be described by reference to the deeds through which they were acquired or to the Supplemental Indenture conveying them to the Trustee. The Certificate shall specify and separately describe any Property Additions consisting of a major item or an Acquired Facility or acquired and paid for in whole or in part through the transfer or delivery of securities or other property, together with a description of the kind and respective amounts of such securities or other property. The Cost to the Company shall be shown separately for each of such Property Additions which is separately described, whether described as a major item or as an Acquired Facility or as Property Additions acquired and paid for in whole or in part through the transfer or delivery of securities or other property. The Cost to the Company may be shown in the aggregate for all Property Additions grouped within each particular major classification and the Cost to the Company may be allocated among major items and major classifications by an estimate of such nature and upon such basis as the signers deem proper. The Certificate shall also state the Fair Value to the Company, in the opinion of the Engineer or Appraiser signing such Certificate, of such Property Additions, separately for each thereof or group thereof for which Cost to the Company is shown separately in the Certificate; PROVIDED, HOWEVER, that if such Property Additions include an Acquired Facility, the Fair Value to the Company thereof shall be stated as being the amount thereof set forth in the Independent Engineer's or Independent Appraiser's Certificate required by paragraph C below. In addition the Certificate shall also state the fair market value in cash, as stated in any Independent Appraiser's Certificate required by paragraph D below, of any securities or other property transferred or delivered to acquire or pay for any such Property Additions. (b) The Certificate shall state that, with respect to each of such Property Additions or group thereof for which Cost to the Company is shown separately or by groups in the Certificate, the certified Amount of Property Additions is the lower of the certified Cost to the Company thereof and the certified Fair Value to the Company thereof. (c) Nothing in this Section shall prevent the Company from certifying any Property Additions acquired by the Company during any period without simultaneously certifying other Property Additions that the Company 47 may have acquired in that or any other period, and by so doing the Company shall not lose the right so to certify later such other Property Additions. (3) The aggregate amount (item 3 in Summary) of all Retirements during the period from the date to which Retirements had been included in item 3 of the most recent Summary theretofore filed with the Trustee (or the Cut-Off Date in the case of the first such Certificate) to a date not earlier than the ninetieth (90th) day before the date of the related Application. (4) The credits (item 4 in Summary) against Retirements, which shall equal, subject to the provisions of the last sentence of clause (5) below, the sum of the following: (a) the excess of credits against Retirements carried forward from the most recent Certificate, as provided in the last sentence of clause (5) below; (b) the aggregate amount of 100% of (i) any cash, (ii) purchase money obligations, (iii) the principal amount of retired Obligations or paid on Obligations (which amount may not be readvanced under such Obligation), (iv) Bondable Additions and (v) Designated Qualifying Securities, in each case, delivered or certified to the Trustee for use as a basis for releases under Section 5.2 during the period covered by clause (3) above; and (c) all insurance moneys received by the Trustee pursuant hereto or paid to a trustee, mortgagee or other holder under a Prior Lien during the period covered by clause (3) above on account of the damage, loss or destruction of any Bondable Property. (5) The excess (item 6 in Summary) of the Amount of Property Additions shown pursuant to clause (2) above (item 2) over the net amount of Retirements (item 5), which net amount shall be determined by deducting the credits shown pursuant to clause (4) above (item 4) from the aggregate amount of Retirements shown pursuant to clause (3) above (item 3), and such excess shall be the amount of the net Bondable Additions then being certified. If in any case the credits against Retirement exceed the aggregate amount of Retirements shown pursuant to clause (3) above (item 3), the net amount of Retirements for the purpose of this clause shall be zero, but such excess of credits against Retirements shall be carried forward and used as a credit against Retirements in the next Certificate. (6) The sum (item 7 in Summary) of the amount shown pursuant to clause (1) above (item 1) and the amount shown pursuant to clause (5) above (item 6), which sum is the total Bondable Additions then available. 48 (7) The total amount (item 8 in Summary) of Bondable Additions which are then being used, which shall equal (in any combination) (i) 110% of the aggregate principal amount of any Additional Obligations whose authentication and delivery are then being applied for under this Section, (ii) 110% of the aggregate principal amount of the advances or issuances under Conditional Obligations which are then being applied for under Section 4.8, (iii) 110% of the amount of any Deposited Cash which is then being withdrawn under Section 4.6, (iv) 100% of any Trust Moneys which are then being withdrawn under Section 6.2, (v) 100% of any Bondable Additions which are then being used as a basis for a release under Section 5.2 and (vi) 110% of the aggregate principal amount of Designated Qualifying Securities then being redesignated or surrendered under Section 16.3. (8) The balance (item 9 in Summary) of the Bondable Additions shown by the Certificate that will remain after the granting of the Application then being made, which shall be computed by deducting the total amount shown pursuant to clause (7) above (item 8) from the sum shown pursuant to clause (6) above (item 7). (9) That the Property Additions described in the Certificate, except such as have been Retired, are used or useful in the conduct of the business of the Company; that the allocation of the Cost to the Company of such Property Additions to each major item or major classification thereof is, in the opinion of the signers, proper; that all property described in the Certificate as Property Additions qualifies as Property Additions and that the balance of the Bondable Additions to remain after the action applied for (item 9 in Summary) plus the Cost to the Company or the Fair Value to the Company, whichever is less, of uncertified Property Additions is at least equal to the aggregate amount of uncertified Retirements. (10) That the allowances or charges, if any, for interest, taxes, engineering, legal and accounting expenses, insurance, casualties and other items during construction (or in connection with the acquisition of Property Additions) which are included in the Cost to the Company of such of the Property Additions described in the Certificate as were constructed or acquired by or for the Company have been charged and are properly chargeable to fixed plant accounts in accordance with Accounting Requirements and are, in the opinion of the signers, proper in respect of the Property Additions specified. (11) That no portion of the Cost to the Company of the Property Additions described in the Certificate should properly have been charged to maintenance or repairs and that no expenditures are included in the Certificate which under Accounting Requirements are not properly chargeable to fixed plant accounts. (12) That the terms used in the Certificate which are defined herein are used as herein defined. 49 The Certificate as to Bondable Additions required by this paragraph B shall be subdivided into lettered or numbered paragraphs corresponding to the foregoing clauses (1) to (8), inclusive, and shall include a Summary in substantially the following form: Summary of Certificate as to Bondable Additions No. - - - - - - - - - - - - The undersigned hereby certify that the following is a true Summary of Certificate as to Bondable Additions: Start with: 1. In the case of the first Certificate as to Bondable Additions filed, $200,000,000, and, in the case of any subsequent Certificate as to Bondable Additions, the balance of Bondable Additions remaining after the action applied for in the next previous Certificate (Certificate No.______________)............ $_______________ Then take the new gross Property Additions as shown in item 2 below: 2. Amount of additional Property Additions now certified (none of which has been certified in any previous Certificate as to Bondable Additions except Property Additions used as the basis for the authentication and delivery of Additional Obligations surrendered to the Trustee pursuant to the last paragraph of Section 4.1 or as the basis for any portion of an Obligation or series of Obligations which has not been advanced or issued and for which the right to advance or issue has been terminated as provided in the last paragraph of Section 4.1)........................................... $_______________ Then determine the deductions for Retirements by deducting item 4 below from item 3 below to produce item 5: 3. The aggregate amount of all Retirements ............... $_______________ 4. The sum of the credits against Retirements ............ $_______________ 50 5. The net amount of Retirements to be deducted (if less than zero, enter zero) ........................... $_______________ Then determine the net Bondable Additions now being certified by deducting item 5 from item 2 to produce item 6: 6. Net Bondable Additions now being certified ............ $_______________ Then add item 1 and item 6 to produce item 7: 7. Total Bondable Additions available for the action applied for ........................................... $_______________ 8. Bondable Additions now being used ..................... $_______________ Deduct item 8 from item 7 to produce item 9: 9. Balance of Bondable Additions to remain after the action applied for .................................... $_______________ Dated ______________, __________. ________________________ (Title) ________________________ (Title) ________________________ (Engineer or Appraiser) ________________________ (Accountant) C. In case any Property Additions described in the Certificate consist of an Acquired Facility, an Engineer's or Appraiser's Certificate (which shall be given by an Independent Engineer or Independent Appraiser if the Amount of Property Additions attributed to such Acquired Facility is not less than $25,000 and not less than 1% of the aggregate principal amount of Obligations then Outstanding), dated within ninety (90) days prior to the date of the related Application, stating, in the opinion of the signer, the Fair Value 51 to the Company of the Property Additions constituting such Acquired Facility, except such as have been Retired. D. In case any Property Additions are shown in the Certificate to have been acquired or paid for in whole or in part through the transfer or delivery of securities or other property, an Appraiser's Certificate (which shall be given by an Independent Appraiser if the fair market value of such securities as set forth in such Certificate is not less than $25,000 and not less than 1% of the aggregate principal amount of Obligations then Outstanding) stating, in the opinion of the signer, the fair market value in cash of such securities and other property at the time of the transfer or delivery thereof in payment for such Property Additions, which fair market value shall be deemed to be the Cost to the Company of such Property Additions. E. Such instruments of conveyance, transfer and assignment as may be necessary to vest in the Trustee as a part of the Trust Estate all right, title and interest of the Company in and to the Property Additions so described and an Opinion of Counsel identifying such instruments of conveyance or stating that no such instruments are necessary for such purpose. F. An Opinion of Counsel (which may be based on opinions of other counsel believed by such counsel to be reliable), dated within five (5) days prior to the date of filing thereof, to the effect that: (1) if such Property Additions include any property located or constructed on, over or under public highways, rivers or other public property, the Company has the lawful right under permits or franchises granted by a governmental body having jurisdiction in the premises or by the law of the state in which such property is located to maintain and operate such property for an unlimited, indeterminate or indefinite period of time or for the period, if any, specified in such permit, franchise or law, and to remove such property at the expiration of the period covered by such permit, franchise or law, or that the terms of such permit, franchise or law require any public authority having the right to take over such property to pay fair consideration therefor or the term of such permit or franchise extends beyond the useful life of such property; (2) the Company has corporate power to own and operate such Property Additions; and (3) the documents which have been or are therewith delivered to the Trustee conform to the requirements of this Indenture for an Application for the action applied for and, upon the basis of such Application, all conditions precedent herein provided for relating to authentication and delivery of the Obligations therein applied for, release of the property whose release is being requested or withdrawal of the Deposited Cash or Trust Moneys whose withdrawal is then being requested have been complied with. 52 G. Title Evidence indicating that the Company has or, contemporaneously with the taking of the action applied for, will have or, in the case of property of the type described in paragraph C of the definition of "Property Additions" at the time the lien of this Indenture attached thereto, had title to the Property Additions described in the Certificate (except Property Additions that have been Retired). H. To the extent not otherwise covered by the Title Evidence provided pursuant to paragraph G above, an Opinion of Counsel (which may be based on opinions of other counsel believed by such counsel to be reliable), dated within five (5) days prior to the date of filing thereof, to the effect that (i) the Company has or, contemporaneously with the taking of action applied for, will have duly obtained any easements, rights-of-way or leaseholds which are described in the Certificate, subject only to Permitted Exceptions, and (ii) the Indenture is or, upon delivery of the instruments of conveyance, transfer or assignment, if any, specified therein, will be a valid lien upon all such Property Additions (except Property Additions that have been Retired), and subject only to Permitted Exceptions and Prior Liens permitted by the proviso to Section 5.2D(2); PROVIDED, that the opinion contained in clause (ii) above may be limited, with respect to personal property, to such Property Additions in which a lien may be perfected by filing a financing statement under the Uniform Commercial Code. Section 4.3 Authentication and Delivery of Additional Obligations Upon Basis of Retirement or Defeasance of Obligations or Payments on Obligations. Additional Obligations may from time to time be executed by the Company and delivered to the Trustee for authentication, and the same shall be authenticated and delivered by the Trustee upon Company Request, in an aggregate principal amount up to but not exceeding the aggregate principal amount of the Obligations and the principal amount of the payments on the Obligations made the basis for such authentication and delivery, upon receipt by the Trustee of the following: A. The documents and any cash deposit required by Section 4.1. B. Subject to the restrictions of paragraph D below, Additional Obligations theretofore authenticated and delivered under this Indenture and in transferable form, matured or unmatured, canceled or uncancelled, in an aggregate principal amount, along with the aggregate amount of principal payments on the Obligations pursuant to paragraph C below, equal to the aggregate principal amount of Additional Obligations whose authentication and delivery are then applied for under this Section; PROVIDED, HOWEVER, that, in lieu of delivering Obligations to the Trustee, the Company may deposit with or deliver to the Trustee: (1) cash sufficient to pay or redeem certain specified Obligations, PROVIDED that, if such Obligations are to be redeemed, notice of such redemption shall have been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee shall have been made; and/or 53 (2) an Officers' Certificate, dated within two (2) days of the relevant Application for the authentication and delivery of such Additional Obligations, stating (a) that cash sufficient (in the opinion of a nationally recognized firm of Independent public accountants expressed in a certificate signed by such firm and delivered to the Trustee) to pay or redeem certain specified Obligations theretofore authenticated and delivered hereunder is then held by the Trustee in trust for such purpose and, if such Obligations are to be redeemed, that irrevocable notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and/or (b) that certain specified Obligations have been paid, redeemed or otherwise retired or have ceased to be Outstanding; and/or (3) an Officer's Certificate, dated within two (2) days of the relevant Application for the authentication and delivery of such Additional Obligations, stating that certain specified Obligations have been defeased under Article VII and are no longer Outstanding. C. Subject to the restrictions of paragraph D below, an Officers' Certificate, dated within two (2) days of the relevant Application for the authentication and delivery of such Additional Obligations, stating that certain specified Obligations have been paid, in whole or in part, in an aggregate principal amount, along with the aggregate principal amount of the Obligations delivered to or with respect to which a deposit or delivery has been made with the Trustee pursuant to paragraph B above, equal to the aggregate principal amount of Additional Obligations whose authorization and delivery are then applied for under this Section; PROVIDED, HOWEVER, that in lieu of delivery of such Officers' Certificate, the Company may deposit with or deliver to the Trustee cash sufficient to pay certain specified Obligations, in whole or in part. D. An Officers' Certificate, dated within two (2) days of the relevant Application for the authentication and delivery of such Additional Obligations, stating that the Obligations and the principal payments on Obligations then being made the basis for the authentication and delivery of Additional Obligations do not include (1) any Obligation or any principal payment on an Obligation which shall have theretofore been made, or are currently being otherwise made, the basis for the authentication and delivery of Additional Obligations (or any advance of issuance thereunder), the release of property, the withdrawal or application of Deposited Cash or Trust Moneys or the surrender or redesignation of Designated Qualifying Securities; or (2) any Obligation (i) whose payment, redemption or other retirement, or provision therefor, has been effected through the operation of any sinking, 54 amortization, improvement or other analogous fund and (ii) whose use under this Article is at the time precluded by any provision of this Indenture; or (3) any Obligation which has been surrendered upon any exchange or transfer or any Obligation in lieu of which another Obligation has been authenticated and delivered under Section 3.8; or (4) any Obligation which, in accordance with the last paragraph of Section 4.1, is treated as though it had never been Outstanding; or (5) any Obligation authenticated and delivered on the basis of Designated Qualifying Securities or any Obligation that has been paid or deemed paid by the proceeds of the payment or redemption of Designated Securities (in all cases after giving effect to any provision of this Indenture whereby Obligations originally authenticated and delivered on one basis shall be deemed to be authenticated and delivered upon another basis); or (6) any Obligation or any principal payment on an Obligation retired or paid pursuant to or by an advance or loan under (i) an Obligation held by a Credit Enhancer and evidencing Credit Enhancement or (ii) an RUS Reimbursement Obligation. E. An Opinion of Counsel stating that the documents and cash and/or Obligations which have been or are therewith delivered to the Trustee conform to the requirements of this Indenture and that, upon the basis of the relevant Application, the conditions precedent to authentication and delivery of the Obligations applied for under this Article have been satisfied. F. An Available Margins Certificate. Every Obligation received by the Trustee and on the basis of which an Additional Obligation is authenticated and delivered under this Article, if not already canceled, shall be promptly canceled and thereafter the Trustee shall retain such Obligations or destroy such Obligations and deliver a certificate of destruction to the Company. Section 4.4 Authentication and Delivery of Additional Obligations Upon Basis of Designated Qualifying Securities. Additional Obligations may from time to time be executed by the Company and delivered to the Trustee for authentication, and the same shall be authenticated and delivered by the Trustee upon Company Request, in an aggregate principal amount up to but not exceeding the aggregate principal amount of the Designated Qualifying Securities made the basis of such authentication and delivery, upon receipt by the Trustee of the following: A. The documents and any cash deposit required by Section 4.1. 55 B. An Available Margins Certificate. C. Designated Qualifying Securities, which (i) the Company designates as the basis for authentication and delivery of such Additional Obligations; (ii) shall be redeemable at the demand of the Trustee on or after an Event of Default; (iii) bear interest at the rate at least equal to the rate of interest to accrue on the Additional Obligations to be authenticated and delivered upon the basis of such Designated Qualifying Securities or on the basis of Deposited Cash to the extent any of such Deposited Cash is withdrawn on the basis of such Designated Qualifying Securities; (iv) may, but need not, contain provisions for the redemption thereof at the option of the issuer thereof, any such redemption to be made at a redemption price or prices not less than the principal amount thereof; (v) mature on such date or dates and in such principal amounts as shall correspond to the maturity date or dates and principal amounts of the Additional Obligations to be authenticated and delivered upon the basis of such Designated Qualifying Securities or on the basis of Deposited Cash to the extent any of such Deposited Cash is withdrawn on the basis of such Designated Qualifying Securities; (vi) containing mandatory redemption provisions corresponding to the mandatory and optional redemption provisions (pursuant to a sinking fund, at the option of the Holder thereof, or otherwise) of the Additional Obligations to be authenticated and delivered on the basis of such Designated Qualifying Securities or on the basis of Deposited Cash to the extent any of such Deposited Cash is withdrawn on the basis of Designated Qualifying Securities; and (vii) shall be held by the Trustee in accordance with Article XVI. D. An Officers' Certificate, dated within two (2) days of the relevant Application for the authentication and delivery of Additional Obligations, stating (1) that the sum of the aggregate principal amount of all Designated Qualifying Securities then on deposit with the Trustee plus the aggregate principal amount of all Designated Qualifying Securities then being made the basis for the authentication and delivery of Additional Obligations does not exceed 20% of the sum of the aggregate principal amount of all Obligations then Outstanding plus the aggregate principal amount of the Additional Obligations which are the subject of such Application; and (2) that the Designated Qualifying Securities then being made the basis for such authentication and delivery of Additional Obligations do not include any Designated Qualifying Securities which shall have theretofore been made, or are currently being otherwise made, the basis for the authentication and delivery of Additional Obligations (or any advance or issuance thereunder), the release of property, the withdrawal of Deposited Cash or Trust Moneys or the surrender or redesignation of Designated Qualifying Securities. E. An Engineer's or Appraiser's Certificate (which shall be given by an Independent Engineer or Independent Appraiser if (i) the aggregate of the fair value of such Designated Qualifying Securities to be deposited with the Trustee in connection with such Application and the fair value of all Designated Qualifying Securities and other securities 56 deposited with the Trustee since the commencement of the then current calendar year (as previously certified to the Trustee) is 10% or more of the aggregate principal amount of Obligations then Outstanding and (ii) the fair value of such Designated Qualifying Securities to be deposited with the Trustee in connection with such Application is not less than $25,000 and less than 1% of the aggregate principal amount of Obligations then Outstanding), dated within thirty (30) days prior to the date of the related Application, stating, in the opinion of the signer, the fair value to the Company of such Designated Qualifying Securities to be deposited with the Trustee in connection with such Application. F. Opinion of Counsel (which as to clauses (1), (2) and (3) below may be from counsel to the issuer of the Designated Qualifying Securities) to the effect that: (1) The forms of the Qualifying Securities delivered pursuant to paragraph C above have been duly approved by the issuer of the Designated Qualifying Securities and have been established in conformity with the provisions of the related Qualifying Securities Indenture; (2) The terms of such Qualifying Securities have been duly authorized by the issuer of the Designated Qualifying Securities and have been established in conformity with the provisions of the related Qualifying Securities Indenture; (3) Such Qualifying Securities have been duly issued under the related Qualifying Securities Indenture and constitute valid and legally binding obligations of the issuer of the Designated Qualifying Securities, entitled to the benefits provided by such Qualifying Securities Indenture, and are enforceable in accordance with their terms; and (4) The documents, cash, if any, and Designated Qualifying Securities which have been or are therewith delivered to Trustee and the Qualifying Securities Indenture pursuant to which such Designated Qualifying Securities have been issued conform to the requirements of this Indenture and that, on the basis of the relevant Application, the conditions precedent to authentication and delivery of the Additional Obligations applied for under this Article have been satisfied. G. Certified copies of all opinions, certificates and other documents delivered to the trustee under the applicable Qualifying Securities Indenture in connection with the issuance of such Designated Qualifying Securities. Section 4.5 Authentication and Delivery of Additional Obligations Upon Deposit of Cash with Trustee. Additional Obligations may from time to time be executed by the Company and delivered to the Trustee for authentication, and the same shall be authenticated and delivered by the Trustee upon Company Request, upon receipt by the Trustee of the following: 57 A. The documents and any cash deposit required by Section 4.1; B. Cash (which may be cash representing the purchase price of, or a loan made pursuant to, the Additional Obligations to be authenticated and delivered under this Section 4.5) equal to the aggregate principal amount of the Additional Obligations whose authentication and delivery are then applied for under this Section (such cash being herein sometimes referred to as "Deposited Cash"); C. An Opinion of Counsel stating that the documents which have been or are therewith delivered to the Trustee conform to the requirements of this Indenture and that, upon the deposit of an amount of cash equal to the aggregate principal amount of the Additional Obligations whose authentication and delivery are so applied for, the conditions precedent to such authentication and delivery of such Additional Obligations under this Article shall have been satisfied; and D. An Available Margins Certificate. Section 4.6 Withdrawal of Deposited Cash. Until paid upon Company Order as provided in this Section, the Trustee shall hold all Deposited Cash as a part of the Trust Estate; and, upon any sale of the Trust Estate or any part thereof under Article VIII, any Deposited Cash then held by the Trustee shall be applied in accordance with Section 8.7; but, prior to any such sale, all or any part of the Deposited Cash shall be applied by the Trustee from time to time as provided in this Section. From time to time, whenever the Company becomes entitled to the authentication and delivery of Additional Obligations under Section 4.2 (upon the basis of Bondable Additions), under Section 4.3 (upon the basis of the retirement or defeasance of Obligations previously Outstanding or payments on Obligations) or under Section 4.4 (upon the basis of Designated Qualifying Securities), the Trustee shall (in lieu of authenticating and delivering Additional Obligations) pay upon Company Request, and the Company shall be entitled to withdraw, Deposited Cash in an amount equal to the principal amount of the Additional Obligations to whose authentication and delivery the Company would be so entitled, but only upon receipt by the Trustee of the following: A. a Board Resolution requesting the withdrawal and payment of Deposited Cash; B. an Officers' Certificate, dated within two (2) days of the date of the relevant Application for such withdrawal and payment, stating that no Event of Default exists and that all conditions precedent provided for in this Indenture relating to such withdrawal and payment have been complied with; C. in the case of an Application for the withdrawal of Deposited Cash upon the basis of Bondable Additions, the additional documents specified in Section 4.2 (other than an Available Margins Certificate) for delivery whenever requesting the use of Bondable Additions as a basis for such withdrawal of Deposited Cash under this Section; 58 D. in the case of an Application for the withdrawal of Deposited Cash upon the basis of the retirement or defeasance of Obligations or payments on Obligations, the documents and Obligations specified in paragraphs B, C, D(1) and E of Section 4.3 for delivery to the Trustee (with such omissions and variations as are appropriate in view of the fact that the Application involves the withdrawal of Deposited Cash and not the authentication and delivery of Additional Obligations), together with an Opinion of Counsel stating that all conditions precedent provided for in this Indenture relating to such withdrawal of Deposited Cash have been complied with; and E. in the case of an Application for the withdrawal of Deposited Cash upon the basis of Designated Qualifying Securities, the documents and Designated Qualifying Securities specified in paragraphs C, D, E, F and G of Section 4.4 for delivery to the Trustee (with such omissions and variations as are appropriate in the view of the fact that the Application involves the withdrawal of Deposited Cash and not the authentication and delivery of any Additional Obligations), together with an Opinion of Counsel stating that all conditions precedent provided for in this Indenture relating to such withdrawal of Deposited Cash have been complied with; PROVIDED that thereafter the Additional Obligations authenticated and delivered on the basis of such Deposited Cash that is then withdrawn on the basis of Designated Qualifying Securities shall be deemed to be authenticated and delivered on the basis of Designated Qualifying Securities. Section 4.7 Credit Obligations. Additional Obligations ("Credit Obligations") of one or more series, or within a series, may from time to time be executed by the Company and delivered to the Trustee for authentication, and the same shall be authenticated and delivered by the Trustee upon Company Request, concurrently with the authentication and delivery of any Additional Obligations authorized pursuant to the provisions of Section 4.2, 4.3, 4.4, 4.5, 4.8 or 4.10 for the purpose of evidencing the Company's obligation to repay any advances or loans made to, or on behalf of, the Company (and related interest, fees, charges and other amounts) in connection with Credit Enhancement or liquidity support of such other authorized Additional Obligations; PROVIDED, HOWEVER, that the stated maximum principal amount of any such Credit Obligations shall not exceed the aggregate principal amount of the Additional Obligations with respect to which such Credit Enhancement or liquidity support is being provided, such number of days' interest thereon as the Company shall determine prior to the issuance thereof computed at the maximum interest rate applicable thereto, and related fees and other charges related thereto or the enforcement thereof. Except as otherwise provided in a Supplemental Indenture, for the purposes of (i) receiving payment of a Credit Obligation, whether at maturity, upon redemption or if the principal of all Obligations is declared immediately due and payable following an Event of Default, as provided in Section 8.1 of this Indenture, or (ii) computing the principal amount of Obligations held by the Holder of a Credit Obligation in giving any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders, the principal amount of a Credit Obligation shall be the actual principal amount that the Company shall owe thereon at the time. The proceeds of any payment pursuant to, or any loan or advance under, any Credit Obligation shall be used solely in connection with the payment of the related Obligation or in connection with the enforcement of, or protection of the security for, such Credit Obligation, and for other related fees and charges. 59 Section 4.8 Conditional Obligations. Additional Obligations ("Conditional Obligations") of one or more series, or within a series, may from time to time be executed by the Company and delivered to the Trustee for authentication, and the same shall be authenticated and delivered by the Trustee upon Company Request, upon receipt by the Trustee of the documents and cash deposit, if any, specified in paragraphs A, B, C and D of Section 4.1 (except that the certification and Opinion of Counsel with respect to the compliance with conditions precedent shall apply only to the conditions precedent set forth in Section 4.1) on or prior to the date of such authentication and delivery; PROVIDED, HOWEVER, no advance under or issuance of such Conditional Obligations shall be permitted or made without the consent of the Trustee, which consent shall be given by the Trustee only upon the Company's delivery of (a) (i) the relevant documents specified in paragraphs B through H, inclusive, of Section 4.2, (ii) the relevant documents and Obligations specified in paragraphs B, C, D(1) and E of Section 4.3, or (iii) the relevant documents and Designated Qualifying Securities specified in paragraphs C through G, inclusive, of Section 4.4 (in each case with such omissions and variations as are appropriate in view of the fact that such Sections are being used as the basis for advances under or issuances of Conditional Obligations rather than the authentication and delivery of Additional Obligations), which documents would permit the authentication and delivery of Additional Obligations in an aggregate principal amount equal to such requested advance or issuance, (b) an Available Margins Certificate and (c) an Officers' Certificate and an Opinion of Counsel each stating that all conditions precedent provided for in this Section relating to such advance or issuance have been complied with. For the purposes of (i) receiving payment of Conditional Obligations, whether at maturity, upon redemption or if the principal of Obligations is declared immediately due and payable following an Event of Default, as provided in Section 8.1 of this Indenture, or (ii) computing the principal amount of such Conditional Obligations held by the Holder thereof in giving any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders, the principal amount of such Conditional Obligations shall be deemed to be the actual principal amount that the Company shall owe thereon, which shall equal the aggregate of the amounts advanced to, or on behalf of, the Company in connection therewith, less any prior repayments thereof. Section 4.9 RUS Reimbursement Obligations. Additional Obligations constituting RUS Reimbursement Obligations of one or more series, or within a series, may from time to time be executed by the Company and delivered to the Trustee for authentication, and the same shall be authenticated and delivered by the Trustee upon Company Request, concurrently with the authentication and delivery of any Additional Obligations authorized pursuant to the provisions of Section 4.2, 4.3, 4.4, 4.5, 4.8 or 4.10 and guaranteed by the United States of America, acting through the Administrator of RUS. Except as otherwise provided in a Supplemental Indenture, for the purposes of (i) receiving payment of a RUS Reimbursement Obligation, whether at maturity, upon redemption or if the principal of all Obligations is declared immediately due and payable following an Event of Default, as provided in Section 8.1 of this Indenture, and (ii) computing the principal amount of any RUS Reimbursement Obligation held by a Holder thereof in giving any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders, the principal amount of such RUS Reimbursement Obligation shall be the actual principal amount that the Company shall owe thereon at the time. The proceeds of any payment pursuant to, or loan or advance under, any RUS 60 Reimbursement Obligation, shall be used solely in connection with the payment of the related guaranteed Obligation, or in connection with the enforcement of, or protection of the security for, such RUS Reimbursement Obligation, and for other related fees and charges. Section 4.10 Certain Additional Obligations Additional Obligations of one or more series, or within a series, may from time to time be executed by the Company and delivered to the Trustee for authentication, and the same shall be authenticated and delivered by the Trustee upon Company Request, upon receipt by the Trustee of the documents and cash deposit, if any, specified in paragraphs A, B, C and D of Section 4.1 on or prior to the date of such authentication and delivery, for the purpose of refinancing or refunding indebtedness of the Company in respect of indebtedness issued by or for the benefit of the Company to refund, refinance or defease (legally or economically) the following pollution control bonds: A. $92,130,000 in principal amount of Development Authority of Burke County (Georgia) Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1992; B. $2,290,000 in principal amount of Development Authority of Burke County (Georgia) Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1982; C. $19,345,000 in principal amount of Development Authority of Burke County (Georgia) Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1993B; D. $2,625,000 in principal amount of Development Authority of Burke County (Georgia) Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1994B; E. $3,760,000 in principal amount of Development Authority of Monroe County (Georgia) Pollution Control Revenue Bonds (Oglethorpe Power Corporation Scherer Project), Series 1982; and F. $9,910,000 in principal amount of Development Authority of Monroe County (Georgia) Pollution Control Revenue Bonds (Oglethorpe Power Corporation Scherer Project), Series 1992A. The aggregate principal amount of the Additional Obligations authorized pursuant to this Section shall not exceed $130,060,000. 61 ARTICLE V RELEASES Section 5.1 Right of Company to Possess and Operate Trust Estate; Dispositions without Release. So long as no Event of Default shall exist, the Company shall have the right, subject to the provisions of this Article, to possess, use, manage, operate and enjoy the Trust Estate (other than any cash and securities constituting part of the Trust Estate and deposited with the Trustee), to use and consume such materials, equipment and supplies as may be necessary or appropriate to generate, transmit and distribute electricity or operate the System, and to collect, receive, use, invest and dispose of the rents, issues, tolls, earnings, profits, revenues and other income, products and proceeds from the Trust Estate, with power, in the ordinary course of business, freely and without restriction on the part of the Trustee or of the Holders, to gather, cut, mine and produce crops, timber, minerals, products, materials and supplies and to use, consume and dispose of any thereof, and to alter, repair and change the position or location of any of its lines, railroads, mines, mills, warehouses, buildings, works, structures, machinery, equipment and other property, PROVIDED that such alterations, repairs or changes shall not materially diminish the value thereof or impair the lien of this Indenture thereon, and to deal with, exercise any and all rights under, receive and enforce performance under, modify or amend, and adjust and settle all matters relating to current performance of, choses in action, leases, contracts and other agreements. The Company shall have, in addition to and not in limitation of the rights set forth in the preceding paragraph, the right, at any time and from time to time if no Event of Default exists, without any release from or consent by the Trustee, A. to sell, exchange or otherwise dispose of, free from the lien of this Indenture, any machinery, equipment, furniture, apparatus, tools or implements, materials or supplies or other similar property subject to the lien hereof, which shall have become old, inadequate, obsolete, worn out, unfit, unadaptable, unserviceable, undesirable or unnecessary for use in the operations of the Company, upon substituting for the same other machinery, equipment, furniture, apparatus, tools or implements, materials or supplies or other property not necessarily of the same character but of at least equal value to the Company as the property disposed of, which shall forthwith become, without further action, subject to the lien of this Indenture; and no purchaser of any such property shall be bound to inquire into any question affecting the right of the Company to sell or otherwise dispose of the same free from the lien of this Indenture; B. to abandon, terminate, cancel, amend, release or make alterations in or substitutions of any leases, contracts, easements, rights-of-way or other agreements subject to the lien of this Indenture, PROVIDED that any amended, altered or substituted leases, contracts, easements, rights-of-way or other agreements shall forthwith, without further action, become subject to the lien of this Indenture to the same extent as those previously existing and PROVIDED FURTHER that, if the Company shall receive any money or property as consideration or compensation for such termination, cancellation, release, 62 amendment, alteration or substitution, such money (to the extent it exceeds $100,000 per cancellation, release, amendment, alteration or substitution) or property, forthwith upon its receipt by the Company, shall be deposited with the Trustee (unless otherwise required by a Prior Lien) or otherwise subjected to the lien of this Indenture; C. to surrender or modify any franchise, right (charter and statutory), license or permit subject to the lien of this Indenture which it may own or hold or under which it may be operating, PROVIDED that, in the opinion of the Board of Directors or an Officer of the Company, the preservation of such franchise, right, license or permit is no longer necessary in the conduct of the business of the Company, PROVIDED FURTHER that the exercise of the right of any municipality or any other political subdivision to terminate a permit, license or franchise shall not be deemed to be a surrender or modification of the same, and PROVIDED FURTHER that, if the Company shall receive any money or property as consideration or compensation for such surrender or modification, such money (to the extent it exceeds $100,000 per surrender or modification) or property, forthwith upon its receipt by the Company, shall be deposited with the Trustee (unless otherwise required by a Prior Lien) or otherwise subjected to the lien of this Indenture; D. to grant rights-of-way and easements over or in respect of any property in the Trust Estate, or release rights-of-way and easements constituting portions of the Trust Estate, PROVIDED that, in the opinion of the Board of Directors or an Officer of the Company, no such grant will impair the usefulness of such property in the conduct of the Company's business and no such release shall occur with respect to any right-of-way or easement that is necessary to the operation of the System, and PROVIDED FURTHER that any cash consideration in excess of $100,000 (per grant or release) received by the Company upon or in connection with the granting thereof, forthwith upon its receipt by the Company, shall be deposited with the Trustee (unless otherwise required by a Prior Lien); E. to demolish, dismantle, tear down or, use for scrap or abandon any property in the Trust Estate, or abandon any thereof other than land and estates in land, if in the opinion of the Board of Directors or any Officer of the Company such demolition, dismantling, tearing down, scrapping or abandonment is desirable in the conduct of the business of the Company and the value and utility of the Trust Estate as an entirety will not thereby be materially impaired; F. to alter, repair, replace, change the location or position of and add to its plants, structures, machinery, systems, equipment, fixtures and appurtenances, PROVIDED that no change shall be made in the location of any such property subject to the lien of this Indenture which removes such property into a jurisdiction in which this Indenture and any required financing or continuation statement covering security interests in such property have not been recorded, registered or filed in the manner required by law to preserve the lien of this Indenture on such property or otherwise impairs the lien hereof; G. to deal in, sell, dispose of or otherwise use inventory which are subject to the lien of this Indenture in the ordinary course of the Company's business, collect or liquidate accounts which are subject to the lien of this Indenture in the ordinary course of the 63 Company's business, or use cash proceeds of the Trust Estate which are subject to the lien of the Indenture (other than cash deposited or required to be deposited with the Trustee pursuant to this Indenture) in the business of the Company, PROVIDED, that the Company's right to rely upon this paragraph G shall be conditioned upon and the Company shall deliver to the Trustee, within thirty (30) days following January 1 and July 1 in each year (each, a "Six-Month Period"), an Officers' Certificate to the effect that all dealings in, and sales, dispositions and other uses of, such inventory by the Company and all collections and liquidations of such accounts by the Company during such Six-Month Period were in the ordinary course of the Company's business and that all such cash proceeds were used by the Company in connection with its business or to make other cash payments permitted by this Indenture, and PROVIDED FURTHER that this paragraph G shall not apply to any dealing in, or sale, disposition or other use of, such inventory, collection or liquidation of such accounts, or use of such cash proceeds in any single transaction or related series of transactions involving more than 10% of the fair value of the Trust Estate and, in such event, such action shall be made pursuant to the provisions of Section 5.2; and H. to sell, lease or sublease, subject to the lien of this Indenture, any property, PROVIDED that the Company shall maintain possession and control of such property pursuant to a lease or sublease meeting the requirements of paragraph C of the definition of "Property Additions." The Trustee shall, from time to time, execute a written instrument to evidence and confirm any action taken by the Company under this Section, upon receipt by the Trustee of (i) a Board Resolution or Officers' Certificate requesting the same and expressing any required opinions, (ii) an Officers' Certificate stating that no Event of Default exists and that said action was duly taken in conformity with a designated paragraph of this Section, and (iii) an Opinion of Counsel stating that said action was duly taken by the Company in conformity with this Section and that the execution of such written instrument by the Trustee is appropriate to confirm such action under this Section. Section 5.2 Releases. The Company shall have the right, at any time and from time to time, to sell, exchange or otherwise dispose of any part of the Trust Estate (except cash, Pledged Securities and other personal property held by, or required to be deposited with, the Trustee hereunder) and the Trustee shall, from time to time, release property so sold, exchanged or otherwise disposed of from the lien of this Indenture, but only upon receipt by the Trustee of the following: A. A Board Resolution requesting such release and describing the property to be released; PROVIDED, HOWEVER, that no Board Resolution shall be required as to any item of property if the Officers' Certificate delivered pursuant to paragraph B below states that the value of such item of property to be released does not exceed 0.1% of the fair value of the Trust Estate. B. An Officers' Certificate (hereinafter called a "Release Certificate"), dated not more than thirty (30) days prior to the date of the Application for such release and signed, in 64 the case of the following clause (2), by an Engineer, and, in the case of the following clauses (5) and (6), by an Engineer or an Appraiser, setting forth in substance as follows: (1) that the Company has sold, exchanged or otherwise disposed of, has contracted to sell, exchange or otherwise dispose of, or intends to sell, exchange or otherwise dispose of, the property so requested to be released; (2) that (a) such sale, exchange or other disposition is desirable in the conduct of the business of the Company and the property to be released is no longer necessary in the conduct of the business of the Company, or (b) such sale, exchange or other disposition has been or is to be made in lieu and reasonable anticipation of the taking of such property by eminent domain by the United States of America or a designated state, municipality or other governmental authority having the power to take such property by eminent domain, or (c) such sale, exchange or other disposition has been or is to be made in lieu and reasonable anticipation of the exercise of a right of the United States of America or a designated state, municipality or other governmental authority to purchase, or designate a purchaser or order the sale of, such property; (3) that no Event of Default exists; (4) that, in the opinion of the signers, the proposed release will not impair the security under this Indenture in contravention of the provisions hereof and that all conditions precedent herein provided for relating to such release have been complied with; (5) the fair value, in the opinion of said Engineer or Appraiser, of the property to be released at the date of the Release Certificate; and if, by virtue of clause (7) of this paragraph, any of the property to be released shall be separately described in the Release Certificate, the fair value of such property shall be separately stated; PROVIDED, HOWEVER, that it shall not be necessary under this clause to state the fair value of any property whose fair value is certified in an Independent Engineer's or Independent Appraiser's Certificate under paragraph C below; (6) whether (a) the aggregate of the fair value of the property to be released at the date of the Release Certificate and the fair value of all securities or other property released since the commencement of the then current calendar year (as previously certified to the Trustee in connection with releases) is 10% 65 or more of the aggregate principal amount of all Obligations at the time Outstanding and whether the fair value of the property to be released is at least $25,000 and at least 1% of the aggregate principal amount of all Obligations at the time Outstanding, or (b) the fair value of the property to be released at the date of the Release Certificate is more than 0.1% of the fair value of the Trust Estate. and, if all the facts specified in either clause (a) or (b) above are present, that a certificate of an Independent Engineer or Independent Appraiser as to the fair value of the property to be released will be furnished under paragraph C below; and (7) whether any purchase money obligations to be delivered to the Trustee or to be certified as delivered to the trustee, mortgagee or other holder of a Prior Lien under paragraph D(4) below are to be secured by a purchase money mortgage on less than all the property to be released; and, if so, the property to be covered by such purchase money mortgage shall be separately described. C. In case it shall be stated pursuant to paragraph B(6) above that the same will be furnished, a certificate of an Independent Engineer or Independent Appraiser, dated not more than thirty (30) days prior to the date of the Application for such release, stating the fair value, in the Independent Engineer's or Independent Appraiser's opinion, at the date of the Release Certificate of the property to be released, and stating separately the fair value of any such property separately described pursuant to paragraph B(7) above and stating also that, in the opinion of the Independent Engineer or Independent Appraiser, the proposed release will not impair the security under this Indenture in contravention of the provisions hereof. D. Cash equal to the fair value, as certified pursuant to this Section, of the property to be released; PROVIDED, HOWEVER, that, no cash deposit will be required if the Officers' Certificate delivered pursuant to paragraph B above states that the value of each item of property to be released does not exceed 0.1% of the fair value of the Trust Estate and the value of all property released during the current calendar year under this proviso does not exceed 0.5% of the fair value of the Trust Estate; and PROVIDED FURTHER that, in lieu of all or any part of such cash, the Company shall have the right to deposit and pledge with or deliver to the Trustee any of the items described in the following clauses of this paragraph: (1) purchase money obligations secured by a mortgage or similar instrument (hereinafter in this paragraph called a "mortgage") on the property to be released or the portion thereof separately described pursuant to paragraph B(7) above, maturing not more than 10 years after the date of the deposit thereof and not exceeding in principal amount 80% of the fair value of the property covered by such purchase money mortgage, as certified pursuant to paragraph B(5) or C above, which purchase 66 money obligations and the mortgage securing the same shall be duly assigned to and deposited and pledged with the Trustee, shall be accompanied by an Officers' Certificate stating that the aggregate unpaid principal amount of all purchase money obligations received by the Trustee under this clause and then deposited and pledged with it (including those then being deposited and pledged with the Trustee), together with all those then and theretofore delivered to and then held by any trustees, mortgagees or other holders of Prior Liens under clause (4) below, does not exceed 10% of the aggregate principal amount of all Obligations then Outstanding and shall be received by the Trustee at their principal amount in lieu of cash; (2) the relevant documents specified in paragraphs B through H, inclusive, of Section 4.2 for delivery whenever requesting the use of Bondable Additions as a basis, in whole or in part, for the release of any part of the Trust Estate under this Section, said documents to be received by the Trustee in lieu of cash up to the Bondable Additions thereby certified; PROVIDED, HOWEVER, that if all the property to be released was, immediately before the sale or disposition thereof Non-Bondable Property, subject to a Prior Lien, the Bondable Additions being used as a basis for such release may be subject to the same Prior Lien without any deduction for the Prior Lien Obligations thereby secured in computing such Bondable Additions and said documents may be modified accordingly; (3) the relevant documents and Obligations specified in paragraphs B, C, D(1) and E of Section 4.3 (with such omissions and variations as are appropriate in view of the fact that the Obligations described therein as previously or concurrently retired or defeased or principal payments on Obligations are being used as the basis for the release of any part of the Trust Estate) for delivery whenever requesting the use of Obligations previously or concurrently retired or defeased or payments on Obligations as a basis, in whole or in part, for the release of any part of the Trust Estate under this Section, said documents to be received by the Trustee in lieu of cash up to an amount equal to the principal amount of Obligations previously or concurrently retired or defeased or payments on Obligations and in either case not previously used as a basis for the issuance of Additional Obligations or the withdrawal of cash; (4) a certificate of the trustee, mortgagee or other holder of a Prior Lien on all or any part of the property to be released, stating that a specified amount of cash or a specified principal amount of purchase money obligations of the character described in clause (1) above and representing proceeds of the sale of such property have been deposited with such trustee, mortgagee or other holder pursuant to the requirements of such Prior Lien, such certificate to be received by the Trustee in lieu of cash equal to the cash and the principal amount of the purchase money obligations so certified to have been deposited with such trustee, mortgagee or other holder, PROVIDED there shall also be delivered to the Trustee an Officers' Certificate stating that such property to be released was subject to such Prior Lien, which shall be briefly described or otherwise identified, and that the aggregate principal amount of all purchase money obligations received by the Trustee under clause (1) of this paragraph and then deposited and pledged with it, together with all those then and theretofore delivered to and then held by any trustees, mortgagees or other holders 67 of Prior Liens under this clause, does not exceed 10% of the aggregate principal amount of all Obligations then Outstanding; (5) an Officers' Certificate stating that the property to be released has been sold, exchanged or otherwise disposed of subject to a specified Prior Lien or Prior Liens existing thereon immediately before such sale or disposition, briefly describing or otherwise identifying such Prior Lien or Prior Liens, stating the principal amount of the outstanding Prior Lien Obligations secured thereby and stating that such property constitutes all the property which, immediately before such sale or disposition was subject to such Prior Lien or Prior Liens, said Certificate to be received by the Trustee in lieu of cash in an amount equal to the principal amount of outstanding Prior Lien Obligations so stated to be secured by such Prior Lien or Prior Liens; or (6) The relevant documents and Designated Qualifying Securities specified in paragraphs C, D, E, F and G of Section 4.4 (with such omissions and variations as are appropriate in view of the fact that the Designated Qualifying Securities described therein are being used as the basis for the release of any part of the Trust Estate and except that the maturity date or dates for such Designated Qualifying Securities may be as determined by the Company) for delivery whenever requesting the use of Designated Qualifying Securities as a basis, in whole or in part, for the release of any part of the Trust Estate under this Section, said documents to be received by the Trustee in lieu of cash up to an amount equal to the principal amount of such Designated Qualifying Securities. E. An Opinion of Counsel (1) stating that the certificates, opinions and other instruments and/or cash and/or obligations which have been or are therewith delivered to or deposited and pledged with the Trustee conform to the requirements of this Indenture, and that, upon the basis of the Application, all conditions precedent herein provided for or relating to the release from the lien of this Indenture of the property so sold, exchanged or otherwise disposed of or contracted to be sold, exchanged or otherwise disposed of have been complied with; (2) stating that the purchase money obligations, if any, being delivered to the Trustee or to the trustee, mortgagee or other holder of a Prior Lien are valid obligations and are duly secured by a valid purchase money mortgage constituting a lien upon all the property to be released, or upon the portion thereof separately described pursuant to paragraph B(7) above, free of any Prior Liens other than any existing on the property to be released immediately prior to such release, and that the assignment to the Trustee of such purchase money obligations and the mortgage securing the same is valid and in recordable form; (3) in case any cash or purchase money obligation shall be certified to have been deposited with the trustee, mortgagee or other holder of a Prior Lien, stating 68 that the property to be released, or a specified portion thereof, is or immediately before such sale, exchange or other disposition was subject to such Prior Lien and that such deposit is required by such Prior Lien; (4) in case the sale, exchange or other disposition of the property to be released shall have been certified, pursuant to paragraph B(2)(b) above, to be in lieu and reasonable anticipation of the taking of such property by eminent domain, stating that such property could lawfully have been taken by the grantee by eminent domain; (5) in case the sale, exchange or other disposition of the property to be released shall have been certified, pursuant to paragraph B(2)(c) above, to be in lieu and reasonable anticipation of the exercise of a right to purchase, or to designate a purchaser or order the sale of, such property, stating that the designated governmental authority had, at the time of such sale or disposition, a right to purchase or designate a purchaser of such property or to order its sale; and (6) in case an Officers' Certificate shall have been delivered to the Trustee in lieu of cash pursuant to paragraph D(4) above, stating that the property to be released, or a specified portion thereof, is or immediately before such sale or disposition was subject to the Prior Lien or Prior Liens described or otherwise identified in said Certificate. If any property released from the lien of this Indenture as provided in this Section shall continue to be owned by the Company after such release, this Indenture shall not become or be, or be required to become or be, a lien on such property or any improvement, extension or addition to such property or renewals, replacements or substitutions of or for any part or parts of such property unless the Company shall execute and deliver to the Trustee a Supplemental Indenture, in recordable form, containing a grant, conveyance, transfer or mortgage thereof to the Trustee all in accordance with Section 13.5. Section 5.3 Eminent Domain. If any or all of the Trust Estate shall be taken by eminent domain or purchased pursuant to the right of a governmental authority to purchase or designate a purchaser for such property or to order its sale, the Trustee may release the property so taken and shall be fully protected in so doing upon being furnished with A. an Officers' Certificate requesting such release, describing the property to be released and stating that such property has been taken by eminent domain or purchased pursuant to the right of a governmental authority to purchase or designate a purchaser for such property or to order its sale and that all conditions precedent herein provided for relating to such release have been complied with; B. an Opinion of Counsel to the effect that an order of a court of competent jurisdiction has been issued providing for the taking of such property by exercise of the right of eminent domain or purchased pursuant to the right of a governmental authority to purchase 69 or designate a purchaser for such property or to order its sale, that such order or such sale of such property has become final or an appeal therefrom is not being pursued by the Company and that all conditions precedent herein provided for relating to such release have been complied with; and C. subject to the requirements of any Prior Lien on the property so taken, cash equal to such award or sale price. Section 5.4 Written Disclaimer of Trustee. In case the Company proposes to sell, exchange or otherwise dispose of or has sold, exchanged or otherwise disposed any property not subject to the lien hereof and the recipient thereof requests the Company to furnish a written disclaimer or quitclaim by the Trustee of any interest in such property under this Indenture, the Trustee shall execute such an instrument without substitution of other property or cash upon receipt by the Trustee of A. a Company Request for the execution of such disclaimer or quitclaim; B. an Officers' Certificate which shall identify the sale, exchange or other disposition or proposed sale, exchange or other disposition, describe the property sold or to be sold, exchanged or otherwise disposed of, state that such property is not subject to the lien hereof, and state that the recipient of such property has requested a written disclaimer or quitclaim by the Trustee; and C. an Opinion of Counsel which shall also state that such property is not subject to the lien hereof and not required to be subjected thereto by any of the provisions hereof. Section 5.5 Powers Exercisable Notwithstanding Event of Default. While in possession of all or substantially all of the Trust Estate (other than any cash and securities constituting part of the Trust Estate and deposited with the Trustee), the Company may exercise the powers conferred upon it in this Article even though it would otherwise be prohibited from doing so while an Event of Default exists as provided therein, if the Trustee in its discretion (based upon such opinions and certifications as the Trustee deems necessary), or the Holders of not less than a majority in aggregate principal amount of the Obligations then Outstanding, by Act of such Holders, shall specifically consent to such action, in which event none of the instruments required to be furnished to the Trustee under this Article as a condition to the exercise of such powers need state that no Event of Default exists as provided therein. Section 5.6 Powers Exercisable by Trustee or Receiver. In case all or substantially all of the Trust Estate (other than any cash and securities constituting part of the Trust Estate and deposited with the Trustee) shall be in the possession of a trustee or receiver lawfully appointed, the powers hereinbefore in this Article conferred upon the Company with respect to the sale, exchange or other disposition and release of the Trust Estate may be exercised by such trustee or receiver (with the consent of the Trustee or Holders as specified in 70 Section 5.5), in which case a written request signed by such receiver or trustee shall be deemed the equivalent of any Board Resolution or Company Request required by this Article and a certificate signed by such trustee or receiver shall be deemed the equivalent of any Officers' Certificate required by this Article and such certificate need not state that no Event of Default exists. If the Trustee shall be in possession of the Trust Estate under Section 8.3, such powers may be exercised by the Trustee in its discretion. Section 5.7 Purchaser Protected. No purchaser or other recipient in good faith of property purporting to be released herefrom shall be bound to ascertain the authority of the Trustee to execute the release or to inquire as to the satisfaction of any conditions herein prescribed for the exercise of such authority; nor shall any purchaser or other recipient of any property or rights permitted by this Article to be sold, exchanged or otherwise disposed of by the Company be under any obligation to ascertain or inquire into the authority of the Company to make any such sale, exchange or other disposition. Any release executed by the Trustee under this Article shall be sufficient for the purpose of this Indenture and shall constitute a good and valid release of the property therein described from the lien hereof. Section 5.8 Disposition of Collateral on Discharge of Prior Liens. Upon the cancellation and discharge of any Prior Lien, the Company will cause all cash and purchase money obligations then held by the trustee, mortgagee or other holder of such Prior Lien, which were received by such trustee, mortgagee or other holder in accordance with the provisions of this Article (including all proceeds of or substitutions for any thereof), to be paid to or deposited and pledged with the Trustee, such cash to be held and paid over or applied by the Trustee as provided in Article VI. Section 5.9 Disposition of Obligations Received. All purchase money obligations received by the Trustee under this Article shall be held by the Trustee as a part of the Trust Estate. Upon payment to the Trustee of the entire unpaid principal amount of any such obligation, the Trustee shall release and transfer such obligation and any mortgage securing the same upon Company Request. Any cash received by the Trustee in respect of the principal of any such obligations shall be held by the Trustee as Trust Moneys under Article VI subject to application as therein provided. The Trustee shall not be responsible for the collection of the principal of or interest on any such obligations. All interest and other income on any such obligations, when received by the Trustee, shall, except to any extent otherwise provided in Section 15.4, be paid from time to time to the Company upon Company Request, unless an Event of Default shall exist. If an Event of Default shall exist, any interest and other income on any such obligations not theretofore paid upon Company Request, when collected by the Trustee, shall be applied by the Trustee in accordance with Section 8.7. 71 ARTICLE VI APPLICATION OF TRUST MONEYS Section 6.1 "Trust Moneys" Defined. All moneys received by the Trustee A. upon the release of property from the lien of this Indenture, including all moneys received in respect of the principal of all purchase money obligations, or B. as compensation for, or proceeds of sale of, any part of the Trust Estate taken by eminent domain or purchased by, or sold pursuant to an order of, a governmental authority or otherwise disposed of, or C. as proceeds of insurance upon any part of the Trust Estate, or D. as excess principal paid on Designated Qualifying Securities pursuant to Section 16.2B, or E. for application under this Article as elsewhere herein provided, or whose disposition is not elsewhere herein otherwise specifically provided for, (all such moneys being herein sometimes called "Trust Moneys") shall be held by the Trustee, except as otherwise provided in this Article, as a part of the Trust Estate and, upon any entry upon or sale of the Trust Estate or any part thereof under Article VIII, Trust Moneys shall be applied in accordance with Section 8.7; but, prior to any such entry or sale, all or any part of the Trust Moneys may be withdrawn, and shall be paid, released or applied by the Trustee, from time to time as provided in Sections 6.2 to 6.9, inclusive, and may be applied by the Trustee as provided in Sections 9.7, 13.11 and Section 15.14. Section 6.2 Withdrawal on Basis of Bondable Additions. Trust Moneys may be withdrawn by the Company and shall be paid by the Trustee under this Section upon Company Request, from time to time, equal to the Bondable Additions made the basis for such withdrawal pursuant to paragraph C below, upon receipt by the Trustee of the following: A. A Board Resolution requesting the withdrawal and payment of Trust Moneys. B. An Officers' Certificate dated not more than thirty (30) days prior to the date of the Application for the withdrawal and payment of such Trust Moneys, stating (1) that no Event of Default exists; and (2) that all conditions precedent herein provided for relating to such withdrawal and payment have been complied with. 72 C. The additional relevant documents specified in Section 4.2 (other than an Available Margins Certificate) for delivery whenever requesting the use of Bondable Additions as a basis for the withdrawal of Trust Moneys under this Section. Section 6.3 Withdrawal on Basis of Retirement or Defeasance of Obligations or Payments on Obligations. Trust Moneys may be withdrawn by the Company and shall be paid by the Trustee under this Section upon Company Request, from time to time, equal to the principal amount of Obligations or payments on Obligations made the basis for such withdrawal pursuant to paragraph C below, upon receipt by the Trustee of the following: A. A Board Resolution requesting the withdrawal and payment of Trust Moneys. B. An Officers' Certificate, dated not more than thirty (30) days prior to the date of the Application for the withdrawal and payment of such Trust Moneys, stating (1) that no Event of Default exists; and (2) that all conditions precedent herein provided for relating to such withdrawal and payment have been complied with. C. The Obligations and documents which the Company would be required to furnish to the Trustee upon an Application for the authentication and delivery of Additional Obligations under Section 4.3, but without complying with the requirements of paragraphs A, E and F thereof. D. An Opinion of Counsel stating that the documents and Obligations which have been or are therewith delivered to the Trustee conform to the requirements of this Indenture, and that, upon the basis of the relevant Application, all conditions precedent herein provided for or relating to withdrawal and payment of the Trust Moneys whose withdrawal and payment is then requested have been complied with. Section 6.4 Withdrawal on Basis of Designated Qualifying Securities. Trust Moneys may be withdrawn by the Company and shall be paid by the Trustee under this Section upon Company Request, from time to time, equal to the principal amount of Designated Qualifying Securities made the basis for such withdrawal pursuant to paragraph C below, upon receipt by the Trustee of the following: A. A Board Resolution requesting withdrawal and payment of Trust Moneys. B. An Officers' Certificate, dated not more than thirty (30) days prior to the date of the Application for the withdrawal and payment of such Trust Moneys, stating 73 (1) that no Event of Default exists; and (2) that all conditions precedent herein provided for relating to such withdrawal and payment have been complied with. C. The Designated Qualifying Securities documents and opinions which the Company would be required to furnish to the Trustee upon an Application for the authentication and delivery of Additional Obligations under Section 4.4, but without complying with the requirements of paragraphs A, B and F(4) thereof (with such omissions and variations as are appropriate in view of the fact that the Designated Qualifying Securities described therein are being used as the basis for the release of Trust Moneys and except that the maturity date or dates for such Designated Qualifying Securities may be as determined by the Company). D. An Opinion of Counsel stating that the documents and the Designated Qualifying Securities which have been or are therewith delivered to the Trustee conform to the requirements of this Indenture, and that, upon the basis of the relevant Application, all conditions precedent herein provided for or relating to the withdrawal and payment of the Trust Moneys whose withdrawal and payment is then requested have been complied with. Section 6.5 Retirement of Obligations or Payments on Obligations. Trust Moneys shall be applied by the Trustee from time to time to the redemption of Outstanding Secured Obligations of the several series and maturities that may be designated for the purpose by the Company, all in accordance with the provisions applicable to redemption at the option of the Company and with any premiums applicable thereto, or to the payment of the principal of any such Obligations at their Stated Maturity or to the purchase thereof upon tender or in the open market or at private sale or upon any exchange or in any one or more of said ways, or to the payment of the Obligations that may be designated by the Company, all in accordance with the rights of the Company to make such payments and with any penalties or premiums applicable thereto, as the Company shall request upon Company Request, upon receipt by the Trustee of the following: A. A Board Resolution directing the application pursuant to this Section of Trust Moneys and, in case any such moneys are to be applied to redemption or payment, designating the Obligations so to be redeemed or paid and stating the applicable Redemption Price, if any, and, in case such moneys are to be applied to the purchase of Obligations, prescribing the method of purchase, the price or prices to be paid and the maximum principal amount of Obligations to be purchased, and in the case such moneys are to be applied to the payment on Obligations, designating the Obligations to be so paid and stating the applicable penalties or premiums, if any. B. Cash equivalent to the maximum amount of the accrued interest and the premium or penalty, if any, required to be paid in connection with any such redemption, purchase or payment, which cash shall be held by the Trustee in trust for such purpose. 74 C. An Officers' Certificate, dated not more than thirty (30) days prior to the date of the relevant Application, stating (1) that no Event of Default exists; and (2) that all conditions precedent herein provided for relating to such application of Trust Moneys have been complied with. D. An Opinion of Counsel stating that the documents and the cash, if any, which have been or are therewith delivered to and deposited with the Trustee conform to the requirements of this Indenture, and that, upon the basis of such Application, all conditions precedent herein provided for relating or to such application of Trust Moneys under this Section in accordance with such Board Resolution have been complied with. Upon compliance with the foregoing provisions of this Section, the Trustee shall apply Trust Moneys as directed by such Board Resolution, up to, but not exceeding, the principal amount of the Obligations so redeemed, paid or purchased, or the principal amount of the Obligations so paid, using the cash deposited pursuant to paragraph B above, to the extent necessary, to pay any accrued interest, penalty and premium required in connection with such redemption, purchase or payment. A Board Resolution expressed to be irrevocable directing the application of Trust Moneys under this Section to the payment of the principal of particular Obligations shall, for all purposes of this Indenture, be deemed the equivalent of the deposit of money with the Trustee in trust for such purpose. Such Trust Moneys and any cash deposited with the Trustee pursuant to paragraph B above for the payment of accrued interest, penalty and premium shall not, after compliance with the foregoing provisions of this Section, be deemed to be a part of the Trust Estate or Trust Moneys. Section 6.6 Withdrawal of Insurance Proceeds. A. To the extent that any Trust Moneys consist of proceeds of insurance upon any part of the Trust Estate, they may also be withdrawn by the Company and shall be paid by the Trustee upon Company Request to reimburse the Company for the Cost to the Company to repair, rebuild or replace the property destroyed or damaged, upon receipt by the Trustee of the following: (1) An Officers' Certificate, dated not more than thirty (30) days prior to the date of the Application for the withdrawal and payment of such Trust Moneys and signed with respect to clauses (1) and (3) below, in addition to the two Officers signing the same, by a Person, who may be one of such Officers, signing as an Accountant, setting forth: (a) that expenditures have been made, or costs incurred, by the Company in a specified amount for the purpose of making certain repairs, rebuildings and replacements, which shall be briefly described, and setting forth the amount of any such expenditures or costs for the acquisition of a major item of property, which shall be separately specified, in replacement of any destroyed or damaged property; 75 (b) that no part of such expenditures or costs has been or is being made the basis for the authentication and delivery of Obligations or the withdrawal of any cash or the release of any property from the lien of this Indenture or has been paid out of the proceeds of insurance upon any part of the Trust Estate not required to be paid to the Trustee under Section 13.8; (c) that there is no outstanding indebtedness, other than costs for which payment is being requested, known to the Company, after due inquiry, for the purchase price or construction of such repairs, rebuildings or replacements, or for labor, wages, materials or supplies in connection with the making thereof, which, if unpaid, might become the basis of a vendor's, mechanics', laborers', materialmen's, statutory or other similar lien upon any of such repairs, rebuildings or replacements, which lien might, in the opinion of the signers of such Certificate, materially impair the security afforded by such repairs, rebuildings or replacements; (d) that no Event of Default exists; and (e) that all conditions precedent herein provided for relating to such withdrawal and payment have been complied with. (2) An Engineer's or Appraiser's Certificate, dated not more than thirty (30) days prior to the date of the related Application, stating, in the opinion of the signer, the fair value to the Company of any major item of property specified in paragraph A(1) above; and the Engineer or Appraiser shall be an Independent Engineer or Appraiser if such property constitutes an Acquired Facility and if the fair value to the Company of such Acquired Facility is at least $25,000 and at least 1% of the aggregate principal amount of all Obligations at the time Outstanding. (3) An Opinion of Counsel stating (a) that the documents which have been or are therewith delivered to the Trustee conform to the requirements of this Indenture, that, upon the basis of the related Application, all conditions precedent herein provided for relating to such withdrawal and payment of Trust Moneys then requested have been complied with; and (b) that the Company's right, title and interest in and to the repairs, rebuildings and replacements described in the Officers' Certificate delivered pursuant to paragraph A above are subject to the lien of this Indenture. (4) Title Evidence indicating that the Company has acquired, or upon payment of the costs to be paid as requested will acquire, title to the repairs, rebuildings or replacements described in the Officers' Certificate delivered pursuant to paragraph A above at least equivalent to its title to the property destroyed or damaged. 76 Upon compliance with the foregoing provisions of this paragraph, the Trustee shall pay on Company Request an amount of Trust Moneys of the character aforesaid equal to the amount of the expenditures or costs stated in such Officers' Certificate; PROVIDED, HOWEVER, that, in the case of expenditures or costs for the acquisition of a major item of property in replacement of any destroyed or damaged property, such expenditures or costs shall not exceed the fair value to the Company of such replacement as certified pursuant to the paragraph (2) above. B. To the extent that any Trust Moneys consist of proceeds of insurance upon, or payable in consequence of destruction of or damage to, that portion of the Trust Estate consisting of the property ("Leased Assets") subject to a lease (a "Capital Asset Lease") described in paragraph C of the definition of "Property Additions" or paragraph H of Section 5.1, they shall be paid by the Trustee upon Company Request to the lessor under a Capital Assets Lease or its designee, upon receipt by the Trustee of the following: (1) An Officer's Certificate, dated not more than 30 days prior to the date of the Application for the withdrawal and payment of such Trust Moneys and signed also in the case of the following clauses (b), (c) and (d) by an Engineer or Appraiser, setting forth in substance as follows: (a) an amount is, or with an election which shall be made by the Company, will be, due and payable to the lessor under the Capital Assets Lease in respect of such destruction of or damage to the Leased Assets and the amount of the request for withdrawal of Trust Moneys to which such Officers' Certificate relates does not exceed such amount; (b) the amount of Trust Moneys to be withdrawn pursuant to such Company Request is not more than the difference of (i) the amount of proceeds of insurance received in consequence of such destruction of or damage to the Leased Assets which has theretofore been deposited with the Trustee, minus either (ii) if the Leased Assets are not to be repaired or replaced, the difference between (A) the fair value in the opinion of said Engineer or Appraiser of the Leased Assets immediately prior to the destruction or damage giving rise to the receipt of the proceeds of insurance, minus (B) the fair value in the opinion of said Engineer or Appraiser of the Leased Assets at the date of such Officers' Certificate or (iii) if the Leased Assets are to be repaired or replaced, the cost of repair or replacement as estimated by such Engineer or Appraiser; (c) whether (i) the aggregate of the amount of Trust Moneys to be withdrawn in accordance with such Application and the fair value of all Trust Moneys, withdrawn pursuant to this paragraph B of this Section 6.6 or securities or other property released pursuant to Section 5.2 since the commencement of the then current calendar year (as previously certified to the Trustee in connection with withdrawals or releases) is 10% or more of the aggregate principal amount of all Obligations at the time Outstanding, and whether said 77 amount of Trust Moneys to be withdrawn is at least $25,000 and at least 1% of the aggregate principal amount of all Obligations at the time Outstanding, or (ii) the amount of the Trust Moneys to be withdrawn in accordance with such Application is more than $1,000,000; (d) that, in the opinion of the signers, the proposed withdrawal will not impair the security under this Indenture in contravention of the provisions hereof; and (e) that no Event of Default exists. If the facts specified in either Subclause (i) or (ii) of clause (c) above are present, such Officers' Certificate shall be accompanied by a certificate of an Independent Engineer or Independent Appraiser, dated not more than 30 days prior to the date of the Application for withdrawal and payment of Trust Moneys, to the effect set forth in clauses (b) and (d) above. Upon compliance with the foregoing provisions of this Section, the Trustee shall pay on Company Request an amount of Trust Moneys of the character aforesaid equal in the amount stated in such Officers' Certificate. Section 6.7 Amounts under $25,000. In case the amount of Trust Moneys at any one time received by the Trustee shall not exceed $25,000, the same shall (unless an Event of Default exists) be paid over upon Company Request; and the Company covenants and agrees that it will, within 12 months after such Trust Moneys shall have been so paid over, deposit and file with the Trustee the documents and Obligations, if any, which by the provisions of Sections 6.2, 6.3, 6.4, 6.6 or 6.8 would have been delivered to the Trustee to entitle the Company to have the Trust Moneys paid over as in such Section provided, with such omissions and variations as are appropriate by reason of the fact that such Trust Moneys have theretofore been paid over by the Trustee without prior compliance with such Sections. In the event that the Company shall have failed to comply with the foregoing covenant, no further payment may be made under this Section until the Company shall have deposited and filed with the Trustee the required documents and Obligations, if any. Section 6.8 Powers Exercisable Notwithstanding Default. While in possession of all or substantially all of the Trust Estate (other than any cash and securities constituting part of the Trust Estate and deposited with the Trustee), the Company may do any of the things enumerated in Sections 6.2 to 6.7, inclusive, which it is prohibited from doing while an Event of Default exists as provided therein, if the Trustee in its discretion (based upon such opinions and certifications as the Trustee deems necessary), or the Holders of not less than a majority in aggregate principal amount of the Obligations then Outstanding, by Act of such Holders, shall specifically consent to such action, in which event any Certificate filed under any of said Sections shall omit any statement to the effect that no Event of Default exists as provided thereunder. 78 Section 6.9 Powers Exercisable by Trustee or Receiver. In case all or substantially all of the Trust Estate (other than any cash and securities constituting part of the Trust Estate and deposited with the Trustee) shall be in the possession of a receiver or trustee lawfully appointed, the powers hereinbefore in this Article conferred upon the Company with respect to the withdrawal or application of Trust Moneys may be exercised by such receiver or trustee (with the consent of the Trustee or Holders specified in Section 6.8), in which case a written request signed by such receiver or trustees shall be deemed the equivalent of any Board Resolution or Company Request required by this Article and a certificate signed by such receiver or trustee shall be deemed the equivalent of any Officers' Certificate required by this Article and such certification need not state that no Event of Default exists. If the Trustee shall be in possession of the Trust Estate under Section 8.3, such powers may be exercised by the Trustee in its discretion. Section 6.10 Disposition of Obligations Retired. All Obligations received by the Trustee and on the basis of which Trust Moneys are paid over or for whose payment, redemption or purchase Trust Moneys are applied under this Article, if not previously canceled, shall be promptly canceled by the Trustee and thereafter the Trustee shall retain or destroy such Obligations and deliver a certificate of destruction to the Company. ARTICLE VII DEFEASANCE Section 7.1 Termination of Company's Obligations. A. The Company may terminate its obligations under the Obligations and this Indenture if all Obligations previously authenticated and delivered (other than destroyed, lost or stolen Obligations which have been replaced or paid or Obligations for whose payment money or securities has theretofore been held in trust and thereafter repaid to the Company, as provided in Section 7.3) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder; or B. Except as otherwise provided in this Section, the Company may terminate its obligations under all Obligations constituting a series, or a maturity within a series, and all of its obligations under this Indenture to or for the benefit of the Holders of such Obligations, if: (1) the Company has (i) in case any of such Obligations are to be redeemed on any date prior to their Stated Maturity, given to the Trustee irrevocable instructions to give as provided in Article XIV notice of redemption of such Obligations (other than Obligations which have been purchased by the Trustee at the direction of the Company as hereinafter provided prior to the giving of such notice of redemption), and (ii) irrevocably deposited or caused to be deposited with the Trustee or Paying Agent (if other than the Company), under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee and any such Paying Agent, as trust funds in trust for the benefit of the Holders of such 79 Obligations for that purpose, money or Defeasance Securities maturing as to principal and interest in such amounts and at such times as are sufficient (in the opinion of a nationally recognized firm of Independent public accountants expressed in a certificate signed by such firm and delivered to the Trustee), without consideration of any reinvestment of such interest, to pay principal or Redemption Price (if applicable) of, and interest due or to become due on such Obligations (other than destroyed, lost or stolen Obligations which have been replaced or paid or Obligations for whose payment money or securities has theretofore been held in trust and thereafter repaid to the Company as provided in the second sentence of Section 7.3) on or prior to the Redemption Date or Stated Maturity thereof, as the case may be, in accordance with the terms of this Indenture and such Obligations; PROVIDED that the Trustee or Paying Agent shall have been irrevocably instructed to apply such money or the proceeds of such Defeasance Securities to the payment of said principal, Redemption Price and interest with respect to such Obligations; (2) no Event of Default shall exist on the date of such deposit or shall occur as a result of such deposit; (3) the Company shall have delivered to the Trustee either (i) a ruling from the Internal Revenue Service and directed to the Trustee to the effect that the Holders of such Obligations will not recognize income, gain or loss for Federal income tax purposes as a result of the Company's exercise of its option under this paragraph and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such option had not been exercised, or (ii) an Opinion of Counsel from nationally recognized tax counsel not an employee of the Company to the same effect as the ruling described in clause (i); (4) the Company has paid or caused to be paid all sums then due from the Company hereunder and under such Obligations; (5) the Company has delivered an Opinion of Counsel stating that the deposit shall not result in the Company, the Trustee or the trust becoming or being deemed to be an "investment company" under the Investment Company Act of 1940; (6) the Company has delivered an Opinion of Counsel stating that the Holders of such Obligations (or the Trustee for the benefit of such Holders) shall have a perfected security interest under applicable law in the money or Defeasance Securities so deposited; and (7) the Company has delivered to the Trustee and any Paying Agent an Officers' Certificate, each stating that the conditions set forth in clauses (1) through (6) above have been complied with. After any such irrevocable deposit, the Trustee upon Company Request shall acknowledge in writing the discharge of the Company's obligations under such Obligations and of the Company's obligations to or for the benefit of the Holders of such Obligations or under this Indenture, except for those surviving obligations specified below. 80 C. Notwithstanding the satisfaction of the conditions set forth in paragraph B with respect to all Obligations constituting a series, or a maturity within a series, the Company's obligations to or for the Holders of such Obligations or to the Trustee under Sections 3.7, 3.8, 7.2, 7.3, 7.4, 9.7, 9.10, 10.2, 13.1, 13.2, 13.3 and 15.14 shall survive until such Obligations are no longer Outstanding. Thereafter, only the Company's obligations under Sections 7.3, 7.4, 9.7 and 15.14 shall survive with respect to such Holders or the Trustee. If and when a ruling from the Internal Revenue Service or Opinion of Counsel referred to in paragraph B(3) above is able to be provided specifically without regard to, and not in reliance upon, the continuance of the Company's obligations to such Holders under Section 13.1, then the Company's obligations to such Holders under such Section 13.1 shall cease upon delivery to the Trustee of such ruling or Opinion of Counsel and compliance with the other conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture with respect to such Holders. D. The Trustee shall, if so directed by the Company (i) prior to the Stated Maturity of Obligations in respect of which a deposit has been made under paragraph B(l) above which are not to be redeemed prior to their Stated Maturity or (ii) prior to the giving of the notice of redemption referred to in paragraph B(l) above with respect to any Obligations in respect of which a deposit has been made under paragraph B(l) which are to be redeemed on a date prior to their Stated Maturity, apply moneys deposited with the Trustee in respect of such Obligations and redeem or sell Defeasance Securities so deposited with the Trustee and apply the proceeds thereof to the purchase of such Obligations and the Trustee shall immediately thereafter cancel all such Obligations so purchased; PROVIDED, HOWEVER, that the moneys and Defeasance Securities remaining on deposit with the Trustee after the purchase and cancellation of such Obligations shall be sufficient to pay when due the principal or Redemption Price (if applicable) of, and interest due or to become due on, all Obligations in respect of which such moneys and Defeasance Securities are being held by the Trustee on or prior to the Redemption Date or Stated Maturity thereof, as the case may be. In the event that on any date as a result of any purchases and cancellations of Obligations as provided in this paragraph the total amount of moneys and Defeasance Securities remaining on deposit with the Trustee under this Section is in excess of the total amount that would have been required to be deposited with the Trustee on such date under paragraph B(l) in respect of the remaining Obligations for which such moneys and Defeasance Securities are being held, the Trustee shall, if requested by the Company and upon receipt by the Trustee of a certificate of an Independent Accountant setting forth the calculation of such excess, pay the amount of such excess to the Company free and clear of any trust, lien, security interest, pledge or assignment securing such Obligations or otherwise existing under this Indenture. E. If the requirements of this Section have been satisfied with respect to all Obligations theretofore Outstanding, then, upon Company Request, the lien, rights and interest created hereby shall be canceled and surrendered (except as otherwise provided below) and the Trustee and each co-trustee and separate trustee, if any, then acting as such hereunder shall, at the expense of the Company, execute and deliver a termination statement and such instruments of satisfaction and discharge as may be necessary and pay, sign, transfer and deliver to the Company or upon Company Order all cash, securities and other personal property then held by it hereunder as part of the Trust Estate. 81 Section 7.2 Application of Deposited Money and Money From Defeasance Securities. Money or Defeasance Securities deposited with the Trustee or the Paying Agent pursuant to Section 7.1 shall not be part of the Trust Estate and shall not be deemed to be Trust Moneys but shall constitute a separate trust fund for the benefit of persons entitled thereto. Subject to the provisions of Section 13.3, the Trustee or Paying Agent shall hold in trust money or Defeasance Securities deposited with it pursuant to Section 7.1, and shall apply the deposited money and the money from Defeasance Securities to the payment of the principal or Redemption Price (if applicable) of, and interest on, the Obligations in respect of which such money and Defeasance Securities are deposited. If money deposited with the Trustee under this Article VII, or money received from principal or interest payments on Defeasance Securities deposited with the Trustee under this Article VII, will be required at a later date for payment of the principal or Redemption Price (if applicable) of, and interest on, the Obligations in respect of which such money and Defeasance Securities are deposited, such money shall, at the written investment direction of the Company, to the extent practicable, be reinvested in Defeasance Securities maturing at times and in amounts that, together with other moneys so deposited or to be generated by other Defeasance Securities, will be sufficient to pay when due the principal or Redemption Price (if applicable) of, and interest to become due on, such Obligations, and the interest earned from such reinvestments shall be paid over to the Company, as received by the Trustee, free and clear of any trust, lien, security interest, pledge or assignment securing said Obligations or otherwise existing under this Indenture. Section 7.3 Repayment to Company. Subject to Section 7.1, to the extent any Defeasance Securities deposited with the Trustee under this Article, or cash received from principal or interest payments on such Defeasance Securities, will not be required (in the opinion of a nationally recognized firm of Independent public accountants expressed in a certificate signed by such firm and delivered to the Trustee and the Paying Agent) for the payment of the principal or Redemption Price (if applicable) of, and interest on, the Obligations in respect of which such money and Defeasance Securities are deposited, the Trustee and the Paying Agent shall promptly pay and deliver to the Company upon Company Request any such Defeasance Securities and cash, and thereupon the Trustee shall be relieved from any liability with respect thereto. Without limiting the foregoing, the Trustee and the Paying Agent shall pay to the Company upon Company Request any money held by them for the payment of principal, Redemption Price or interest that remains unclaimed for two years after the date such payment was due; PROVIDED that the Trustee or such Paying Agent before being required to make any payment may at the expense of the Company cause to be published once in a newspaper of general circulation in Atlanta, Georgia or mail by first-class mail, postage prepaid to each Holder entitled to such money, notice that such money remains unclaimed and that after a date specified therein (which shall be at least thirty (30) days from the date of publication or mailing) any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Holders entitled to such money must look to the Company for payment as general creditors unless an applicable law designates another person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 82 Section 7.4 Reinstatement. If the Trustee or Paying Agent is unable to apply any money or Defeasance Securities in accordance with Section 7.1 and the second sentence of Section 7.2 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, (i) the Company's obligations under this Indenture to or for the benefit of the Holders of Obligations for whose benefit such money or Defeasance Securities were deposited (other than obligations arising under any provisions creating the lien hereof) and under such Obligations shall be revived and reinstated as though no deposit had occurred pursuant to Section 7.1 until such time as the Trustee or Paying Agent is permitted to apply all such money and Defeasance Securities in accordance with Section 7.1, and (ii) the lien of this Indenture shall be reinstated for the benefit of such Holders (and, if the lien of this Indenture shall previously have been fully released, then to the extent possible, the Company shall take all actions required to subject assets of the Company to a lien substantially similar, in amount and otherwise, to the Trust Estate subject to the lien of this Indenture as in effect on the date of the termination of the Company's obligations hereunder pursuant to Section 7.1, which lien shall be effective until such time as the Trustee or Paying Agent is permitted to apply all such money and Defeasance Securities in accordance with Section 7.1); PROVIDED, HOWEVER, that if the Company has made any payment of interest on or principal of any Obligations because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Obligations to receive such payment from the money or Defeasance Securities held therefor by the Trustee or Paying Agent. ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES Section 8.1 Events of Default. "Event of Default" means, wherever used herein, any one of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): A. default in the payment of any interest upon any Obligation when such interest becomes due and payable, and continuance of such default for forty-five (45) days or such other period provided for in such Obligation or in the Supplemental Indenture under which such Obligation is issued; PROVIDED, HOWEVER, that no payment by RUS pursuant to any guarantee by the United States of America, acting through the Administrator of RUS, or pursuant to any RUS insuring of, or by any other guarantor or insurer of, any Obligation shall be considered a payment under this paragraph for purposes of determining the existence of such a failure to pay; or B. default in the payment of the principal of (or premium, if any, on) any Obligation at its Maturity and, if so provided for in such Obligation or the Supplemental Indenture under which such Obligation is issued, the continuance of such default for the 83 period so provided; PROVIDED, HOWEVER, that no payment by RUS pursuant to any guarantee by the United States of America, acting through the Administrator of RUS, or pursuant to any RUS insuring of, or by any other guarantor or insurer of, any Obligation shall be considered a payment under this paragraph for purposes of determining the existence of such a failure to pay; or C. default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in the performance or breach of which is dealt with in paragraph A or B of this Section), and continuance of such default or breach for a period of forty-five (45) days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 10% in principal amount of the Obligations Outstanding, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or D. a failure to pay any portion of the principal when due and payable (other than amounts due and payable on acceleration) under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company, other than any indebtedness evidenced or secured by an Obligation, whether such indebtedness now exists or shall hereafter be created, which failure shall have resulted in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable in an aggregate principal amount exceeding $10,000,000, without such indebtedness having been discharged or such acceleration having been rescinded or annulled within a period of ten (10) days after such acceleration; or E. the rendering against the Company of a judgment for the payment of moneys in excess of the sum of $10,000,000 and the continuance of such judgment unsatisfied and without stay of execution thereon for a period of forty-five (45) days after the entry of such judgment, or the continuance of such judgment unsatisfied for a period of forty-five (45) days after the termination of any stay of execution thereon entered within such first mentioned forty-five (45) days; but only in either case if such judgment shall have been continued unstayed or unsatisfied for a period of ten (10) days after written notice of default hereunder shall have been given to the Company by the Trustee, or to the Company and the Trustee by the holders of not less than 10% in principal amount of the Obligations Outstanding; or F. the entry by a court having jurisdiction in the premises of (i) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or (ii) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief of any such other decree or order unstayed and in effect for a period of sixty (60) consecutive days; or 84 G. the commencement by the Company of a voluntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or state law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action. Section 8.2 Acceleration of Maturity; Rescission and Annulment. If an Event of Default exists, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Obligations Outstanding may declare the principal (or, in the case of Obligations of any series constituting are Original Issue Discount Obligations, such portion of the principal amount of such Original Issue Discount Obligations as may be specified in the terms of such series) of all the Obligations to be due and payable immediately, by a notice in writing to the Company (and to the Trustee, if given by Holders), and upon any such declaration such principal shall become immediately due and payable. At any time after such a declaration of acceleration has been made, but before any sale of any of the Trust Estate has been made under this Article or any judgment or decree for payment of money due on any Obligations has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Obligations Outstanding (unless such declaration has been made under Section 8.23 only with respect to a particular series of Outstanding Obligations, in which event only a majority in principal amount of the Obligations of such series) may, by written notice to the Company and the Trustee, rescind and annul such declaration and its consequences if A. the Company has paid or deposited with the Trustee a sum sufficient to pay (1) all overdue installments of interest on all Obligations, (2) the principal of (and premium, if any, on) any Obligations which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Obligations, (3) to the extent that payment of such interest is lawful, interest upon overdue installments of interest at the rate or rates prescribed therefor in such Obligations, and 85 (4) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and B. all Events of Default, other than the non-payment of the principal of Obligations which have become due solely by such declaration of acceleration, have been cured or have been waived as provided in Section 8.17. No such rescission and annulment shall affect any subsequent default or impair any right consequent thereon. Section 8.3 Entry. The Company agrees that upon the occurrence of an Event of Default the Company, upon demand of the Trustee during the continuance thereof, shall forthwith surrender to the Trustee the actual possession of, and it shall be lawful for the Trustee by such officers or agents as it may appoint to enter and take possession of, the Trust Estate (and the books, papers and accounts of the Company), and to hold, operate, manage and control the Trust Estate (including the making of all needful repairs, and such alterations, additions and improvements which the Trustee shall determine in its discretion to make) and to receive the rents, issues, tolls, profits, revenues and other income thereof, and, after deducting the costs and expenses of entering, taking possession, holding, operating and managing the Trust Estate, as well as payments for taxes, insurance and other proper charges upon the Trust Estate and reasonable compensation to itself, its agents and counsel, to apply the same as provided in Section 8.7. Whenever all that is then due upon the Obligations and under any of the terms of this Indenture shall have been paid and all defaults hereunder shall have been made good, the Trustee shall surrender possession of such property to the Company. Section 8.4 Power of Sale; Suits for Enforcement. In case an Event of Default shall exist, the Trustee, with or without entry, in its discretion may, subject to the provisions of Section 8.16: A. sell, subject to any mandatory requirements of applicable law, the Trust Estate as an entirety, or in such parcels as the Holders of a majority in principal amount of the Obligations then Outstanding shall in writing request, or in the absence of such request, as the Trustee may determine, to the highest bidder at public auction and upon such terms as the Trustee may (subject to applicable law) fix; or B. proceed to protect and enforce its rights and the rights of the Holders under this Indenture by sale pursuant to judicial proceedings or by a suit, action or proceeding in equity or at law or otherwise, whether for the specific performance of any covenant or agreement contained in this Indenture or in aid of the execution of any power granted in this Indenture or for the foreclosure of this Indenture or for the enforcement of any other legal, equitable or other remedy, as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce any of the rights of the Trustee or the Holders. 86 Section 8.5 Incidents of Sale. Upon any sale of any of the Trust Estate, whether made under the power of sale hereby given or pursuant to judicial proceedings, to the extent permitted by law: A. the principal of and accrued interest on all Outstanding Secured Obligations, if not previously due, shall at once become and be immediately due and payable; B. any Holder or Holders or the Trustee may bid for and purchase the property offered for sale, and upon compliance with the terms of sale may hold, retain and possess and dispose of such property, without further accountability, and may, in paying the purchase price therefor, deliver any Outstanding Secured Obligations or claims for interest thereon in lieu of cash in the amount which shall, upon distribution of the net proceeds of such sale, be payable thereon, and (unless such sale is effected under power of sale) such Obligations, in case the amounts so payable thereon shall be less than the amount due thereon, shall be returned to the Holders thereof after being appropriately stamped to show partial payment; C. the Trustee may make and deliver to the purchaser or purchasers a good and sufficient deed, bill of sale and instrument of assignment and transfer of the property sold; D. the Trustee is hereby irrevocably appointed the true and lawful attorney of the Company, in its name and stead, to make all necessary deeds, bills of sale and instruments of assignment and transfer of the property thus sold; and for that purpose it may execute all necessary deeds, bills of sale and instruments of assignment and transfer, and may substitute one or more persons, firms or corporations with like power, the Company hereby ratifying and confirming all that its said attorney or such substitute or substitutes shall lawfully do by virtue hereof; but if so requested by the Trustee or by any purchaser, the Company shall ratify and confirm any such sale or transfer by executing and delivering to the Trustee or to such purchaser or purchasers all proper deeds, bills of sale, instruments of assignment and transfer and releases as may be designated in any such request; E. all right, title, interest, claim and demand whatsoever, either at law or in equity or otherwise, of the Company of, in and to the property so sold shall be divested and such sale shall be a perpetual bar both at law and in equity against the Company, its successors and assigns, and against any and all persons claiming or who may claim the property sold or any part thereof from, through or under the Company, its successors and assigns; and F. the receipt of the Trustee or of the officer making such sale shall be a sufficient discharge to the purchaser or purchasers at such sale for his or their purchase money and such purchaser or purchasers and his or their assigns or personal representatives shall not, after paying such purchase money and receiving such receipt, be obliged to see to the application of such purchase money, or be in anywise answerable for any loss, misapplication or non-application thereof. Upon a sale of substantially all the Trust Estate, whether made under the power of sale hereby given or pursuant to judicial proceedings, the Company will permit, to the extent permitted by law, 87 the purchaser thereof and its successors and its and their assigns to take and use the name of the Company and to carry on business under such name or any variant or variants thereof and to use and employ any and all other trade names, brands and trade marks of the Company; and in such event, upon written request of such purchaser or its successors, or its or their assigns, the Company will, at the expense of the purchaser, change its name in such manner as to eliminate any similarity. Section 8.6 Covenant to Pay Trustee Amounts Due on Obligations and Right of Trustee to Judgment. The Company covenants that, if A. default is made in the payment of any interest on any Obligation when such interest becomes due and payable, and such default continues for the period prescribed in paragraph A of Section 8.1, or B. default is made in the payment of the principal of (or premium, if any, on) any Obligation at its Maturity, and, if applicable, such default continues for the period prescribed in paragraph B of Section 8.1, then upon demand of the Trustee, the Company will pay to the Trustee, for the benefit of the Holders of such Obligations, the whole amount then due and payable on such Obligations for principal (and premium, if any) and interest, with interest at the respective rate or rates prescribed therefor in the Obligations on overdue principal (and premium, if any) and, to the extent that payment of such interest is legally enforceable, on overdue installments of interest; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled to sue for and recover judgment against the Company and any other obligor on the Obligations for the whole amount so due and unpaid. The Trustee shall be entitled to sue and recover judgment as aforesaid either before, after or during the pendency of any proceedings for the enforcement of the lien of this Indenture, and in case of a sale of the Trust Estate and the application of the proceeds of sale as aforesaid, the Trustee, in its own name and as trustee of an express trust, shall be entitled to enforce payment of, and to receive, all amounts then remaining due and unpaid upon the Outstanding Secured Obligations, for the benefit of the Holders thereof, and shall be entitled to recover judgment for any portion of the same remaining unpaid, with interest as aforesaid. No recovery of any such judgment upon any property of the Company shall affect or impair the lien of this Indenture upon the Trust Estate or any rights, powers or remedies of the Trustee hereunder, or any rights, powers or remedies of the Holders of the Obligations. Section 8.7 Application of Money Collected. Any money collected by the Trustee pursuant to this Article, including any rents, issues, tolls, profits, revenues and other income collected pursuant to Section 8.3 (after the deductions therein provided) and any proceeds of any sale (after deducting the costs and expenses of such sale, including 88 a reasonable compensation to the Trustee, its agents and counsel, and any taxes, assessments or liens prior to the lien of this Indenture, except any thereof subject to which such sale shall have been made), whether made under any power of sale herein granted or pursuant to judicial proceedings, and any money collected by the Trustee under Sections 5.9 and 15.5 to be applied under this Section, together with, in the case of an entry or sale or as otherwise provided herein, any other sums then held by the Trustee as part of the Trust Estate, shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Obligations and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: A. First: To the payment of all undeducted amounts due the Trustee under Sections 9.7 and 15.14; B. Second: To the payment of the interest and principal or Redemption Price then due on the Obligations, as follows: (1) unless the principal of all of the Obligations shall have become due and payable, First: Interest - To the payment to the persons entitled thereto of all installments of interest then due (and, to the extent that payment of such interest is legally enforceable, interest on overdue installments of interest) on Outstanding Secured Obligations in the order of the maturity of such installments, together with accrued and unpaid interest on the Obligations theretofore called for redemption or prepayment, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and Second: Principal or Redemption Price - To the payment to the persons entitled thereto of the unpaid principal or Redemption Price of any Outstanding Secured Obligations which shall have become due, whether at Maturity or by call for redemption, and, if the amount available shall not be sufficient to pay in full all the Obligations which shall have become due, then to the payment thereof ratably, according to the amounts of principal or Redemption Price due, to the persons entitled thereto, without any discrimination or preference. (2) if the principal of all of the Obligations and shall have become due and payable, to the payment of the principal and interest then due and unpaid upon the Outstanding Secured Obligations without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Obligation over any other Obligation, ratably, according to the amounts due respectively for principal and interest, to the persons 89 entitled thereto without any discrimination or preference except as to any difference in the respective rates of interest specified in the Obligations; and C. Third: To the payment of any amounts due under Obligations to maintain the value of reserve funds established and maintained in connection with debt securities (i) secured by a pledge of certain Obligations, (ii) issued on behalf of the Company and (iii) with respect to which an opinion was delivered on the date of the issuance of such securities to the effect that the interest on such securities is excluded from the gross income of the holder of such securities pursuant to the Internal Revenue Code, as amended. D. Fourth: To the payment of the remainder, if any, to the Company or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. Section 8.8 Receiver. Upon the occurrence of an Event of Default and commencement of judicial proceedings by the Trustee to enforce any right under this Indenture, the Trustee shall be entitled, as against the Company, without notice or demand and without regard to the adequacy of the security for the Obligations or the solvency of the Company, to the appointment of a receiver of the Trust Estate, and of the rents, issues, profits, revenues and other income thereof, but, notwithstanding the appointment of any receiver, the Trustee shall be entitled to retain possession and control of, and to collect and receive the income from, cash, securities and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder. Section 8.9 Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Obligations or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Obligations shall then be due and payable, as therein expressed or by declaration or otherwise, and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal, premium or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, A. to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Outstanding Secured Obligations and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and B. to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; 90 and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Sections 9.7 and 15.14. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 8.10 Trustee May Enforce Claims Without Possession of Obligations. All rights of action and claims under this Indenture or the Obligations may be prosecuted and enforced by the Trustee without the possession of any of the Obligations or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Obligations in respect of which such judgment has been recovered. Section 8.11 Limitation on Suits. No Holder of any Obligation shall have any right to institute any proceeding, judicial or otherwise, under or with respect to this Indenture, or for the appointment of a receiver or trustee or for any other remedy hereunder, unless A. such Holder has previously given written notice to the Trustee of a continuing Event of Default; B. the Holders of not less than 25% in principal amount of the Outstanding Obligations shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; C. such Holder or Holders (other than the United States of America or its agencies or instrumentalities) have offered to the Trustee indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; D. the Trustee for sixty (60) days after its receipt of such notice, request and offer of indemnity, if any is required pursuant to paragraph C, has failed to institute any such proceeding; and 91 E. no direction inconsistent with such written request has been given to the Trustee during such sixty (60) day period by the Holders of a majority in principal amount of the Outstanding Obligations; it being understood and intended that no one or more Holders of Obligations shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the lien of this Indenture or the rights of any other Holders of Obligations, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all Outstanding Secured Obligations. Section 8.12 Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Obligation shall have the absolute and unconditional right to receive payment of the principal of (and premium, if any) and interest on such Obligation on the respective Stated Maturities expressed in such Obligation (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 8.13 Restoration of Positions. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture by foreclosure, entry or otherwise and such proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 8.14 Rights and Remedies Cumulative. Except as otherwise provided in Sections 3.8, 7.3 and 13.3 with respect to the replacement or payment of mutilated, destroyed, lost or stolen Obligations or the payment of certain moneys, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 8.15 Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Obligation to exercise any right or remedy accruing upon an Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this 92 Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 8.16 Control by Holders. The Holders of a majority in principal amount of the Outstanding Obligations shall have the right, during the continuance of an Event of Default, A. to require the Trustee to proceed to enforce this Indenture, either by judicial proceedings for the enforcement of the payment of the Obligations and the foreclosure of this Indenture, the sale of the Trust Estate or otherwise or, at the election of the Trustee, by the exercise of the power of entry and/or sale hereby conferred; and B. to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee hereunder, PROVIDED that (1) such direction shall not be in conflict with any rule of law or this Indenture, (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and (3) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the Holders not taking part in such direction. Section 8.17 Waiver of Past Defaults. Before any sale of any of the Trust Estate has been made under this Article or any judgment or decree for payment of money due has been obtained by the Trustee as provided in this Article, the Holders of not less than a majority in principal amount of the Outstanding Obligations may, by Act of such Holders delivered to the Trustee and the Company, on behalf of the Holders of all the Obligations waive any past default hereunder and its consequences, except a default A. in the payment of the principal of (or premium, if any) or interest on any Obligation, or B. in respect of a covenant or provision hereof which under Article XII cannot be modified or amended without the consent of the Holder of each Outstanding Obligation affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. 93 Section 8.18 Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Obligation by acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party in such suit, having due regard to the merits and good faith of the claims or defenses made by such party; but the provisions of this Section shall not apply to any suit instituted by the Trustee, by the United States of America (or its agencies or instrumentalities) or by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Obligations, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Obligation on or after the respective Stated Maturities expressed in such Obligation (or, in the case of redemption, on or after the Redemption Date). Section 8.19 Waiver of Appraisement and Other Laws. To the full extent that it may lawfully so agree, the Company will not at any time insist upon, plead, claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or redemption law now or hereafter in force, in order to prevent or hinder the enforcement of this Indenture or the absolute sale of the Trust Estate, or any part thereof, or the possession thereof by any purchaser at any sale under this Article; and the Company, for itself and all who may claim under it, so far as it or they now or hereafter may lawfully do so, hereby waives the benefit of all such laws. The Company, for itself and all who may claim under it, waives, to the extent that it may lawfully do so, all right to have the property in the Trust Estate marshaled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Indenture may order the sale of the Trust Estate as an entirety. If any law in this Section referred to and now in force, of which the Company or its successor or successors might take advantage despite this Section, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of the contract herein contained or to preclude the application of this Section. Section 8.20 Suits to Protect the Trust Estate. The Trustee shall have power to institute and to maintain such proceedings as it may deem expedient to prevent any impairment of the Trust Estate by any acts which may be unlawful or in violation of this Indenture and to protect its interests and the interests of the Holders in the Trust Estate and in the rents, issues, profits, revenues, proceeds, products and other income arising therefrom, including power to institute and maintain proceedings to restrain the enforcement of or compliance with any governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment, rule or order would impair the security hereunder or be prejudicial to the interests of the Holders or the Trustee. 94 Section 8.21 Remedies Subject to Applicable Law. All rights, remedies and powers provided by this Article may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Article are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Indenture invalid, unenforceable or not entitled to be recorded, registered, or filed under the provisions of any applicable law. Section 8.22 Principal Amount of Original Issue Discount Obligation. The principal amount of an Original Issue Discount Obligation shall, for purposes of voting, directing the time, place or manner or exercising any remedy, applying moneys, authenticating and delivering Additional Obligations, release of any part of the Trust Estate and for all other purposes hereunder, be determined in the manner specified in the Supplemental Indenture establishing the series to which such Original Issue Discount Obligation belongs. Section 8.23 Default Not Affecting All Series of Obligations. In case an Event of Default affecting the rights of the Holders of Obligations of any one or more series which does not similarly affect the rights of Holders of all other series of Obligations at the time Outstanding (including, without limitation, an Event of Default specified in a Supplemental Indenture creating a series of Obligations) shall have occurred and be continuing, then whatever action (including, without limitation, the acceleration of Obligations under Section 8.2, the giving of any request or direction to the Trustee under Section 8.11 or 8.16 or the waiver of any default under Section 8.17) may or shall be taken under this Article upon the occurrence of such Event of Default by or upon the request of the Holders of a specified percentage in principal amount of the Obligations then Outstanding, may or shall be taken in respect of the Obligations then Outstanding of the series as to which such Event of Default shall have been made, by or upon the request of the Holders of the same percentage in principal amount of such series then Outstanding. Section 8.24 Defaults Under Qualifying Securities Indentures. In addition to every other right and remedy provided herein, the Trustee may exercise any right or remedy available to the Trustee in its capacity as owner and holder of Qualifying Securities which arises as a result of a default or a matured event of default under any Qualifying Securities Indenture, whether or not an Event of Default shall then have occurred and be continuing. 95 ARTICLE IX THE TRUSTEE Section 9.1 Certain Duties and Responsibilities. A. Except during the continuance of an Event of Default, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. B. In case an Event of Default exists, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. C. No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that (1) this paragraph shall not be construed to limit the effect of paragraph A above; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Obligations relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and (4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. 96 D. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. Section 9.2 Notice of Defaults. Within ninety (90) days after the occurrence of any default hereunder, the Trustee shall transmit by mail to all Holders entitled to receive reports pursuant to Section 10.3C, if operative, and if Section 10.3C is not operative, to all Holders of Obligations as their names and addresses appear in the Obligation Register, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; PROVIDED, HOWEVER, that, except in the case of a default in the payment, repayment or prepayment of the principal of (or premium, if any) or interest on any Obligation or in the payment of any sinking or purchase fund installment, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interests of the Holders; and PROVIDED FURTHER that, in the case of any default of the character specified in Section 8.1C or 8.1D, no such notice to Holders shall be given until at least sixty (60) days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. Section 9.3 Certain Rights of Trustee. Except as otherwise provided in Section 9.1: A. the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; B. any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; C. whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; D. the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by the Trustee hereunder in good faith and in reliance thereon; E. the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this 97 Indenture, unless such Holders (other than the United States of America or its agencies or instrumentalities) shall have offered to the Trustee security or indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; F. the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, or, except as specifically provided herein, compliance by the Company with its agreements or covenants in this Indenture, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; G. the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; H. the Trustee shall not be personally liable, in case of entry by it upon the Trust Estate, for debts contracted or liabilities or damages incurred in the management or operation of the Trust Estate; I. The Trustee shall not be required to take notice or be deemed to have notice of any default hereunder unless the Trustee shall be specifically notified in writing of such default by the Company or by the Holder of any Obligation as to the Events of Default described in paragraph A or B of Section 8.1, or by the Holders of not less than ten percent (10%) of the Holders of Obligations as to any other Event of Default; and J. The Trustee shall not be required to give any bond or surety in respect of the execution of the trusts set forth in this Indenture or otherwise in respect hereof or of the Trust Estate. Section 9.4 Not Responsible for Recitals or Issuance of Obligations or Application of Proceeds. The recitals contained herein and in the Obligations, except the Trustee's certificate of authentication on the Obligations, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the value or condition of the Trust Estate or any part thereof, or as to the title of the Company thereto or as to the security afforded thereby or hereby, or as to the validity or genuineness of any securities at any time pledged and deposited with the Trustee hereunder, or as to the validity or sufficiency of this Indenture or of the Obligations. The Trustee shall not be accountable for the use or application by the Company of Obligations or the proceeds thereof or of any money paid to the Company or upon Company Order under any provision hereof. 98 Section 9.5 May Hold Obligations. The Trustee, any Paying Agent, Obligation Registrar, Authenticating Agent or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Obligations and, subject to Sections 9.8 and 9.13, if operative, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Obligation Registrar, Authenticating Agent or such other agent. Section 9.6 Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. Section 9.7 Compensation and Reimbursement. The Company agrees A. to pay to the Trustee from time to time such compensation as may be specifically agreed upon with the Trustee and, absent specific agreement, reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); B. except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to the Trustee's negligence or bad faith; and C. to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. All such payments and reimbursements shall be made with interest at the rate of 10% per annum. As security for the performance of the obligations of the Company under this Section, the Trustee shall be secured under this Indenture by a lien prior to the Obligations, and for the payment of such compensation, expenses, reimbursements and indemnity the Trustee shall have the right to use and apply any Trust Moneys held by it under Article VI. 99 Section 9.8 Disqualification; Conflicting Interests. A. If the Trustee has or shall acquire any conflicting interest, as defined in this Section (certain terms being defined and percentages calculated as hereinafter stated in this Section), if the default to which such conflicting interest relates has not been cured or duly waived or otherwise eliminated within the ninety (90) day period immediately following the date on which the Trustee ascertains that it has such conflicting interest, it shall, within such ninety (90) day period, either eliminate such conflicting interest or resign in the manner and with the effect hereinafter specified in this Article. B. In the event that the Trustee shall fail to comply with the provisions of paragraph A above the Trustee shall, within ten (10) days after the expiration of such ninety (90) day period, transmit notice of such failure to the Holders in the manner and to the extent provided in Section 10.3C. C. For the purposes of this Section, the Trustee shall be deemed to have a conflicting interest if there is an Event of Default and (1) the Trustee is trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the Company are outstanding, or is trustee for more than one outstanding series of securities, as hereafter defined, under a single indenture of the Company, unless such other indenture is a collateral trust indenture under which the only collateral consists of Obligations issued under or secured by this Indenture, PROVIDED that there shall be excluded from the operation of this clause other series under this Indenture and any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if the Company shall have sustained the burden of proving, on application to the Commission and after opportunity for hearing thereon, that trusteeship under this Indenture and such other indenture or indentures or under more than one outstanding series under a single indenture is not so likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under one of such indentures or with respect to such series; or (2) the Trustee or any of its directors or executive officers is an underwriter for the Company; or (3) the Trustee directly or indirectly controls or is directly or indirectly controlled by or is under direct or indirect common control with the Company or an underwriter for the Company; or (4) the Trustee or any of its directors or executive officers is a director, officer, partner, employee, appointee or representative of the Company, or of an underwriter (other than the Trustee itself) for the Company who is currently engaged in the business of underwriting, except that (i) one individual may be a director or an executive officer, or both, of the Trustee and a director or an executive officer, or both, of the Company but may not be at the same time an executive officer of both the Trustee and the Company; (ii) if and so 100 long as the number of directors of the Trustee in office is more than nine, one additional individual may be a director or an executive officer, or both, of the Trustee and a director of the Company; and (iii) the Trustee may be designated by the Company or by any underwriter for the Company to act in the capacity of transfer agent, registrar, custodian, paying agent, fiscal agent, escrow agent, or depositary, or in any other similar capacity, or, subject to the provisions of clause (1) above, to act as trustee, whether under an indenture or otherwise; or (5) 10% or more of the voting securities of the Trustee is beneficially owned either by the Company or by any director, partner, or executive officer thereof, or 20% or more of such voting securities is beneficially owned, collectively, by any two or more of such persons; or 10% or more of the voting securities of the Trustee is beneficially owned either by an underwriter for the Company or by any director, partner or executive officer thereof, or is beneficially owned, collectively, by any two or more such persons; or (6) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default (as hereinafter in this paragraph defined), (i) 5% or more of the voting securities, or 10% or more of any other class of security, of the Company not including the obligations issued under or secured by this Indenture and securities issued under any other indenture under which the Trustee is also trustee, or (ii) 10% or more of any class of security of an underwriter for the Company; or (7) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default (as hereinafter in this paragraph defined), 5% or more of the voting securities of any person who, to the knowledge of the Trustee, owns 10% or more of the voting securities of, or controls directly or indirectly or is under direct or indirect common control with, the Company; or (8) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default (as hereinafter in this paragraph defined), 10% or more of any class of security of any person who, to the knowledge of the Trustee, owns 50% or more of the voting securities of the Company; or (9) the Trustee owns, upon the occurrence of an Event of Default (or any occurrence that would constitute an Event of Default upon the lapse of time or giving of notice) or any anniversary of such date while such Event of Default or occurrence remains outstanding, in the capacity of executor, administrator, testamentary or inter vivos trustee, guardian, committee or conservator, or in any other similar capacity, an aggregate of 25% or more of the voting securities, or of any class of security, of any person, the beneficial ownership of a specified percentage of which would have constituted a conflicting interest under clauses (6), (7) or (8) above. As to any such securities of which the Trustee acquired ownership through becoming executor, administrator, or testamentary trustee of an estate which included them, the provisions of the preceding sentence shall not apply, for a period of two (2) years from the date of such acquisition, to the extent that such securities included in such estate do not exceed 25% of such voting securities or 25% of any such class of security. Promptly after any Event of Default (or other occurrence that would constitute an Event of Default upon the lapse of time or giving of notice) and annually in each succeeding 101 year that any Event of Default or other occurrence remains outstanding, the Trustee shall make a check of its holdings of such securities in any of the above-mentioned capacities as of such dates. If the Company fails to make payment in full of the principal of, or the premium, if any, or interest on, any of the Obligations when and as the same becomes due and payable, and such failure continues for thirty (30) days thereafter, the Trustee shall make a prompt check of its holdings of such securities in any of the above-mentioned capacities as of the date of the expiration of such thirty (30) day period, and after such date, notwithstanding the foregoing provisions of this clause, all such securities so held by the Trustee, with sole or joint control over such securities vested in it, shall, but only so long as such failure shall continue, be considered as though beneficially owned by the Trustee for the purposes of clauses (6), (7) and (8) above; or (10) except under the circumstances described in clauses (1), (3), (4), (5) or (6) of Section 9.13B, the Trustee shall become a creditor of the Company. For purposes of clause (1) above, the term "series of securities" or "series" means a series, class or group of securities issuable under an indenture pursuant to whose terms holders of one such series may vote to direct the Trustee, or otherwise take action pursuant to a vote of such Holders, separately from Holders of another such series; PROVIDED that "series of securities" or "series" shall not include any series of securities issuable under an indenture if all such series rank equally and are wholly unsecured. The specification of percentages in clauses (5) to (9) inclusive, above, shall not be construed as indicating that the ownership of such percentages of the securities of a person is or is not necessary or sufficient to constitute direct or indirect control for the purposes of clause (3) or (7) above. For the purposes of clauses (6), (7), (8) and (9) above only, (a) the terms "security" and "securities" shall include only such securities as are generally known as corporate securities, but shall not include any note or other evidence of indebtedness issued to evidence an obligation to repay moneys lent to a person by one or more banks, trust companies or banking firms, or any certificate of interest or participation in any such note or evidence of indebtedness; (b) an obligation shall be deemed to be "in default" when a default in payment of principal shall have continued for thirty (30) days or more and shall not have been cured; and (c) the Trustee shall not be deemed to be the owner or holder of (i) any security which it holds as collateral security, as trustee or otherwise, for an obligation which is not in default as defined above, or (ii) any security which it holds as collateral security under this Indenture, irrespective of any default hereunder, or (iii) any security which it holds as agent for collection, or as custodian, escrow agent, or depositary, or in any similar representative capacity. Except in the case of the failure to pay, repay or prepay the principal of or interest on any Obligation, or to pay any sinking or purchase fund installment, on the date on which it becomes due, the Trustee shall not be required to resign as provided by this paragraph if such Trustee shall have sustained the burden of proving, on application to the Commission and after opportunity for hearing thereon, that 102 (a) the Event of Default (or other event that would constitute an Event of Default upon the passage of time or giving of notice) otherwise giving rise to an obligation by the Trustee to resign may be cured or waived during a reasonable period and under the procedures described in such application, and (b) a stay of the Trustee's duty to resign will not be inconsistent with the interests of Holders of the Obligations. The filing of such an application shall automatically stay the performance of the duty to resign until the Commission orders otherwise. Any resignation of the Trustee shall become effective only upon the appointment of a successor trustee and such successor's acceptance of such an appointment. D. For the purposes of this Section: (1) The term "underwriter" when used with reference to the Company means every person who, within one year prior to the time as of which the determination is made, has purchased from the Company with a view to, or has offered or sold for the Company in connection with, the distribution of any security of the Company outstanding at such time, or has participated or has had a direct or indirect participation in any such undertaking, or has participated or has had a participation in the direct or indirect underwriting of any such undertaking, but such term shall not include a person whose interest was limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors' or sellers' commission. (2) The term "director" means any director of a corporation, or any individual performing similar functions with respect to any organization whether incorporated or unincorporated. (3) The term "person" means an individual, a corporation, a partnership, an association, a joint-stock company, a trust, an unincorporated organization, or a government or political subdivision thereof. As used in this clause, the term "trust" shall include only a trust where the interest or interests of the beneficiary or beneficiaries are evidenced by a security. (4) The term "voting security" means any security presently entitling the owner or holder thereof to vote in the direction or management of the affairs of a person, or any security issued under or pursuant to any trust, agreement or arrangement whereby a trustee or trustees or agent or agents for the owner or holder of such security are presently entitled to vote in the direction or management of the affairs of a person. (5) The term "Company" means any obligor upon the Obligations. (6) The term "Trustee" includes any separate or co-trustee appointed under Section 9.14. 103 (7) The term "executive officer" means the president, every vice president, every trust officer, the cashier, the secretary, and the treasurer of a corporation, and any individual customarily performing similar functions with respect to any organization whether incorporated or unincorporated, but shall not include the chairman of the board of directors. E. The percentages of voting securities and other securities specified in this Section shall be calculated in accordance with the following provisions: (1) A specified percentage of the voting securities of the Trustee, the Company or any other person referred to in this Section (each of whom is referred to as a "person" in this clause) means such amount of the outstanding voting securities of such person as entitles the holder or holders thereof to cast such specified percentage of the aggregate votes which the holders of all the outstanding voting securities of such person are entitled to cast in the direction or management of the affairs of such person. (2) A specified percentage of a class of securities of a person means such percentage of the aggregate amount of securities of the class outstanding. (3) The term "amount" means, when used in regard to securities, the principal amount if relating to evidences of indebtedness, the number of shares if relating to capital shares, and the number of units if relating to any other kind of security. (4) The term "outstanding" means issued and not held by or for the account of the issuer. The following securities shall not be deemed outstanding within the meaning of this definition: (a) securities of an issuer held in a sinking fund relating to securities of the issuer of the same class; (b) securities of an issuer held in a sinking fund relating to another class of securities of the issuer, if the obligation evidenced by such other class of securities is not in default as to principal or interest or otherwise; (c) securities pledged by the issuer thereof as security for an obligation of the issuer not in default as to principal or interest or otherwise; and (d) securities held in escrow if placed in escrow by the issuer thereof; PROVIDED, HOWEVER, that any voting securities of an issuer shall be deemed outstanding if any person other than the issuer is entitled to exercise the voting rights thereof. (5) A security shall be deemed to be of the same class as another security if both securities confer upon the holder or holders thereof substantially the same rights and privileges; PROVIDED, HOWEVER, that, in the case of secured evidences of indebtedness, all of which are issued under a single indenture, differences in the interest rates or maturity dates of various series thereof shall not be deemed sufficient to constitute such series as 104 different classes, and PROVIDED FURTHER that, in the case of unsecured evidences of indebtedness, differences in the interest rates or maturity dates thereof shall not be deemed sufficient to constitute them securities of different classes, whether or not they are issued under a single indenture. Section 9.9 Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which (i) shall be a corporation organized and doing business under the laws of the United States of America or of the State of Georgia, and having its principal office in Atlanta, Georgia, which is authorized under such laws to exercise corporate trust powers, and subject to supervision or examination by Federal, state, territorial or District of Columbia authority, and (ii) shall have a combined capital and surplus of at least $50,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of such supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Neither the Company nor any Person directly or indirectly controlling, controlled by or under common control with the Company shall serve as Trustee hereunder. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 9.10 Resignation and Removal; Appointment of Successor. A. No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 9.11. B. The Trustee may resign at any time by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within thirty (30) days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. C. Unless an Event of Default (or an occurrence that would constitute an Event of Default upon the passage of time or the giving of notice) exists, the Company may remove the Trustee with or without cause, by delivery to the Trustee of a Board Resolution effecting such removal. The Trustee may be removed with or without cause at any time by Act of the Holders of a majority in principal amount of the Outstanding Obligations, delivered to the Trustee and to the Company. D. If at any time: (1) the Trustee shall fail to comply with Section 9.8A after written request therefor by the Company or by any Holder who has been a bona fide Holder of an Obligation for at least six (6) months, or 105 (2) the Trustee shall cease to be eligible under Section 9.9 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its properly shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 8.18, any Holder who has been a bona fide Holder of an Obligation for at least six (6) months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. E. If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. In case all or substantially all of the Trust Estate shall be in the possession of a receiver or trustee lawfully appointed, such receiver or trustee, by written instrument, may similarly appoint a successor to fill such vacancy until a new Trustee shall be so appointed by the Holders. If, within one (1) year after such resignation, removal or incapability or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Obligations delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company or by such receiver or trustee. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, subject to Section 8.18, any Holder who has been a bona fide Holder of an Obligation for at least six (6) months may, on behalf of himself and all other similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. F. The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Obligations as their names and addresses appear in the Obligation Register and to the Holders of Notes as their addresses have been previously provided to the Trustee in writing. Each notice shall include the name of the successor Trustee and the address of its principal corporate trust office. Section 9.11 Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the estates, properties, rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument conveying and transferring to such successor Trustee upon the trusts herein expressed all the estates, properties, rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer 106 and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject nevertheless to its lien, if any, provided for in Sections 9.7 and 15.14. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such estates, properties, rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article, to the extent operative. Section 9.12 Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, to the extent operative, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Obligations shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Obligations so authenticated with the same effect as if such successor Trustee had itself authenticated such Obligations. Section 9.13 Preferential Collection of Claims against Company. A. Subject to paragraph B below, if the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Company within three (3) months prior to a default (as defined in paragraph C below), or subsequent to such a default, then, unless and until such default shall be cured, the Trustee shall set apart and hold in a special account for the benefit of the Trustee individually, the Holders of the Obligations and the holders of other indenture securities (as defined in paragraph C below: (1) an amount equal to any and all reductions in the amount due and owing upon any claim as such creditor in respect of principal or interest, effected after the beginning of such three (3) month period and valid as against the Company and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in clause (2) below, or from the exercise of any right of set-off which the Trustee could have exercised if a petition in bankruptcy had been filed by or against the Company upon the date of such default; and (2) all property received by the Trustee in respect of any claim as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such three (3) month period, or an amount equal to the proceeds of any such property, if disposed of, SUBJECT, HOWEVER, to the rights, if any, of the Company and its other creditors in such property or such proceeds. Nothing herein contained, however, shall affect the right of the Trustee 107 (a) to retain for its own account (i) payments made on account of any such claim by any Person (other than the Company) who is liable thereon, and (ii) the proceeds of the bona fide sale of any such claim by the Trustee to a third person, and (iii) distributions made in cash, securities or other property in respect of claims filed against the Company in bankruptcy or receivership or in proceeding for reorganization pursuant to the Federal Bankruptcy Code or applicable state law; or (b) to realize, for its own account, upon any property held by it as security for any such claim, if such property was so held prior to the beginning of such three (3) month period; or (c) to realize, for its own account, but only to the extent of the claim hereinafter mentioned, upon any property held by it as security for any such claim, if such claim was created after the beginning of such three (3) month period and such property was received as security therefor simultaneously with the creation thereof, and if the Trustee shall sustain the burden of proving that at the time such property was so received the Trustee had no reasonable cause to believe that a default would occur within three (3) months; or (d) to receive payment on any claim referred to in Subclause (b) or (c) above, against the release of any property held as security for such claim as provided in Subclause (b) or (c) above, as the case may be, to the extent of the fair value of such property. For the purposes of Subclauses (b), (c) and (d) above, property substituted after the beginning of such three (3) month period for property held as security at the time of such substitution shall, to the extent of the fair value of the property released, have the same status as the property released, and, to the extent that any claim referred to in any of said Subclauses is created in renewal of or in substitution for or for the purpose of repaying or refunding any pre-existing claim of the Trustee as such creditor, such claim shall have the same status as such pre-existing claim. If the Trustee shall be required to account, the funds and property held in such special account and the proceeds thereof shall be apportioned among the Trustee, the Holders and the holders of other indenture securities in such manner that the Trustee, the Holders and the holders of other indenture securities realize, as a result of payments from such special account and payments of dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for liquidation or reorganization pursuant to the Federal Bankruptcy Code or applicable state law, the same percentage of their respective claims, figured before crediting to the claim of the Trustee anything on account of the receipt by it from the Company of the funds and property in such special account and before crediting to the respective claims of the Trustee and the Holders and the holders of other indenture securities dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for liquidation or reorganization pursuant to the Federal Bankruptcy Code or applicable state law, but after crediting thereon receipts on account of the indebtedness represented by their respective claims from all sources other than from such dividends and from the funds and property so held in such special account. As used in this paragraph, with respect to any claim, the term "dividends" shall include any distribution with respect to such claim, in bankruptcy 108 or receivership or proceedings for reorganization pursuant to the Federal Bankruptcy Code or applicable state law, whether such distribution is made in cash, securities, or other property, but shall not include any such distribution with respect to the secured portion, if any, of such claim. The court in which such bankruptcy, receivership or proceeding for reorganization is pending shall have jurisdiction (i) to apportion among the Trustee, the Holders and the holders of other indenture securities, in accordance with the provisions of this paragraph, the funds and property held in such special account and proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part, to give to the provisions of this paragraph due consideration in determining the fairness of the distributions to be made to the Trustee and the Holders and the holders of other indenture securities with respect to their respective claims, in which event it shall not be necessary to liquidate or to appraise the value of any securities or other property held in such special account or as security for any such claim, or to make a specific allocation of such distributions as between the secured and unsecured portions of such claims, or otherwise to apply the provisions of this paragraph as a mathematical formula. Any Trustee which has resigned or been removed after the beginning of such three (3) month period shall be subject to the provisions of this Subsection as though such resignation or removal had not occurred. If any Trustee has resigned or been removed prior to the beginning of such three (3) month period, it shall be subject to the provisions of this Subsection if and only if the following conditions exist: (y) the receipt of property or reduction of claim, which would have given rise to the obligation to account, if such Trustee had continued as Trustee, occurred after the beginning of such three (3) month period; and (z) such receipt of property or reduction of claim occurred within three (3) months after such resignation or removal. B. There shall be excluded from the operation of paragraph A above a creditor relationship arising from: (1) the ownership or acquisition of securities issued under any indenture or any security or securities having a maturity of one year or more at the time of acquisition by the Trustee; or (2) advances authorized by a receivership or bankruptcy court of competent jurisdiction, or by this Indenture, for the purpose of preserving any property which shall at any time be subject to the lien of this Indenture or of discharging tax liens or other prior liens or encumbrances thereon, if notice of such advances and of the circumstances surrounding the making thereof is given to the Holders at the time and in the manner provided in this Indenture; or (3) disbursements made in the ordinary course of business in the capacity of trustee under an indenture, transfer agent, registrar, custodian, paying agent, fiscal agent or depositary, or other similar capacity; or 109 (4) an indebtedness created as a result of services rendered or premises rented; or an indebtedness created as a result of goods or securities sold in a cash transaction (as defined in paragraph C below); or (5) the ownership of stock or of other securities of a corporation organized under the provisions of Section 25(a) of the Federal Reserve Act, as amended, which is directly or indirectly a creditor of the Company; or (6) the acquisition, ownership, acceptance or negotiation of any drafts, bills of exchange, acceptances or obligations which fall within the classification of self-liquidating paper (as defined in paragraph C above). C. For the purposes of this Section only: (1) The term "default" means any failure to make payment in full of the principal of or interest on any of the Obligations or upon the other indenture securities when and as such principal or interest become due and payable; (2) The term "other indenture securities" means securities upon which the Company is an obligor outstanding under any other indenture (i) under which the Trustee is also trustee, (ii) which contains provisions substantially similar to the provisions of this Section, and (iii) under which a default exists at the time of the apportionment of the funds and property held in such special account; (3) The term "cash transaction" means any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; (4) The term "self-liquidating paper" means any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company for the purpose of financing the purchase, processing, manufacturing, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Company arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation; (5) The term "Company" means any obligor upon the Obligations; (6) The term "Federal Bankruptcy Code" means Title 11 of the United States Code, as it may be amended from time to time; and (7) The term "Trustee" includes any separate or co-trustee appointed under Section 9.14. 110 Section 9.14 Co-trustees and Separate Trustees. At any time or times, for the purpose of meeting the legal requirements of any jurisdiction in which any of the Trust Estate may at the time be located, the Company and the Trustee shall have power to appoint, and, upon the written request of the Trustee or of the Holders of at least 25% in principal amount of the Obligations Outstanding, the Company shall for such purpose join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Trustee either to act as co-trustee, jointly with the Trustee, of all or any part of the Trust Estate, or to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section. If the Company does not join in such appointment within fifteen (15) days after the receipt by it of a request so to do, or in case an Event of Default exists, the Trustee alone shall have power to make such appointment. Should any written instrument from the Company be required by any co-trustee or separate trustee so appointed for more fully confirming to such co-trustee or separate trustee such property, title, right or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Company. Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms, namely: A. the Obligations shall be authenticated and delivered, and all rights, powers, duties and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder, shall be exercised solely, by the Trustee. B. the rights, powers, duties and obligations hereby conferred or imposed upon the Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Trustee or by the Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-trustee or separate trustee. C. the Trustee at any time, by an instrument in writing executed by it, with the concurrence of the Company evidenced by a Board Resolution, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section, and, in case an Event of Default has occurred and is continuing, the Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Company. Upon the written request of the Trustee, the Company shall join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee 111 or separate trustee so resigned or removed may be appointed in the manner provided in this Section. D. no co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Trustee, or any other such trustee hereunder; and E. any Act of Holders delivered to the Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee. Section 9.15 Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents which shall be authorized to act on behalf of the Trustee to authenticate Obligations issued upon original issue and upon exchange, registration of transfer or partial redemption or pursuant to Sections 3.6, 3.7, 3.8 or 14.7, and Obligations so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Such Authenticating Agent shall at all times be a bank or trust company, and shall at all times be a corporation organized and doing business under the laws of the United States or of any state, territory or the District of Columbia, with a combined capital and surplus of at least $50,000,000 and authorized under such laws to exercise corporate trust powers and subject to supervision or examination by Federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually pursuant to law or the requirements of such supervising or examining authority, then for the purposes of this Section the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Any corporation into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any corporation succeeding to the corporate trust business of any Authenticating Agent, shall continue to be the Authenticating Agent hereunder, provided such corporation shall otherwise be eligible under this Section, without the execution or filing of any further act on the part of the parties hereto or the Authenticating Agent or such successor corporation. Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and the Company. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section, the Trustee shall promptly appoint a successor Authenticating Agent, shall give written notice of such appointment to the Company and shall mail notice of such appointment by first-class mail, postage prepaid, to all Holders of Obligations of the applicable series as the names and addresses of such Holders appear on the Obligation Register. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. 112 The Trustee agrees to pay to the Authenticating Agent from time to time reasonable compensation for its services under this Section and the Trustee shall be entitled to be reimbursed by the Company for such payments, subject to Sections 9.7 and 15.14. The provisions of Sections 3.10, 9.4 and 9.5 shall be applicable to any Authenticating Agent. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. If an appointment is made pursuant to this Section, the Obligations may have endorsed thereon, in lieu of the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Obligations described in the within-mentioned Indenture. _________________________________________ As Trustee By:______________________________________ As Authenticating Agent By:______________________________________ Authorized Officer ARTICLE X HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 10.1 Company to Furnish Trustee Semi-Annual Lists of Holders. The Company will furnish or cause to be furnished to the Trustee semiannually, not less than forty-five (45) days nor more than sixty (60) days after June 1 and December 1 of each year, and at such other times as the Trustee may request in writing, within thirty (30) days after receipt by the Company of any such request, a list in such form as the Trustee may reasonably require containing all the information in the possession or control of the Company, or any of its Paying Agents other than the Trustee, as to the names and addresses of the Holders of Obligations, obtained since the date as of which the next previous list, if any, was furnished, EXCLUDING from any such list the names and addresses received by the Trustee in its capacity as Obligation Registrar. Any such list may be dated as of a date not more than fifteen (15) days prior to the time such information is furnished and need not include information received after such date. 113 Section 10.2 Preservation of Information; Communications to Holders. A. The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders of Obligations (i) contained in the most recent list furnished to the Trustee as provided in Section 10.1, (ii) received by the Trustee in the capacity of Paying Agent (if so acting) hereunder, (iii) filed with the Trustee by Holders of Obligations within the two (2) preceding years as provided for in Section 10.3C(2), or (iv) received by the Trustee in its capacity as Obligation Registrar. The Trustee may (1) destroy any list furnished to it under Section 10.1 upon receipt of a new list so furnished, (2) destroy any information received by it as Paying Agent (if so acting) hereunder upon delivering to itself as Trustee, not earlier than forty-five (45) days after each June 1 and December 1 of each year, a list containing the names and addresses of the Holders of Obligations obtained from such information since the delivery of the next previous list, if any, (3) destroy any list delivered to itself as Trustee which was compiled from information received by it as Paying Agent (if so acting) hereunder upon the receipt of a new list so delivered, and (4) destroy, not earlier than two (2) years after filing, any information as to their names and addresses filed with the Trustee by Holders of Obligations as provided for in Section 10.3C(2). B. If RUS, to the extent it is a Holder, or three or more Holders of Obligations (hereinafter referred to as "applicants") apply in writing to the Trustee, and furnish to the Trustee reasonable proof that each such applicant has owned an Obligation for a period of at least six (6) months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders of Obligations with respect to their rights under this Indenture or under the Obligations and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five (5) business days after the receipt of such application, at its election, either (1) afford such applicants access to the information preserved at the time by the Trustee in accordance with Section 10.2A, or (2) inform such applicants as to the approximate number of Holders of Obligations whose names and addresses appear in the information preserved at the time by the Trustee in accordance with Section 10.2A, and as to the approximate cost of mailing to such Holders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder whose name and address appear in the information preserved at the time by the Trustee in accordance with Section 10.2A, a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of such mailing, unless within five (5) days after such tender, the Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the Holders of Obligations or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, 114 after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Holders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. C. Every Holder of Obligations, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any Paying Agent shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders of Obligations in accordance with Section 10.2B, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 10.2B. Section 10.3 Reports by Trustee. This Section 10.3 shall be operative only while this Indenture is required to be qualified under the TIA. A. The term "reporting date" means, as used in this Section, January 1 in each year, beginning with the year 1998. Within sixty (60) days after the reporting date in each year, the Trustee shall transmit to the Holders, as provided in paragraph C below, a brief report dated as of such reporting date with respect to any of the following events which may have occurred within the previous twelve (12) months (but if no such event has occurred within such period no such report need be transmitted): (1) any change to its eligibility under Section 9.9 and its qualifications under Section 9.8; (2) the creation of or any material change to a relationship specified in clauses (1) through (10) of Section 9.8(C); (3) the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) which remain unpaid on the date of such report, and for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Obligations, on the Trust Estate or on any property or funds held or collected by it as Trustee, except that the Trustee shall not be required (but may elect) to report such advances if such advances so remaining unpaid aggregate not more than 1/2 of 1% of the principal amount of the Obligations Outstanding on the date of such report; (4) the amount, interest rate and maturity date of all other indebtedness owing by the Company (or by any other obligor on the Obligations) to the Trustee in its individual capacity, on the date of such report, with a brief description of any property held as collateral 115 security therefor, except an indebtedness based upon a creditor relationship arising in any manner described in Section 9.13B(2), (3), (4) or (6); (5) any change to the property and funds, if any, physically in the possession of the Trustee as such on the date of such report; (6) any release, or release and substitution, of property subject to the lien of this Indenture (and the consideration therefor, if any) which the Trustee has not previously reported; PROVIDED, HOWEVER, that to the extent that the aggregate value as shown by the release papers of any or all of such released properties does not exceed an amount equal to 1% of the principal amount of Obligations then Outstanding, the report need only indicate the number of such releases, the total value of property released as shown by the release papers, the aggregate amount of cash received and the aggregate value of property received in substitution therefor as shown by the release papers; (7) any additional issue of Obligations which the Trustee has not previously reported; and (8) any action taken by the Trustee in the performance of its duties hereunder which it has not previously reported and which in its opinion materially affects the Obligations or the Trust Estate, except action in respect of a default, notice of which has been or is to be withheld by the Trustee in accordance with Section 9.2. B. The Trustee shall transmit to the Holders, as provided in paragraph C below, a brief report (which the Company shall cooperate with the Trustee in preparing) with respect to (1) the release, or release and substitution, of property subject to the lien of this Indenture (and the consideration therefor, if any) unless the fair value of such property, as set forth in the Officers' Certificate or certificate of an Engineer or Appraiser under Section 5.2, is less than 10% of the principal amount of Obligations Outstanding at the time of such release, or such release and substitution, such report to be so transmitted within ninety (90) days after such time; and (2) the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) since the date of the last report transmitted pursuant to paragraph A above (or if no such report has yet been so transmitted, since the date of execution of this instrument) for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Obligations, on the Trust Estate or on any property or funds held or collected by it as Trustee, and which it has not previously reported pursuant to this Subsection, except that the Trustee shall not be required (but may elect) to report such advances if such advances remaining unpaid at any time aggregate 10% or less of the principal amount of the Obligations Outstanding at such time, such report to be transmitted within ninety (90) days after such time. C. Reports pursuant to this Section shall be transmitted by mail: 116 (1) to all Holders of Obligations, as the names and addresses of such Holders appear in the Obligation Register; (2) to such Holders as have, within the two (2) years preceding such transmission, filed their names and addresses with the Trustee for that purpose; and (3) except in the case of reports pursuant to paragraph B above, to all Holders whose names and addresses have been furnished to or received by the Trustee pursuant to Section 10.1. D. A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any of the Obligations are listed and also with the Commission. The Company will notify the Trustee when the Obligations are listed on any stock exchange. Section 10.4 Reports by Company. This Section 10.4 shall be operative only while this Indenture is required to be qualified under the TIA. The Company shall: A. file with the Trustee, within fifteen (15) days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of said Sections, then it will file with the Trustee and the Commission, in accordance with rules and regulations prescribed by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed in such rules and regulations; B. file with the Trustee and the Commission, in accordance with rules and regulations prescribed by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required by such rules and regulations; and C. transmit to the Holders of Obligations, within thirty (30) days after the filing thereof with the Trustee, in the manner and to the extent provided in Section 10.3C with respect to reports pursuant to Section 10.3A, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs A and B above as may be required by rules and regulations prescribed by the Commission. 117 ARTICLE XI CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER Section 11.1 Consolidation, Merger, Conveyance or Transfer only on Certain Terms. The Company shall not consolidate with or merge into any other Person or convey or transfer the Trust Estate substantially as an entirety to any Person, unless: A. such consolidation, merger, conveyance or transfer shall be on such terms as shall fully preserve the lien and security hereof as provided for in this Article and the rights and powers of the Trustee and the Holders of the Obligations hereunder; B. the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer the Trust Estate substantially as an entirety shall be a Person organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia and shall execute and deliver to the Trustee a Supplemental Indenture in recordable form, meeting the requirements of Section 11.2 and containing: (1) an assumption by such successor Person of the due and punctual payment of the principal of (and premium, if any) and interest on all the Obligations and, subject to Section 11.2B, the performance and observance of every covenant and condition of this Indenture to be performed or observed by the Company, and (2) a grant, conveyance, transfer and mortgage complying with Section 11.2; C. immediately after giving effect to such transaction, no Event of Default hereunder shall exist; and D. the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each of which shall state that such consolidation, merger, conveyance or transfer and such Supplemental Indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. Section 11.2 Successor Person Substituted. Upon any consolidation or merger or any conveyance or transfer of the Trust Estate substantially as an entirety in accordance with Section 11.1, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; SUBJECT, HOWEVER, to the following limitations: 118 A. If the Supplemental Indenture required by Section 11.1 shall contain a grant, conveyance, transfer and mortgage in terms sufficient to include and subject to the lien of this Indenture, subject only to Permitted Exceptions and any Prior Liens permitted by Section 13.6, all property, rights, privileges and franchises owned by the successor Person on the date of the consolidation, merger, transfer or conveyance and which may be thereafter acquired by such successor Person (other than Excepted Property and Excluded Property), then such successor Person may cause to be executed, in its own name or in the name of the Company prior to such succession, and delivered to the Trustee for authentication, any Obligations issuable hereunder; and upon request of such successor Person, and subject to all the terms of this Indenture, the Trustee shall authenticate and deliver any Obligations which shall have been previously executed and delivered by the Company to the Trustee for authentication, and any Obligations which such successor Person shall thereafter, in accordance with this Indenture, cause to be executed and delivered to the Trustee for such purpose. Such changes in language and form (but not in substance) may be made in such Obligations as may be appropriate in view of such consolidation, merger, conveyance or transfer. B. If the Supplemental Indenture required by Section 11.1 shall not contain the grant, conveyance, transfer and mortgage described in paragraph A above, then such successor Person shall not be entitled to procure the authentication and delivery of any Obligations issuable hereunder (except for Obligations issued under Sections 3.6, 3.7, 3.8 and 14.7), and this Indenture shall not, by virtue of such consolidation, merger, conveyance or transfer, or by virtue of such Supplemental Indenture, or by virtue of the Granting Clauses, become a lien upon, and the term Trust Estate shall not be deemed to include, any of the property, rights, privileges and franchises of such successor Person owned by the successor Person at the time of such consolidation, merger, conveyance or transfer (unless such successor Person, in its discretion shall subject the same to the lien hereof), but this Indenture shall become and be a lien, subject to only Permitted Exceptions and any Prior Liens permitted by Section 13.6, upon only the following property, rights, privileges and franchises acquired by such successor Person after the date of such consolidation, merger, conveyance or transfer, to wit: (1) all betterments, extensions, improvements, additions, repairs, renewals, replacements, substitutions and alterations to, upon, for and of the property, rights, privileges and franchises subject to the lien hereof, and all property constituting appurtenances of the Trust Estate; (2) all property made the basis of the withdrawal of cash from the Trustee or the release of property from the lien of this Indenture; (3) all property acquired or constructed with the proceeds of (i) any insurance on any part of the Trust Estate, including with the proceeds of insurance on the Trust Estate not required to be paid to the Trustee under Section 13.8, or (ii) any part of the Trust Estate released from the lien of this Indenture or disposed of free from any such lien or taken by eminent domain; 119 (4) all property acquired pursuant to Section 13.7 to maintain and preserve and keep the Trust Estate in good condition, repair and working order and all property acquired or constructed with Trust Moneys paid over upon Company Request under Section 6.6; and (5) all property, leases, rights-of-way, franchises, licenses, permits or easements acquired in alteration, substitution, surrender or modification of any property, leases, rights-of-way, franchises, licenses, permits or easements disposed of, altered or modified pursuant to Section 5.1 and all monies deposited in connection therewith pursuant to Section 5.1; and said Supplemental Indenture shall contain a grant, conveyance, transfer or mortgage subjecting the property referred to in the preceding clauses of this paragraph to the lien of this Indenture. C. No such conveyance or transfer of the Trust Estate substantially as an entirety shall have the effect of releasing the Person named as "the Company" in the first paragraph of this instrument or any successor Person which shall have become such in the manner prescribed in this Article from its liability as obligor and maker on any of the Obligations, unless such conveyance or transfer is followed by the complete liquidation of such Person or successor Person and substantially all its assets immediately following such conveyance or transfer are the securities of such successor Person received in such conveyance or transfer. ARTICLE XII. SUPPLEMENTAL INDENTURES Section 12.1 Supplemental Indentures Without Consent of Holders. Without the consent of the Holders of any Obligations, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more Supplemental Indentures, in form satisfactory to the Trustee, for any of the following purposes: A. to correct or amplify the description of any property at any time subject to the lien of this Indenture, or better to assure, convey and confirm unto the Trustee any property subject or required to be subjected to the lien of this Indenture, or to subject additional property to the lien of this Indenture; or B. to add to the conditions, limitations and restrictions on the authorized amount, terms or purposes of issue, authentication and delivery of Obligations or of any series of Obligations, as herein set forth, additional conditions, limitations and restrictions thereafter to be observed; or C. to create any series of Obligations and make such other provisions as provided in Section 3.3; or 120 D. to modify or eliminate any of the terms of this Indenture; PROVIDED, HOWEVER, that (1) in the event any such modification or elimination made in such Supplemental Indenture would adversely affect or diminish the rights of the Holders of any Obligations then Outstanding against the Company or its property, it shall expressly be stated in such Supplemental Indenture that any such modifications or eliminations shall become effective only when such Obligations are no longer Outstanding; and (2) the Trustee may, in its discretion, decline to enter into any such Supplemental Indenture which, in its opinion, may not afford adequate protection to the Trustee when the same becomes operative; or E. to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein and in the Obligations contained; or F. to evidence the appointment of any successor trustee or separate trustee or trustees or co-trustee or co-trustees hereunder, and to define the rights, powers, duties and obligations conferred upon any such separate trustee or trustees or co-trustee or co-trustees; or G. to add to the covenants of the Company or the Events of Default for the benefit of the Holders of all or any series of Obligations or to surrender any right or power herein conferred upon the Company; or H. to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein or to make any other provisions, with respect to matters or questions arising under this Indenture, which shall not be inconsistent with the provisions of this Indenture, PROVIDED such action shall not, in the opinion of the Company, as evidenced by an Officers' Certificate delivered to the Trustee, adversely affect the interests of the Holders of the Obligations in any material respect; or I. to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the TIA or under any similar federal statute hereafter enacted, and to add to this Indenture such other provisions as may be expressly permitted by the TIA, EXCLUDING, HOWEVER, the provisions referred to in Section 316(a)(2) of the TIA as in effect at the date as of which this instrument was executed or any corresponding provision in any similar federal statute hereafter enacted; or J. to add or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Obligations (i) in bearer form, registrable or not registrable as to principal and with or without interest coupons or (ii) in book-entry form; or 121 K. to make any change in the Indenture that, in the reasonable judgment of the Trustee, will not materially and adversely affect the rights of Holders. For purposes of this paragraph of this Section, any Supplemental Indenture will be presumed not to materially and adversely affect the rights of the Holders if (1) this Indenture, as supplemented and amended by such Supplemental Indenture, secures equally and ratably the payment of principal of (and premium, if any) and interest on the Outstanding Secured Obligations which are to remain Outstanding and (2) subject to the last sentence of this paragraph, the Company shall furnish to the Trustee written evidence from at least two (2) nationally recognized statistical rating organizations then rating the Obligations (or other obligations primarily secured by Outstanding Secured Obligations) that their respective ratings of the Outstanding Secured Obligations (or other obligations primarily secured by Outstanding Secured Obligations) that are not subject to Credit Enhancement will not be withdrawn or reduced as a result of the changes in the Indenture effected by such Supplemental Indenture; PROVIDED, HOWEVER, that the failure to qualify for the presumption set forth in this sentence shall not create any presumption to the contrary or be used to question the judgment of the Trustee and PROVIDED, FURTHER, that the provisions of this paragraph may not be used to amend or modify the items listed in paragraphs A through F of Section 12.2 hereof in any way that is inconsistent with the provisions of such Section 12.2. The Trustee may rely on the written evidence of the nationally recognized statistical rating organizations then rating the Obligations (or other obligations primarily secured by Outstanding Secured Obligations) with respect to credit matters relating to the Company to the extent that it deems such reliance to be appropriate. Section 12.2 Supplemental Indentures With Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Obligations of all series then Outstanding affected by such Supplemental Indenture, by Act of such Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into a Supplemental Indenture for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of the Obligations under this Indenture; PROVIDED, HOWEVER, that no such Supplemental Indenture shall, without the consent of the Holder of each Outstanding Obligation affected thereby, A. change the Stated Maturity of the principal of, or any installment of interest on, any Obligation, or reduce the principal amount thereof or the interest thereon or any premium payable upon the redemption thereof, or change any Place of Payment where, or the coin or currency in which, any Obligation, or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemp tion, on or after the Redemption Date); or B. reduce the percentage in principal amount of the Outstanding Obligations, the consent of whose Holders is required for any such Supplemental Indenture, or the consent of whose Holders is required for any waiver provided for in this Indenture of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences; or 122 C. modify or alter the provisions of the proviso to the definition of the term "Outstanding" or "Outstanding Secured Obligations"; or D. modify any of the provisions of this Section, Section 8.12 or Section 8.17, except to increase any percentage provided thereby or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Obligation affected thereby; or E. permit the creation of any lien ranking prior to or on a parity with the lien of this Indenture with respect to any of the Trust Estate; or F. modify, in the case of Obligations of any series for which a mandatory sinking fund is provided, any of the provisions of this Indenture in such manner as to affect the rights of the Holders of such Obligations to the benefits of such sinking fund. The Trustee may in its discretion determine whether or not any Obligation would be affected by any Supplemental Indenture and any such determination shall be conclusive upon the Holder of all Obligations, whether theretofore or thereafter authenticated and delivered hereunder, and the Trustee shall have no liability to any Holder of any Obligation for any such determination made in good faith. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed Supplemental Indenture, but it shall be sufficient if such Act shall approve the substance thereof. Section 12.3 Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any Supplemental Indenture permitted by this Article or the modification thereby of the trust created by this Indenture, the Trustee shall be entitled to receive, and, subject to Section 9.1, shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such Supplemental Indenture is authorized or permitted by this Indenture. The Trustee may, but shall not, except to the extent required in the case of a Supplemental Indenture entered into under Section 12.1I, be obligated to, enter into any such Supplemental Indenture which adversely affects the Trustee's own rights, duties or immunities under this Indenture. Section 12.4 Effect of Supplemental Indentures. Upon the execution of any Supplemental Indenture under this Article, this Indenture shall be modified in accordance therewith and such Supplemental Indenture shall form a part of this Indenture for all purposes; and every Holder of Obligations theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. 123 Section 12.5 Conformity with Trust Indenture Act. After qualification of this Indenture under the TIA, every Supplemental Indenture executed pursuant to this Article thereafter shall conform to the requirements of the TIA as then in effect. Section 12.6 Reference in Obligations to Supplemental Indentures. Obligations authenticated and delivered after the execution of any Supplemental Indenture pursuant to this Article may, and if required by the Trustee or the Company shall, bear a notation in form approved by the Trustee as to any matter provided for in such Supplemental Indenture. If the Company shall so determine, new Obligations so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such Supplemental Indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Obligations. ARTICLE XIII COVENANTS Section 13.1 Payment of Principal, Premium and Interest. The Company will duly and punctually pay the principal of (and premium, if any) and interest on the Obligations in accordance with the terms of the Obligations and this Indenture. Section 13.2 Maintenance of Office or Agency. The Company will maintain an office or agency in each Place of Payment where Obligations may be presented or surrendered for payment, where Obligations entitled to be registered, transferred, exchanged or converted may be presented or surrendered for registration, transfer, exchange or conversion and where notices and demands to or upon the Company in respect of the Obligations and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and of any change in the location, of any such office or agency. If at any time the Company shall fail to maintain such an office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the principal corporate trust office of the Trustee, and the Company hereby appoints the Trustee its agent to receive all such presentations, surrenders, notices and demands. Section 13.3 Money for Obligation Payments to be Held in Trust; Repayment of Unclaimed Money. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Obligations, segregate and hold in trust for the benefit of the Holders of such Obligations a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Holders or 124 otherwise disposed of as herein provided, and the Company will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents, it will, prior to each due date of the principal of (and premium, if any) or interest on any Obligations, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Holders of such Obligations entitled to such principal (and premium, if any) or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. Moneys so segregated or deposited and held in trust shall not be a part of the Trust Estate and shall not be deemed Trust Moneys but shall constitute a separate trust fund for the benefit of the Persons entitled to such principal, premium or interest. Except in the case of moneys so segregated by the Company when acting as its own Paying Agent, moneys held in trust by the Trustee or any other Paying Agent for the payment of the principal (or premium, if any) or interest on the Obligations need not be segregated from other funds, except to the extent required by law. The Company will cause each Paying Agent other than the Company and Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will A. hold all sums held by it for the payment of principal of (and premium, if any) or interest on Obligations in trust for the benefit of the Holders of such Obligations until such sums shall be paid to the Holders or otherwise disposed of as herein provided; B. give the Trustee notice of any default by the Company (or any other obligor upon the Obligations) in the making of any payment of principal (and premium, if any) or interest; and C. at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all money held in trust by the Company or such Paying Agent, such money to be held by the Trustee upon the same trusts as those upon which such money was held by the Company or such Paying Agent; and, upon such payment by the Company, the Company shall be discharged from such trust, and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent or held by the Company in trust for the payment of the principal of (and premium, if any) or interest on any Obligation and remaining unclaimed for two (2) years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Obligation shall thereafter, as an unsecured 125 general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such payment to the Company, shall at the expense of the Company cause to be published once, in a newspaper of general circulation in each Place of Payment of such Obligation, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than thirty (30) days from the date of such publication, any unclaimed balance of such money then remaining will be paid to the Company. Section 13.4 Ownership of Property. At the time of the execution and delivery of this instrument, the Company owns and holds the real property specifically described in Subdivision A of Granting Clause First in fee (or such other estate as may be specified) and owns and holds the other interests in real property specifically described in Granting Clause First, subject to no mortgage, lien, charge or encumbrance other than Permitted Exceptions, and has full power and lawful authority to grant, bargain, sell, alienate, remise, release, convey, assign, transfer, mortgage, pledge, set over and confirm said real property and interests in real property in the manner and form aforesaid. The Company lawfully owns and is possessed of the personal property and securities described in Granting Clauses First and Second (other than property of the Company acquired after the time of the execution and delivery of this Indenture), subject to no mortgage, lien, charge or encumbrance other than Permitted Exceptions, and has full power and lawful authority to mortgage, assign, transfer, deliver and pledge said personal property and securities in the manner and form aforesaid. Said securities are genuine and valid outstanding securities of the corporations which issued the same, according to their tenor and purport, and all shares of stock specifically described are fully paid and nonassessable. The Company hereby does and will forever warrant and defend its ownership, as set forth above, of the real property and interests in real property described in Granting Clauses First and Second against all claims and demands of all persons whomsoever, except Permitted Exceptions. Section 13.5 After-Acquired Property; Further Assurances; Recording. All property of every kind, other than Excepted Property and Excludable Property, acquired by the Company after the date hereof, shall, immediately upon the acquisition thereof by the Company, and without any further mortgage, conveyance or assignment, become subject to the lien of this Indenture; SUBJECT, HOWEVER, to the exceptions permitted by Section 11.2B. Nevertheless, the Company will do, execute, acknowledge and deliver all and every such further acts, conveyances, mortgages, financing statements and assurances as the Trustee shall require for accomplishing the purposes of this Indenture. The Company will cause this Indenture and all Supplemental Indentures and other instruments of further assurance, including all financing statements and continuation statements covering security interests in personal property, and all mortgages securing purchase money obligations delivered to the Trustee or to the trustee, mortgagee or other holder of a Prior Lien under Section 5.2 to be 126 promptly recorded, registered and filed, and at all times to be kept recorded, registered and filed, and will execute and file such financing statements or cause to be issued and filed such continuation statements, all in such manner and in such places as may be required by law fully to preserve and protect the rights of the Holders and the Trustee hereunder to all property comprising the Trust Estate. Furthermore, the Company will use its best efforts to cause all contracts and contract rights of the type and duration set forth in Subdivision C of Granting Clause First and acquired by the Company after the date hereof to become subject to the lien of this Indenture. The Company will furnish to the Trustee: A. promptly after the execution and delivery of each Supplemental Indenture or other instrument of further assurance, an Opinion of Counsel stating that, in the opinion of such Counsel, this Indenture and such Supplemental Indentures and other instruments of further assurance have been properly recorded, registered and filed, or have been received for recording, filing or registration, to the extent necessary to make effective the lien intended to be created by this Indenture and stating that all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the rights of the Holders and the Trustee hereunder, or stating that, in the opinion of such Counsel, no such action is necessary to make such lien effective; and B. within thirty (30) days after January 1 in each year beginning with the year 1998, an Opinion of Counsel, dated as of such date, either stating that, in the opinion of such Counsel, such action has been taken with respect to the recording, registering, filing, re-recording, re-registering and re-filing of this instrument and of all Supplemental Indentures, financing statements, continuation statements or other instruments of further assurance as is necessary to maintain the lien of this Indenture (including the lien on any property acquired by the Company after the execution and delivery of this instrument and owned by the Company at the end of the preceding calendar year) and stating that all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the rights of the Holders and the Trustee hereunder, or stating that, in the opinion of such Counsel, no such action is necessary to maintain such lien. Upon the cancellation and discharge of any Prior Lien, the Company will cause all cash, obligations and securities then held by the trustee, mortgagee or other holder of such Prior Lien, which were received by such trustee, mortgagee or other holder on account of the release or the taking by eminent domain or the purchase by a public authority or the sale by virtue of a designation or order of a public authority or any other disposition of, or insurance on, the Trust Estate, or any part thereof (including all proceeds of or substitutions for any thereof), to be paid to or deposited and pledged with the Trustee, such cash to be held and paid over or applied by the Trustee as provided in Article VI. Section 13.6 Limitations on Liens; Payment of Taxes. The Company will not create or incur or suffer or permit to be created or incurred or to exist any mortgage, lien, charge or encumbrance on or pledge of any of the Trust Estate prior to or upon a parity with the lien of this Indenture except Permitted Exceptions and except that: 127 A. The Company may create, incur or suffer to exist purchase money mortgages or other purchase money liens upon any real property purchased by the Company or acquire real property subject to mortgages and liens existing thereon at the date of acquisition, or acquire or agree to acquire and own personal property subject to or upon chattel mortgages, conditional sales agreements or other title retention agreements; PROVIDED that (1) the principal amount of the indebtedness secured by each such mortgage, lien or agreement shall not exceed 80% of the Cost or Fair Value to the Company at the time of the acquisition thereof by the Company, whichever is less, as evidenced by an Officers' Certificate, of the property subject thereto, PROVIDED that if the property subject to such mortgage, lien or agreement is not necessary to the operations of the remaining portion of the System, the principal amount thereby secured may not exceed 100% of such Cost or Fair Value to the Company, whichever is less; (2) the aggregate principal amount of all indebtedness of the Company at the time outstanding secured by such mortgages, liens and agreements (including extensions, renewals and replacements thereof, as provided by the paragraph B below, and also the indebtedness then being incurred) shall not exceed 15% of the aggregate principal amount of all Obligations then Outstanding; and (3) each such mortgage, lien or agreement shall apply only to the property originally subject thereto, fixed improvements erected on any such real property or affixed to such personal property or equipment used in connection with such real or personal property, any contracts, licenses, permits and other property related solely to such real or personal property, and the proceeds thereof. B. The Company may modify, extend, renew or replace any mortgage, lien or agreement permitted by paragraph A above upon the same property theretofore subject thereto, or modify, replace, renew or extend the indebtedness secured thereby, PROVIDED that in any such case the principal amount of such indebtedness so modified, replaced, extended or renewed shall not be increased above the limits described in paragraph A above. The Company will pay or cause to be paid as they become due and payable all taxes, assessments and other governmental charges lawfully levied or assessed or imposed upon the Trust Estate or any part thereof or upon any income therefrom, and also (to the extent that such payment will not be contrary to any applicable laws) all taxes, assessments and other governmental charges lawfully levied, assessed or imposed upon the lien or interest of the Trustee or of the Holders in the Trust Estate, so that (to the extent aforesaid) the lien of this Indenture shall at all times be wholly preserved at the cost of the Company and without expense to the Trustee or the Holders; PROVIDED, HOWEVER, that the Company shall not be required to pay and discharge or cause to be paid and discharged any such tax, assessment or governmental charge to the extent that the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings and the Company shall have established and shall maintain adequate reserves on its books for the payment of the same. 128 Section 13.7 Maintenance of Properties. The Company will cause all its properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; PROVIDED, HOWEVER, that nothing in this Section shall prevent the Company from discontinuing the operation and maintenance of any of its properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business and not disadvantageous in any material respect to the Holders. The Company will promptly classify, and record on its books, as retired, all property that has permanently ceased to be used or useful in the business of the Company. Section 13.8 To Insure. The Company will at all times keep all its property of an insurable nature and of the character usually insured by companies operating similar properties, insured in amounts customarily carried, and against loss or damage from such causes as are customarily insured against, by similar companies. All such insurance shall be effected with responsible insurance carriers. All policies or other contracts for such insurance upon any part of the Trust Estate shall provide that the proceeds of such insurance (except in the case of any particular casualty resulting in damage or destruction not exceeding $2,000,000 in the aggregate) shall be payable, subject to the requirements of any Prior Lien, to the Trustee as its interest may appear (by means of a standard mortgagee clause or other similar clause acceptable to the Trustee, without contribution). Each policy or other contract for such insurance, or such mortgagee clause, shall contain an agreement by the insurer that, notwithstanding any right of cancellation reserved to such insurer, such policy or contract shall continue in force for the benefit of the Trustee for at least thirty (30) days after written notice to the Trustee of cancellation. As soon as practicable after the execution of this Indenture, and within ninety (90) days after the close of each calendar year thereafter, and at any time upon the request of the Trustee, the Company will file with the Trustee an Officers' Certificate containing a detailed list of the insurance in force upon the Trust Estate on a date therein specified (which date shall be within thirty (30) days of the filing of such Certificate), including the names of the insurers with which the policies and other contracts of insurance on the Trust Estate are carried, the numbers, amounts and expiration dates of such policies and other contracts and the property and hazards covered thereby, and stating that the insurance so listed complies with this Section, and the Trustee may conclusively rely on such Certificate. Any appraisement or adjustment or any loss or damage of or to any part of the Trust Estate and any settlement in respect thereof which may be agreed upon between the Company and any insurer, as evidenced by an Officers' Certificate, shall be accepted by the Trustee. All proceeds of insurance received by the Trustee shall be held and paid over or applied by the Trustee as provided in Article VI. 129 All proceeds of any insurance on any part of the Trust Estate not payable to the Trustee or the trustee, mortgagee or other holder of a Prior Lien shall be applied by the Company to the repair, rebuilding or replacement of the property destroyed or damaged or shall be deposited with the Trustee to be held and paid over or applied by it as provided in Article VI. Section 13.9 Corporate Existence. Subject to Article XI, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises; PROVIDED, HOWEVER, that the Company shall not be required to preserve any right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. Section 13.10 To Keep Books; Inspection by Trustee. The Company will keep proper books of record and account, in which full and correct entries shall be made of all dealings or transactions of or in relation to the Obligations and the plant, properties, business and affairs of the Company in accordance with Accounting Requirements. The Company will, upon reasonable written notice by the Trustee to the Company and at the expense of the Company, permit the Trustee by its representatives to inspect the plants and properties, books of account, records, reports and other papers of the Company, and to take copies and extracts therefrom, and will afford and procure a reasonable opportunity to make any such inspection, and the Company will furnish to the Trustee any and all information as the Trustee may reasonably request, with respect to the performance by the Company of its covenants in this Indenture. Section 13.11 Use of Trust Moneys and Advances by Trustee. If the Company shall fail to perform any of its covenants in this Indenture, the Trustee may (but shall not be obligated to) at any time and from time to time after notice to the Company, use and apply any Trust Moneys held by it under Article VI, or make advances, to effect performance of any such covenant on behalf of the Company; and all moneys so used or advanced by the Trustee, together with interest at the rate of 10% per annum, shall be repaid by the Company upon demand and such advances shall be secured under this Indenture prior to the Obligations. For the repayment of all such advances the Trustee shall have the right to use and apply any Trust Moneys at any time held by it under Article VI but no such use of Trust Moneys or advance shall relieve the Company from any default hereunder. Nothing contained herein shall be deemed to obligate the Trustee to advance its own monies for any purpose. Section 13.12 Statement as to Compliance. The Company will deliver to the Trustee, within one hundred and twenty (120) days after the end of each calendar year, a written statement signed by the principal executive officer and by the principal financial officer or principal accounting officer of the Company stating that a review of the Company's activities has been made under their supervision and that the Company has fulfilled its obligations hereunder in all material respects. 130 Promptly after any Officer of the Company may reasonably be deemed to have knowledge of a default hereunder, the Company will deliver to the Trustee a written notice specifying the nature and period of existence thereof and the action the Company is taking and proposes to take with respect thereto. Section 13.13 Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any covenant or condition set forth in this Article except Sections 13.1, 13.2, 13.3, 13.4, 13.5, 13.9, 13.10, 13.11 and the first sentence of Section 13.14 if before or after the time for such compliance the Holders of at least a majority in principal amount of all Obligations then Outstanding, shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. Section 13.14 Rate Covenant. The Company shall establish and collect rates, rents, charges, fees and other compensation (collectively, "Rates") for the use or the sale of the output, capacity or service of the System that, together with other moneys available to the Company, produce moneys sufficient to enable the Company to comply with all its covenants under this Indenture. Subject to any necessary regulatory approval or determination, including the approval or determination of RUS, if required, the Company also shall establish and collect Rates for the use or the sale of output, capacity or service of the System that, together with other revenues available to the Company, are reasonably expected to yield Margins for Interest for each fiscal year of the Company equal to at least 1.10 times Interest Charges for such period. Promptly upon any material change in the circumstances which were contemplated at the time such Rates were most recently reviewed, but not less frequently than once every twelve (12) months, the Company shall review the Rates so established and shall promptly establish or revise such Rates as necessary to comply with the foregoing requirements, subject in the case of the foregoing Margins for Interest requirement to any necessary regulatory approval or determination, including that of RUS, if required. The Company will not furnish or supply or cause to be furnished or supplied any use, output, capacity or service of the System with respect to which a charge is regularly or customarily made, free of charge to any Person, and the Company will use commercially reasonable efforts to enforce the payment of any and all accounts owing to the Company with respect to the use, output, capacity or service of the System. Section 13.15 Distributions to Members. The Company shall not directly or indirectly declare or pay any dividend or make any payments of, distributions of, or retirements of patronage capital to its members (each a "Distribution") if, at the time thereof or after giving effect thereto, (i) an Event of Default shall exist, or (ii) the Company's aggregate margins and equities (determined in accordance with Accounting Requirements) as of the end of the Company's most recent fiscal quarter would be less than 20% of the Company's total long-term debt and equities (determined in accordance with 131 Accounting Requirements) at such time, or (iii) the aggregate amount expended for all Distributions on or after the date on which the Company's aggregate margins and equities (determined in accordance with Accounting Requirements) first reached 20% of the Company's total long-term debt and equities (determined in accordance with Accounting Requirements) shall exceed 35% of the aggregate net margins (whether or not such net margins have since been allocated to members) of the Company earned after such date (subtracting, in the case of any deficit, 100% of such deficit). Notwithstanding the foregoing and so long as no Event of Default shall exist, the Company may declare and make Distributions at any time if, after giving effect thereto, the Company's aggregate margins and equities (determined in accordance with Accounting Requirements) as of the end of the Company's most recent fiscal quarter would have been not less than 30% of the Company's total long-term debt and equities (determined in accordance with Accounting Requirements) as of such date. Notwithstanding any of the foregoing, the Company may declare and make the Distributions contemplated to be made by that certain Member Agreement, among the Company, Georgia Transmission Corporation (An Electric Membership Corporation), Georgia System Operations Corporation and the distribution members of the Company. Section 13.16 Restriction on Short-Term Indebtedness. The Company shall not on any date permit Short-Term Indebtedness to exceed 15% of the Company's long-term debt and equities (determined in accordance with Accounting Requirements, except that such determinations and calculations shall not be made on a consolidated basis and shall not, therefore, take into account the Short-Term Indebtedness, long-term debt and equities of the Company's Affiliates and Subsidiaries) as of the end of the fiscal quarter immediately preceding such date. As used in this Section 13.16, "Short-Term Indebtedness" means all indebtedness of, or guaranteed or in effect guaranteed (whether directly or indirectly, contingent or otherwise) against loss in respect thereof to the holder thereof by, the Company (other than trade payables) which on the date of original issuance thereof is classified as short-term debt under Accounting Requirements. Section 13.17 Limitation on Certain Cash Investments. The Company shall invest or direct the Trustee to invest at least 75% of each of (i) its cash on hand for working capital needs, (ii) Trust Moneys and (iii) Deposited Cash (as determined by the Company), in (a) Defeasance Securities, (b) securities issued by any agency or instrumentality of the United States of America or any corporation created pursuant to any act of the Congress of the United States, (c) commercial paper rated in either of the two highest rating categories by a national credit rating agency, (d) demand or time deposits, certificates of deposit and bankers' acceptances issued or accepted by any bank or trust company having capital surplus and undivided profits aggregating at least $50,000,000 and whose long-term debt is rated in any of the three highest rating categories by a national credit rating agency, (e) any non-convertible debt securities rated in any of the three highest rating categories by a national credit rating agency, (f) repurchase agreements that are secured by a perfected security interest in securities listed in clauses (a) or (b) above entered into with a government bond dealer recognized as a primary dealer by the Federal Reserve Bank of New York or any bank described in clause (d) above, or (g) any short-term institutional investment fund or account which invests solely in any of the foregoing obligations. 132 ARTICLE XIV REDEMPTION OF OBLIGATIONS; SINKING FUNDS Section 14.1 Applicability of Sections 14.1 Through 14.7. Obligations which are by their express terms redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise provided with respect to the Obligations of any particular series by the provisions of a Supplemental Indenture creating such series) in accordance with Sections 14.1 through 14.7, inclusive. Section 14.2 Election to Redeem; Notice to Trustee. The election of the Company to redeem any Obligations shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company of less than all the Outstanding Obligations of any series, the Company shall, at least sixty (60) days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee) notify the Trustee of such Redemption Date and of the principal amount of Obligations of such series to be redeemed and of the numbers of any Outstanding Obligations of such series then owned by the Company. Section 14.3 Selection by Trustee of Obligations to be Redeemed. Unless otherwise provided in a Supplemental Indenture authorizing a particular series of Obligations, if less than all the Outstanding Obligations of any series or maturity within a series are to be redeemed, the particular Obligations to be redeemed shall be selected not more than sixty (60) days prior to the Redemption Date by the Trustee from the Outstanding Obligations of such series or maturity within a series which have not previously been called for redemption by prorating, as nearly as may be, the principal amount of Obligations of such series or maturity within a series to be redeemed among the Holders of such Obligations in proportion to the aggregate principal amount of such Obligations registered in their respective names; EXCEPT that, if there shall have been previously filed with the Trustee an Act of all the Holders of such Obligations satisfactory to the Trustee specifying the method of selecting the Obligations to be redeemed, such selection shall be made by the Trustee in accordance with the terms of such Act. In any proration pursuant to this Section, the Trustee shall make such adjustments, reallocations and eliminations as it shall deem proper to the end that the principal amount of Obligations of such series or maturity within a series so prorated shall be equal to the greater of $1,000 and the smallest authorized denomination of the Obligations of such series, or a multiple thereof, by increasing or decreasing or eliminating the amount which would be allocable to any Holder on the basis of exact proportion by an amount not exceeding such prorated minimum. The Trustee in its discretion may determine the particular Obligations (if there is more than one) registered in the name of any Holder which are to be redeemed, in whole or in part. The Trustee shall promptly notify the Company in writing of the Obligations selected for redemption and, in the case of any Obligation selected for partial redemption, the principal amount thereof to be redeemed. 133 For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Obligations shall relate, in the case of any Obligation redeemed or to be redeemed only in part, to the portion of the principal of such Obligation which has been or is to be redeemed. Section 14.4 Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than thirty (30) nor more than sixty (60) days prior to the Redemption Date, to each Holder of Obligations of such series to be redeemed, at his address appearing in the Obligation Register. All notices of redemption shall state: A. the CUSIP number (if any) of all Obligations to be redeemed, B. the Redemption Date, C. the Redemption Price, D. the principal amount of Obligations of each series to be redeemed, and, if less than all Outstanding Obligations of a series are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the Obligations of such series to be redeemed, E. that on the Redemption Date the Redemption Price of each of the Obligations to be redeemed will become due and payable and that the interest thereon shall cease to accrue from and after said Redemption Date, F. the place or places where the Obligations of each series to be redeemed are to be surrendered for payment of the Redemption Price, which shall be the office or agency of the Company in each Place of Payment for such series, G. if it be the case, that such Obligations are to be redeemed by the application of certain specified Trust Moneys, and H. if it be the case, that such redemption is to satisfy sinking fund requirements. Notice of redemption of Obligations to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. If the Company requests that the Trustee give such notice, the Company shall furnish such notice to the Trustee not less than five (5) business days prior to the date such notice is required to be given. 134 Section 14.5 Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 13.3) an amount of money sufficient to pay the Redemption Price of all the Obligations which are to be redeemed on that date. Such money shall be held in trust for the benefit of the Persons entitled to such Redemption Price and shall not be deemed to be part of the Trust Estate or Trust Moneys. Subject to the requirements of any Supplemental Indenture, the Company may determine what sinking fund requirements (if any) to apply redeemed Obligations against. Section 14.6 Obligations Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Obligations so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified and from and after such date (unless the Company shall default in the payment of the Redemption Price) such Obligations shall cease to bear interest. Upon surrender of any such Obligation for redemption in accordance with said notice, such Obligation shall be paid by the Company at the Redemption Price. Installments of interest with a Stated Maturity on or prior to the Redemption Date shall be payable to the Holders of the Obligations registered as such on the relevant Record Dates according to the terms of such Obligations and the provisions of Section 3.9. If any Obligation called for redemption shall not be so paid upon surrender thereof for redemption or as otherwise provided under Section 14.7 in lieu of surrender, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Obligation. Section 14.7 Obligations Redeemed in Part. Unless otherwise provided in any Supplemental Indenture, any Obligation which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Obligation, without service charge, a new Obligation or Obligations of the same series and maturity of any authorized denomination or denominations as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Obligation so surrendered. In lieu of surrender under the preceding paragraph, payment of the Redemption Price of a portion of any Obligation held in the Book-Entry System may be made directly to the Holder thereof without surrender thereof if there shall have been filed with the Trustee either (i) a written agreement between the Company and such Holder and, if such Holder is a nominee, the Person for whom such Holder is a nominee, that payment shall be so made and that such Holder will not sell, transfer or otherwise dispose of such Obligation unless prior to delivery thereof such Holder shall present such 135 Obligation to the Trustee for notation thereon of the portion of the principal thereof redeemed or shall surrender such Obligation in exchange for a new Obligation or Obligations for the unredeemed balance of the principal of the surrendered Obligation or (ii) a certificate of the Company that such an agreement has been entered into and remains in force. Section 14.8 Applicability of Sections 14.8 Through 14.10. The provisions of Sections 14.8 through 14.10, inclusive, shall be applicable to any sinking fund for the retirement of Obligations except as otherwise specified as contemplated by Section 3.3 for Obligations of such series. The minimum amount of any sinking fund payment provided for by the terms of Obligations of any series is herein referred to as a "mandatory sinking fund payment," and any payment in excess of such minimum amount provided for by the terms of Obligations of any series is herein referred to as an "optional sinking fund payment." If provided for by the terms of Obligations of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 14.9. Each sinking fund payment shall be applied to the redemption of Obligations of any series as provided for by the terms of Obligations of such series. Section 14.9 Satisfaction of Sinking Fund Payments with Obligations. The Company (1) may deliver Outstanding Obligations of a series (other than any previously called for redemption) and (2) may apply, as a credit, Obligations of a series which have been redeemed either at the election of the Company pursuant to the terms of such Obligations or through the application of permitted optional sinking fund payments pursuant to the terms of such Obligations, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Obligations of such series required to be made pursuant to the terms of such Obligations as provided for by the terms of such series; PROVIDED that such Obligations have not been previously so credited. Such Obligations shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Obligations for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. Section 14.10 Redemption of Obligations for Sinking Fund. Not less than sixty (60) days prior to each sinking fund payment date for any series of Obligations, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Obligations of that series pursuant to Section 14.9 and will also deliver to the Trustee any Obligations to be so delivered. Not less than thirty (30) days before each such sinking fund payment date the Trustee shall select the Obligations to be redeemed upon such sinking fund payment date in the manner specified in Section 14.3 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 14.4. Such notice having been duly given, the redemption of such Obligations shall be made upon the terms and in the manner stated in Sections 14.6 and 14.7. The Company shall 136 prepare each such notice of redemption and furnish it to the Trustee not less than five (5) business days prior to the date such notice is required to be given. ARTICLE XV CONTROL OF PLEDGED SECURITIES Section 15.1 Pledged Securities Deposited with Trustee. Any shares of stock and certificates representing the same and any obligations and indebtedness and evidences thereof and any other securities which are at the time deposited with the Trustee or required to be deposited and pledged with the Trustee, except Undesignated Qualifying Securities and Designated Qualifying Securities, are herein sometimes collectively called the "Pledged Securities." As and when any Pledged Securities shall come into the possession of the Company or under its control, the Company shall forthwith deposit and pledge the same with the Trustee, together with such proper instruments of assignment and transfer as the Trustee may reasonably require, which shall include express authority to the Trustee to vote any shares of stock included therein to the extent herein provided or permitted and to cause such authority to be recorded in the entry of transfer of such stock on the books of the corporation issuing the same. The Trustee shall not be obliged at any time to accept any Pledged Securities or to cause or to permit a transfer thereof to be made to it, if, in the opinion of the Trustee, such action would subject it to the risk of any liability or expense, unless the Trustee shall be indemnified to its satisfaction for so doing. The Trustee shall have no responsibility for ascertaining the validity or priority of such pledge, or for making any filings in connection therewith. The Trustee shall not be under any duty to examine into or pass upon the validity or genuineness of any of the Pledged Securities. The Trustee shall be entitled to assume that any Pledged Securities are genuine and valid and what they purport to be and that any endorsements or assignments thereof are genuine and valid. Section 15.2 Form of Holding. The Trustee may hold any Pledged Securities in bearer form or in the name of the Trustee or any nominee or nominees of the Trustee or (unless an Event of Default exists or the Holders of a majority in principal amount of the Obligations then Outstanding otherwise direct) in the name of the Company or any nominee or nominees of the Company, endorsed or assigned in blank or in favor of the Trustee. The Trustee may deliver any of the Pledged Securities to the Company for a period of not more than twenty-one (21) days or to the issuer thereof for the purpose of making exchanges or registrations of transfers or for such other purposes in furtherance of this trust as the Trustee may deem advisable. 137 Section 15.3 Right of Trustee to Preserve Issuers; Directors' Qualifying Shares. The Trustee may do whatever in its judgment may be necessary for the purpose of preserving or extending the corporate existence of any corporation whose shares are included in the Pledged Securities, but (subject to Section 9.1) it shall be under no duty to take any action in respect thereof. Upon Company Request stating that the Company has no shares for the purpose under its control other than shares held hereunder, the Trustee shall transfer or permit the Company to transfer as many shares of stock as may be necessary to qualify the requisite number of persons to act as directors of or in any other official relation to the corporation issuing such shares; PROVIDED, HOWEVER, that no such transfer of the stock of any Pledged Subsidiary shall be made which would change the status of the issuing corporation as a Pledged Subsidiary. In every such case the Trustee may make such arrangements as it shall deem necessary for the protection of the trust hereunder in respect of the shares so transferred. While such shares remain so transferred they shall not be deemed to be Pledged Securities, but when such shares are no longer needed for such qualification purposes they shall immediately be redeposited and repledged and thereupon again become Pledged Securities. Section 15.4 Income Before Event of Default. Unless an Event of Default exists, the Company from time to time shall be entitled to receive and collect for its own use all interest paid on any Pledged Security (other than any such interest which shall have been collected or paid out of the proceeds of any sale or condemnation or expropriation of any property covered by a mortgage or other lien securing such Pledged Security) and all dividends on any Pledged Security which are paid in cash out of the net profits or earned surplus of the issuing corporation accrued since the date of deposit and pledge of such Pledged Security with the Trustee hereunder. The Trustee from time to time shall execute and deliver upon Company Request suitable orders in favor of the Company or its nominee for the payment of such interest and cash dividends and shall deliver upon Company Request any and all coupons held by the Trustee representing such interest as the date of the maturity thereof approaches. The Trustee shall likewise pay over all sums which are received or collected by it as such interest or cash dividends. Until actually paid, all rights to such interest or cash dividends shall remain subject to the lien hereof. The Trustee shall be entitled (subject to Section 9.1) to assume that any cash dividend received by it on any Pledged Security is paid out of the net profits or earned surplus of the issuing corporation accrued since the date of deposit and pledge of such Pledged Security with the Trustee hereunder and that any interest has not been collected or paid out of the proceeds of any such sale or condemnation or expropriation, unless and until notified in writing to the contrary by any Holder or the Company or the person making such payment, in which event the Trustee may (subject to Section 9.1) accept an Officers' Certificate stating any pertinent facts in connection with any such dividend or interest as conclusive evidence of such facts. Section 15.5 Income After Event of Default. If an Event of Default exists, in addition to the other remedies herein provided, the Trustee shall collect and receive all interest and dividends on Pledged Securities and shall cancel and revoke all interest and dividend orders in favor of the Company or its nominee. All money so received by 138 the Trustee which, in the absence of an Event of Default, would be receivable by the Company under Section 15.4, shall be applied in accordance with Section 8.7. In every such case, after all Events of Default have been cured, the right of the Company to receive and collect interest and dividends, and the duty of the Trustee with respect thereto, under Section 15.4, shall revive and continue; and the Trustee shall pay over upon Company Request any such interest or dividends received by it which, in the absence of an Event of Default, would be receivable by the Company under Section 15.4 and then remain unexpended in its hands. Section 15.6 Principal and Other Payments. In case any sum shall be paid on account of A. the principal of (or premium, if any, on) any Pledged Security, or B. any dividend upon any Pledged Security other than a cash dividend paid out of the net profits or earned surplus of the issuing corporation accrued since the date of deposit and pledge of such Pledged Security with the Trustee hereunder, or C. the liquidation or dissolution or reduction of capital of the corporation issuing any Pledged Security, or D. interest on any Pledged Security which shall have been collected or paid out of the proceeds of any sale or condemnation or expropriation of any property covered by a mortgage or other lien securing such Pledged Security, or in case any other distribution (including stock dividends but excluding any dividend excluded by Subsection B) shall be made in respect of any Pledged Security, such sum or other distribution shall be paid or delivered to the Trustee to be held as a part of the Trust Estate. In case the Company or the Trustee shall receive rights to subscribe to additional securities in respect of any Pledged Securities, the Company may exercise or (subject to Section 15.8) sell such rights in its discretion, PROVIDED, HOWEVER, that (i) all securities acquired by exercise of such rights shall forthwith be deposited and pledged with the Trustee hereunder, (ii) all net proceeds from the sale of any such rights shall forthwith be paid to the Trustee, (iii) if the Company shall not have elected to exercise or sell such rights by the fifth (5th) business day prior to the expiration thereof, it shall give the Trustee notice thereof and the Trustee shall forthwith sell or, in the event that Section 15.8 is applicable, may exercise such rights in such manner as in its uncontrolled discretion it may deem advisable and (iv) if an Event of Default exists, the Trustee shall be entitled at any time in its discretion to exercise or sell such rights. Section 15.7 Voting. Unless an Event of Default exists, the Company shall have the right to vote and give consents with respect to all Pledged Securities and from time to time, in case any Pledged Securities have been transferred into the name of the Trustee or its nominee or nominees, the Trustee, upon Company 139 Request, shall execute and deliver or cause to be executed and delivered to the Company or its nominee appropriate powers of attorney or proxies to vote such Pledged Securities or to execute a waiver or consent with respect thereto, for such purpose or purposes as may be specified in such request; PROVIDED, HOWEVER, that such right of the Company shall not include (and every such power of attorney or proxy shall be limited, either generally or specifically, to provide in effect that the powers thereby conferred do not include) any power to vote for or to authorize or consent to any act or thing inconsistent with or in avoidance of the Company's obligations under this Indenture. If an Event of Default exists, the Trustee may in its discretion, and if requested by the Holders of a majority in principal amount of the Obligations then Outstanding and provided with indemnity reasonably satisfactory to it shall, revoke all such powers of attorney and proxies and the Trustee may in its discretion vote and exercise, or cause the nominee or nominees of the Trustee to vote and exercise, all the powers of an owner with respect to any Pledged Securities. In so voting and exercising the powers of an owner with respect to any Pledged Securities, the Trustee shall not be required to attend any meeting of security holders, but the Trustee may vote or act by power of attorney or proxy and such power of attorney or proxy may be granted to any person selected by the Trustee, including an Officer of the Company. The Trustee may so vote and exercise the powers of an owner with respect to any Pledged Securities for any purpose or purposes which the Trustee, in its discretion, shall deem advisable and in the interest of the Holders, whether or not such action may involve a change in the character of any Pledged Security or in the corporate identity or business of the issuer thereof or in the proportionate interest or voting power represented by such security. In every such case, after all Events of Default have been cured, the right of the Company to vote and give consents with respect to the Pledged Securities, and the duty of the Trustee to execute powers of attorney and proxies as hereinabove provided, shall revive and continue. Section 15.8 Limitations on Issue of Voting Stock or Grant of Membership Interests of Pledged Subsidiaries. The Company will not permit any Pledged Subsidiary to issue any additional shares of Voting Stock, other than stock dividends, unless simultaneously there shall be made effective provision that certificates for all such additional Voting Stock, forthwith upon the issue thereof, will be deposited and pledged with the Trustee; PROVIDED, HOWEVER, that, if the, holders of any stock of such Pledged Subsidiary not then included in the Pledged Securities shall have a preemptive right to subscribe for and purchase their pro rata share of such additional shares of Voting Stock, then such part of such additional shares as shall be actually subscribed for and purchased by such stockholders pursuant to such preemptive right may be issued to them and need not be deposited and pledged with the Trustee. The Company will not permit any Pledged Subsidiary to grant any additional membership interests, unless simultaneously there shall be made effective provision that certificates evidencing all such additional membership interests, forthwith upon the granting thereof, will be deposited and pledged with the Trustee. Section 15.9 Increase, Reduction or Reclassification of Stock; Dissolution; Consolidation, etc. Except as otherwise provided in Article XIII or this Article, the capital stock of any corporation whose shares are included in the Pledged Securities may be increased (subject to Section 140 15.8) or reduced or reclassified (other than a reclassification resulting in the creation of a preferred stock of any Pledged Subsidiary or a reclassification reducing the proportionate voting power of any Pledged Securities in any corporation) and any such corporation may be dissolved; PROVIDED, HOWEVER, that effective provision shall (to the extent the Company has any control of such matters) be made that, in the case of any such increase, whether by stock dividend or otherwise (subject to Section 15.8), certificates for such part of each class of additional stock as shall be proportionate to the part of the entire issued and outstanding capital stock of such class of such corporation previously deposited and pledged with the Trustee and, in the case of any such reclassification, any distribution in connection therewith shall be deposited and pledged with the Trustee and that, in the case of any such reduction, there shall continue to be deposited and pledged with the Trustee certificates for not less than the same proportion of such class of capital stock deposited and pledged with the Trustee before such reduction. The Trustee may make any exchange, substitution, cancellation or surrender of certificates of stock held by it for the purpose of such increase, reduction, reclassification or dissolution. Prior to any such cancellation or surrender of stock certificates for the purpose of dissolution, the share, if any, of all the assets of the corporation so dissolved which is distributable in respect of the Pledged Securities (excluding Excepted Property) shall be subjected to the lien of this Indenture. The Trustee shall be entitled to receive and shall (subject to Section 9.1) be fully protected in relying upon an Officers' Certificate as to the amount of the share of the assets of any corporation dissolved as aforesaid which is so distributable to the holder of such Pledged Securities. The deposit and pledge with the Trustee at any time of any shares of stock of any corporation shall not prevent any one or more of the following transactions: A. subject to the provisions of Articles XI and XII, the merger or consolidation of any Pledged Subsidiary into or with the Company or the conveyance or transfer of all or any of the assets of any Pledged Subsidiary to the Company, or B. the merger or consolidation of any corporation, any of whose shares may be Pledged Securities, into or with any other corporation other than the Company, or the conveyance or transfer of all or any of the assets of any corporation, any of whose shares may be Pledged Securities, to any other corporation other than the Company; PROVIDED, HOWEVER, that no such action involving a Pledged Subsidiary shall be taken unless the corporation resulting from such consolidation, or into which such merger shall be made, or which shall have acquired the assets of a Pledged Subsidiary, shall thereupon be a Pledged Wholly-Owned Subsidiary. Section 15.10 Enforcement. In case default shall be made in the payment of the principal of or interest on any Pledged Security or in the due performance of any covenant contained in any Pledged Security or the instrument securing the same, then and in any such case (without prejudice, however, to any right to claim a default under this Indenture or to assert any right consequent upon such default) the Trustee, upon Company Request, may, in its discretion and upon receipt of indemnity to its satisfaction, cause, or join with other owners of like securities in causing, such proceedings as may be approved by the Trustee to be instituted and prosecuted to collect such principal and interest or enforce the 141 performance of such covenant. If an Event of Default exists, the Trustee may, and upon the written request of the Holders of a majority in principal amount of the Obligations then Outstanding shall, upon receipt of indemnity to its satisfaction, institute such proceedings without Company Request. Section 15.11 Acquisition of Property of Issuers of Pledged Securities. In case, at any time, all or any of the property of any corporation, any of whose securities are at the time Pledged Securities, shall be sold upon insolvency or foreclosure or otherwise, then and in such event, if the property of such corporation or the property sold can be acquired by crediting on any of the Pledged Securities any sum accruing or to be received thereon out of the proceeds of such property, the Trustee in its discretion may, and if requested by Company Request or by the Holders of a majority in principal amount of the Obligations then Outstanding and provided by the Company or such Holders with indemnity reasonably satisfactory to it and the amount of any cash necessary therefor shall, purchase such property or cause the same to be purchased, either in the name of the Trustee or the Company or a purchasing trustee or trustees as the Trustee may determine, and shall use or permit the Company or such purchasing trustees to use such Pledged Securities so far as necessary to make payment for such property. In case of any such purchase the Trustee shall take such steps as it may deem proper to cause the property so purchased to be vested in the Company subject to the lien of this Indenture, or in some other corporation organized or to be organized with power to acquire and manage such property, or partly in the Company and partly in such other corporation, as the Company may deem advisable, PROVIDED that all debt of such corporation with a maturity more than one year from date of issuance (except such, if any, as shall represent a lien existing upon the property at the time it was acquired) and certificates for all the capital stock (except directors' qualifying shares) of such corporation shall be deposited and pledged with the Trustee. In case the property so sold shall not be purchased in the manner hereinabove in this Section provided, the Trustee shall receive the proceeds of sale accruing on and apportioned to such Pledged Securities and such proceeds shall be held and paid over or applied by the Trustee as provided in Article VI. Section 15.12 Reorganization. With Company Consent, the Trustee may join in any plan of voluntary or involuntary reorganization or readjustment or rearrangement in respect of any Pledged Securities and may accept or authorize the acceptance of new securities issued in exchange therefor under any such plan. If an Event of Default exists, the Trustee shall be entitled to take such steps without Company Consent. Any new securities so issued shall be deposited and pledged with the Trustee under this Indenture. If the Trustee does not join in such plan or reorganization or readjustment or rearrangement, the Trustee shall receive any moneys accruing on or apportioned to such Pledged Securities and such moneys shall be held and paid over or applied by the Trustee as provided in Article VI. 142 Section 15.13 Renewal and Refunding. Nothing contained in this Article shall prevent A. the renewal or extension, without impairment of lien or security, at the same or at a lower or higher rate of interest, of any of the obligations or indebtedness of any corporation included in the Pledged Securities, or B. the issue in substitution for any such obligations or indebtedness of other obligations or indebtedness of such corporation for equivalent amounts and of substantially equal or superior rank as to security, if any; PROVIDED, HOWEVER, that every such obligation or indebtedness as so renewed or extended shall continue to be subject to the lien hereof and every substituted obligation or indebtedness and the evidence thereof shall be deposited and pledged with the Trustee. Except as otherwise provided in Article XIII, unless an Event of Default exists, the Trustee upon receipt of a Company Request shall, and if an Event of Default exists the Trustee may without such Company Request, consent to any such renewal, extension or substitution. Section 15.14 Expenses. On demand of the Trustee, the Company forthwith will pay or satisfactorily provide for all expenses incurred by the Trustee under this Article, including all expenditures (except as otherwise provided in Section 15.11) made to acquire the ownership and title to any property which the Trustee shall purchase or shall cause or authorize to be purchased under this Article. Without impairment of or prejudice to any of its rights hereunder by reason of any default of the Company, the Trustee in its discretion may (but shall not be obligated to) advance all such expenses and other sums required or may procure such advances to be made by others. The Company will repay all such advances, with interest thereon at the rate of 10% per annum, and for all such advances the Trustee shall be secured by a lien on the Trust Estate prior to the Obligations. For the repayment of all such advances the Trustee shall have the right to use and apply any Trust Moneys held by it under Article VI as part of the Trust Estate. Section 15.15 Opinion of Counsel. The Trustee shall be entitled, before taking any action under this Article, to receive an Opinion of Counsel stating the legal effect of any transaction relating to the Pledged Securities and the steps necessary to be taken to consummate the same and stating also that such action is in compliance with the provisions hereof and will not impair the security of the Holders hereunder in contravention of the provisions hereof. Such Opinion of Counsel shall (subject to Section 9.1) be full protection to the Trustee for any action taken or omitted to be taken by it in reliance thereon. 143 ARTICLE XVI QUALIFYING SECURITIES; QUALIFYING SECURITIES INDENTURES Section 16.1 Registration and Ownership of Designated Qualifying Securities. Designated Qualifying Securities delivered to the Trustee pursuant to Sections 4.4, 4.6, 4.8, 5.2, 6.4 and 16.3 shall be registered in the name of the Trustee or its nominee and shall be owned and held by the Trustee, subject to the provisions of this Indenture, for the benefit of the Holders of all Obligations from time to time Outstanding, and the Company shall have no interest therein. The Trustee shall be entitled to exercise all rights of security holders under each Qualifying Securities Indenture in its discretion except as otherwise provided in this Article or in Article VIII. Section 16.2 Payments on Qualifying Securities. Unless an Event of Default shall have occurred and be continuing: A. Any payment of principal of Designated Qualifying Securities shall be applied by the Trustee to the payment of the principal of the Obligations which were authenticated and delivered on the basis of such Qualifying Securities which is then due, and, to the extent of such application, the obligation of the Company to make such payment in respect of such Obligations shall be deemed to have been satisfied and discharged; B. If, at the time of any such payment of principal of Designated Qualifying Securities, the principal then due in respect of the Obligations which were authenticated and delivered on the basis of such Qualifying Securities, if any, shall be less than such payment, the excess of such payment shall constitute Trust Moneys and shall be held by the Trustee as part of the Trust Estate, to be withdrawn, used or applied in the manner, to the extent and for the purposes, and subject to the conditions, provided in Article VI. Any Outstanding Obligations, which were authenticated and delivered on the basis of Designated Qualifying Securities which have been paid, shall be thereafter deemed not to have been authenticated and delivered on the basis of Designated Qualifying Securities; C. Any payment of premium or interest on Designated Qualifying Securities shall be applied by the Trustee to the payment of premium or interest, as the case may be, on the Obligations which were authenticated and delivered on the basis of such Designated Qualifying Securities, if any, which is then due, and, to the extent of such application, the obligation of the Company to make such payment in respect of such Obligations shall be deemed to have been satisfied and discharged; D. If, at the time of any such payment of premium or interest on Designated Qualifying Securities, the premium or interest, as the case may be, then due in respect of the Obligations which were authenticated and delivered on the basis of such Designated Qualifying Securities, if any, shall be less than such payment, the excess of such payment shall be remitted to the Company upon receipt by the Trustee of a Company Request requesting the same; and 144 E. Any payment to the Trustee of principal of, or premium or interest on, any Undesignated Qualifying Securities shall be remitted to the Company upon receipt by the Trustee of a Company Request requesting the same. Section 16.3 Surrender or Redesignation of Designated Qualifying Securities. A. At the time any Obligations of any series, which shall have been authenticated and delivered upon the basis of the issuance and delivery to the Trustee of Designated Qualifying Securities, shall cease to be Outstanding (other than as a result of the application of the proceeds of the payment or redemption of such Designated Qualifying Securities), the Company, by notice to the Trustee, may designate an equal principal amount of such Designated Qualifying Securities as Undesignated Qualifying Securities. B. Upon Company Request, the Trustee shall surrender for cancellation any Undesignated Qualifying Securities. Upon Company Request and receipt of the opinions required by paragraphs F and G of Section 4.4, the Trustee shall surrender for cancellation any Designated Qualifying Securities specified in such request in exchange for an equal principal amount of substitute Qualifying Securities, which substitute Qualifying Securities shall comply with Section 4.4C (except that, if the Designated Qualifying Securities to be surrendered were delivered other than as the basis for the authentication and delivery of Additional Obligations, the maturity date or dates for such substitute Qualifying Securities may be as determined by the Company) and which the Company shall designate as the basis for such surrender. Upon receipt of a notice of an event of default under a Qualifying Securities Indenture, the Trustee shall surrender for cancellation all Undesignated Qualifying Securities issued under such Qualifying Securities Indenture. Upon receipt of a notice of a meeting of bondholders under a Qualifying Securities Indenture, the Trustee shall surrender for cancellation all Undesignated Qualifying Securities issued under such Qualifying Securities Indenture. C. Upon delivery to the Trustee of (i) the relevant documents specified in paragraphs B through H, inclusive, of Section 4.2 for delivery whenever requesting the use of Bondable Additions as the basis for the surrender or redesignation of Designated Qualifying Securities, or (ii) the relevant documents and Obligations specified in paragraphs B, D(1) and E of Section 4.3 for the delivery to the Trustee whenever requesting the use of retired or defeased Obligations or payments on Obligations as the basis for the surrender or redesignation of Designated Qualifying Securities, in each case with such omissions and variations as are appropriate in view of the fact that the Application involves the surrender or redesignation of Designated Qualifying Securities and not the authentication and delivery of Additional Obligations, and in each case together with an Opinion of Counsel stating that all conditions precedent provided for in this Indenture relating to such surrender or redesignation of Qualifying Securities have been complied with, the Trustee shall, upon Company Request surrender to the Company or redesignate Designated Qualifying Securities as Undesignated Qualifying Securities in a principal amount equal to the principal amount of the Obligations that could have been issued on the basis thereof. Upon receipt by the Trustee of the documents specified in this Section, all Obligations then Outstanding which were authenticated and delivered on the basis of such surrendered or redesignated Qualifying Securities shall thereafter be deemed not to have been authenticated and delivered on the basis of Designated Qualifying Securities. 145 Section 16.4 No Transfer of Qualifying Securities. Except as provided in Section 16.3 or if an Event of Default exists, the Trustee shall not sell, assign or otherwise transfer any Qualifying Securities issued and delivered to it except to a successor trustee under this Indenture. Section 16.5 Voting of Qualifying Securities. The Trustee shall, as a holder of Qualifying Securities Outstanding under each Qualifying Securities Indenture, attend such meeting or meetings of bondholders under such Qualifying Securities Indenture, or, at its option, deliver its proxy in connection therewith, as relate to matters with respect to which it is entitled to vote or consent. So long as no Event of Default shall have occurred and be continuing, either at any such meeting or meetings, or otherwise when the consent of the holders of the Qualifying Securities Outstanding under any Qualifying Securities Indenture is sought without a meeting, the Trustee shall vote as holder of such Qualifying Securities, or shall consent with respect thereto. The Trustee shall vote all Qualifying Securities Outstanding under such Qualifying Securities Indenture then held by it, or consent with respect thereto, as the Trustee reasonably believes will be in the best interests of the Holders; PROVIDED, HOWEVER, that the Trustee shall not so vote in favor of, or so consent to, any amendment or modification of a Qualifying Securities Indenture which, if it were an amendment or modification of this Indenture, would require the consent of Holders, without the prior consent, obtained in the manner prescribed in Section 12.2, of Holders of Securities which would be required under Section 12.2 for such an amendment or modification of this Indenture. Section 16.6. Reorganization. With Company Consent, the Trustee may join in any plan of voluntary or involuntary reorganization or readjustment or rearrangement in respect of any Qualifying Securities and may accept or authorize the acceptance of new securities issued in exchange therefor under any such plan. If an Event of Default exists, the Trustee shall be entitled to take such steps without Company Consent. Any new securities so issued shall be deposited and pledged with the Trustee under this Indenture. If the Trustee does not join in such plan or reorganization or readjustment or rearrangement, the Trustee shall receive any moneys accruing on or apportioned to such Qualifying Securities and such moneys shall be held and paid over or applied by the Trustee as provided in Article VI. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. (Signatures begin on next page.) 146 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed under seal as of the day and year first above written. Company: OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized under the laws of the State of Georgia 2100 East Exchange Place P. O. Box 1349 Tucker, Georgia 30085-1349 By: /s/ T. D. Kilgore ----------------------------------- Name: T. D. Kilgore Title: President and Chief Executive Officer Signed, sealed and delivered Attest: /s/ Patricia N. Nash by the Company in the presence of: ------------------------------- Name: Patricia N. Nash /s/ Robert D. Steele Title: Assistant Secretary - ---------------------------------- Witness /s/ Thomas J. Brendiar - ---------------------------------- Notary Public [CORPORATE SEAL] (Notarial Seal) My commission expires: November 14, 2000 (Signatures continued on next page.) 147 (Signatures continued from previous page.) Trustee: SUNTRUST BANK, ATLANTA a banking corporation organized and existing under the laws of the State of Georgia By: /s/ Bryan Echols Signed, sealed and delivered -------------------------------------- by the Trustee in the Name: Bryan Echols presence of: Title: Vice President /s/ Olga G. Warren By: /s/ M.R. Smith, Jr. - ---------------------------- --------------------------------------- Witness Name: M.R. Smith, Jr. Title: Vice President /s/ Thomas J. Brendiar - ---------------------------- Notary Public [BANK SEAL] (Notarial Seal) My commission expires: November 14, 2000 148 EXHIBIT A TO THE INDENTURE DATED AS OF MARCH 1, 1997 MADE BY OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) AND SUNTRUST BANK, ATLANTA, AS TRUSTEE SCHEDULE OF CONVEYED PROPERTY All right, title and interest of the Mortgagor in and to the electric generating plants and facilities and electric transmission and distribution lines and facilities now owned by the Mortgagor and located in the Counties of Appling, Ben Hill, Burke, Carroll, Clarke, Cobb, DeKalb, Floyd, Fulton, Heard, Jackson, Monroe, and Toombs, State of Georgia, or hereafter constructed or acquired by the Mortgagor, wherever located, and in and to all extensions and improvements thereof and additions thereto, including all substations, service and connecting lines (both overhead and underground), poles, towers, posts, cross arms, wires, cables, conduits, mains, pipes, tubes, transformers, insulators, meters, electrical connections, lamps, fuses, junction boxes, fixtures, appliances, generators, dynamos, water turbines, water wheels, boilers, steam turbines, motors, switch boards, switch racks, pipe lines, machinery, tools, supplies, switching and other equipment, and any and all other property of every nature and description, used or acquired for use by the Mortgagor in connection therewith and including, without limitation, the following described property, now owned or hereafter acquired, to-wit: 1. A 30% undivided interest in those certain tracts or parcels of land containing, in the aggregate, 1337.43 acres, more or less, in Land Lots 618, 619, 620, 580 and 581 of the 2nd District of Appling County, Georgia, being more particularly shown and delineated as Tracts 1, 2 and 3 on Plat of Survey prepared by C. H. Wright and certified by C. H. Wright (Registered Land Surveyor No. 1333), designated as "GEORGIA POWER COMPANY, LAND DEPARTMENT, Property Map of Site Edwin I. Hatch-Nuclear Plant, Appling and Toombs Counties, Georgia, for Oglethorpe Electric Membership Corporation and Georgia Power Company, dated December 9, 1974," said plat recorded in Plat Book 8, Page 35, in the Office of the Clerk of Superior Court of Appling County, Georgia. 2. That certain tract or parcel of land known as the "Plant Hatch Substation" containing 53.44 acres, more or less, in Land Lots 392, 488, 521, 536, 569 and 570 of the 2nd District of Appling County, Georgia, being more particularly shown and delineated on Plat of Survey prepared by Riley, Park, Hayden & Associates, Inc., Georgia Registered Land Surveyor No. 1749, recorded in Plat Book 8, Pages 36-38, in the Office of the Clerk of Superior Court of Appling County, Georgia, and being that certain tract conveyed to Oglethorpe Electric Membership Corporation by Warranty Deed from Georgia Power Company, dated January 16, 1975, and recorded in Deed Book 173, Folio 186, in the Office of the Clerk of Superior Court of Appling County, Georgia, and being that property conveyed to Oglethorpe Electric Membership Corporation from Georgia Power Company by General Warranty Deed and Bill of Sale recorded in Deed Book 163, Page 352, in the Office of the Clerk of Superior Court of Appling County, Georgia. 3. That certain tract or parcel of land containing .31 acres in Land Lot 300 of the 4th District, Ben Hill County, Georgia and being more particularly described as: Beginning at an iron pin found at the intersection of the northern right of way line of Oconee Street (a 60 foot right of way) and the eastern right of way line of North Logan Street (a 60 foot right of way); running thence along said eastern right of way line of North Logan Street North 00(degree) 02' 45" East a distance of 169.48 feet to an iron pin found on the southern right of way line of a 20 foot alley; thence leaving said eastern right of way line of North Logan Street and running along the southern right of way line of said 20 foot alley, North 87(degree) 53' 50" East a distance of 77.72 feet to an iron pin found; run thence South 00(degree) 52' 55" East a distance of 170.95 feet to an iron pin found on the aforementioned northern right of way line of Oconee Street; run thence along said northern right of way line of Oconee Street South 88(degree) 59' 50" West a distance of 80.45 feet to an iron pin found on the eastern right of way line of North Logan Street and THE POINT OF BEGINNING, as shown on survey prepared by Albert M. Wynn, Jr., Georgia Registered Land Surveyor No. 2178, dated September 12, 1996, last revised February 5, 1997. 4. A 30% undivided interest in those certain tracts or parcels of land containing in the aggregate 3,043.11 acres, more or less, in the 66th and 68th G.M.D. of Burke County, Georgia, being more particularly shown and delineated as Tract One on Plat of Survey prepared by C. H. Wright (Registered Land Surveyor No. 1333), designated as "Boundary Survey of Alvin W. Vogtle Plant Site and Combustion Turbine Site" dated March 15, 1976, revised December 13, 1976, said plat being filed in File No. A-3120, in the Office of the Clerk of Superior Court of Burke County, Georgia; and being that certain tract conveyed to Oglethorpe Electric Membership Corporation by General Warranty Deed and Bill of Sale from Georgia Power Company and recorded in Deed Book 107, Page 100 of Burke County Records; LESS AND EXCEPT: 3.079 acres, more or less, conveyed by Right-of-Way Deed, dated December 13, 1982, from Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) to Burke County, Georgia, recorded in Deed Book 124, Page 740, Burke County Records. 5. That certain tract or parcel of land known as the "Plant Vogtle Railroad" containing 111.346 acres, more or less, being in the 66th and 67th G.M.D. of Burke County, Georgia, being more particularly shown and delineated on Plat of Survey prepared by Riley, Park, Hayden & Associates, Inc., Georgia Registered Land Surveyor No. 1749, recorded in the Office of the Clerk of Superior Court of Burke County, Georgia, and being that certain tract conveyed to Oglethorpe Electric Membership Corporation by Warranty Deed from Georgia Power Company, and recorded in Deed Book 107, Page 100, in the Office of the Clerk of Superior Court of Burke County, Georgia. 2 6. A 30% undivided interest in those certain tracts or parcels of land containing, in the aggregate, 2,144.44 acres, more or less, in Land Lots 154, 153, 152, 151, 150, 149, 155, 156, 157, 158, 159, 160 and 161 of the 4th District of Carroll County, Georgia, being more particularly shown and delineated as Tract One, on Plat of Survey prepared by George M. Ingram, Registered Land Surveyor No. 799, designated as "GEORGIA POWER COMPANY, LAND DEPARTMENT, perimeter survey of Yellowdirt (Wansley) Plant Area, Carroll and Heard Counties, Georgia, dated June 19th, 1972, revised December 9th, 1975," (known as Plant Wansley), said plat being recorded in Plat Book 16, Page 26, in the Office of the Clerk of Superior Court of Carroll County, Georgia; and being that certain tract conveyed to Oglethorpe Electric Membership Corporation by General Warranty Deed and Bill of Sale, dated April 9, 1976, from Georgia Power Company and recorded in Deed Book 342, Page 382, Carroll County Records. 7. That certain tract or parcel of land known as the "Tallassee Hydro Dam" containing 32.73 acres, more or less, in the 2418th and 1347th G.M.D. of Clarke County, Georgia, and the 1747th G.M.D. of Jackson County, Georgia, and being more particularly shown and delineated on Plat of Survey made by Roland McCann, Georgia Registered Land Surveyor No. 1752, and being that certain tract conveyed to Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) by Warranty Deed from Harold T. Barrett, Jr., dated October 27, 1983, and recorded in Deed Book 441, Page 90, in the Office of the Clerk of Superior Court of Clarke County, Georgia, and Deed Book 8-M, Page 65, in the Office of the Clerk of Superior Court of Jackson County, Georgia. 8. All right, title and interest in, to and over the transmission line known as "Tallassee Hydro Project" located in Clarke County and Jackson County, Georgia, said right, title and interest being more particularly described by the following instruments, all which are of record in the Office of the Clerk of Superior Court of Clarke County, Georgia: (i) Deed from Tina Tinsley and Roger Pharr, recorded in Deed Book 441, Page 90, (ii) Easement from Tina Tinsley and Roger Pharr, recorded in Deed Book 476, Page 284, (iii) Deed from Tina Tinsley and Roger Pharr, recorded in Deed Book 476, Page 295, (iv) Lease Agreement from Tina Tinsley and Roger Pharr, recorded in Deed Book 476, Page 279, (v) Easement from Tina Tinsley and Roger Pharr, recorded in Deed Book 476, Page 287, and (vi) Easement from Pierce J. Kenney, et al., recorded in Deed Book 476, Page 290. 9. That certain tract or parcel of land containing 4.33 acres, located in Land Lots 599 and 626 of the 16th District, 2nd Section of Cobb County, Georgia, and being more particularly described as: BEGINNING at an iron pin located at the corner formed by the intersection of the northeasterly right-of-way line of Tritt Road (a 50 foot right-of-way) with the southeasterly right-of-way of C. R. Parker Drive; said point of beginning also being located 4066.0 feet southeasterly, as measured along the northeasterly right-of-way line of Tritt Road, from the corner formed by the intersection of the northeasterly right-of-way line of Tritt Road with the southeasterly right-of-way line of Sandy Plains Road; thence North 16 degrees 19 minutes 03 seconds east, along the southeasterly right-of-way line of C. R. Parker Drive, 212.95 feet to an iron pin; thence North 30 degrees 10 minutes 12 seconds east, along the southeasterly right-of-way line of C. R. Parker Drive, 124.23 feet to an iron pin; thence 3 South 67 degrees 51 minutes 22 seconds east, 260.60 feet to an iron pin; thence South 32 degrees 58 minutes 41 seconds east, 105.34 feet to an iron pin; thence South 45 degrees 35 minutes 58 seconds east, 299.69 feet to an iron pin; thence South 08 degrees 00 minutes 00 seconds west, 206.03 feet to an iron pin located on the northeasterly right-of-way line of Tritt Road; thence North 63 degrees 12 minutes 59 seconds west, along the northeasterly right-of-way line of Tritt Road, 355.98 feet to a FC post, which post is located on the land lot line dividing Land Lots 599, and 626, said district and section; thence North 61 degrees 51 minutes 30 seconds west, along the northeasterly right-of-way line of Tritt Road, 116.07 feet to an iron pin; thence North 68 degrees 29 minutes 59 seconds west, along the northeasterly right-of-way line of Tritt Road, 200.23 feet to an iron pin and THE POINT OF BEGINNING; as shown on that certain plat recorded in Plat Book 127, page 17, in the Office of the Clerk of Superior Court of Cobb County, Georgia; LESS AND EXCEPT: that certain tract or parcel of land conveyed to Cobb County, Georgia, by virtue of that certain Right-of-Way Deed from Oglethorpe Power Corporation, dated January 25, 1990, filed March 30, 1990, and recorded in Deed Book 5688, page 28, Records of Cobb County, Georgia. 10. That certain tract or parcel of land known as the "OPC New Corporate Headquarters Facility," containing 20.76 acres of land, more or less, in Land Lots 188 and 189 of the 18th District of DeKalb County, Georgia, being more particularly shown and delineated on Plat of Survey made by George T. White, Georgia Registered Land Surveyor No. 1929, and being that certain tract conveyed to Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) by Limited Warranty Deed from Southern Realty Equities, Inc., dated July 15, 1981, and recorded in Deed Book 4503, Page 114, in the Office of the Clerk of Superior Court of DeKalb County, Georgia; LESS AND EXCEPT: Declaration of Drainage Easements dated March 16, 1981, by and between Laing Properties, Inc. and Southern Realty Equities, Inc., as recorded in Deed Book 4435, Page 483, DeKalb County, Georgia Records, as amended by First Amendment to Declaration of Drainage Easements dated July 15, 1981, by and between Laing Properties, Inc. and Oglethorpe Power Corporation, recorded in Deed Book 4553, Page 585, DeKalb County, Georgia Records; Amendment to Declaration of Drainage Easements, dated September 17, 1982, by and between Laing Properties, Inc. and Oglethorpe Power Corporation, recorded in Deed Book 4466, Page 132, DeKalb County, Georgia Records; and Third Amendment to Declaration of Drainage Easements, dated July 15, 1983, filed August 19, 1983, and recorded in Deed Book 4817, Page 608, DeKalb County, Georgia Records. 11. All of the undivided interests and undivided executory, future interests of Oglethorpe Power Corporation (An Electric Membership Generation &Transmission Corporation) in and to the "Rocky Mountain Hydroelectric Property" containing 4,876.966 acres, more or less, in the 4th Section, 4th and 5th Districts of Floyd County, Georgia, granted or arising under that certain General Warranty Deed, Assignment and Bill of Sale from Piedmont-Forrest Corporation to Oglethorpe Power Corporation and Georgia Power Company, dated as of December 15, 1988, recorded December 15, 1988, in Deed Book 1053, Page 1, Floyd County, Georgia records; ALSO, fee simple interest in the "Rocky Mountain Switching Station Property" and easement interests in and to the "Rocky Mountain Primary Transmission Line Easement Property" and the "Rocky Mountain Distribution and 4 Transmission Line Property" in aforesaid Section and Districts of Floyd County, Georgia, granted or arising under that certain General Warranty Deed, Assignment and Bill of Sale from Piedmont-Forrest Corporation to Oglethorpe Power Corporation, dated as of December 15, 1988, recorded December 15, 1988, in Deed Book 1052, Page 779, Floyd County, Georgia Records; SUBJECT TO (i) the terms, conditions, covenants and limitations set forth in that certain Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement, between Oglethorpe Power Corporation and Georgia Power Company, dated as of November 18, 1988, (ii) the terms, conditions, covenants and limitations set forth in that certain Rocky Mountain Pumped Storage Hydroelectric Project Ownership Participation Agreement, between Oglethorpe Power Corporation and Georgia Power Company, dated as of November 18, 1988; (iii) reservation of exclusive easement for Distribution and Transmission Lines, exclusive Temporary Easement for Transmission Lines, General Easement, easement across the Switching Station and easement for Distribution Substation, as contained in the General Warranty Deed, Assignment and Bill of Sale by and between Georgia Power Company and Piedmont-Forrest Corporation, dated as of December 14, 1988, recorded in Deed Book 1052, Page 399, Floyd County, Georgia records; and (iv) reservation of Project Switching Station easement and Primary Transmission Line Crossing Easement as contained in that certain General Warranty Deed, Assignment and Bill of Sale by and between Piedmont-Forrest Corporation and Oglethorpe Power Corporation, dated as of December 15, 1988, recorded in Deed Book 1052, Page 779, Floyd County, Georgia records (v) Conditional Road Easement from Oglethorpe Power Corporation to Fellowship of Zion, Inc., dated December 17, 1996, recorded in the Office of the Clerk of Superior Court of Floyd County, Georgia; LESS AND EXCEPT: The property conveyed to Georgia Power Company by Quitclaim Deed, dated December 26, 1996, and recorded in Book 1365, Page 555, in the Office of the Clerk of Superior Court of Floyd County, Georgia; TOGETHER WITH: The property conveyed to Oglethorpe Power Corporation (An Electric Membership Generation &Transmission Corporation) by Quitclaim Deed, dated December 26, 1996, and recorded in Book 1365, Page 557, in the Office of the Clerk of Superior Court of Floyd County, Georgia. 12. That certain Office Lease between P.C. Towers, L.P., a Georgia limited partnership, acting by and through its managing agent, Peachtree Center Management Company, as Landlord and Oglethorpe Power Corporation, a Georgia corporation, as Tenant, dated December 20, 1989, as the same may have been amended, for space located in the building known as Marquis Two Tower, located at 285 Peachtree Center Avenue, Atlanta, Fulton County, Georgia. 13. A 30% undivided interest in that certain tract or parcel of land containing, in the aggregate, 3,080.91 acres, more or less, of Land Lots 168, 167, 166, 165, 164, 171, 172, 173, 174, 175, 180, 179, 178, 177, 183, 184, 185 and 186 of the 4th District of Heard County, Georgia, being more particularly shown and delineated as Tract Two, on Plat of Survey prepared by George M. Ingram, Registered Land Surveyor No. 799, designated as "GEORGIA POWER COMPANY, LAND DEPARTMENT, perimeter survey of Yellowdirt Plant Area (Wansley), Carroll and Heard Counties, Georgia, dated June 19, 1972, revised December 9th, 1975," (known as Plant Wansley) said plat being recorded in Plat Book 2, Page 229, in the Office of the Clerk of Superior Court of Heard County, Georgia; and being that 5 certain tract conveyed to Oglethorpe Electric Membership Corporation by General Warranty Deed and Bill of Sale, dated April 9, 1976, from Georgia Power Company and recorded in Deed Book 78, Page 1, in the Office of the Clerk of Superior Court of Heard County, Georgia; TOGETHER WITH: a 30% undivided interest in and to a fifty (50) MWe nominally rated combustion turbine electric generating unit located at said Plant Wansley, said property being conveyed to Oglethorpe Power Corporation by General Assignment and Bill of Sale, dated November 3, 1982, from Georgia Power Company and recorded in Deed Book 93, Page 616, in the Office of the Clerk of Superior Court of Heard County, Georgia. 14. All right, title and interest in, to and over the transmission line known as "Tallassee Hydro Project" located in Clarke County and Jackson County, Georgia, said right, title and interest being more particularly described by the following instruments, all which are of record in the Office of the Clerk of Superior Court of Jackson County, Georgia: (i) Deed from Mose W. Gordon, Jr., recorded in Book 8-R, Page 22, (ii) Easement from Vivian Gilbert, recorded in Book 8-R, Page 24; (iii) Easement from Walter A. and Valerie V. Puryer, recorded in Book 8-R, Page 32; (iv) Easement and Agreement from James and Deborah Escoe, recorded in Book 9-E, Page 38, (v) Easement from Michael Gautreaux, recorded in Book 8-R, Page 26, (vi) Easement from Southeast Timberlands, Inc., recorded in Book 8-R, Page 28, (vii) Easement and Access Rights Lease from Georgia Kraft Company, recorded in Book 9-E, Page 41, (viii) Easement from Mrs. W.A. Jackson, recorded in Book 8-R, Page 30, (ix) Easement from Marthella Gordon Hagan, recorded in Book 8-X, Page 118, (x) Easement from Roger Pharr and Tina Tinsley, recorded in Book 8-R, Page 312, (xi) Easements from Roger Pharr and Tina Tinsley, recorded in Book 8-R, Page 306 and Book 8-R, Page 309, and (xii) Easement from Ruby C. and M.L. Gilbert, recorded in Book 8-R, Page 33. 15. That certain tract or parcel of land known as the "Tallassee Hydro Dam" containing 32.73 acres, more or less, in the 2418th and 1347th G.M.D. of Clarke County, Georgia, and the 1747th G.M.D. of Jackson County, Georgia, and being more particularly shown and delineated on Plat of Survey made by Roland McCann, Georgia Registered Land Surveyor No. 1752, and being that certain tract conveyed to Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) by Warranty Deed from Harold T. Barrett, Jr., dated October 27, 1983, and recorded in Deed Book 441, Page 90, in the Office of the Clerk of Superior Court of Clarke County, Georgia, and Deed Book 8-M, Page 65, in the Office of the Clerk of Superior Court of Jackson County, Georgia. 16. That certain tract or parcel of land known as the "Combustion Turbine Property", containing 1800 acres, more or less, in Land Lot 83, 84, 85, 86, 87, 118 and 119 of the 13th District and Land Lots 96 and 65 of the 5th District of Monroe County, Georgia, being those tracts conveyed to Oglethorpe Power Corporation, (An Electric Membership Generation & Transmission Corporation) by Deed of Conveyance from Gabriel P. Rumble dated April 18, 1989, ["Tract 1"(311.4656 acres) only; less and except "Tract 2" (20.6530) and "Tract 4" (3.1247)] which is recorded in Deed Book 286, Page 128, in the Office of the Clerk of Superior Court of Monroe County, Georgia [see plat by American Energy Services entitled "Oglethorpe Power Corporation Combustion Turbine Project, " dated August 3, 1988]; and by Deed from Mead Coated Board, Inc., dated May 19, 1989, which is recorded in Deed 6 Book 288, Page 251, in the Office of the Clerk of Superior of Monroe County, Georgia [see plats by American Energy Services entitled "Oglethorpe Power Corporation Combustion Turbine Project, " dated January 31, 1989, January 27, 1989 and January 25, 1989]; and by Warranty Deed from Myrtice Jo Rumble, et al., dated November 14, 1989, which is recorded in Deed Book 301, Page 241, in the Office of the Clerk of Superior Court of Monroe County, Georgia [see plats by American Energy Services entitled "Oglethorpe Power Corporation Combustion Turbine Project," dated February 2, 1989, September 18, 1989 and August 3, 1988, updated September 27, 1989]; and by Limited Warranty Deed from The Proctor & Gamble Cellulose Company, dated December 7, 1990, which is recorded in Deed Book 382, Page 292, in the Office of the Clerk of Superior Court of Monroe County, Georgia [see plats by American Energy Services entitled "Oglethorpe Power Corporation Combustion Turbine Project," dated September 26, 1989]; and by Warranty Deed from Jeffrey L. Rader and Luanne K. Rader, dated May 17, 1991, which is recorded in Deed Book 339, Page 47, in the Office of the Clerk of Superior Court of Monroe County, Georgia [see plat by American Energy Services entitled "Oglethorpe Power Corporation Combustion Turbine Project, " dated September 28, 1990]; and by Warranty Deed from Mercer University, dated April 30, 1992, which is recorded in Deed Book 373, Page 980, in the Office of the Clerk of Superior Court of Monroe County, Georgia; LESS AND EXCEPT therefrom the following two tracts: Tract 1 Commence at that point where the centerline of Little Deer Creek intersects the Southwesterly right-of-way margin of Interstate Highway 75, thence North 64 degrees 23 minutes 14 seconds East 5 feet; then go South 25 degrees 36 minutes 46 seconds East 50 feet; thence South 64 degrees 23 minutes 14 seconds West 20 feet; thence South 25 degrees 36 minutes 46 seconds East 394.65 feet to the Northeasterly corner of the Georgia D.O.T. Safety Rest Area property [This corner lies 94.960 feet left of and opposite STA. 468+02.140 on the construction centerline of I-75 SBL.]; thence South 64 degrees 37 minutes 16 seconds West 154.06 feet along the Northerly boundary of the Safety Rest Area to a concrete monument found; thence South 36 degrees 35 minutes 10 seconds West 429.38 feet continuing along the Northerly boundary of the Safety Rest Area to a concrete monument found; thence South 41 degrees 23 minutes 04 seconds East 375.6 feet along the Westerly boundary of the Safety Rest Area to a point which is the POINT OF BEGINNING; thence South 41 degrees 22 minutes 26 seconds East 516.75 feet continuing along the Westerly boundary of the Safety Rest Area to a concrete monument found; thence South 57 degrees 23 minutes 58 seconds East 404.294 feet continuing along the Westerly boundary of the Safety Rest Area to a concrete monument found; thence South 88 degrees 12 minutes 44 seconds East 189.141 feet to the Southerly boundary of the Safety Rest Area to a boundary corner common to the property of Oglethorpe Power, to the West, and the property of Burke L. Slocumb, III, to the East [This corner lies 157.950 feet left of and opposite STA. 453+42.420 on the construction centerline of I-75 SBL.]; thence South 63 degrees 39 minutes 16 seconds West 417.983 feet to a point; thence North 56 degrees 17 minutes 11 seconds West 657.900 feet to a point; thence North 25 degrees 03 minutes 54 seconds West 175.904 feet to a point; thence North 24 degrees 40 minutes 07 seconds East 299.863 feet to the POINT OF BEGINNING; said tract comprising 5.940 acres and Tract 2: Commence at that point where the centerline of Little Deer Creek intersects the Southwesterly right-of-way margin of Interstate Highway 75, thence North 64 degrees 23 minutes 14 seconds East 5 feet; then go South 25 degrees 36 minutes 46 seconds East 50 feet; 7 thence South 64 degrees 23 minutes 14 seconds West 20 feet; thence South 25 degrees 36 minutes 46 seconds East 394.65 feet to the Northeasterly corner of the Georgia D.O.T. Safety Rest Area property [This corner lies 94.960 feet left of and opposite STA. 468+02.140 on the construction centerline of I-75 SBL.], which is POINT OF BEGINNING; thence South 64 degrees 35 minutes 45 seconds West 20.040 feet along the Northerly boundary of the Safety Rest Area to a point; thence North 23 degrees 09 minutes 51 seconds West 352.404 feet to a point on the Southwesterly right-of-way of I-75; thence South 26 degrees 25 minutes 28 seconds East 352.187 feet along the Southwesterly right-of-way of I-75 to the POINT OF BEGINNING; said tract comprising 0.081 acres., the descriptions of Tract 1 and Tract 2 being according to (a) plans on file at the Georgia D.O.T. offices, No. 2 Capitol Square, Atlanta, Georgia, for Project No. IM-75-2(197), Monroe County, P.I. No. 311617, dated May 12, 1995, and according to (b) that certain plat of survey by Sam H. Thompson, Georgia Registered Land Surveyor No. 1961, dated September 26, 1989, revised October 23, 1990, which is recorded in the offices of the Clerk of the Superior Court of Monroe County, Georgia, at Plat Book 17, Page 71, which plans and plat are by this reference incorporated into and made a part of this description. 17. 60% undivided interest in those certain tracts or parcels of land known as the "Unit 1 & 2 Property" and the "Common Area Property" of Plant Robert W. Scherer, comprising approximately 12,000 acres, in the 5th District of Monroe County, Georgia, all as shown and delineated on (i) that certain blueprint of survey captioned "Plant Scherer, General Arrangement, Plant Site," dated February 12, 1976, last revised January 2, 1979, prepared for Georgia Power Company by Southern Services, Inc., bearing Drawing No. EPS 4035-75, and (ii) that certain blueprint of survey captioned "Plant Scherer, A Plat of Project Boundary and Road & Gas Line Relocation, 5th District, Monroe County, Georgia," dated April 27, 1978, prepared for Georgia Power Company Land Dept. by Hugh W. Mercer, Jr., Georgia Registered Land Surveyor No. 1890, bearing drawing number M-154-3; being all of that certain property conveyed to Oglethorpe Power Corporation by General Warranty Deed and Bill of Sale from Georgia Power Company, dated May 22, 1980, and recorded in Deed Book 125, Page 1, in the Office of the Clerk of Superior Court of Monroe County, Georgia. LESS AND EXCEPT: (w) all rights of Oglethorpe Power Corporation (An Electric Membership Generation &Transmission Corporation) to claim all Federal tax benefits allowable under the Internal Revenue Code, as amended, for or in respect of the property (i) described in three separate Consents and Partial Releases of Lien, dated as of April, 1982, by the United States of America to Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) and recorded, respectively, in Deed Book 143, Page 59, in Deed Book 143, Page 68 and in Deed Book 143, Page 56, in the Office of the Clerk of Superior Court of Monroe County, Georgia, and (ii) described in three separate Consents and Partial Releases of Lien, dated as of April, 1982, by Trust Company Bank to Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) and recorded, respectively, in Deed Book 143, Page 62, in Deed Book 143, Page 66, and in Deed Book 143, Page 53, in the Office of the Clerk of Superior Court of Monroe County, Georgia; (x) The property described in that certain Partial Release and Subordination Agreement among the United States of America, Columbia Bank for Cooperatives and Trust Company Bank, as trustee under certain indentures identified therein and Oglethorpe Power Corporation (An 8 Electric Membership Generation & Transmission Corporation), dated December 30, 1985, recorded in Deed Book 202, Page 113, in the Office of the Clerk of Superior Court of Monroe County, Georgia; (y) the property described in that certain Quitclaim Deed and Partial Release, dated as of November 19, 1987, made by the United States of America, Columbia Bank for Cooperatives and Trust Company Bank, as trustee under certain indentures identified therein, to Gulf Power Company, recorded in Deed Book 254, Page 158, in the Office of the Clerk of Superior Court of Monroe County, Georgia; and (z) the property described in that certain Quitclaim Deed and Partial Release, dated as of October 3, 1989, made by the United States of America, National Bank for Cooperatives, as successor by merger to Columbia Bank for Cooperatives effective January 1, 1989, and Trust Company Bank, as trustee under certain indentures identified therein, to Georgia Power Company, recorded in Deed Book 297, Page 295, in the Office of the Clerk of the Superior Court of Monroe County, Georgia. 18. The "Undivided Interest" (in Plant Robert W. Scherer Unit No. 2) as defined in, and leased to Oglethorpe Power Corporation (An Electric Membership Generation &Transmission Corporation) pursuant to, four separate Lease Agreements Nos. 1-4, dated December 30, 1985, between Wilmington Trust Company and William J. Wade as Owner Trustees under Trust Agreements Nos. 1-4 and Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) and recorded, respectively, in Deed Book 205, Page 167; in Deed Book 205, Page 328; in Deed Book 206, Page 138; and in Deed Book 206, Page 298 in the Office of the Clerk of Superior Court of Monroe County, Georgia. 19. A 30% undivided interest in that certain tract or parcel of land containing 906.65 acres, more or less, in the 43rd G.M.D. of Toombs County, Georgia, being more particularly shown and delineated as Tract 4 on Plat of Survey prepared by C. H. Wright and certified by C. H. Wright, Registered Land Surveyor No. 1333, designated as "GEORGIA POWER COMPANY, LAND DEPARTMENT, Property Map of Site Edwin I. Hatch-Nuclear Plant, Appling and Toombs Counties, Georgia, for Oglethorpe Electric Membership Corporation and Georgia Power Company, dated December 9, 1974," said plat being recorded in Plat Book 11, Page 84, in the Office of the Clerk of Superior Court of Toombs County, Georgia; and being that certain tract conveyed to Oglethorpe Electric Membership Corporation by General Warranty Deed and Bill of Sale from Georgia Power Company, recorded in Deed Book 134, Page 758, in the Office of the Clerk of Superior Court of Toombs County, Georgia. 9 EXHIBIT B TO THE INDENTURE DATED AS OF MARCH 1, 1997 MADE BY OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) AND SUNTRUST BANK, ATLANTA, AS TRUSTEE SCHEDULE OF CERTAIN EXCEPTED PROPERTIES 1. The construction funds, bond funds and reserve funds established under the indentures pursuant to which debt securities have been issued on behalf of the Company, the interest on which debt securities is excludable from gross income of the holder thereof pursuant to the Internal Revenue Code, as amended. 2. All right, title and interest of the Company in and to the following described property and the proceeds of such property: A. All amounts paid from time to time to the Company under the Head Leases listed in paragraph E (i) below, less $70,701,313.51 in the aggregate with respect to the Head Leases identified in paragraphs E (i) (a), (c), (d) and (e) below, and $25,043,389.98 in the aggregate with respect to the Head Leases identified in paragraphs E (i) (b) and (f) below; B. All amounts paid from time to time by the Company to the Rocky Mountain Leasing Corporation ("RMLC") in connection with the transactions contemplated by the Participation Agreements listed in paragraph E (ii) below, including amounts paid and to be paid in consideration of the purchase of stock and as a capital contribution to RMLC and amounts paid and to be paid under the Facility Subleases, the Ground Sub-subleases and the Rocky Mountain Agreements Second Re-assignments (each as defined in the Participation Agreements referenced above); C. All shares of stock of RMLC owned by the Company on the date hereof and all assets of RMLC; D. All amounts paid from time to time by the Company under the Operative Documents listed in paragraph E (iii) below to the parties thereto; and E. All interest, if any, of the Company in the items listed in paragraphs (i) through (viii), inclusive, below or any substitutions or replacements for such items. (i) Head Leases: (a) Rocky Mountain Head Lease Agreement (P1), dated as of December 30, 1996, between Oglethorpe and SunTrust Bank, Atlanta ("SunTrust Bank"), not in its individual capacity, but solely as Co-Trustee (the "Co-Trustee P1") under the Trust Agreement (P1), dated as of December 30, 1996, between Philip Morris Capital Corporation ("PMCC") and Fleet National Bank ("Fleet") (in the capacities set forth therein). (b) Rocky Mountain Head Lease Agreement (P2), dated as of January 3, 1997, between Oglethorpe and SunTrust Bank, not in its individual capacity, but solely as Co-Trustee (the "Co-Trustee P2") under the Trust Agreement (P2), dated as of January 3, 1997, between PMCC and Fleet (in the capacities set forth therein). Rocky Mountain Head Lease Agreement (F3), dated as of December 30, 1996, between Oglethorpe and SunTrust Bank, not in its individual capacity, but solely as Co-Trustee (the "Co-Trustee F3") under the Trust Agreement (F3), dated as of December 30, 1996, between SunTrust Bank and First Chicago Leasing Corporation ("FC") (in the capacities set forth therein). (c) Rocky Mountain Head Lease Agreement (F4), dated as of December 30, 1996, between Oglethorpe and SunTrust Bank, not in its individual capacity, but solely as Co-Trustee (the "Co-Trustee F4") under the Trust Agreement (F4), dated as of December 30, 1996, between FC and Fleet (in the capacities set forth therein). (d) Rocky Mountain Head Lease Agreement (N5), dated as of December 30, 1996, between Oglethorpe and SunTrust Bank, not in its individual capacity, but solely as Co-Trustee (the "Co-Trustee N5") under the Trust Agreement (N5), dated as of December 30, 1996, between NationsBanc Leasing & R.E. Corporation ("NB") and Fleet (in the capacities set forth therein). (e) Rocky Mountain Head Lease Agreement (N6), dated as of January 3, 1997, between Oglethorpe and SunTrust Bank, not in its individual capacity, but solely as Co-Trustee (the "Co-Trustee N6") under the Trust Agreement (N6), dated as of January 3, 1997, between NB and Fleet (in the capacities set forth therein). (ii) Participation Agreements: (a) Participation Agreement (P1), dated as of December 30, 1996, among Oglethorpe, RMLC, SunTrust Bank (in the capacities set forth therein), Fleet (in the capacities set forth therein), PMCC, and Utrecht-America Finance Co. ("Utrecht-America"). 2 (b) Participation Agreement (P2), dated as of January 3, 1997, among Oglethorpe, RMLC, SunTrust Bank (in the capacities set forth therein), Fleet (in the capacities set forth therein), PMCC, and Utrecht-America. (c) Participation Agreement (F3), dated as of December 30, 1996, among Oglethorpe, RMLC, SunTrust Bank (in the capacities set forth therein), Fleet (in the capacities set forth therein), FC, and Utrecht-America. (d) Participation Agreement (F4), dated as of December 30, 1996, among Oglethorpe, RMLC, SunTrust Bank (in the capacities set forth therein), Fleet (in the capacities set forth therein), FC, and Utrecht-America. (e) Participation Agreement (N5), dated as of December 30, 1996, among Oglethorpe, RMLC, SunTrust Bank (in the capacities set forth therein), Fleet (in the capacities set forth therein), NB, and Utrecht-America. (f) Participation Agreement (N6), dated as of January 3, 1997, among Oglethorpe, RMLC, SunTrust Bank (in the capacities set forth therein), Fleet (in the capacities set forth therein), NB, and Utrecht-America. (iii) Operative Documents: (a) The "Operative Documents" as defined in the Participation Agreement (P1). (b) The "Operative Documents" as defined in the Participation Agreement (P2). (c) The "Operative Documents" as defined in the Participation Agreement (F3). (d) The "Operative Documents" as defined in the Participation Agreement (F4). (e) The "Operative Documents" as defined in the Participation Agreement (N5). (f) The "Operative Documents" as defined in the Participation Agreement (N6). (iv) Collateral: (a) Surety Bond No. SF0003BE, dated December 30, 1996, issued by AMBAC Indemnity Corporation ("AMBAC") in favor of PMCC and Co-Trustee (P1); Surety Bond No. SF0004BE, dated December 30, 1996, issued by AMBAC in favor of RMLC and RMLC's assignee; and any other "Qualifying Head Lease Surety Bond," "Qualifying Facility Sublease Surety Bond," "Qualifying Letter of Credit" as defined in the Participation Agreement (P1) or other collateral substituting or replacing any of the foregoing instruments. (b) Surety Bond No. SF0011BE, dated January 3, 1997, issued by AMBAC in favor of PMCC and Co-Trustee (P2); Surety Bond No. SF0012BE, dated 3 January 3, 1997, issued by AMBAC in favor of RMLC and RMLC's assignee; and any other "Qualifying Head Lease Surety Bond," "Qualifying Facility Sublease Surety Bond," "Qualifying Letter of Credit" as defined in the Participation Agreement (P2) or other collateral substituting or replacing any of the foregoing instruments. (c) Surety Bond No. SF0007BE, dated December 30, 1996, issued by AMBAC in favor of FC and Co-Trustee (F3); Surety Bond No. SF0008BE, dated December 30, 1996, issued by AMBAC in favor of RMLC and RMLC's assignee; and any other "Qualifying Head Lease Surety Bond," "Qualifying Facility Sublease Surety Bond," "Qualifying Letter of Credit" as defined in the Participation Agreement (F3) or other collateral substituting or replacing any of the foregoing instruments. (d) Surety Bond No. SF0009BE, dated December 30, 1996, issued by AMBAC in favor of FC and Co-Trustee (F4); Surety Bond No. SF0010BE, dated December 30, 1996, issued by AMBAC in favor of RMLC and RMLC's assignee; and any other "Qualifying Head Lease Surety Bond," "Qualifying Facility Sublease Surety Bond," "Qualifying Letter of Credit" as defined in the Participation Agreement (F4) or other collateral substituting or replacing any of the foregoing instruments. (e) Surety Bond No. SF0005BE, dated December 30, 1996, issued by AMBAC in favor of NB and Co-Trustee (N5); Surety Bond No. SF0006BE, dated December 30, 1996, issued by AMBAC in favor of RMLC and RMLC's assignee; and any other "Qualifying Head Lease Surety Bond," "Qualifying Facility Sublease Surety Bond," "Qualifying Letter of Credit" as defined in the Participation Agreement (N5) or other collateral substituting or replacing any of the foregoing instruments. (f) Surety Bond No. SF0013BE, dated January 3, 1997, issued by AMBAC in favor of NB and Co-Trustee (N6); Surety Bond No. SF0014BE, dated January 3, 1997, issued by AMBAC in favor of RMLC and RMLC's assignee; and any other "Qualifying Head Lease Surety Bond," "Qualifying Facility Sublease Surety Bond," "Qualifying Letter of Credit" as defined in the Participation Agreement (N6) or other collateral substituting or replacing any of the foregoing instruments. (v) Equity Funding Agreements: (a) Equity Funding Agreement (P1), dated as of December 30, 1996, between RMLC and AIG Matched Funding Corp. ("AIG") and substitutions therefor. (b) Equity Funding Agreement (P2), dated as of January 3, 1997, between RMLC and AIG and substitutions therefor. 4 (c) Equity Funding Agreement (F3), dated as of December 30, 1996, between RMLC and AIG and substitutions therefor. (d) Equity Funding Agreement (F4), dated as of December 30, 1996, between RMLC and AIG and substitutions therefor. (e) Equity Funding Agreement (N5), dated as of December 30, 1996, between RMLC and AIG and substitutions therefor. (f) Equity Funding Agreement (N6), dated as of January 3, 1997, between RMLC and AIG and substitutions therefor. (vi) Payment Undertaking Agreements: (a) Payment Undertaking Agreement (P1), dated as of December 30, 1996, between RMLC and the Cooperative Centrale Raiffeisen - Boerenleenbank B.A., New York Branch (the "Payment Undertaking Issuer") and substitutions therefor. (b) Payment Undertaking Agreement (P2), dated as of January 3, 1997, between RMLC and the Payment Undertaking Issuer and substitutions therefor. (c) Payment Undertaking Agreement (F3), dated as of December 30, 1996, between RMLC and the Payment Undertaking Issuer and substitutions therefor. (d) Payment Undertaking Agreement (F4), dated as of December 30, 1996, between RMLC and the Payment Undertaking Issuer and substitutions therefor. (e) Payment Undertaking Agreement (N5), dated as of December 30, 1996, between RMLC and the Payment Undertaking Issuer and substitutions therefor. (f) Payment Undertaking Agreement (N6), dated as of January 3, 1997, between RMLC and the Payment Undertaking Issuer and substitutions therefor. (vii) Qualifying Additional Security: (a) Any "Qualifying Additional Security" as defined in the Participation Agreement (P1). (b) Any "Qualifying Additional Security" as defined in the Participation Agreement (P2). 5 (c) Any "Qualifying Additional Security" as defined in the Participation Agreement (F3). (d) Any "Qualifying Additional Security" as defined in the Participation Agreement (F4). (e) Any "Qualifying Additional Security" as defined in the Participation Agreement (N5). (f) Any "Qualifying Additional Security" as defined in the Participation Agreement (N6). (viii) Acceptable Substitute Credit Protection: (a) Any "Acceptable Substitute Credit Protection" as defined in the Participation Agreement (P1). (b) Any "Acceptable Substitute Credit Protection" as defined in the Participation Agreement (P2). (c) Any "Acceptable Substitute Credit Protection" as defined in the Participation Agreement (F3). (d) Any "Acceptable Substitute Credit Protection" as defined in the Participation Agreement (F4). (e) Any "Acceptable Substitute Credit Protection" as defined in the Participation Agreement (N5). (f) Any "Acceptable Substitute Credit Protection" as defined in the Participation Agreement (N6). 3. Those certain tracts or parcels of land known as the "Pickens County PSH" described as follows: Seven (7) contiguous parcels of land fronting on the southeasterly side of Hill to Jerusalem Road (a/k/a Hill City-Jerusalem Road) where said road is intersected by Scare Corn Creek in Land Lots 32, 39, 40 and 41 of the 13th District, 2nd Section of Pickens County, Georgia, together comprising approximately 88 acres of land; Two (2) parcels of land fronting on Valley View Road, Rich Mountain Road and Mountain View Drive in Land Lots 113 and 140 of the 13th District, 2nd Section of Pickens County, Georgia, comprising approximately 88 acres of land; and a parcel of land in Land Lot 75 of the 13th District, 2nd Section of Pickens County, Georgia, comprising 19 acres of land; all of the above parcels being conveyed to Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) by (i) Ben C. Langley and Nan E. Langley under Warranty Deed dated September 22, 1987, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 131, pages 333-334 6 (81 acres+/-); (ii) Michael P. Echols under Warranty Deed dated September 22, 1987, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 131, pages 335-336 (5 acres+/-); (iii) John M. Cunningham and Alisa Lynn Cunningham under Warranty Deed dated September 25, 1987, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 131, pages 337-338 (5 acres+/-); (iv) Terry C. Moss and Cynthia Ann Moss under Warranty Deed dated September 30, 1987, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 132, pages 33-34 (34 acres+/-); (v) Frances S. Littleton under Warranty Deed dated October 2, 1987, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 132, pages 35-36 (27 acres+/-); (vi) Donal Dorsey and John L. Humphrey under Warranty Deed dated July 15, 1988, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 139, pages 638-639 (70 acres+/-); (vii) Weldon Thacker and Hansel L. Thacker under Warranty Deed dated June 28, 1988, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 139, pages 188-189 (33 acres+/-); (viii) McRae Interests, Inc. under Warranty Deed dated October 13, 1987, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 132, page 486, Quitclaim Deed dated October 13, 1987, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 132, page 490, and Quitclaim Deed dated October 13, 1987, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 132, page 496 (88 acres+/-); and (ix) Norma Ann Hahn under Warranty Deed dated December 17, 1987, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 133, page 777 (19 acres+/-). 4. Those certain tracts or parcels of land lying and being in Land Lots 117 and 118, 13th District of Monroe County, Georgia, and being more particularly described as follows: Tract 1: Commence at that point where the centerline of Little Deer Creek intersects the Southwesterly right-of-way margin of Interstate Highway 75, thence North 64 degrees 23 minutes 14 seconds East 5 feet; then go South 25 degrees 36 minutes 46 seconds East 50 feet; thence South 64 degrees 23 minutes 14 seconds West 20 feet; thence South 25 degrees 36 minutes 46 seconds East 394.65 feet to the Northeasterly corner of the Georgia D.O.T. Safety Rest Area property [This corner lies 94.960 feet left of and opposite STA. 468+02.140 on the construction centerline of I-75 SBL.]; thence South 64 degrees 37 minutes 16 seconds West 154.06 feet along the Northerly boundary of the Safety Rest Area to a concrete monument found; thence South 36 degrees 35 minutes 10 seconds West 429.38 feet continuing along the Northerly boundary of the Safety Rest Area to a concrete monument found; thence South 41 degrees 23 minutes 04 seconds East 375.6 feet along the Westerly boundary of the Safety Rest Area to a point which is the POINT OF BEGINNING; thence South 41 degrees 22 minutes 26 seconds East 516.75 feet continuing along the Westerly boundary of the Safety Rest Area to a concrete monument found; thence South 57 degrees 23 minutes 58 seconds East 404.294 feet continuing along the Westerly boundary of the Safety Rest Area to a concrete monument found; thence South 88 degrees 12 minutes 44 seconds East 189.141 feet to the Southerly boundary of the 7 Safety Rest Area to a boundary corner common to the property of Oglethorpe Power, to the West, and the property of Burke L. Slocumb, III, to the East [This corner lies 157.950 feet left of and opposite STA. 453+42.420 on the construction centerline of I-75 SBL.]; thence South 63 degrees 39 minutes 16 seconds West 417.983 feet to a point; thence North 56 degrees 17 minutes 11 seconds West 657.900 feet to a point; thence North 25 degrees 03 minutes 54 seconds West 175.904 feet to a point; thence North 24 degrees 40 minutes 07 seconds East 299.863 feet to the POINT OF BEGINNING; said tract comprising 5.940 acres; Tract 2: Commence at that point where the centerline of Little Deer Creek intersects the Southwesterly right-of-way margin of Interstate Highway 75, thence North 64 degrees 23 minutes 14 seconds East 5 feet; then go South 25 degrees 36 minutes 46 seconds East 50 feet; thence South 64 degrees 23 minutes 14 seconds West 20 feet; thence South 25 degrees 36 minutes 46 seconds East 394.65 feet to the Northeasterly corner of the Georgia D.O.T. Safety Rest Area property [This corner lies 94.960 feet left of and opposite STA. 468+02.140 on the construction centerline of I-75 SBL.], which is POINT OF BEGINNING; thence South 64 degrees 35 minutes 45 seconds West 20.040 feet along the Northerly boundary of the Safety Rest Area to a point; thence North 23 degrees 09 minutes 51 seconds West 352.404 feet to a point on the Southwesterly right-of-way of I- 75; thence South 26 degrees 25 minutes 28 seconds East 352.187 feet along the Southwesterly right-of-way of I-75 to the POINT OF BEGINNING; said tract comprising 0.081 acres; the descriptions of Tract 1 and Tract 2 being according to (a) plans on file at the Georgia D.O.T. offices, No. 2 Capitol Square, Atlanta, Georgia, for Project No. IM- 75-2(197), Monroe County, P.I. No. 311617, dated May 12, 1995, and according to (b) that certain plat of survey by Sam H. Thompson, Georgia Registered Land Surveyor No. 1961, dated September 26, 1989, revised October 23, 1990, which is recorded in the offices of the Clerk of the Superior Court of Monroe County, Georgia, at Plat Book 17, Page 71, which plans and plat are by this reference incorporated into and made a part of this description. 8 EXHIBIT C TO THE INDENTURE DATED AS OF MARCH 1, 1997 MADE BY OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) AND SUNTRUST BANK, ATLANTA, AS TRUSTEE SCHEDULE OF EXISTING OBLIGATIONS 1. Retained Indebtedness Note, dated as of March 1, 1997, from the Company to the Federal Financing Bank, in the original face principal amount not to exceed $2,637,782,327.56. 2. Reimbursement Note, dated as of March 1, 1997, from the Company to the United States of America (the "Government"), acting through the Administrator of RUS. 3. Mortgage Note, dated as of March 1, 1997, from the Company to the Government, acting through the Administrator of RUS, in the original face principal amount of $3,820,352.89. 4. Mortgage Note, dated as of March 1, 1997, from the Company to the Government, acting through the Administrator of RUS, in the original face principal amount of $14,786,985.70. 5. Promissory Note, dated March 1, 1997, made by the Company to the order of CoBank, ACB, in the original face principal amount of $1,856,475.12. 6. Promissory Note, dated March 1, 1997, made by the Company to the order of CoBank, ACB, in the original face principal amount of $7,102,740.26. 7. Note, dated as of September 1, 1993, made by the Company to the trustee for the Development Authority of Appling County Pollution Control Revenue Bonds (Oglethorpe Corporation Power Hatch Project), Series 1993, as assignee, in the original face principal amount of $26,785,000. 8. Note, dated as of September 1, 1994, made by the Company to the trustee for the Development Authority of Appling County Pollution Control Revenue Bonds (Oglethorpe Power Corporation Hatch Project), Series 1994, as assignee, in the original face principal amount of $22,240,000. 9. Note, dated as of December 1, 1992, made by the Company to the trustee for the Development Authority of Burke County Adjustable Tender Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1993A, as assignee, in the original face principal amount of $199,690,000. 10. Note, dated as of December 1, 1992, made by the Company to the trustee for the Development Authority of Burke County Adjustable Tender Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1994A, as assignee, in the original face principal amount of $122,740,000. 11. Note, dated as of September 1, 1993, made by the Company to the trustee for the Development Authority of Burke County Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1993B, as assignee, in the original face principal amount of $155,610,000. 12. Note, dated as of September 1, 1994, made by the Company to the trustee for the Development Authority of Burke County Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1994B, as assignee, in the original face principal amount of $13,720,000.00. 13. Note, dated as of March 1, 1997, made by the Company to the trustee for the Development Authority of Burke County Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project), Series 1997A, as assignee, in the original face principal amount of $216,925,000. 14. Note, dated as of September 1, 1993, made by the Company to the trustee for the Development Authority of Heard County Pollution Control Revenue Bonds (Oglethorpe Power Corporation Wansley Project), Series 1993, as assignee, in the original face principal amount of $12,305,000. 15. Note, dated as of October 1, 1992, made by the Company to the trustee for the Development Authority of Monroe County Pollution Control Revenue Bonds (Oglethorpe Power Corporation Scherer Project), Series 1992A, as assignee, in the original face principal amount of $143,710,000. 2 EXHIBIT D TO THE INDENTURE DATED AS OF MARCH 1, 1997 MADE BY OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) AND SUNTRUST BANK, ATLANTA, AS TRUSTEE SCHEDULE OF CERTAIN PLEDGED CONTRACTS Amended and Consolidated Wholesale Power Contract, between Altamaha Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Amicalola Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Canoochee Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Carroll Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Central Georgia Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Coastal Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Cobb Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Colquitt Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Coweta-Fayette Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Excelsior Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Flint Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Grady County Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between GreyStone Power Corporation, An Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Habersham Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Hart County Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Irwin County Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Jackson Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Jefferson Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Lamar Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Little Ocmulgee Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Middle Georgia Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Mitchell Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Ocmulgee Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Oconee Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Okefenoke Rural Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Pataula Electric Membership Corporation and the Company, dated as of December 1, 1988. 2 Amended and Consolidated Wholesale Power Contract, between Planters Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Rayle Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Satilla Rural Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Sawnee Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Slash Pine Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Snapping Shoals Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Sumter Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Three Notch Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Tri-County Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Troup Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Upson County Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Walton Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Washington Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Restated Wholesale Power Contract, between Altamaha Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Amicalola Electric Membership Corporation and the Company, dated as of August 1, 1996. 3 Amended and Restated Wholesale Power Contract, between Canoochee Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Carroll Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between The Central Georgia Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Coastal Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Cobb Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Colquitt Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Coweta-Fayette Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Excelsior Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Flint Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Grady Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between GreyStone Power Corporation, An Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Habersham Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Hart Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Irwin Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Jackson Electric Membership Corporation and the Company, dated as of August 1, 1996. 4 Amended and Restated Wholesale Power Contract, between Jefferson Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Lamar Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Little Ocmulgee Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Middle Georgia Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Mitchell Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Ocmulgee Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Oconee Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Okefenoke Rural Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Pataula Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Planters Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Rayle Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between The Satilla Rural Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Sawnee Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Slash Pine Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Snapping Shoals Electric Membership Corporation and the Company, dated as of August 1, 1996. 5 Amended and Restated Wholesale Power Contract, between Sumter Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Three Notch Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Tri-County Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Troup Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Upson County Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Walton Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Washington Electric Membership Corporation and the Company, dated as of August 1, 1996. 6 EX-4.8-2 8 EXHIBIT 4.8.2 Exhibit 4.8.2 SECURITY AGREEMENT THIS SECURITY AGREEMENT (this "Security Agreement"), dated as of March 1, 1997, is executed and delivered by OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized and existing under the laws of the State of Georgia (the "Company") to SUNTRUST BANK, ATLANTA (the "Trustee") in its capacity as Trustee under that certain Indenture, dated as of March 1, 1997, by and between the Company and the Trustee (the "Indenture"). SECTION 1. Effect Under Uniform Commercial Code. This Security Agreement is executed and delivered by the Company with the intention that the security interest created hereunder in the personal property (excluding fixtures) of the Company shall constitute a security interest to which the filing provisions of the Official Code of Georgia Annotated ("O.C.G.A.") Title 11, Article 9 apply pursuant to O.C.G.A. Section 11-9-302(3)(c). Accordingly, the filing of a financing statement covering the Collateral shall be governed by O.C.G.A. Title 11, Article 9 and shall be effective for all purposes thereof. It is the intention of the parties that this Security Agreement be interpreted and construed consistent with the provisions of the Indenture in all respects, including, without limitation, the rights of the Company to amend this Security Agreement consistent with Article XII of the Indenture and to use and, upon satisfying the conditions set forth in Article V of the Indenture, release the property subject to the security interest created by this Security Agreement. SECTION 2. Definitions. Capitalized terms used in this Security Agreement, unless otherwise defined herein, shall have the meanings assigned to them in the Indenture. SECTION 3. Grant of Security Interest. For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company hereby grants a security interest to the Trustee and its successors and assigns in the trust created by the Indenture, in trust, in all personal property, rights, privileges and franchises of the Company (except any fixtures, any Excepted Property (as defined in Section 4 of this Security Agreement) and any Excludable Property) of every kind and description, tangible or intangible, whether now owned or hereafter acquired by the Company, wherever located, and including all and singular the following property, subject in all cases to Section 5.2 and 11.2(B) of the Indenture and to the rights of the Company under the Indenture, including the rights set forth in Article V of the Indenture: (A) All contracts of the Company (i) that relate to the ownership, operation or maintenance of any electric generation, transmission or distribution facility owned, whether solely or jointly, by the Company; (ii) for the management or operation of all or substantially all of the System; (iii) for the purchase or sale of electric power and energy by the Company and having an original term in excess of one (1) year, including, without limitation, all rights of the Company in and to the contracts listed on Exhibit A hereto; (iv) for the transmission of electric power and energy by or on behalf of the Company and 1 having an original term in excess of one (1) year; and (v) for pooling or other power supply arrangements and having an original term in excess of one (1) year, including in respect of any of the foregoing, any amendments, supplements, restatements, consolidations and replacements thereto, but excluding any of such contracts (a) that relate substantially to a facility or other property that constitutes Excludable Property or the output of such Excludable Property, or (b) for the purchase of electric power and energy by the Company for which the seller has no recourse, directly or indirectly, to the general credit of the Company, or (c) for the resale of the electric power and energy purchased pursuant to a contract described in the immediately preceding clause (b); (B) All other personal property, rights, privileges and franchises of every kind and description, tangible or intangible, whether now owned or hereafter acquired by the Company, wherever located, including, without limitation, goods (including equipment, fuel, materials and supplies, but excluding electricity), accounts, contracts of the type and duration set forth in the immediately preceding paragraph (A), Trust Moneys, Designated Qualifying Securities and general intangibles now owned or which may be hereafter acquired by the Company, but excluding fixtures, Excepted Property and Excludable Property, it being the intention hereof that all of such property, rights, privileges and franchises now owned by the Company or acquired by the Company after the date hereof (other than fixtures, Excepted Property and Excludable Property) shall be as fully embraced within and subjected to the lien hereof as if such property were specifically described herein; and (C) Also any Excepted Property or Excludable Property that may, from time to time hereafter, by delivery or by writing of any kind, be subjected to the lien hereof by the Company or by anyone else; and the Trustee is hereby authorized to receive the same at any time as additional security hereunder. Such subjection to the lien hereof of any Excepted Property or Excludable Property as additional security may be subject to any reservation, limitation or condition which shall be set forth in a written instrument executed by the Company or the person so acting in its behalf or by the Trustee respecting the ownership, use and disposition of such property or the proceeds thereof. Together with all of the rents, issues, profits, revenues and other income, and the products and proceeds of the property described in clauses (A), (B) and (C) above subjected or required to be subjected to the lien of the Indenture (other than fixtures, Excepted Property and Excludable Property) (collectively, the "Collateral"). Where applicable, all terms used herein shall have the same meaning as set forth in the Uniform Commercial Code as codified at Title 11 of the O.C.G.A., as amended. SECTION 4. Excepted Property. There is, however, expressly excepted and excluded from the security interest and operation of this Security Agreement the following described property of the Company, now owned or hereafter acquired (collectively, the "Excepted Property"): 2 (A) All cash on hand or in banks or other financial institutions (excluding proceeds of the Trust Estate, including the Collateral, in which the security interest created by the Indenture or this Security Agreement continues to be perfected pursuant to the Uniform Commercial Code, for so long as such perfection continues, and also excluding amounts deposited or required to be deposited with the Trustee pursuant to the Indenture) claims, choses in action and judgments, contracts and contract rights (except to the extent set forth in Section 3(A) of this Security Agreement), shares, stocks, interests, participations or other equivalents (including, without limitation, any interest of the Company in the National Rural Utilities Cooperative Finance Corporation or in CoBank, ACB, but excluding shares of stock or other ownership interests of the Company in any Subsidiary then issuing Designated Qualifying Securities), Undesignated Qualifying Securities, allowances for emissions or similar rights granted by any governmental authority, bonds, notes, repurchase agreements, evidences of indebtedness and other securities and instruments, bills, patents, patent licenses and other patent rights, patent applications, service marks, trade names and trademarks, other than (i) Pledged Securities, (ii) Designated Qualifying Securities and (iii) any other property referred to in this paragraph which is specifically described in Section 3(A) of this Security Agreement or is by the express provisions of this Security Agreement or the Indenture subjected or required to be subjected to the lien hereof or thereof; (B) all automobiles, buses, trucks, truck cranes, tractors, trailers, rolling stock, railcars and similar vehicles and movable equipment, and all parts, tools, accessories and supplies used in connection with any of the foregoing; (C) all vessels, boats, barges and other marine equipment, all airplanes, airplane engines and other flight equipment, and all parts, tools, accessories and supplies used in connection with any of the foregoing; (D) all goods, inventory, wares and merchandise acquired or produced for the purpose of resale in the ordinary course of business, all materials and supplies and other personal property, other than fuel, which are consumable (otherwise than by ordinary wear and tear) in their use in the operation of the business of the Company, and all hand and other portable tools and equipment; (E) all office furniture, equipment and supplies and all data processing, accounting and other computer equipment, software and supplies; (F) all leasehold interests of the Company (for other than office purposes) under leases for an original term (including any period for which the Company shall have a right of renewal) of less than five (5) years; (G) all leasehold interests for office purposes; 3 (H) all timber separated from the land included in the Trust Estate and all coal, ore, gas (natural or otherwise), oil and other minerals, mined, extracted or otherwise separated from the land included in the Trust Estate and all electric energy, gas, steam, water and other products generated, produced or purchased; (I) the last day of the term of each leasehold estate (oral or written) and any agreement therefor, now or hereafter enjoyed by the Company and whether falling within a general or specific description of property herein; provided, however, that the Company covenants and agrees that it will hold each such last day in trust for the use and the benefit of the Holders; (J) all permits, licenses, franchises, leases, contracts, agreements, contract rights and other rights not specifically subjected or required to be subjected to the lien of the Indenture by the express provisions of the Indenture, whether now owned or hereafter acquired by the Company, which by their terms or by reason of applicable law would become void or voidable if granted, conveyed, mortgaged, transferred, assigned or pledged by this Security Agreement without the consent of other parties whose consent is not secured, or without subjecting the Trustee to a liability not otherwise contemplated by the provisions of the Indenture, or the granting, conveying, mortgaging, transferring or assigning of which would result in a breach or a default thereof or would permit the termination or cancellation thereof, or which otherwise may not be hereby lawfully and effectively granted, conveyed, mortgaged, transferred and assigned by the Company; (K) all personal property which is (i) located outside the State of Georgia, (ii) not specifically described in Section 3 of this Security Agreement, (iii) not specifically subjected or required to be subjected to the lien of this Security Agreement or the Indenture by any provision hereof or thereof, and (iv) not part of or used or for use in connection with any property specifically subjected or required to be subjected to the lien hereof by the express provisions of this Security Agreement or the Indenture; (L) all personal property located outside the State of Georgia in which a security interest cannot be perfected solely by the filing of a financing statement under the Uniform Commercial Code; (M) all personal property in which a security interest cannot be lawfully perfected under the laws of the United States or of any state or in which the grant of a security interest would in the Opinion of Counsel be prohibited by applicable law; (N) all property released pursuant to the last paragraph of Section 5.2 of the Indenture; (O) all nuclear fuel located outside the State of Georgia; and (P) the property described on Exhibit B hereto. 4 PROVIDED, HOWEVER, that if, upon the occurrence of an Event of Default, the Trustee, or any separate trustee or co-trustee appointed under the Indenture or any receiver appointed pursuant to a statutory provision or order of court, shall have entered into possession of all or substantially all of the Trust Estate (including the Collateral), all the Excepted Property described or referred to in the foregoing paragraphs (A) through (H), inclusive, then owned or thereafter acquired by the Company, shall immediately, and, in the case of any Excepted Property described or referred to in paragraphs (I), (J), (L), (N) and (P) (excluding the property described in Section 2 of Exhibit B hereto), upon demand of the Trustee or such other trustee or receiver, become subject to the security interest hereof to the extent permitted by law, and the Trustee or such other trustee or receiver may, to the extent permitted by law, at the same time likewise take possession thereof, and whenever all Events of Default shall have been cured and the possession of all or substantially all of the Trust Estate (including the Collateral) shall have been restored to the Company, such Excepted Property shall again be excepted and excluded from the security interest hereof to the extent and otherwise as hereinabove set forth. SECTION 5. Excludable Property. There is also expressly excepted and excluded from the security interest and operation of this Security Agreement all Excludable Property now owned or hereafter acquired. SECTION 6. Obligations Secured. The security interest granted hereunder shall secure the payment of the principal of (and premium, if any) and interest on the Outstanding Secured Obligations and the performance of the covenants therein and in the Indenture contained, for the equal and proportionate benefit of all the Holders of the Outstanding Secured Obligations. SECTION 7. Rights and Remedies. Upon the occurrence and during the continuance of any Event of Default and at any time thereafter, the Trustee shall have all remedies as provided under the Indenture. SECTION 8. Other Provisions. (A) Amendment and Modification. Without the prior written consent of the Trustee, no amendment, modification, or waiver of, or consent to any departure by the Company from, any provision hereunder shall be effective. Any such amendment, modification, waiver, or consent shall be effective only in the specific instance and for the specific purpose for which given. The Trustee may consent to amendments to this Security Agreement on the same basis as it would consent to supplements to the Indenture as set forth in Article XII of the Indenture. (B) Continuing Effect. The term of this Security Agreement and the Trustee's security interest in the Collateral shall coincide with the term of the Indenture. (C) Binding Effect. This Security Agreement shall be binding upon and inure to the benefit of the Company and the Trustee and their respective successors and assigns as and to the extent the Indenture shall be binding upon and inure to the benefit of the Company and the Trustee and their respective successors and assigns as provided in the Indenture. 5 (D) Security Agreement as Financing Statement. A photographic copy or other reproduction of this Security Agreement may be used as a financing statement. (E) Governing Law. This Security Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. (F) Notices. All notices hereunder shall be deemed to be duly given upon delivery in the form and manner set forth in the Indenture to the parties at the following addresses (or such other address for a party as shall be specified by like notice): If to the Company, as follows: Oglethorpe Power Corporation 2100 East Exchange Place P.O. Box 1349 Tucker, Georgia 30085-1349 If to the Trustee, SunTrust Bank, Atlanta as follows: Corporate Trust Department P.O. Box 4625 Atlanta, Georgia 30302 (G) Severability. The determination that any term or provision of this Security Agreement is unenforceable or invalid shall not affect the enforceability or validity of any other term or provision hereof. (H) Benefits of Security Agreement. Nothing in this Security Agreement, the Indenture, or the Obligations, express or implied, shall give to any person, other than the parties hereto and their successors hereunder, any separate trustee or co-trustee under Section 9.14 of the Indenture and the Holders, any benefit or any legal or equitable right, remedy or claim under this Security Agreement or under the Indenture. (I) Releases of Property. The Company's right to sell, exchange or otherwise dispose of the Collateral, and the Trustee's obligation to release the Collateral from the operation and security interest of this Security Agreement, shall be governed by the provisions of Article V of the Indenture, relating to releases of the Trust Estate. (J) Trustee's Rights, Obligations, Etc. The rights, duties and responsibilities of the Trustee hereunder shall be governed by the provisions of Article IX of the Indenture relating to the Trustee and the indemnities provided for in the Indenture shall include all action by the Trustee taken hereunder. (Signatures on next page.) 6 IN WITNESS WHEREOF, the Company has caused this Security Agreement to be executed and attested under seal and delivered by its duly authorized officers as of the day and year shown below. OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) By: /s/ T.D. Kilgore --------------------------------- Name: T. D. Kilgore Title: President and Chief Executive Officer Attest: /s/ Patricia N. Nash ------------------------------- Name: Patricia N. Nash Title: Assistant Secretary [CORPORATE SEAL] ACCEPTED AND AGREED TO by SUNTRUST BANK, ATLANTA, as Trustee under the herein described Indenture, as of the day and year shown above. By: _______________________________________ Name: _________________________________ Title:_________________________________ By: _______________________________________ Name: _________________________________ Title:_________________________________ [BANK SEAL] 7 EXHIBIT A To Security Agreement Dated March 1, 1997 Executed By Oglethorpe Power Corporation Amended and Consolidated Wholesale Power Contract, between Altamaha Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Amicalola Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Canoochee Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Carroll Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Central Georgia Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Coastal Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Cobb Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Colquitt Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Coweta-Fayette Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Excelsior Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Flint Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Grady County Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between GreyStone Power Corporation, An Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Habersham Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Hart County Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Irwin County Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Jackson Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Jefferson Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Lamar Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Little Ocmulgee Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Middle Georgia Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Mitchell Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Ocmulgee Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Oconee Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Okefenoke Rural Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Pataula Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Planters Electric Membership Corporation and the Company, dated as of December 1, 1988. 2 Amended and Consolidated Wholesale Power Contract, between Rayle Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Satilla Rural Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Sawnee Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Slash Pine Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Snapping Shoals Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Sumter Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Three Notch Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Tri-County Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Troup Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Upson County Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Walton Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Consolidated Wholesale Power Contract, between Washington Electric Membership Corporation and the Company, dated as of December 1, 1988. Amended and Restated Wholesale Power Contract, between Altamaha Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Amicalola Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Canoochee Electric Membership Corporation and the Company, dated as of August 1, 1996. 3 Amended and Restated Wholesale Power Contract, between Carroll Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between The Central Georgia Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Coastal Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Cobb Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Colquitt Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Coweta-Fayette Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Excelsior Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Flint Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Grady Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between GreyStone Power Corporation, An Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Habersham Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Hart Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Irwin Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Jackson Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Jefferson Electric Membership Corporation and the Company, dated as of August 1, 1996. 4 Amended and Restated Wholesale Power Contract, between Lamar Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Little Ocmulgee Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Middle Georgia Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Mitchell Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Ocmulgee Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Oconee Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Okefenoke Rural Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Pataula Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Planters Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Rayle Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between The Satilla Rural Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Sawnee Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Slash Pine Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Snapping Shoals Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Sumter Electric Membership Corporation and the Company, dated as of August 1, 1996. 5 Amended and Restated Wholesale Power Contract, between Three Notch Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Tri-County Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Troup Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Upson County Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Walton Electric Membership Corporation and the Company, dated as of August 1, 1996. Amended and Restated Wholesale Power Contract, between Washington Electric Membership Corporation and the Company, dated as of August 1, 1996. 6 EXHIBIT B To Security Agreement Dated March 1, 1997 Executed By Oglethorpe Power Corporation Described below is the property constituting "Excepted Property" in addition to that specifically described in Section 4 of the Security Agreement: 1. The construction funds, bond funds and reserve funds established under the indentures pursuant to which debt securities have been issued on behalf of the Company, the interest on which debt securities is excludable from gross income of the holder thereof pursuant to the Internal Revenue Code, as amended. 2. All right, title and interest of the Company in and to the following described property and the proceeds of such property: A. All amounts paid from time to time to the Company under the Head Leases listed in paragraph E (i) below, less $70,701,313.51 in the aggregate with respect to the Head Leases identified in paragraphs E (i) (a), (c), (d) and (e) below, and $25,043,389.98 in the aggregate with resepct to the Head Leases identified in paragraphs E (i) (b) and (f) below; B. All amounts paid from time to time by the Company to the Rocky Mountain Leasing Corporation ("RMLC") in connection with the transactions contemplated by the Participation Agreements listed in paragraph (ii) below, including amounts paid and to be paid in consideration of the purchase of stock and as a capital contribution to RMLC and amounts paid and to be paid under the Facility Subleases, the Ground Sub-subleases and the Rocky Mountain Agreements Second Re-assignments (each as defined in the Participation Agreements referenced above); C. All shares of stock of RMLC owned by the Company on the date hereof and all assets of RMLC; D. All amounts paid from time to time by the Company under the Operative Documents listed in paragraph E (iii) below to the parties thereto; and E. All interest, if any, of the Company in the items listed in paragraphs (i) through (viii), inclusive, below or any substitutions or replacements for such items. (i) Head Leases: (a) Rocky Mountain Head Lease Agreement (P1), dated as of December 30, 1996, between Oglethorpe and SunTrust Bank, Atlanta ("SunTrust Bank"), not in its individual capacity, but solely as Co-Trustee (the "Co-Trustee P1") under the Trust Agreement (P1), dated as of December 30, 1996, between Philip Morris Capital Corporation ("PMCC") and Fleet National Bank ("Fleet") (in the capacities set forth therein). (b) Rocky Mountain Head Lease Agreement (P2), dated as of January 3, 1997, between Oglethorpe and SunTrust Bank, not in its individual capacity, but solely as Co-Trustee (the "Co-Trustee P2") under the Trust Agreement (P2), dated as of January 3, 1997, between PMCC and Fleet (in the capacities set forth therein). (c) Rocky Mountain Head Lease Agreement (F3), dated as of December 30, 1996, between Oglethorpe and SunTrust Bank, not in its individual capacity, but solely as Co-Trustee (the "Co-Trustee F3") under the Trust Agreement (F3), dated as of December 30, 1996, between SunTrust Bank and First Chicago Leasing Corporation ("FC") (in the capacities set forth therein). (d) Rocky Mountain Head Lease Agreement (F4), dated as of December 30, 1996, between Oglethorpe and SunTrust Bank, not in its individual capacity, but solely as Co-Trustee (the "Co-Trustee F4") under the Trust Agreement (F4), dated as of December 30, 1996, between FC and Fleet (in the capacities set forth therein). (e) Rocky Mountain Head Lease Agreement (N5), dated as of December 30, 1996, between Oglethorpe and SunTrust Bank, not in its individual capacity, but solely as Co-Trustee (the "Co-Trustee N5") under the Trust Agreement (N5), dated as of December 30, 1996, between NationsBanc Leasing & R.E. Corporation ("NB") and Fleet (in the capacities set forth therein). (f) Rocky Mountain Head Lease Agreement (N6), dated as of January 3, 1997, between Oglethorpe and SunTrust Bank, not in its individual capacity, but solely as Co-Trustee (the "Co-Trustee N6") under the Trust Agreement (N6), dated as of January 3, 1997, between NB and Fleet (in the capacities set forth therein). 2 (ii) Participation Agreements: (a) Participation Agreement (P1), dated as of December 30, 1996, among Oglethorpe, RMLC, SunTrust Bank (in the capacities set forth therein), Fleet (in the capacities set forth therein), PMCC, and Utrecht-America Finance Co. ("Utrecht-America"). (b) Participation Agreement (P2), dated as of January 3, 1997, among Oglethorpe, RMLC, SunTrust Bank (in the capacities set forth therein), Fleet (in the capacities set forth therein), PMCC, and Utrecht-America. (c) Participation Agreement (F3), dated as of December 30, 1996, among Oglethorpe, RMLC, SunTrust Bank (in the capacities set forth therein), Fleet (in the capacities set forth therein), FC, and Utrecht-America. (d) Participation Agreement (F4), dated as of December 30, 1996, among Oglethorpe, RMLC, SunTrust Bank (in the capacities set forth therein), Fleet (in the capacities set forth therein), FC, and Utrecht-America. (e) Participation Agreement (N5), dated as of December 30, 1996, among Oglethorpe, RMLC, SunTrust Bank (in the capacities set forth therein), Fleet (in the capacities set forth therein), NB, and Utrecht-America. (f) Participation Agreement (N6), dated as of January 3, 1997, among Oglethorpe, RMLC, SunTrust Bank (in the capacities set forth therein), Fleet (in the capacities set forth therein), NB, and Utrecht-America. (iii) Operative Documents: (a) The "Operative Documents" as defined in the Participation Agreement (P1). (b) The "Operative Documents" as defined in the Participation Agreement (P2). (c) The "Operative Documents" as defined in the Participation Agreement (F3). (d) The "Operative Documents" as defined in the Participation Agreement (F4). (e) The "Operative Documents" as defined in the Participation Agreement (N5). 3 (f) The "Operative Documents" as defined in the Participation Agreement (N6). (iv) Collateral: (a) Surety Bond No. SF0003BE, dated December 30, 1996, issued by AMBAC Indemnity Corporation ("AMBAC") in favor of PMCC and Co-Trustee (P1); Surety Bond No. SF0004BE, dated December 30, 1996, issued by AMBAC in favor of RMLC and RMLC's assignee; and any other "Qualifying Head Lease Surety Bond," "Qualifying Facility Sublease Surety Bond," "Qualifying Letter of Credit" as defined in the Participation Agreement (P1) or other collateral substituting or replacing any of the foregoing instruments. (b) Surety Bond No. SF0011BE, dated January 3, 1997, issued by AMBAC in favor of PMCC and Co-Trustee (P2); Surety Bond No. SF0012BE, dated January 3, 1997, issued by AMBAC in favor of RMLC and RMLC's assignee; and any other "Qualifying Head Lease Surety Bond," "Qualifying Facility Sublease Surety Bond," "Qualifying Letter of Credit" as defined in the Participation Agreement (P2) or other collateral substituting or replacing any of the foregoing instruments. (c) Surety Bond No. SF0007BE, dated December 30, 1996, issued by AMBAC in favor of FC and Co-Trustee (F3); Surety Bond No. SF0008BE, dated December 30, 1996, issued by AMBAC in favor of RMLC and RMLC's assignee; and any other "Qualifying Head Lease Surety Bond," "Qualifying Facility Sublease Surety Bond," "Qualifying Letter of Credit" as defined in the Participation Agreement (F3) or other collateral substituting or replacing any of the foregoing instruments. (d) Surety Bond No. SF0009BE, dated December 30, 1996, issued by AMBAC in favor of FC and Co-Trustee (F4); Surety Bond No. SF0010BE, dated December 30, 1996, issued by AMBAC in favor of RMLC and RMLC's assignee; and any other "Qualifying Head Lease Surety Bond," "Qualifying Facility Sublease Surety Bond," "Qualifying Letter of Credit" as defined in the Participation Agreement (F4) or other collateral substituting or replacing any of the foregoing instruments. (e) Surety Bond No. SF0005BE, dated December 30, 1996, issued by AMBAC in favor of NB and Co-Trustee (N5); Surety Bond No. SF0006BE, dated December 30, 1996, issued by AMBAC in favor of RMLC and RMLC's assignee; and any other "Qualifying Head Lease Surety Bond," "Qualifying Facility Sublease Surety Bond," "Qualifying Letter of Credit" as defined 4 in the Participation Agreement (N5) or other collateral substituting or replacing any of the foregoing instruments. (f) Surety Bond No. SF0013BE, dated January 3, 1997, issued by AMBAC in favor of NB and Co-Trustee (N6); Surety Bond No. SF0014BE, dated January 3, 1997, issued by AMBAC in favor of RMLC and RMLC's assignee; and any other "Qualifying Head Lease Surety Bond," "Qualifying Facility Sublease Surety Bond," "Qualifying Letter of Credit" as defined in the Participation Agreement (N6) or other collateral substituting or replacing any of the foregoing instruments. (v) Equity Funding Agreements: (a) Equity Funding Agreement (P1), dated as of December 30, 1996, between RMLC and AIG Matched Funding Corp. ("AIG") and substitutions therefor. (b) Equity Funding Agreement (P2), dated as of January 3, 1997, between RMLC and AIG and substitutions therefor. (c) Equity Funding Agreement (F3), dated as of December 30, 1996, between RMLC and AIG and substitutions therefor. (d) Equity Funding Agreement (F4), dated as of December 30, 1996, between RMLC and AIG and substitutions therefor. (e) Equity Funding Agreement (N5), dated as of December 30, 1996, between RMLC and AIG and substitutions therefor. (f) Equity Funding Agreement (N6), dated as of January 3, 1997, between RMLC and AIG and substitutions therefor. (vi) Payment Undertaking Agreements: (a) Payment Undertaking Agreement (P1), dated as of December 30, 1996, between RMLC and the Cooperative Centrale Raiffeisen - Boerenleenbank B.A., New York Branch (the "Payment Undertaking Issuer") and substitutions therefor. (b) Payment Undertaking Agreement (P2), dated as of January 3, 1997, between RMLC and the Payment Undertaking Issuer and substitutions therefor. 5 (c) Payment Undertaking Agreement (F3), dated as of December 30, 1996, between RMLC and the Payment Undertaking Issuer and substitutions therefor. (d) Payment Undertaking Agreement (F4), dated as of December 30, 1996, between RMLC and the Payment Undertaking Issuer and substitutions therefor. (e) Payment Undertaking Agreement (N5), dated as of December 30, 1996, between RMLC and the Payment Undertaking Issuer and substitutions therefor. (f) Payment Undertaking Agreement (N6), dated as of January 3, 1997, between RMLC and the Payment Undertaking Issuer and substitutions therefor. (vii) Qualifying Additional Security: (a) Any "Qualifying Additional Security" as defined in the Participation Agreement (P1). (b) Any "Qualifying Additional Security" as defined in the Participation Agreement (P2). (c) Any "Qualifying Additional Security" as defined in the Participation Agreement (F3). (d) Any "Qualifying Additional Security" as defined in the Participation Agreement (F4). (e) Any "Qualifying Additional Security" as defined in the Participation Agreement (N5). (f) Any "Qualifying Additional Security" as defined in the Participation Agreement (N6). (viii)Acceptable Substitute Credit Protection: (a) Any "Acceptable Substitute Credit Protection" as defined in the Participation Agreement (P1). (b) Any "Acceptable Substitute Credit Protection" as defined in the Participation Agreement (P2). 6 (c) Any "Acceptable Substitute Credit Protection" as defined in the Participation Agreement (F3). (d) Any "Acceptable Substitute Credit Protection" as defined in the Participation Agreement (F4). (e) Any "Acceptable Substitute Credit Protection" as defined in the Participation Agreement (N5). (f) Any "Acceptable Substitute Credit Protection" as defined in the Participation Agreement (N6). 3. Those certain tracts or parcels of land known as the "Pickens County PSH" described as follows: Seven (7) contiguous parcels of land fronting on the southeasterly side of Hill to Jerusalem Road (a/k/a Hill City-Jerusalem Road) where said road is intersected by Scare Corn Creek in Land Lots 32, 39, 40 and 41 of the 13th District, 2nd Section of Pickens County, Georgia, together comprising approximately 88 acres of land; Two (2) parcels of land fronting on Valley View Road, Rich Mountain Road and Mountain View Drive in Land Lots 113 and 140 of the 13th District, 2nd Section of Pickens County, Georgia, comprising approximately 88 acres of land; and a parcel of land in Land Lot 75 of the 13th District, 2nd Section of Pickens County, Georgia, comprising 19 acres of land; all of the above parcels being conveyed to Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) by (i) Ben C. Langley and Nan E. Langley under Warranty Deed dated September 22, 1987, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 131, pages 333-334 (81 acres+/-); (ii) Michael P. Echols under Warranty Deed dated September 22, 1987, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 131, pages 335-336 (5 acres+/-); (iii) John M. Cunningham and Alisa Lynn Cunningham under Warranty Deed dated September 25, 1987, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 131, pages 337-338 (5 acres+/-); (iv) Terry C. Moss and Cynthia Ann Moss under Warranty Deed dated September 30, 1987, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 132, pages 33-34 (34 acres+/-); (v) Frances S. Littleton under Warranty Deed dated October 2, 1987, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 132, pages 35-36 (27 acres+/-); (vi) Donal Dorsey and John L. Humphrey under Warranty Deed dated July 15, 1988, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 139, pages 638-639 (70 acres+/-); (vii) Weldon Thacker and Hansel L. Thacker under Warranty Deed dated June 28, 1988, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 139, pages 188-189 (33 acres+/-); (viii) McRae Interests, Inc. under Warranty Deed dated October 13, 1987, which is 7 recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 132, page 486, Quitclaim Deed dated October 13, 1987, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 132, page 490, and Quitclaim Deed dated October 13, 1987, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 132, page 496 (88 acres+/-); and (ix) Norma Ann Hahn under Warranty Deed dated December 17, 1987, which is recorded in the Offices of the Clerk of the Superior Court of Pickens County, Georgia at Deed Book 133, page 777 (19 acres+/-). 4. Those certain tracts or parcels of land lying and being in Land Lots 117 and 118, 13th District of Monroe County, Georgia, and being more particularly described as follows: Tract 1: Commence at that point where the centerline of Little Deer Creek intersects the Southwesterly right-of-way margin of Interstate Highway 75, thence North 64 degrees 23 minutes 14 seconds East 5 feet; then go South 25 degrees 36 minutes 46 seconds East 50 feet; thence South 64 degrees 23 minutes 14 seconds West 20 feet; thence South 25 degrees 36 minutes 46 seconds East 394.65 feet to the Northeasterly corner of the Georgia D.O.T. Safety Rest Area property [This corner lies 94.960 feet left of and opposite STA. 468+02.140 on the construction centerline of I-75 SBL.]; thence South 64 degrees 37 minutes 16 seconds West 154.06 feet along the Northerly boundary of the Safety Rest Area to a concrete monument found; thence South 36 degrees 35 minutes 10 seconds West 429.38 feet continuing along the Northerly boundary of the Safety Rest Area to a concrete monument found; thence South 41 degrees 23 minutes 04 seconds East 375.6 feet along the Westerly boundary of the Safety Rest Area to a point which is the POINT OF BEGINNING; thence South 41 degrees 22 minutes 26 seconds East 516.75 feet continuing along the Westerly boundary of the Safety Rest Area to a concrete monument found; thence South 57 degrees 23 minutes 58 seconds East 404.294 feet continuing along the Westerly boundary of the Safety Rest Area to a concrete monument found; thence South 88 degrees 12 minutes 44 seconds East 189.141 feet to the Southerly boundary of the Safety Rest Area to a boundary corner common to the property of Oglethorpe Power, to the West, and the property of Burke L. Slocumb, III, to the East [This corner lies 157.950 feet left of and opposite STA. 453+42.420 on the construction centerline of I-75 SBL.]; thence South 63 degrees 39 minutes 16 seconds West 417.983 feet to a point; thence North 56 degrees 17 minutes 11 seconds West 657.900 feet to a point; thence North 25 degrees 03 minutes 54 seconds West 175.904 feet to a point; thence North 24 degrees 40 minutes 07 seconds East 299.863 feet to the POINT OF BEGINNING; said tract comprising 5.940 ----- acres; Tract 2: Commence at that point where the centerline of Little Deer Creek ----- intersects the Southwesterly right-of-way margin of Interstate Highway 75, thence North 64 degrees 23 minutes 14 seconds East 5 feet; then go South 25 degrees 36 minutes 46 seconds East 50 feet; thence South 64 degrees 23 minutes 14 seconds West 20 feet; thence South 25 degrees 36 minutes 46 seconds East 394.65 feet to the Northeasterly corner of the Georgia D.O.T. Safety Rest Area property [This corner lies 94.960 feet left of and opposite STA. 468+02.140 on the construction centerline of I-75 SBL.], which is POINT OF BEGINNING; thence South 64 degrees 35 minutes 45 seconds West 20.040 feet along the Northerly boundary of the Safety Rest Area to a point; thence North 23 degrees 09 8 minutes 51 seconds West 352.404 feet to a point on the Southwesterly right-of-way of I- 75; thence South 26 degrees 25 minutes 28 seconds East 352.187 feet along the Southwesterly right-of-way of I-75 to the POINT OF BEGINNING; said tract comprising 0.081 acres; the descriptions of Tract 1 and Tract 2 being according to (a) plans on file at the Georgia D.O.T. offices, No. 2 Capitol Square, Atlanta, Georgia, for Project No. IM-75-2(197), Monroe County, P.I. No. 311617, dated May 12, 1995, and according to (b) that certain plat of survey by Sam H. Thompson, Georgia Registered Land Surveyor No. 1961, dated September 26, 1989, revised October 23, 1990, which is recorded in the offices of the Clerk of the Superior Court of Monroe County, Georgia, at Plat Book 17, Page 71, which plans and plat are by this reference incorporated into and made a part of this description. 9 EX-4.131 9 EXHIBIT 4.13.1 Exhibit 4.13.1 INDEMNITY AGREEMENT THIS INDEMNITY AGREEMENT (this "Indemnity Agreement"), dated as of March 1, 1997, is made by and between GEORGIA TRANSMISSION CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION) ("GTC") and OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) ("OPC"). RECITALS The Authorities have issued the Bonds on behalf of OPC and have loaned the proceeds of the sale of the Bonds to OPC pursuant to the Loan Agreements and the Notes (as all such terms are defined below). OPC's payment obligations under the Loan Agreements and the Notes are secured under OPC's Consolidated Mortgage and Security Agreement, dated as of September 1, 1994, made by and among OPC, as mortgagor, and the United States of America (the "Government"), acting through the Administrator of the Rural Utilities Service (as successor to the powers of the Rural Electrification Administration), CoBank, ACB (formerly known as the National Bank for Cooperatives) ("CoBank"), Credit Suisse, acting by and through its New York Branch (the "Credit Bank"), and SunTrust Bank, Atlanta (formerly known as Trust Company Bank), as trustee (the "Trustees") under the Bond Indentures (as defined below), as mortgagees (as such instrument may be amended, modified, supplemented, restated, consolidated or replaced, the "OPC Mortgage"). Pursuant to the OPC Mortgage, OPC has granted the mortgagees a lien on substantially all of its assets, including the assets which comprise its transmission business. OPC, GTC and Georgia System Operations Corporation ("GSOC") have entered into an Second Amended and Restated Restructuring Agreement, dated as of February 24, 1997 (as it may have been or may be amended from time to time, the "Restructuring Agreement"), under which OPC has agreed to transfer its transmission business, including its transmission assets, to GTC (OPC has also agreed pursuant to the Restructuring Agreement to transfer its system operations business, including its system operations assets, to GSOC). The purchase price to be paid by GTC to OPC pursuant to the Restructuring Agreement for the transmission business will be paid by: (i) GTC's assumption of a pro rata portion of OPC's existing obligations secured under the OPC Mortgage, including a portion of OPC's payment obligations under the Loan Agreements, the Notes and the Related Financial Arrangements (as such term is defined below); (ii) GTC's assumption of certain transmission liabilities; and (iii) the remainder in cash. To evidence GTC's assumption of a portion of OPC's payment obligations on the Loan Agreements and the Notes, GTC has entered into Assumption Agreements, dated of even date herewith, for the benefit of each of the Trustees (collectively, the "Assumption Agreements"). GTC and OPC are entering into this Indemnity Agreement to set forth their respective rights and obligations with respect to the Bonds, the Loan Agreements, the Notes, the Assumption Agreements and the Related Financial Arrangements. GTC has entered into an Indenture with SunTrust Bank, Atlanta, dated as of March 1, 1997 (as such instrument may be amended, modified, supplemented, restated, consolidated or replaced, the "GTC Indenture"), and has secured under the GTC Indenture its obligations pursuant to the Assumption Agreements. GTC has granted a lien on substantially all of its assets which comprise its transmission business pursuant to the GTC Indenture, including the transmission assets transferred to it by OPC. NOW, THEREFORE, in consideration of the premises and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, OPC and GTC agree as follows: SECTION 1. Definitions. The terms defined in this Section 1 shall for all purposes of this Indemnity Agreement have the meanings herein specified, except as otherwise expressly provided or unless the context otherwise requires: "Authorities" shall mean the Development Authority of Appling County (Georgia), the Development Authority of Burke County (Georgia), the Development Authority of Heard County (Georgia) and the Development Authority of Monroe County (Georgia). "Bonds" shall mean the Development Authority of Appling County (Georgia) Pollution Control Revenue Bonds (Oglethorpe Power Corporation Hatch Project) Series 1993, the Development Authority of Appling County (Georgia) Pollution Control Revenue Bonds (Oglethorpe Power Corporation Hatch Project) Series 1994, the Development Authority of Burke County (Georgia) Adjustable Tender Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project) Series 1993A, the Development Authority of Burke County (Georgia) Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project) Series 1993B, the Development Authority of Burke County (Georgia) Adjustable Tender Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project) Series 1994A, the Development Authority of Burke County (Georgia) Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project) Series 1994B, the Development Authority of Burke County (Georgia) Pollution Control Revenue Bonds (Oglethorpe Power Corporation Vogtle Project) Series 1997A, the Development Authority of Heard County (Georgia) Pollution Control Revenue Bonds (Oglethorpe Power Corporation Wansley Project) Series 1993 and the Development Authority of Monroe County (Georgia) Pollution Control Revenue Bonds (Oglethorpe Power Corporation Scherer Project) Series 1992A. "Bond Indentures" shall mean, collectively, the Trust Indentures between the Authorities and the Trustees relating to the Bonds (including any amendments or supplements thereto). "GTC Assumption Percentage" shall mean, with respect to a portion of the Loan Agreements and the Notes representing each maturity of each issue of the Bonds, initially sixteen and eight hundred sixty-four thousandths percent (16.864%), as such percentage may be adjusted pursuant to Section 3 of the Assumption Agreement relating to such issue of the Bonds. 2 "Loan Agreements" shall mean, collectively, the Loan Agreements, between OPC and the Authorities (including any amendments or supplements thereto). "Notes" shall mean, collectively, the mortgage notes of OPC (including any amendments or supplements thereto) issued in respect of the Bonds to evidence the obligation of OPC under the Loan Agreements to pay to the Authorities an amount sufficient to pay the principal of and premium, if any, and interest on, and to the extent applicable under the Bond Indentures and Loan Agreements the purchase price of, the Bonds. "OPC Sole Liability Percentage" shall mean, with respect to a portion of the Loan Agreements and the Notes representing each maturity of each issue of the Bonds, the percentage equal to one hundred percent (100%) minus the GTC Assumption Percentage, as such GTC Assumption Percentage may be adjusted pursuant to Section 3 of the Assumption Agreement relating to such issue of the Bonds. "Related Financial Arrangements" shall mean, with respect to each maturity of each issue of the Bonds, any interest rate swap agreements, credit and liquidity facilities and other similar financial arrangements entered into by OPC in connection with or otherwise related to such maturity of such issue of the Bonds. SECTION 2. Assumption. Pursuant to the Assumption Agreements, GTC has assumed joint and several liability, along with OPC, to the Trustees, for the benefit of the holders of the Bonds and the Trustees, for the payment when due and payable of the then applicable GTC Assumption Percentage of each payment of principal, premium (if any) and interest, and the purchase price, due and payable under the Loan Agreements and the Notes, including any obligation to make payments on account of debt service reserve or other similar funds under the Bond Indentures and any obligation to pay any trustee's, the Authorities' or paying agent's fees and expenses (including attorney's fees), amounts due under any indemnities, and any and all other amounts due under the Loan Agreements and the Notes. SECTION 3. Indemnity. OPC and GTC agree that, as between OPC and GTC, OPC will be liable for, will be the primary obligor for, and will indemnify GTC with respect to, the OPC Sole Liability Percentage of the principal of and premium (if any) and interest on, to the extent applicable under the Bond Indentures and Loan Agreements, the purchase price of, and all other amounts due under the Loan Agreements and the Notes with respect to each maturity of each issue of the Bonds; and GTC will be liable for, will be the primary obligor for, and will indemnify OPC with respect to, the GTC Assumption Percentage of the principal of and premium (if any) and interest on, to the extent applicable under the Bond Indentures and Loan Agreements the purchase price of, and all other amounts due under the Loan Agreements and the Notes with respect to each maturity of each issue of the Bonds; provided, that, as between the parties hereto, OPC shall have the full benefit of, and responsibility for, the debt service reserve and other funds under the Bond Indentures except to the extent that any draws are made on such funds to pay amounts otherwise due from GTC under the Assumption Agreements, in which case such amounts immediately shall be paid in same day 3 funds by GTC to OPC or to the applicable Trustee (as directed by OPC) to reimburse such fund for such draw. In the event either party makes a payment on any obligation for which the other party is the primary obligor pursuant to this Section 3, the primary obligor immediately shall reimburse the paying party in same day funds with interest in an amount equal to the lesser of (i) the maximum rate lawfully payable, or (ii) the amount that would cause the paying party to earn an investment yield (as calculated in accordance with section 1.148-5(b) of the Treasury regulations promulgated under the Internal Revenue Code of 1986, as amended) in respect of such reimbursable payment that is equal to the yield on the Bonds (as calculated in accordance with section 1.148-4 of the Treasury regulations) to which such reimbursable payment is allocable (under section 1.148-6 or other applicable provisions of the Treasury regulations). SECTION 4. Prepayment and Acceleration of Assumption Obligations. (a) Pursuant to the Assumption Agreements, GTC has the right at any time to prepay its assumption obligations under the Loan Agreements and the Notes with respect to any maturity of any issue of the Bonds. OPC agrees to take all action reasonably requested by GTC to permit GTC to exercise such right of prepayment; provided, that (i) GTC shall reimburse OPC for any expenses incurred by OPC in connection therewith and (ii) OPC shall not be required, and GTC shall not be permitted, to take any action that would (A) cause the interest earned by holders of any of the Bonds to become taxable under federal income tax law or (B) have an adverse economic impact on OPC (unless GTC fully reimburses OPC in connection with any such adverse economic impact). (b) Pursuant to the Loan Agreements and the Notes, OPC has the right at certain times to prepay its obligations with respect to any maturity of any issue of the Bonds. GTC agrees to take all action reasonably requested by OPC to permit OPC to exercise such right of prepayment, including GTC prepaying its assumption obligation with respect to such Bonds; provided, that (i) OPC shall reimburse GTC for any expenses incurred by GTC in connection therewith, (ii) OPC shall be responsible for the premiums, if any, due with respect to such prepayment (unless GTC shall have previously prepaid its assumption obligation with respect to such maturity of such issue of the Bonds), and (iii) GTC shall have the right to elect to fund its prepayment through an assumption of a corresponding amount of any refunding indebtedness issued by OPC in connection with such prepayment of the Bonds if such assumption would not result in the interest earned by any of the holders of the refunding indebtedness being taxable under federal income tax law, such assumption to be evidenced in agreements in the form of this Indemnity Agreement and the Assumption Agreements. SECTION 5. Related Financial Arrangements. GTC agrees to assume, and to the extent reasonably possible obtain OPC's release as to, the GTC Assumption Percentage of all obligations under and with respect to any Related Financial Arrangement with respect to each maturity of each issue of the Bonds, including obligations for the payment of swap amounts and applicable termination payments due under interest rate swap agreements, and all fees, expenses and 4 other charges due with respect to any credit and liquidity facilities. To the extent that OPC is not released from any such obligations to be assumed by GTC, GTC agrees to be liable for and to indemnify OPC with respect to the GTC Assumption Percentage of such obligations and, in the event OPC makes a payment on such obligations which pursuant to this Section 5 is to be made by GTC, GTC immediately shall reimburse OPC in same day funds with interest equal to the lesser of (i) the maximum rate lawfully payable, or (ii) the variable prime rate as announced by SunTrust Bank, Atlanta or any other bank mutually agreed to by the parties. SECTION 6. Security; Term. GTC's obligations under the Assumption Agreements are secured under the GTC Indenture. In the event GTC fulfills all of its obligations under this Indemnity Agreement by making all of the payments provided for herein and in the Assumption Agreements, this Indemnity Agreement shall be canceled and OPC shall execute such documents and instruments as may be requested by GTC to evidence or effect the foregoing. SECTION 7. Further Assurances. If at any time any further actions are necessary or desirable to evidence or effect the indemnity and agreements contemplated by this Indemnity Agreement, or otherwise to carry out the purposes and provisions of this Indemnity Agreement, each of OPC and GTC shall take such action and execute and deliver such instruments as are necessary or desirable to evidence and effect the indemnity and agreements contemplated hereby and otherwise to carry out the purposes and provisions of this Indemnity Agreement. SECTION 8. Binding Effect. This Indemnity Agreement shall inure to the benefit of, and shall be binding upon, each of OPC and GTC and their respective successors and assigns. This Indemnity Agreement may not be assigned without the consent of all parties. SECTION 9. Severability. If any provision of this Indemnity Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. SECTION 10. Effectiveness. The effectiveness of this Indemnity Agreement and the parties obligations hereunder shall commence on the "Effective Date" as defined in the Restructuring Agreement. SECTION 11. Execution Counterparts. This Indemnity Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. SECTION 12. Law Governing Construction of Indemnity Agreement. This Indemnity Agreement shall be governed by, and construed in accordance with, the laws of the State of Georgia. [Signatures on next page.] 5 IN WITNESS WHEREOF, each of GTC and OPC has caused this Indemnity Agreement to be executed in its corporate name and its corporate seal hereunto affixed and attested by its duly authorized officer, all as of the date first above written. GEORGIA TRANSMISSION CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION) By: /s/ Charles R. Fendley --------------------------------- Chairman of the Board (SEAL) Attest: /s/ Roy Tollerson, Jr. OGLETHORPE POWER CORPORATION - ---------------------------- (AN ELECTRIC MEMBERSHIP Secretary GENERATION & TRANSMISSION CORPORATION) By: /s/ J. Calvin Earwood --------------------------------- Chairman of the Board (SEAL) Attest: /s/ Patricia N. Nash - ---------------------------- Assistant Secretary 6 EX-4.132 10 EXHIBIT 4.13.2 Exhibit 4.13.2 INDEMNIFICATION AGREEMENT THIS INDEMNIFICATION AGREEMENT (this "Agreement") is entered into as of March 11, 1997, by OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) ("Oglethorpe") and GEORGIA TRANSMISSION CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION) ("GTC") for the benefit of the UNITED STATES OF AMERICA (the "Government) and certain other entities and persons identified in Section 1 below. WHEREAS, pursuant to that certain Second Amended and Restated Restructuring Agreement, dated as of February 24, 1997, by and among Oglethorpe, GTC and Georgia System Operations Corporation, as heretofore amended (the "Restructuring Agreement"), Oglethorpe has on the date hereof, sold, transferred and assigned the Transmission Assets (as defined in the Restructuring Agreement) to GTC; and WHEREAS, pursuant to Article II, Section 5(c)(bb) of the 1994 Mortgage (defined below), the Government, acting through the Administrator (the "Administrator") of the Rural Utilities Service (the "RUS"), and CoBank, ACB, and SunTrust Bank, Atlanta, as trustee under certain pollution control bond indentures (collectively, the "Other Mortgagees") this date released the Transmission Assets from the lien of all mortgages made by Oglethorpe for the benefit of the Government prior to September 1, 1994 (collectively, the "Mortgages"); and WHEREAS, pursuant to Article V, Section 8 of the Consolidated Mortgage and Security Agreement, dated as of September 1, 1994, made by Oglethorpe for the benefit of the Government and the Other Mortgagees (the "1994 Mortgage"), Oglethorpe has agreed to indemnify the Government for any liability or damages which it may incur or sustain in the exercise and performance of its powers and duties under the 1994 Mortgage; NOW, THEREFORE, in consideration of the approval by the Government, acting through the Administrator of the RUS, of the transactions contemplated by the Restructuring Agreement, the release of the Transmission Assets from the lien of the Mortgages and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Oglethorpe and GTC hereby undertake and agree as follows: 1. Subject to the provisions of Sections 3 and 4 of this Agreement, Oglethorpe and GTC hereby agree to indemnify, defend and save harmless the Government, the Administrator, the RUS, and any and all employees of the Department of Agriculture (each an "Indemnified Party") from and against any and all losses, claims, liabilities or other damages incurred as a result of any claim or assertion against the Government by any of the Other Mortgagees, or the holder of any bond or other security directly or indirectly secured under the Mortgages, related to the consent of the Government, acting through the Administrator of the RUS, to the release of the Transmission Assets from the security title and lien of the Mortgages (each such claim or assertion, an "Indemnified Claim"), including, without limitation, (i) the execution and delivery by the Government of the "GTC Release" and the "Assignment," as such terms are defined in that certain Agreement Regarding Encumbrances, dated as of even date herewith, made by Oglethorpe and GTC for the benefit of the Government, the Other Mortgagees and others, and (ii) the execution and delivery by the Government of such Agreement Regarding Encumbrances and any and all actions taken by the Government pursuant thereto, and any and all actions, suits, proceedings, demands, assessments, penalties, judgments, costs and legal and other expenses (including attorneys' fees) incidental to any of the foregoing. 2. The indemnification and other obligations of Oglethorpe and GTC under this Agreement are joint and several, absolute, unconditional and irrevocable. 3. Each Indemnified Party shall notify both Oglethorpe and GTC in writing of an Indemnified Claim promptly upon becoming aware of the assertion of such Indemnified Claim (each such notice, an "Indemnity Notice"). Oglethorpe and GTC shall have no indemnification or other obligation under this Agreement with respect to any Indemnified Claim if written notice thereof is not given to both Oglethorpe and GTC within 180 days after an Indemnified Party has knowledge of such Indemnified Claim. 4. Oglethorpe and GTC shall have thirty (30) days after receipt of any notice given in accordance with Section 3 to undertake, conduct and control, through counsel of their own choosing and at their expense, the settlement or defense of any Indemnified Claim and the Indemnified Parties shall cooperate with Oglethorpe and GTC in connection therewith. In connection with their pursuit of such settlement or defense (i) neither Oglethorpe nor GTC shall thereby permit to exist any lien, encumbrance or other adverse charge upon any asset of any Indemnified Party and (ii) Oglethorpe and GTC shall permit the Indemnified Parties to participate or consult with Oglethorpe and GTC and their counsel in such settlement or defense through counsel chosen by the Indemnified Parties, provided that the fees and expenses of such counsel shall be borne by the Indemnified Parties. If Oglethorpe or GTC within thirty (30) days after receipt of an Indemnity Notice undertakes the settlement or defense of an Indemnified Claim, and at any time that either Oglethorpe or GTC is reasonably pursuing a settlement or defense thereof in good faith, the Indemnified Parties may settle such Indemnified Claim, provided that in such event the Indemnified Parties shall waive any right to indemnity therefor by Oglethorpe and GTC and any such settlement shall also provide for the release of Oglethorpe and GTC from their liability, if any, with respect to such Indemnified Claim. If neither Oglethorpe nor GTC within thirty (30) days after receipt of an Indemnity Notice undertakes the settlement or defense of an Indemnified Claim, or if both Oglethorpe and GTC at any time cease to reasonably pursue a settlement or defense thereof in good faith, the Indemnified Party shall have the right to settle or defend such Indemnified Claim in the exercise of its exclusive discretion at the expense of Oglethorpe and GTC. 5. This Agreement shall be governed and construed in accordance with the laws of the State of Georgia. The address for any notice required hereunder for each party is: Oglethorpe Power Corporation 2100 East Exchange Place Post Office Box 1349 Tucker, Georgia 30085-1349 Attn: President and Chief Executive Officer Georgia Transmission Corporation 2100 East Exchange Place Post Office Box 1349 Tucker, Georgia 30085-1349 Attn: President and Chief Executive Officer [SIGNATURES BEGIN ON NEXT PAGE] IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above. OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) By: /s/ J. Calvin Earwood --------------------------------- Chairman of the Board GEORGIA TRANSMISSION CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION) By: /s/ Charles R. Fendley --------------------------------- Chairman of the Board EX-10.8-1 11 EXHIBIT 10.8.1 Exhibit 10.8.1 AMENDED AND RESTATED WHOLESALE POWER CONTRACT BETWEEN OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) AND ALTAMAHA ELECTRIC MEMBERSHIP CORPORATION DATED AS OF August 1, 1996 TABLE OF CONTENTS RECITALS.......................................................................1 1. DEFINITIONS.....................................................2 2. PURCHASE AND SALE OBLIGATION....................................2 2.1 Purchase and Sale........................................2 2.2 No Dedication of Resources...............................3 2.3 Member's Unconditional Obligation to Pay.................3 3. POWER SUPPLY PLANNING AND RESOURCE ALLOCATIONS..................3 3.1 Percentage Capacity Responsibilities; Power Sale Resources ..........................................3 3.2 Change of Certain Member Obligations.....................4 3.3 Planning and Resource Management.........................5 3.4 Future Resources, Power Sale Resources and Resource Modifications ..............................5 3.5 Cost Responsibility......................................7 3.6 Non-Recourse Resources...................................8 4. POOLING.........................................................8 4.1 Seller's Energy and Capacity Pool........................8 4.2 System Operator..........................................9 4.3 Operating Policies and Procedures........................9 4.4 Sale Transactions by Members in the Pool.................9 4.5 Scheduling Member........................................9 4.6 Right to Designate Agent.................................9 5. RATES..........................................................10 5.1 General.................................................10 5.2 Periodic Review.........................................10 5.3 Pool Settlement.........................................10 5.4 Functional Unbundling...................................10 5.5 Reasonable Rates........................................10 5.6 Allocation of Payment Defaults..........................10 5.7 Covenant of the Member..................................11 i 6. DELIVERY POINTS AND GENERAL TERMS AND CONDITIONS OF SERVICE............................................................11 6.1 Delivery Points.........................................11 6.2 General Terms and Conditions. .........................11 6.3 Seller and Member Duties................................11 7. RIGHTS OF ACCESS, RECORDS AND ACCOUNTS.........................12 7.1 Rights of Access. .....................................12 7.2 Accounting Records. ...................................12 7.3 Access to Books and Records. ..........................12 8. REORGANIZATIONS, TRANSFERS AND SALES OF ASSETS BY THE MEMBER..................................................13 8.1 Dissolution or Liquidation. ...........................13 8.2 Permitted Transactions. ...............................13 8.3 Service Territory and Distribution System. ............14 8.4 Specific Performance. .................................14 9. ASSIGNMENTS....................................................14 9.1 General. ..............................................14 9.2 Assignment for Security.................................15 9.3 Corporate Reorganization. .............................15 9.4 Receiver or Trustee in Bankruptcy.......................16 9.5 Express Rejection of Implied Limitations................16 10. EVENTS OF DEFAULT AND REMEDIES.................................16 10.1 Payment Default. ......................................16 10.2 Seller's Failure to Deliver. ..........................17 10.3 Performance Default. ..................................17 10.4 Remedies................................................17 11. REASONABLENESS OF RATES........................................18 11.1 Fixed Rate Contract. ..................................18 11.2 Formulaic Rate. .......................................18 11.3 Regulatory Review.......................................18 12. EFFECTIVENESS AND TERM.........................................19 12.1 Effectiveness and Term..................................19 12.2 Reduction in Term.......................................19 ii 13. AMENDMENTS, ENTIRE AGREEMENT AND CONFLICTS.....................19 13.1 Amendments. ............................................19 13.2 Entire Agreement. .....................................19 13.3 Conflicts. ............................................20 13.4 Counterparts. .........................................20 14. SEVERABILITY...................................................20 15. AMENDMENT AND RESTATEMENT......................................20 16. GOVERNING LAW..................................................20 17. MEDIATION......................................................20 18. MEMBER'S WITHDRAWAL FROM SELLER................................21 18.1 Member Withdrawal. ....................................21 18.2 References..............................................21 19. MISCELLANEOUS..................................................21 19.1 No Retail Sales.........................................21 19.2 Indemnification. ......................................22 19.3 No Restriction on Revenue Allocation. .................22 19.4 Corporate Documents. ..................................22 19.5 Information Requirements. .............................22 19.6 No Third Party Beneficiaries. .........................23 19.7 Rules of Construction...................................23 20. NOTICES........................................................23 iii AMENDED AND RESTATED WHOLESALE POWER CONTRACT THIS AMENDED AND RESTATED WHOLESALE POWER CONTRACT, dated as of August 1, 1996 (together with permitted amendments hereto, this "Agreement"), is entered into by and between Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation), an electric membership corporation organized and existing under the laws of the State of Georgia (the "Seller"), and Altamaha Electric Membership Corporation, an electric membership corporation organized and existing under the laws of the State of Georgia (the "Member"). R E C I T A L S: WHEREAS, the Seller's existing members, including the Member, are 39 electric membership corporations doing business in the State of Georgia, each of which joined with the others, beginning in 1974, to form the Seller in order to share the benefits and costs of ownership of an entity that would engage in providing electric capacity and energy for the benefit of its members; and WHEREAS, the Seller currently owns and operates electric generation plants and in the future may construct additional electric generation plants or purchase or otherwise obtain electric capacity and energy for the purpose, among others, of supplying electric capacity and energy to its members, several of which are borrowers from the Rural Utilities Service, as successor to the Rural Electrification Administration (the "RUS"), and others; and WHEREAS, the Seller has financed the construction of such generating plants in whole or in part through loans, and may in the future obtain additional loans, evidenced by mortgage notes (collectively, the "Notes") made or guaranteed by the United States of America (the "Government"), acting through the Administrator of the RUS (the "Administrator") and loans made by, or securities issued to, or obligations undertaken to, others; and WHEREAS, the Notes and certain of the loans made by, or securities issued to, or obligations undertaken to, others (collectively, with the Notes, the "Secured Obligations") are or may be secured by that certain Consolidated Mortgage and Security Agreement, dated as of September 1, 1994, made by and among the Seller; the Government; CoBank, ACB, as successor in interest to National Bank for Cooperatives; Credit Suisse, acting by and through its New York Branch; and SunTrust Bank, Atlanta, successor in interest to Trust Company Bank, as trustee, as it may hereafter be amended, supplemented, restated, or replaced or substituted for, including by a trust indenture, from time to time (the "Mortgage"); and WHEREAS, this Agreement and payments due to the Seller under this Agreement are pledged and assigned to secure the Secured Obligations as provided in the Mortgage; and WHEREAS, the Seller and the Member are parties to that certain Amended and Consolidated Wholesale Power Contract, dated as of December 1, 1988; and WHEREAS, the Government and the other holders of the Secured Obligations are relying on this Agreement and other wholesale power contracts between the Seller and its other members to assure that the Secured Obligations are repaid and the purposes of the Rural Electrification Act of 1936, as amended (the "REAct"), are carried out, and the Seller and the Member, by executing this Agreement, acknowledge that reliance; and WHEREAS, the Seller and the Member believe that, under current and foreseeable industry conditions, the continued ability of the Seller's members to operate as effective retail electric cooperatives in furtherance of the purposes of the REAct requires more flexibility in meeting their future needs for electric capacity and energy than would be available under the "all requirements" terms of the Existing Contracts, provided that adequate provision is made for the continued recovery by the Seller of all costs and expenses associated with electric capacity and energy to which the Seller has committed through the date of this Agreement; and WHEREAS, for the purpose of adjusting to changes in the electric industry, it is the intent of the parties that, as of the effective date of this Agreement, the Seller shall transfer its transmission and distribution assets substantially as an entirety to Georgia Transmission Corporation, a new electric membership corporation organized and existing under the laws of the State of Georgia ("GTC"); and WHEREAS, the Member has determined that its interests and the interests of its consumers will be best served by purchasing certain amounts of electric capacity and associated energy from *the Seller on the terms and conditions of this Agreement; and WHEREAS, the Member is undertaking to purchase from the Seller, and the Seller is undertaking to sell to the Member, certain amounts of electric capacity and associated energy on the terms and conditions herein set forth; NOW, THEREFORE, in consideration of the premises and the mutual undertakings herein contained, the Seller and the Member hereby agree as follows: 1. DEFINITIONS. All capitalized terms used herein shall have the respective meanings set forth in Schedule C attached hereto, unless the context in which such term is used clearly requires otherwise. 2. PURCHASE AND SALE OBLIGATION. 2.1 Purchase and Sale. The Seller shall sell and deliver to the Member, and the Member shall take and pay for or pay for, even if not available, delivered or taken, at the rates provided for in Section 5, all electric capacity allocated to the Member as reflected in the Member's 2 Percentage Capacity Responsibilities set forth in the Exhibits to Appendix 1 to "Rate Schedule A" (as amended from time to time in accordance with Section 3). The Seller shall sell and deliver to the Member, and the Member shall pay for, at the rates provided for in Section 5, any associated energy that the Member shall determine to purchase for its own use or for resale pursuant to this Agreement. The Member's payment obligations associated with its PCR in any Resource shall continue until all costs of such Resource are paid in full notwithstanding the occurrence of any event, or the taking of any action permitted by this Agreement, with respect to such Resources, including, without limitation, any event or action described in Section 2.3. 2.2 No Dedication of Resources. Neither the establishment of a PCR for a Member with respect to a Resource nor the sale by the Seller to the Member of electric capacity and associated energy under this Agreement shall constitute either (i) a sale, lease, transfer , dedication or conveyance of an ownership interest in or to any Resource or (ii) an entitlement to the electric capacity or associated energy from any specific Resource. The Seller shall have the sole authority, which it may exercise in its discretion, to manage, control and operate all of its Resources, subject to the Seller's obligations to provide available electric capacity and associated energy to the Member pursuant to this Agreement. 2.3 Member's Unconditional Obligation to Pay. The Member shall make all payments for electric capacity and energy that are required pursuant to this Agreement in a timely manner, whether or not (i) electric capacity and energy has or is being provided to the Member hereunder, (ii) Resources or any part thereof are completed, delayed, terminated, available, operable, operating, retired, sold, leased, transferred, or otherwise disposed of, (iii) the construction or operation of the Resources or any part thereof is suspended, interrupted, interfered with, reduced, curtailed or terminated, (iv) the Seller is able to purchase or otherwise obtain electric capacity and energy from any source or (v) any similar contract with any other member of the Seller is invalid, in each such case for any reason whatsoever and whether or not due to the conduct, acts or omissions of the Seller. Such payments by the Member shall not be subject to any reduction, whether by offset, recoupment or otherwise, and shall not be conditioned upon performance by the other members of the Seller or the Seller under this Agreement or any other agreement or instrument. This Section 2.3 shall not be construed to release the Seller from the performance of any of its obligations expressed in this Agreement or, except to the extent expressly provided in this Agreement, prevent or restrict the Member from asserting any rights that it may have against the Seller or any other person under this Agreement or any other agreement or under any provision of law or prevent or restrict the Member, at its own cost and expense, from prosecuting or defending any action or proceeding against or by third parties or taking any other action to secure or protect its rights under this Agreement. 3. POWER SUPPLY PLANNING AND RESOURCE ALLOCATIONS. 3.1 Percentage Capacity Responsibilities; Power Sale Resources. 3.1.1 Percentage Capacity Responsibilities. The Seller shall at all times 3 maintain Exhibits to Appendix 1 to "Rate Schedule A" which identify all Resources, all Percentage Capacity Responsibilities for the Member and all other members with respect to each Resource and the original projected useful life or the contract term for each Resource. (The identification of the original projected useful life or the contract term of a Resource is for the sole purpose of determining whether a Resource Modification constitutes a Major Resource Modification). The Seller shall not construct or acquire a Future Resource unless (i) the total of the PCRs allocated to the members of the Seller that have a PCR in the Future Resource equals one hundred percent (100%) at the time the Seller approves the principal documents necessary to commit the Seller to such Future Resource, and (ii) the members of the Seller which do not have a PCR with respect to such Future Resource are liable for a pro rata share of the costs and expenses of such Future Resource in the event of a Payment Default by all members which have a PCR with respect to such Future Resource as provided in Section 3.5.3. 3.1.2 Power Sales Resources. The Seller shall also identify in Exhibits to Appendix 1 to "Rate Schedule A" all Power Sales Resources and the allocations made by the Seller with respect thereto in accordance with Section 3.4.2. 3.2 Change of Certain Member Obligations. 3.2.1 Without the prior written consent of the Member, the Seller may not (i) allocate a PCR to the Member for a Future Resource, (ii) modify the Member's PCR for an Existing Resource or a Future Resource or (iii) otherwise add or modify an Exhibit to Appendix 1 to "Rate Schedule A," except as follows: (a) If the Seller is not then released by the Member from its responsibility set forth in clause (ii) of Section 3.3.1 to undertake future resource procurement, the Seller may allocate a PCR to the Member with respect to a Future Resource in accordance with Section 3.4.1; (b) If the Seller is not then released by the Member from its responsibility set forth in clause (iii) of Section 3.3.1 to sell electric capacity and energy, the Seller may make an allocation to the Member with respect to a Power Sale Resource in accordance with Section 3.4.2; and (c) The Seller may modify the Member's PCR in connection with a Major Resource Modification in accordance with Section 3.4.3. 3.2.2 Any addition of or modification to an Exhibit to Appendix 1 to "Rate Schedule A" made pursuant to Section 3.2.1 shall be prepared and approved by the Seller in accordance with this Agreement and shall be conclusively established by a resolution duly adopted by the Board of Directors of the Seller concurrently with the Board's authorization of the execution of the principal documents necessary to obligate the Seller to the transaction resulting in such 4 modification or addition. The Member's obligations shall thereupon be effective as to any allocation with respect to a Power Sale Resource or any PCR allocated to the Member in such additional or modified Exhibit, and the Member shall make all payments required pursuant to this Agreement with respect to such obligations. Such obligations of the Member shall not be affected by any subsequent release by the Member of the Seller of the responsibilities set forth in Section 3.3.1. 3.3 Planning and Resource Management. 3.3.1 Unless and until the Member provides an applicable written notice pursuant to Section 3.3.2, the Seller shall be responsible for (i) bulk power supply planning, (ii) future resource procurement, and (iii) sales of electric capacity and energy for the Member (all three services, collectively, "Joint Planning and Resource Management"). The Seller shall conduct Joint Planning and Resource Management in accordance with written policies in effect from time to time (the Seller's "Resource Policies"). The Member shall provide an annual written notice to the Seller of the Member's long-range forecast of load and any power supply resources the Member plans to acquire or dispose of on its own behalf (an "Annual Planning Report") at the time(s) required and in accordance with the Seller's Resource Policies. No change to the Seller's Resource Policies made subsequent to the due date of the Member's Annual Planning Report shall be effective, as to the Member, until January 1 of the calendar year following the due date of the Member's next Annual Planning Report. 3.3.2 The Member may elect to take individual responsibility for its own (i) bulk power supply planning, (ii) future resource procurement, or (iii) sales of electric capacity and energy by providing the Seller with written notice of its release of the Seller from all such responsibilities or any one or more of them. Any such notice shall be in the form provided in the Seller's Resource Policies, shall be given no later than the due date of the Member's Annual Planning Report, and shall be effective January 1 of the following year. Notwithstanding any notice given under this Section 3.3.2, the Member shall continue to provide its Annual Planning Report to the Seller unless the Member is a Scheduling Member pursuant to Section 4.1, and the Member shall pay its allocated share of the total cost of Joint Planning and Resource Management until the effective date on which the Member takes individual responsibility for all three services. If the Member has made any such election, the Seller shall reassume any such responsibilities only in accordance with the notice requirements and the terms set forth in the Seller's written policies and procedures, as the Seller may amend such policies and procedures from time to time. 3.4 Future Resources, Power Sale Resources and Resource Modifications. 3.4.1 If the Seller is not then released by the Member from its responsibility set forth in clause (ii) of Section 3.3.1 to undertake future resource procurement, the Seller may allocate to the Member, and the Member shall be responsible for, a PCR with respect to any Future Resource approved by the Seller in accordance with Section 3.2.2. Such allocation shall be made in accordance with the Seller's Resource Policies. 5 3.4.2 If the Seller is not then released by the Member from its responsibility set forth in clause (iii) of Section 3.3.1 to sell electric capacity and energy, the Seller may sell all or part of the electric capacity and associated energy allocated to the Member pursuant to its PCR with respect to any Resource. No such sale shall affect the Member's PCR with respect to any such Resource (even though such sale may reduce or eliminate the electric capacity and associated energy available to the Member during the term of the sale). Any such sale of electric capacity or energy by the Seller for a term of greater than one (1) year shall be allocated among the members of the Seller for whom the sale is made as a Power Sales Resource in accordance with the Seller's Resource Policies and shall be treated as a Resource in "Rate Schedule A." The Seller may, in its sole discretion, at any time and from time to time, modify, amend, extend, shorten or terminate any Power Sales Resource. 3.4.3 The Seller may, in its sole discretion, undertake from time to time capital expenditures for additions, improvements, repairs or modifications to a Generating Resource or modify or extend a Power Purchase Resource (a "Resource Modification"). The parties recognize that a Resource Modification may change the capacity of a Resource. In such event, a change may be required to be made with respect to an existing Exhibit, or a new Exhibit may be required, to Appendix 1 to "Rate Schedule A." Each such Resource Modification shall be determined by the Board of Directors of the Seller to be either a Major Resource Modification or a Minor Resource Modification. (a) A Minor Resource Modification shall not affect the Member's PCR with respect to such Resource (even though such modification may change the electric capacity and associated energy available to the Member or the contract term or useful life of the Resource). (b) If the Board of Directors of the Seller determines that a Major Resource Modification is required to comply with Legal Requirements, such Major Resource Modification shall not affect the Member's PCR with respect to such Resource (even though such modification may change the electric capacity and associated energy available to the Member or the contract term or useful life of the Resource). A determination that a Major Resource Modification is required to comply with Legal Requirements shall be made only by the vote of seventy-five percent (75%) of the Board of Directors of the Seller. (c) If the Seller has determined to make a Major Resource Modification and the Board of Directors of the Seller has not determined that such Major Resource Modification is required to comply with Legal Requirements, such Major Resource Modification shall be a Future Resource. If at the time the Board of Directors of the Seller authorizes such Major Resource Modification the Seller is then released by the Member from its responsibility set forth in clause (ii) of Section 3.3.1 to undertake future resource procurement, the Member may elect not to participate in a Major Resource Modification by providing the Seller with prior written notice in accordance with the Seller's Resource Policies. Such notice shall serve as the Member's prior written consent for the Seller to 6 change the Member's PCR to the extent, if any, required to allocate the increased capacity or extended life resulting from such Major Resource Modification solely to the members that are participating in such Major Resource Modification. (The Seller may also change the Member's PCR in connection with such a Major Resource Modification if at the time the Board of Directors of the Seller authorizes such Major Resource Modification, the Seller is not then released by the Member from its responsibility set forth in clause (ii) of Section 3.3.1 to undertake future resource procurement.) Any addition or modification of an Exhibit made by the Seller's Board of Directors to reflect the allocation of such additional capacity or extended useful life to participating Members shall be based on the study of an independent consulting engineer. If the Member elects not to participate in a Major Resource Modification that extends the useful life, the Board of Directors of the Seller shall also determine the date on which the PCR of the Member shall terminate, based on the expected useful life of the Resource prior to the Major Resource Modification. 3.5 Cost Responsibility. 3.5.1 In the event of a Payment Default by a member of the Seller, the Seller shall allocate the amount of the Payment Default to each Resource with respect to which the defaulting member has a PCR, and each non-defaulting member that has a PCR with respect to each such Resource shall bear the otherwise unrecovered costs resulting from such Payment Default in the proportion of its PCR to the aggregate of the PCRs of all non-defaulting members in each such Resource. 3.5.2 In the event any members of the Seller do not have a PCR with respect to an Existing Resource and there is a Payment Default by all members of the Seller that have a PCR with respect to such Existing Resource, all other members shall become liable for a pro rata share of the costs and expenses of such Existing Resource. The term "liable for a pro rata share" shall mean that each of the non-defaulting members shall have their liability based on the aggregate of Rated Capacity allocated to each of such members pursuant to its PCR with respect to all Resources of the Seller divided by the aggregate of such Rated Capacity of all non-defaulting members that share such pro rata liability. Such pro rata liability shall extend to any modification of an Existing Resource which is a Minor Resource Modification or a Major Resource Modification required to comply with Legal Requirements. 3.5.3 In the event of a Payment Default by all members of the Seller that have a PCR with respect to any Future Resource, the members of the Seller that do not have a PCR with respect to such Future Resource shall become liable for a pro rata share of the costs and expenses of such Future Resource if, and only if, (i) such Future Resource has been approved by seventy-five percent (75%) of the Seller's Board of Directors and seventy-five percent (75%) of the members of the Seller, or (ii) such Future Resource is acquired or constructed solely to meet the requirements of members of the Seller that continue to take capacity and energy under Existing Contracts. Such pro rata liability shall extend to any modification of a Future Resource which is a Minor Resource Modification or a Major Resource Modification required to comply with Legal 7 Requirements. 3.6 Non-Recourse Resources. The Seller may, as provided in this Section 3.6, enter into an agreement for the purchase of capacity and energy or energy with a term greater than one (1) year, or acquire or construct a generating facility without such purchase agreement or generating facility constituting a Resource subject to the provisions of this Agreement. The Seller may enter into such a purchase agreement or acquire or construct such a generating facility if, and only if: (a) Any such purchase agreement shall be a Non-Recourse Obligation; (b) With respect to any such generating facility (including improvements and modifications): (i) Any Indebtedness incurred by the Seller to finance the estimated capitalized cost of such generating facility shall be a Non-Recourse Obligation; (ii) The Seller may not provide more than fifteen percent (15%) of the estimated capitalized cost of such generating facility from its funds (other than proceeds from Non-Recourse Obligations); and (iii) Any contract for the purchase of fuel, fuel transportation or pumping energy for such generating facility with a term greater than one (1) year shall be a Non-Recourse Obligation; and (c) The Seller shall enter into a separate power supply agreement or agreements with one or more of its members or others providing for the full recovery through rates charged to such parties of all costs of any such purchase agreement or the construction, acquisition and operation of any such generating facility. 4. POOLING. 4.1 Seller's Energy and Capacity Pool. From time to time, the Seller may elect to pool the electric capacity and energy associated with the PCR and other resources owned or contracted for by its members (including the allocated electric capacity and energy of the Member) in an energy and capacity pool (the "Pool") . The Member also may elect from time to time not to have the capacity represented by the Member's PCR and other resources and associated energy included in the Pool and to have such capacity and energy to be separately scheduled (during the effectiveness of any such election, the Member shall be a "Scheduling Member"). Such election to be a Scheduling Member shall be made by written notice given to the Seller no later than the due date of the Member's Annual Planning Report and shall be effective on January 1 of the following year, or such other date as the Seller and the Member shall agree in writing. If the Member has made such an election, the Member may re-commit its allocated electric capacity and energy to the Pool 8 only in accordance with the notice requirements and the terms set forth in the Seller's written policies and procedures. 4.2 System Operator. The Seller may from time to time enter into an agreement with another entity to operate the Seller's system. Concurrently with the effective date of this Agreement, the Seller has contracted with Georgia System Operations Corporation ("GSOC") as the initial operator of the Seller's system and as the operator of the Pool. The Seller shall continue to utilize GSOC as the operator of the Seller's system and as operator of the Pool until (i) such time, if any, that the Seller and GSOC mutually agree otherwise or (ii) such contract is terminated in accordance with its terms. 4.3 Operating Policies and Procedures. The Seller shall itself, or pursuant to a contract require the system operator to, at all times maintain in effect written policies and procedures for system operations, energy settlements, reserve sharing and settlements, scheduling and dispatching of resources, sales of excess capacity and energy by the Seller or its members, load following and related matters, that treat on a comparable basis the utilization of all of the Seller's Resources by the Pool and by any members of the Seller which do not participate in the Pool (or if the Seller has not established a Pool that is continuing, the Seller shall treat on a comparable basis the utilization of the resources by the Member and other members). Comparable basis refers to the legal standard then employed by FERC for determining that there has been no undue discrimination as among the owner of a facility and others that have the right to use such facility. Any determination by GSOC or any other independent system operator with respect to application of its written policies and procedures shall be conclusive as to the Seller and the Member, subject to the resolution of disputes in accordance with such independent system operator's applicable tariffs and service agreement. 4.4 Sale Transactions by Members in the Pool. If it is a participant in the Pool, the Member shall be entitled to resell for its own account all or any part of the capacity and associated energy purchased hereunder to any person or entity in accordance with applicable operating policies and procedures in effect from time to time. 4.5 Scheduling Member. While the Member is a Scheduling Member, the Member shall be entitled to resell for its own account all or any part of the capacity and associated energy purchased hereunder to any person or entity and to schedule for its own account such capacity and energy in accordance with applicable operating policies and procedures in effect from time to time. 4.6 Right to Designate Agent. Whenever this Agreement requires or permits the Seller to provide information, schedules, notice or the like to, or to take direction from, the Member the Member may by written notice to the Seller, require the Seller to provide such information, schedules, notice or the like to, or to take direction from, the Member, its agent or both. The provisions of this Section does not create any right to assign this Agreement, such matters being governed exclusively by the provisions of Sections 8 and 9. 9 5. RATES. 5.1 General. The Member shall make all payments to the Seller that are required pursuant to this Agreement at the rates and on the terms and conditions set forth herein and in "Rate Schedule A," as amended from time to time as provided in Section 3 and this Section 5; provided, however, that no Exhibit to Appendix 1 to "Rate Schedule A" shall be amended in any manner inconsistent with Section 3. 5.2 Periodic Review. The Seller at such intervals as it shall deem appropriate, but in any event not less frequently than once in each calendar year, shall review the rates for electric capacity and energy furnished hereunder and under the wholesale power contracts with the Seller's other members and, if necessary, shall revise such rates so that such rates shall produce revenues that shall be sufficient, but only sufficient, with the revenues of the Seller from all other sources, to meet all of the Seller's costs, to cover all payments on account of indebtedness of the Seller (except any Non-Recourse Obligation), to provide for the establishment and maintenance of reasonable reserves, and to comply with all financial requirements contained in the Mortgage or in any indenture, mortgage, or contract relating to any indebtedness or other financial obligations of the Seller as they may exist from time to time (except any Non-Recourse Obligation). 5.3 Pool Settlement. The rates shall include credits and charges to the Member to reflect settlements related to the operation of the Seller's Resources, including the Member's PCR and associated energy and other resources in the Pool, unless the Member shall then be a Scheduling Member. 5.4 Functional Unbundling. The Seller shall account for its direct and indirect costs so that the rate for each Resource and the charge for each service that the Seller provides to one or more members recovers all direct costs and a share of indirect costs for each Resource and service, including administrative and general expenses and margins, allocated in accordance with Accounting Requirements. 5.5 Reasonable Rates. The rates and terms and conditions of service provided by the Seller hereunder, including changes from time to time in "Rate Schedule A," shall be just and reasonable and not unduly discriminatory, but shall at all times be sufficient to comply with the requirements of Section 5.2. 5.6 Allocation of Payment Defaults. The Seller shall at all times provide in "Rate Schedule A" a mechanism by which the Seller shall allocate all unrecovered costs resulting from a Payment Default by the Member or a Payment Default by any other member to each Resource with respect to which the defaulting member has a PCR and a mechanism for recovering such costs from the members that also have a PCR with respect to such Resource in accordance with the provisions of Section 3.5.1. Such rate provision shall further ensure that if the Member has no PCR with respect to a Resource, the Seller shall not seek to recover from the Member any of the costs of that 10 Resource otherwise unrecovered as the result of a Payment Default by another member unless every member that has a PCR in such Resource has defaulted. In the event of Payment Defaults by all members that have a PCR with respect to a Resource, the Seller may recover the amount of such Payment Defaults only in accordance with Sections 3.5.2 and 3.5.3. 5.7 Covenant of the Member. The Member covenants and agrees to establish, maintain and collect rates and charges for the service of its electric system, and to conduct its business, in a manner which shall produce revenues and receipts at least sufficient to enable the Member to pay to the Seller, when due, all amounts payable by the Member under this Agreement and to pay any and all other amounts payable from, or which might constitute a charge and a lien upon, the revenues and receipts derived from its electric system, including all operation and maintenance expenses and the principal of, premium, if any, and interest on all indebtedness related to the Member's electric system. 6. DELIVERY POINTS AND GENERAL TERMS AND CONDITIONS OF SERVICE. 6.1 Delivery Points. Subject to Section 6.3, the Seller shall furnish the electric capacity and deliver the energy purchased by the Member under this Agreement to the Member at (i) the high side of the step-up transformer at each Resource with respect to capacity and energy that is produced by a Resource that is interconnected with the Georgia Integrated Transmission System (the "ITS") and (ii) the interface of the ITS at which capacity is furnished and energy is delivered to Seller from a Resource that is not interconnected with the ITS. Title and risk of loss of such energy shall pass from the Seller to the Member at such delivery points. As between the parties hereto, the Seller shall be deemed to be in exclusive control (and responsible for any injury and damage caused thereby) of the electric capacity and energy prior to the delivery point, and the Member shall be deemed to be in exclusive control (and responsible for any damages or injury caused thereby) of the electric capacity and energy at and from the delivery point. 6.2 General Terms and Conditions. The general terms and conditions of service (which reflect implementing details of this Agreement) provided by the Seller to the Member hereunder are established in the General Terms and Conditions in "Rate Schedule A." 6.3 Seller and Member Duties. 6.3.1 The Seller and the Member shall use reasonable diligence to deliver and receive a constant and uninterrupted supply of electric capacity and energy. If the supply of electric capacity and energy shall fail or be interrupted, or become defective, as the result of an event of force majeure or its adverse effects, the Seller shall not be liable therefor or for damages caused thereby. "Force majeure" shall mean the occurrence or non-occurrence of any act or event that could not reasonably have been expected and avoided by exercise of due diligence and foresight and such act or event is beyond the reasonable control of the Seller. In the event of an interruption of service, the Seller and the Member shall use all due diligence to restore their respective systems to enable the delivery and receipt of electric capacity and energy. In the event of a power shortage, or an 11 adverse condition or disturbance, the Seller may, without incurring liability, take such emergency action as, in the judgment of the Seller, may be necessary. Such emergency action may include, but shall not be limited to, reduction or interruption of the supply of electricity to some points of delivery in order to compensate for an emergency condition on the system of the Seller, or on any other directly or indirectly interconnected system. 6.3.2 The Seller covenants and agrees that it will use its reasonable best efforts to operate, maintain and manage its Resources in accordance with Prudent Utility Practice. For purposes of this Agreement, "Prudent Utility Practice" shall mean any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry during the relevant time period, or any of the practices, methods and acts that, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at lowest reasonable cost consistent with good business practices, reliability, safety, and expedition. Prudent Utility Practice is not intended to be limited to the optimum practice, method, or act, to the exclusion of all others, but rather to include a spectrum of possible practices, methods, or acts generally acceptable in the region in light of the circumstances. 7. RIGHTS OF ACCESS, RECORDS AND ACCOUNTS. 7.1 Rights of Access. Duly authorized representatives of either party hereto shall be permitted to enter the premises of the other party hereto at all reasonable times in order to carry out the provisions hereof. 7.2 Accounting Records. The Seller shall keep accurate records and accounts in accordance with Accounting Requirements. Promptly after the close of each fiscal year (and not later than 120 days after the end of each fiscal year), the Seller shall cause such records and accounts of all transactions of the Seller with respect to such fiscal year to be subject to an annual audit by a firm of independent certified public accountants experienced in electric utility accounting and possessing a national reputation in accounting and auditing. The Seller shall without delay provide a copy of each such annual audit, including all written comments and recommendations of such accountants to the Member. 7.3 Access to Books and Records. The Member shall at all times have reasonable access during business hours to examine any and all and the books, records and supporting worksheets and data of the Seller as may be appropriate to determine the accuracy of any charges or payments required to be made by the Member to the Seller. If such books, records and supporting worksheets and data of the Seller contain information about another member of the Seller, the Seller shall excise any identification of a specific member or members or provide such information to an independent certified public accountant or other independent representative of the Member under a confidentiality agreement. If, after such examination of Seller's records, there is still a dispute as to the accuracy of any charge and the Member proceeds with mediation, arbitration or litigation, only requirements of confidentiality imposed by a mediator, arbitrator or court shall be applied. 12 8. REORGANIZATIONS, TRANSFERS AND SALES OF ASSETS BY THE MEMBER. 8.1 Dissolution or Liquidation. The Member shall not dissolve, liquidate or otherwise wind up its affairs without the approval in writing of the Seller. 8.2 Permitted Transactions. The Member shall not consolidate or merge with any other Person or reorganize or change the form of its business organization from an electric membership corporation or sell, transfer, lease or otherwise dispose of all or substantially all of its assets (each, a "Member Transaction") to any Person (or make any agreement therefor), whether in a single transaction or series of transactions, unless either: (a) Such Member Transaction is expressly approved in writing by the Seller; or (b) All of the following conditions are satisfied: (i) The Transferee shall be an entity organized and existing under the laws of the United States of America or any State or the District of Columbia; and (ii) No default or breach of this Agreement shall have occurred and be continuing; and (iii) If the Transferee is not the Member, the Transferee shall execute and deliver to the Seller an instrument supplemental hereto in form reasonably satisfactory to the Seller containing an assumption by the Transferee of the performance and observance of every covenant and condition of this Agreement required to be performed or observed by the Member; and (iv) A firm of independent certified public accountants shall prepare for the two calendar years immediately preceding the Member Transaction a set of pro forma financial statements that assume the consummation of the Member Transaction throughout the applicable determination period and that are prepared in accordance with generally accepted accounting principles. Based on such pro forma financial statements, such accountants must certify that: (A) the Transferee's Debt Service Coverage Ratio is at least 1.25 and Times Interest Earned Ratio is at least 1.50 for each of the two immediately preceding calendar years (assuming such Member Transaction had been consummated at the beginning of such two-year period); (B) the Transferee's Equity equals at least 27% of its Total Assets after giving effect to such Member Transaction; and 13 (C) the ratio of the Transferee's Net Utility Plant to its Long- Term Debt is at least 1.0 after giving effect to such Member Transaction. The specification of conditions in subsection 8.2(b) shall not be construed to establish minimum standards under which the Member may effect a Member Transaction, the purpose of such conditions being to establish when the Seller's approval need not be obtained. In the event the Member seeks the Seller's approval of a Member Transaction, the Seller may withhold such approval only upon a determination by the Board of Directors of the Seller that the Member Transaction could reasonably be expected to have a material adverse effect on the Member's ability to perform its obligations under this Agreement. 8.3 Service Territory and Distribution System. The Member shall not convey, transfer, lease, or otherwise dispose of any part of its electric distribution system or assigned service territory or voluntarily transfer or assign to another Person any customer of the Member (each, a "Conveyance") if such Conveyance, considered together with (i) all prior Conveyances, and (ii) all prior additions (by construction, conveyance, transfer or lease to the Member) to its electric distribution system, assigned service territory or customers could reasonably be expected to have a material adverse affect on the Member's ability to perform its obligations under this Agreement. 8.4 Specific Performance. The Member and the Seller agree that the failure or threatened failure of the Member to comply with the terms of this Section 8 will cause irreparable injury to the Seller, which cannot properly or adequately be compensated by the mere payment of money. The Member agrees, therefore, that in the event of a breach or threatened breach of this Section 8 by the Member, the Seller, in addition to any other remedies that may be available to the Seller, shall have the right to obtain from any competent court a decree enjoining such breach or threatened breach of this Section 8 or providing that the terms of this Section 8 be specifically enforced. 9. ASSIGNMENTS. 9.1 General. 9.1.1 This Agreement shall be binding upon and inure to the benefit of the permitted successors and permitted assigns of the parties, except that this Agreement may not be assigned by either party unless prior consent to such assignment is given in writing by the other party and, if either party is then an RUS borrower, the Administrator. Any assignment made without a consent required hereunder shall be void and of no force or effect as against the non-consenting party. 9.1.2 No sale, assignment, transfer or other disposition permitted by this Agreement shall affect, release or discharge either party from its rights or obligations under this Agreement, except as may be expressly provided by this Agreement. 14 9.2 Assignment for Security. 9.2.1 Notwithstanding any other provision of this Agreement, a party, without the other party's consent but, if such assigning party is then a borrower of the RUS, only with the consent of the Administrator, may assign, transfer, mortgage or pledge its interest in this Agreement as security (an "Assignment for Security") for any obligation secured by any indenture, mortgage or similar lien on its system assets without limitation on the right of the secured party to further assign this Agreement, including, without limitation, the assignment by the Member or the Seller to create a security interest for the benefit of the Government, acting through the Administrator, or for the benefit of any third party. 9.2.2 After any Assignment for Security to the Administrator or other secured party (including any indenture trustee under any indenture securing the obligations of the Seller), the Administrator or other secured party, without the approval of the other party to this Agreement, may (i) cause this Agreement to be sold, assigned, transferred or otherwise disposed of to a third party pursuant to the terms governing such Assignment for Security, or (ii) if the Administrator or other secured party first acquires this Agreement, sell, assign, transfer or otherwise dispose of this Agreement to a third party; provided, however, that in either case the party who made the Assignment for Security is in default of its obligations to the Administrator or other secured party that are secured by such security interest. 9.3 Corporate Reorganization. 9.3.1 The Seller may assign any or all of its rights and delegate any or all of its duties under this Agreement in connection with any reorganization, merger or consolidation of the Seller with another entity in which the Seller is not the surviving entity if (a) such merger or consolidation (i) is approved by seventy-five percent (75%) of the Board of Directors of Seller and seventy-five percent (75%) of the members of Seller, or (ii) is approved by a majority of the Board of Directors of the Seller and a majority of the members of the Seller if a payment default under the Mortgage shall have occurred and be continuing and (b) the surviving entity shall expressly assume by written agreement executed and delivered to the Member, the performance and observance of the provisions of this Agreement required to be performed or observed by the Seller. 9.3.2 The Seller may, in its sole discretion, at any time and from time to time, retire, sell, transfer, lease, terminate or otherwise dispose of any Resource (even though such transaction may reduce or eliminate the electric capacity and associated energy available to the Member with respect to such Resource); provided, that the Seller shall not sell, transfer, lease or otherwise dispose of all or substantially all of its Resources (each a "Seller Transaction") to any Person (or make any agreement therefor), whether in a single transaction or a series of transactions, unless such Seller Transaction is either: (a) approved by seventy-five percent (75%) of the Seller's Board of Directors and seventy-five percent (75%) of the members of the Seller, or (b) approved by a majority of the Board of Directors of the Seller and a majority of the members of the Seller if a payment default under the Mortgage shall have occurred and be continuing. The Seller may sell or 15 lease and leaseback any interest in a Resource (a "Leasehold Interest") in a sale-leaseback, lease-leaseback or similar transaction of any term or length (a "Lease Transaction") (even though such Lease Transaction may reduce the capacity and associated energy available to the Member with respect to such Resource). In connection with any Lease Transaction, the Leasehold Interest shall be considered the same Generating Resource and not a new Future Resource. 9.4 Receiver or Trustee in Bankruptcy. The parties intend that the obligations of the Member under this Agreement shall not be affected by a receiver, a trustee in bankruptcy, a mortgagee or an indenture trustee taking charge of the assets or business of the Seller, and that such receiver, trustee, mortgagee or indenture trustee may exercise all of the rights of, and make all of the determinations provided to be made in this Agreement by, the Board of the Directors of the Seller. 9.5 Express Rejection of Implied Limitations. The parties intend that this Agreement shall be assignable in accordance with the provisions of this Section 9 without regard to any other provisions of this Agreement, the nature of the Person to which this Agreement is assigned, or the issues raised in the case, In the Matter of Wabash Valley Power Ass'n., Inc., 72 F.3d. 1305 (7th Cir. 1995). Consequently, the parties agree that this Agreement may be assigned to any Person (including any receiver or trustee in bankruptcy) pursuant to this Section 9 without regard to the fact that (i) such Person is not a cooperative; (ii) the Board of Directors of such Person, if any, is not chosen by a vote in which the Member participates; or (iii) such Person is not operated on a not-for-profit basis. Further, no other provision of this Agreement shall restrict the assignment of this Agreement pursuant to this Section 9. In the event an assignment is made to a Person that is not an electric membership corporation (or other form of electric cooperative), all provisions of this Agreement requiring approval of the members or of the Board of Directors of the Seller shall cease to be applicable, and in such instances the Seller may act in its discretion. References in this Agreement to an assignment of this Agreement shall mean and include either or both of an assignment of rights or a delegation of duties. 10. EVENTS OF DEFAULT AND REMEDIES. 10.1 Payment Default. If the Member fails to make full payment to the Seller when required to be made under the provisions of this Agreement, and such failure continues for a period of ten (10) business days, the Seller shall give or cause to be given written notice to the Member. If the Member does not, within ten (10) business days from the date of the mailing of such notice, pay the full amount then due to the Seller, together with interest thereon, at the maximum legal rate of interest permitted by law from the date it became due, then such failure shall constitute a "Payment Default" on the part of the Member. The Seller shall promptly provide written notice to the other members of the Payment Default. 10.1.1 Upon a Payment Default, the Seller may suspend service to the Member for all or any part of the period of continuing default. The Seller's right to suspend service shall not be exclusive, but in addition to all other remedies available to the Seller at law or in equity. No suspension of service or termination of this Agreement or recovery of additional revenues from 16 other members pursuant to Section 5.6 shall relieve the Member of its obligations hereunder, which are absolute and unconditional. The Seller shall credit the obligations of the Member during any suspension of service with the monies actually received by the Seller from sales of capacity and energy that would have been available to serve the Member, but the Seller shall not be responsible for failure to mitigate the consequences of the Member's failure to pay in absence of gross negligence or willful misconduct. 10.1.2 The Seller may terminate this Agreement if (i) a Payment Default shall have occurred and be continuing and (ii) such termination is approved by seventy-five percent (75%) of the Seller's Board of Directors and seventy-five percent (75%) of the non-defaulting members of the Seller. 10.1.3 The fact that other members have paid increased rates and charges shall not relieve the Member of its liability for the amount owed by it to the Seller, and any member, either individually or as a member of a group, shall have such right of recovery from the Member as may be provided by law. The Seller or any member as their interests may appear, jointly or severally, may commence such suits, actions or proceedings, at law or in equity, including suits for specific performance, as may be necessary or appropriate to enforce the obligations of the Member under this Agreement. 10.2 Seller's Failure to Deliver. If the Seller fails to deliver electric capacity and energy as a result of the breach of the duties imposed on it under Section 6, the Seller shall promptly reimburse the Member for the cost of electric capacity and energy required to replace such capacity and energy, but the Member shall not be entitled to terminate this Agreement or to withhold payments required to be made pursuant to this Agreement. 10.3 Performance Default. If either party fails to comply with any of the terms, conditions and covenants of this Agreement (and such failure does not constitute a Payment Default by the Member), the non-defaulting party shall give the defaulting party written notice of the default (a "Performance Default"). The defaulting party shall have a period of thirty (30) days after receipt of such notice to commence reasonable efforts to cure such Performance Default, and it shall have an additional thirty (30) days to cure such Performance Default. Thereafter, if such Performance Default is continuing, the non-defaulting party, subject to the provisions of Section 10.4.1, shall have all of the rights and remedies provided at law and in equity, other than termination of this Agreement. 10.4 Remedies. 10.4.1 No remedy conferred upon or reserved to the Seller or the Member under this Agreement is intended to be exclusive of any other remedy or remedies available hereunder or now or hereafter existing and every such remedy shall be cumulative and shall be in addition to every other such remedy, provided that no Performance Default by the Seller shall permit the Member to terminate this Agreement or relieve the Member of its obligation to make payments 17 pursuant to this Agreement, which obligation shall be absolute and unconditional. 10.4.2 No waiver by either party hereto of any one or more defaults by the other party hereto in the performance of any provision of this Agreement shall be construed as a waiver of any other default or defaults, whether of a like kind or different nature. 10.4.3 Any action taken or determination made by the Board of Directors of the Seller as provided in Sections 3.2.2 and 3.4.3 shall be conclusive and binding as to the Member and all other members of the Seller. 10.4.4 To the fullest extent permitted by law, neither party shall be liable to the other for any indirect, consequential, multiple or punitive damages unless such damages are the result of the party's bad faith, gross negligence or willful misconduct. 11. REASONABLENESS OF RATES. 11.1 Fixed Rate Contract. The Seller was organized by the Member and 38 other electric membership corporations in Georgia to provide collectively for their electric capacity and energy requirements. This Agreement was established between the parties hereto, taking into account the present and projected needs for electric capacity and energy of the members of the Seller, the costs of the facilities subject to and contemplated by this Agreement and the alternatives thereto. The parties agree that the rates established hereunder are just and reasonable under the current circumstances and reflect their determination of what would be just and reasonable under future conditions reasonably contemplated by them. The rates take into account specific benefits achieved by the parties through this Agreement and not otherwise available to the parties, and reflect the sharing of those benefits without undue discrimination against any current or future customer of the Seller. 11.2 Formulaic Rate. The charges to be paid by the Member to the Seller for electric capacity and energy provided under this Agreement are intended to be adjusted only pursuant to and in accordance with the formulaic rates specified in "Rate Schedule A," as such formulae may be revised from time to time pursuant to the express terms of this Agreement. 11.3 Regulatory Review. 11.3.1 Nothing contained in this Agreement shall be construed as affecting in any way the right of the Seller unilaterally to file an application for a change in any part of "Rate Schedule A" to any governmental authority having jurisdiction, including the FERC under Section 205 of the Federal Power Act and pursuant to the FERC's rules and regulations promulgated thereunder, upon approval of the change by the Seller in a manner consistent with this Agreement. Other than an initial application filed by the Seller with the FERC to provide service pursuant to "Rate Schedule A," the Seller agrees that the Member may protest or contest the filings referred to in this Section 11.3 or any filings made by any member of Seller to change the formulary rate 18 mechanism contained in "Rate Schedule A," and the Member does not waive any rights it may have with respect to such filings. 11.3.2 It is the intent of the parties hereto that any such governmental authority having jurisdiction shall not, on its own motion or after petition by any person other than the Seller, replace the rates contained in "Rate Schedule A" with any other rate except upon finding that "Rate Schedule A" is contrary to the public interest. 11.3.3 If the Seller's rates are not established pursuant to a formulary rate mechanism, such as "Rate Schedule A" as changed from time to time, the Member shall have the right to file any applications relating to rates as may be permitted by law. 12. EFFECTIVENESS AND TERM. 12.1 Effectiveness and Term. This Agreement is dated as of the date specified in the introductory paragraph and shall become effective upon (i) execution and delivery hereof by the Seller and the Member, (ii) the approval in writing by the Administrator and (iii) the acquisition by GTC of the Seller's transmission and distribution assets substantially as an entirety. This Agreement shall remain in effect until December 31, 2025, and from year to year thereafter unless terminated on December 31, 2025, or any succeeding December 31, by either party's giving to the other not less than three years' prior written notice of its intention to terminate. 12.2 Reduction in Term. In the event the Seller prepays all of its obligations to the United States of America, the term of this Agreement will be shortened to coincide with the latest maturity of any then outstanding indebtedness, including any indebtedness issued to finance the amount of the prepayment, if such latest maturity occurs prior to December 31, 2025, provided, however, that in no event shall the term of this Agreement be shortened to a date prior to the expiration of any Lease Transaction, the performance of which depends upon the continued existence of this Agreement. 13. AMENDMENTS, ENTIRE AGREEMENT AND CONFLICTS. 13.1 Amendments. 13.1.1 No amendment to this Agreement shall be effective unless it has been approved or accepted for filing and permitted to go into effect by each governmental authority having jurisdiction. 13.1.2 This Agreement may be amended by agreement between the Seller and the Member, but no such amendment to this Agreement shall be effective unless it is in writing, executed by both parties; provided, however, that changes to "Rate Schedule A" shall be effective when made in accordance with the express provisions of this Agreement. 19 13.2 Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto relating to the subject matter contemplated by this Agreement and supersedes all prior agreements, whether oral or written. "Rate Schedule A", Schedule B and Schedule C are incorporated herein by reference. 13.3 Conflicts. 13.3.1 The Seller's Resource Policies, a current copy of which is attached hereto as Schedule B, may be modified from time to time by the Seller's Board of Directors. In the event of any conflict between the provisions of this Agreement and the Seller's Resource Policies, the provisions of this Agreement shall govern. 13.3.2 The provisions of this Agreement and "Rate Schedule A" incorporated by reference shall be interpreted to harmonize as a single instrument. In the event of any conflict between the provisions of this Agreement and the provisions of any amendments to "Rate Schedule A" or any future exhibits, appendices or schedules attached thereto and incorporated by reference herein, the provisions of this Agreement shall govern. 13.4 Counterparts. This Agreement may be executed in multiple counterparts to be construed as one. 14. SEVERABILITY. If any part, term, or provision of this Agreement is held by a court of competent jurisdiction to be unenforceable, the validity of the remaining portions or provisions shall not be affected, and the rights and obligations of the parties shall be construed and enforced as if this Agreement did not contain the particular part, term, or provision held to be unenforceable. 15. AMENDMENT AND RESTATEMENT. This Agreement restates into a single instrument the terms of the Existing Contract and the amendments made hereby. Prior to the amendments made hereby, the Existing Contract provided that "[t]he Seller shall sell and deliver to the Member and the Member shall purchase and receive from the Seller all electric power and energy which the Member shall require for the operation of the Member's system," subject to certain limited exceptions. The Seller and the Member acknowledge that their mutual intent in amending and restating the Existing Contract as provided in this Agreement is to change the all requirements obligation between them by fixing the Member's responsibility for electric capacity and associated energy committed to by the Seller pursuant to and in reliance upon the Existing Contract and similar contracts with its other members, and charges for such electric capacity and energy, in a manner such that the Seller can continue to meet its obligations with respect to such capacity and energy and to permit the Member to utilize electric capacity and energy from other sources on the terms and conditions set forth in this Agreement. 16. GOVERNING LAW. Except to the extent governed by applicable federal law, this Agreement shall be governed by, and construed in accordance with, the laws of the State of Georgia. 20 17. MEDIATION. If a dispute arises out of or relates to this Agreement, including all attachments hereto, or the breach thereof, the parties shall first in good faith seek to resolve the dispute through negotiation. If such dispute cannot be settled through negotiation, the parties agree to try in good faith to settle the dispute by mediation under the Commercial Mediation Rules of the American Arbitration Association, before resorting to arbitration, litigation, or some other dispute resolution procedure; provided that a party may not invoke mediation unless it has provided the other with written notice of the dispute and has attempted in good faith to resolve such dispute through negotiation. Notwithstanding the foregoing, any party may seek immediate equitable relief, without attempting to settle a dispute through mediation, in any case where such party is entitled to equitable relief by the terms of this Agreement or otherwise. 18. MEMBER'S WITHDRAWAL FROM SELLER. 18.1 Member Withdrawal. In the event the Member elects to withdraw as a member of Seller, the Member shall execute a copy of the Withdrawal Agreement (the "Withdrawal Agreement") in the form attached to the Member Agreement, dated as of August 1, 1996, among the Seller and its members, and deliver the same to Seller along with its Notice of Intent to Withdraw, including all required attachments to such Notice, as required by the Seller's bylaws. Such existing provisions of the Seller's bylaws and the form of the Withdrawal Agreement are incorporated by reference into this Agreement, and no amendment of such provision of the Seller's bylaws or the form of the Withdrawal Agreement shall reduce the rights of the Member (without its consent) as provided therein. The Member agrees that in the event of its withdrawal as a member of Seller, the performance by the Member in accordance with the terms of the Withdrawal Agreement shall be required in order to satisfy its obligations to Seller under this Agreement. The Member, by executing this Agreement, hereby stipulates and agrees that any other member of Seller may satisfy its obligations to the Seller, to the Member and to all other members of the Seller (current and former) by performing in accordance with the terms of the Withdrawal Agreement. 18.2 References. For the purposes of this Agreement, each reference to the "Member" shall mean (i) the withdrawn Member from and after the effective date of the Member's withdrawal from the Seller or (ii) any permitted assignee from and after the effective date of an assignment by the Member of this Agreement as provided in the Withdrawal Agreement. Further, for the purposes of this Agreement, each reference to a "member" or to the "members" of the Seller shall include any member or members which withdraw from the Seller or any permitted assignee of such member or members, except that any reference to an approval of the members shall not include any withdrawn member or members or such permitted assignees. 19. MISCELLANEOUS. 19.1 No Retail Sales. The Seller shall not, during the term of this Agreement, without the consent of the Member, (a) provide retail electric service in the State of Georgia within the Member's assigned geographic area established in accordance with the Georgia Territorial Electric Service Act, as such statute may be amended or replaced, or (b) offer to provide retail 21 electric service to any existing customer of the Member. 19.2 Indemnification. The Member shall indemnify and hold the Seller harmless from and against any and all losses, costs, liabilities, damages and expense (including without limitation attorneys' fees and expenses) of any kind incurred or suffered by the Seller pursuant to, as a result of or in connection with any resale by the Member of capacity, energy or both in the exercise of the Member's rights under Sections 4.4 or 4.5 except for losses, costs, liabilities, damages and expenses (including without limitation attorneys' fees and expenses) incurred or suffered by the Seller as a proximate cause of any action of the Seller that is not Prudent Utility Practice or is a breach of this Agreement. 19.3 No Restriction on Revenue Allocation. The Member's PCR and that of other members of the Seller for any or all Future Resources may be different from their respective percentages set forth on Exhibit 1 to Appendix 1 to "Rate Schedule A" with respect to Existing Resources, and may also vary among Future Resources or be zero as to any Future Resource. Recognizing the potential for such variation, and notwithstanding anything in any other agreement or document existing on the date of this Agreement, the Member agrees that the Seller shall not be restricted in its ability to apply revenues received from the Member or other amounts received by the Seller from the Member and others from or on account of the ownership or operation of its system or through or on account of the financing thereof, in such manner as the Seller shall determine to be in its best business interest. Likewise, the Member agrees that the Seller shall not be restricted in the Seller's ability to secure any and all indebtedness it may incur under instruments conveying security title to or creating a lien or other security interest in any or all of the Seller's assets, without regard to the purpose for which the indebtedness has been or may be incurred or the purpose for which the assets are used or are to be used, but the Member's contingent liability in the event of a Payment Default shall be governed by Section 3.5. 19.4 Corporate Documents. Whenever this Agreement authorizes the Seller to amend a schedule hereto, to develop and implement policies or to make other decisions or do other acts or things, at its sole discretion or otherwise, the Seller shall do so substantially in accordance with the applicable provisions of its duly adopted Articles, bylaws and corporate policies. Any failure on the part of the Seller to comply with this Section shall not relieve the Member of any obligation under this Agreement, but the Member shall not otherwise be prevented or limited in asserting any other rights it may have against the Seller in respect of such failure. 19.5 Information Requirements. The Seller and the Member shall each furnish to the other promptly upon request any and all information about itself, its financial condition, business and properties which may be necessary or desirable to facilitate any financing undertaken by the requesting party or any continuing disclosure obligation incurred by the requesting party in connection with any such financing. The supplying party shall be responsible only to the requesting party for the accuracy and completeness of the information furnished and shall have no responsibility or liability for the manner in which such information is used or its appropriateness for such use. The supplying party shall have no liability to any third party to which the requesting party may furnish 22 this information or any excerpt therefrom or summary thereof, and shall be entitled to receive appropriate assurances and indemnities from the requesting party to that effect as a condition to providing such information, provided that no such assurance or indemnity shall relieve the supplying party of liability to the requesting party for the accuracy and completeness of the information supplied. 19.6 No Third Party Beneficiaries. The Seller and the Member agree that no other member of the Seller or any other third party is an intended third-party beneficiary of this Agreement, except as may be provided in a separate instrument executed by each of the Seller and the Member. 19.7 Rules of Construction. (a) The descriptive headings of the various articles, sections and subsections of this Agreement and the Schedules attached hereto have been inserted for convenience of reference only and shall not be construed as to define, expand, or restrict the rights and obligations of the parties. (b) Wherever the term "including" is used in this Agreement and the Schedules attached hereto, such term shall not be construed as limiting the generality of any statement, clause, phrase or term. (c) The terms defined in this Agreement and the Schedules attached hereto shall include the plural as well as the singular and the singular as well as the plural. 20. NOTICES. All notices, requests, statements or payments provided for, required or permitted by this Agreement shall be sufficient for any and all purposes under this Agreement when transmitted by facsimile, first class United States Mail, hand delivery, or a private express delivery service to the facsimile numbers or addresses provided below. Seller: Oglethorpe Power Corporation 2100 East Exchange Place P. O. Box 1349 Tucker, Georgia 30085-1349 Attention: President and Chief Executive Officer FAX: (770) 270-7872 23 Member: Altamaha Electric Membership Corporation 611 West Liberty Street P.O. Box 346 Lyons, Georgia 30436 Attention: James D. Musgrove, General Manager FAX: (912) 526-4235 (Signatures on next page) 24 IN WITNESS WHEREOF, the Seller and the Member have caused this Agreement to be executed, attested, sealed and delivered by their respective duly authorized officers as of the day and year first written above. SELLER: OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) [CORPORATE SEAL] By: /s/ T.D. Kilgore ---------------------------------------- T. D. Kilgore, President and Chief Executive Officer ATTEST: /s/ Patricia N. Nash - ---------------------------------------- Patricia N. Nash, Assistant Secretary MEMBER: ALTAMAHA ELECTRIC MEMBERSHIP CORPORATION [CORPORATE SEAL] By: /s/ Jmon Warnock ---------------------------------------- Name: Jmon Warnock Title: President ATTEST: /s/ Bernard Hart - ---------------------------------------- Name: Bernard Hart Title: Secretary-Treasurer 25 SCHEDULE TO EXHIBIT 10.8.1 AMENDED AND RESTATED WHOLESALE POWER CONTRACT The following is a list of Substantially Identical Amended and Restated Wholesale Power Contracts for 37 other Electric Membership Corporations: 1. Amicalola EMC 20. Middle Georgia EMC 2. Canoochee EMC 21. Mitchell EMC 3. Carroll EMC 22. Ocmulgee EMC 4. Central Georgia EMC 23. Oconee EMC 5. Coastal EMC 24. Pataula EMC 6. Cobb EMC 25. Planters EMC 7. Colquitt EMC 26. Rayle EMC 8. Coweta-Fayette EMC 27. Satilla Rural EMC 9. Excelsior EMC 28. Sawnee EMC 10. Flint EMC 29. Slash Pine EMC 11. Grady EMC 30. Snapping Shoals EMC 12. Greystone Power Corporation, 31. Sumter EMC an EMC 32. Three Notch EMC 13. Habersham EMC 33. Tri-County EMC 14. Hart EMC 34. Troup EMC 15. Irwin EMC 35. Upson EMC 16. Jackson EMC 36. Walton EMC 17. Jefferson EMC 37. Washington EMC 18. Lamar EMC 19. Little Ocmulgee EMC Schedule A and Schedule B to the Amended and Restated Wholesale Power Contract are not filed herewith; however the Registrant hereby agrees that such Schedules will be provided to the Commission upon request. SCHEDULE C All capitalized terms used in this Agreement, including in this Schedule C, in "RATE SCHEDULE A" and in Schedule B, and not otherwise defined shall have the respective meanings set forth below. "Accounting Requirements" shall mean the requirements of any system of accounts prescribed by the RUS as long as the Government is the holder, insurer or guarantor of any indebtedness of the Member or, in the absence thereof, the requirements of generally accepted accounting principles applicable from time to time to companies similar to the Member. "Administrator" shall be as defined in the third Recital. "Agreement" shall be as defined in the first sentence of this Agreement. "Annual Planning Report" shall be as defined in Section 3.3.1. "Assignment for Security" shall be as defined in Section 9.2.1. "Conveyance" shall be as defined in Section 8.3. "Debt Service Coverage Ratio" shall mean the ratio determined as follows: for each calendar year ADD (i) Patronage Capital or Margins, (ii) Interest Expense, and (iii) Depreciation and Amortization Expense AND DIVIDE the total so obtained by an amount equal to the sum of all payments of principal and interest required to be made on account of Long-Term Debt during such calendar year; provided, however, that in the event that any Long-Term Debt has been refinanced during such year, the payments of principal and interest required to be made during such year on account of such Long-Term Debt shall be based (in lieu of actual payments required to be made on such refinanced debt) upon the larger of (y) an annualization of the payments required to be made with respect to the refinancing debt during the portion of such year such refinancing debt is outstanding, or (z) the payment of principal and interest required to be made during the following year on account of such refinancing debt, all as computed in accordance with Accounting Requirements. "Depreciation and Amortization Expense" shall mean an amount constituting the depreciation and amortization, as computed pursuant to Accounting Requirements. "Equity" shall mean the total equities and margins (or, if not a cooperative, equity), excluding Regulatory Assets, as computed pursuant to Accounting Requirements. "Existing Contract" shall mean that certain Amended and Consolidated Wholesale Power Contract, dated as of December 1, 1988, between the Seller and the Member, and when used in C-1 the plural, shall mean such contract and the similar contracts dated as of the same date and between the Seller and any other member. "Existing Resources" shall mean the Resources as set forth in Exhibit 1 to Appendix 1 to "RATE SCHEDULE A", as changed as a result or any Minor Resource Modification and any Major Resource Modification required to comply with Legal Requirements pursuant to Section 3.4.3. "FERC" shall mean the Federal Energy Regulatory Commission. "Force majeure" shall have the meaning set forth in Section 6.3.1. "Future Resource" shall mean any (i) new Generating Resource, or (ii) Power Purchase Resource of the Seller or (iii) Major Resource Modification pursuant to Section 3.4.3(c). "GSOC" shall be as defined in Section 4.2. "GTC" shall be as defined in the ninth Recital. "Generating Resource" shall mean the Seller's interest in and to any existing, additional or repowered generating facilities, which may be owned (jointly or individually), leased or otherwise acquired, as changed as a result of any Minor Resource Modification and any Major Resource Modification required to comply with Legal Requirements pursuant to Section 3.4.3. A single unit or facility may be divided into one or more Generating Resources as the result of a Major Resource Modification. "Government" shall be as defined in the third Recital. "ITS" shall be as defined in Section 6.1. "Indebtedness" shall mean (1) debt incurred or assumed by the Seller for borrowed money or for the acquisition, construction or improvement of property other than goods or services that are acquired in the ordinary course of business of the Seller; (2) lease obligations of the Seller that, in accordance with generally accepted accounting principles are shown on the liability side of a balance sheet; (3) all debt (other than indebtedness otherwise treated as Indebtedness hereunder) for borrowed money or the acquisition, construction or improvement of property or capitalized lease obligations guaranteed, directly or indirectly, in any manner by the Seller, or in effect guaranteed, directly or indirectly, by the Seller through an agreement, contingent or otherwise, to purchase any such indebtedness or to advance or C-2 supply funds for the payment or purchase of any such indebtedness or to purchase property or services primarily for the purpose of enabling the debtor or seller to make payment of such indebtedness, or to assure the owner of the indebtedness against loss, or to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether or not such property is delivered or such services are rendered), or otherwise; or (4) any agreement by the Seller to purchase or lease power, supplies, property or services primarily for the purpose of enabling a debtor or seller to make payment of debt service on indebtedness, pursuant to which the Seller agrees to pay for power, supplies, property or services irrespective of whether or not such power, supplies or property are delivered or such services are rendered. "Interest Expense" shall mean an amount constituting the interest expense on Long-Term Debt, as computed in accordance with Accounting Requirements. "Joint Planning and Resource Management" shall be as defined in Section 3.3.1. "Leasehold Interest" shall be as defined in Section 9.3.2. "Lease Transaction" shall be as defined in Section 9.3.2. "Legal Requirements" shall mean: (1) obligations of the Seller under all laws, codes, ordinances, orders, judgments, decrees, injunctions, licenses, rules, permits, approvals, regulations, and requirements of every governmental authority having jurisdiction over the matter in question, whether federal, state or local, which may be applicable to the Seller; (2) obligations of the Seller under an existing joint ownership agreement or other existing contract with respect to Existing Resources; (3) requirements pursuant to Prudent Utility Practice to keep Existing Resources in good operating condition during the useful life or contract term of such Existing Resources; (4) obligations of the Seller under a joint ownership agreement or other agreement with respect to a Future Resource, which agreement has been approved by a vote of seventy-five percent (75%) of each of the members of the Seller's Board of Directors and the members of the Seller; or (5) requirements pursuant to Prudent Utility Practice to keep a Future Resource in good operating condition during the useful life or contract term of such C-3 Future Resource, if such Future Resource has been approved by a vote of seventy-five percent (75%) each of the members of the Seller's Board of Directors and the members of the Seller. "Long-Term Debt" shall mean an amount constituting long-term debt, as computed in accordance with Accounting Requirements. "Major Resource Modification" shall mean any of (i) a Resource Modification that is expected to result in an increase in the Rated Capacity of a Resource by five percent (5%) or more, (ii) a Resource Modification that results in the extension of the projected total useful life by five percent (5%) or more of the original projected useful life, or (iii) an extension of the contract term for a Power Purchase Resource by more than one (1) year; all as conclusively determined by the Seller's Board of Directors and, with respect to (i) and (ii), based upon a study by an independent consulting engineer. "member" shall mean a member of the Seller. "Member" shall mean the electric membership corporation identified as such in the first sentence of this Agreement. "Member Transaction" shall be as defined in Section 8.2. "Minor Resource Modification" shall mean any Resource Modification that is not a Major Resource Modification. "Mortgage" shall be as defined in the fourth Recital. "Non-Recourse Obligation" shall mean any indebtedness or other obligation, (a) liability for which is limited to (i) specific property of the Seller and (ii) the revenues and other rights under separate power supply agreements and (b) for which there is no recourse, directly or indirectly, to any other property, revenues or agreements of the Seller; provided that such indebtedness or other obligation is incurred solely in connection with the acquisition, construction or operation of the property or agreements to which the liability relates. "Notes" shall be as defined in the third Recital. "Patronage Capital or Margins" shall mean the amount of net patronage capital and margins (or, if not a cooperative, net income), as computed in accordance with Accounting Requirements. "Payment Default" shall be as defined in Section 10.1 or where the context requires similar payment default by another of the members of the Seller. C-4 "Percentage Capacity Responsibility" or "PCR" of the Member and of each other member shall mean the percentage allocation with respect to a Resource, including the allocation of electric capacity, cost responsibility and revenues, if applicable. Exhibit 1 to Appendix 1 to "RATE SCHEDULE A" sets forth the PCR for the Member with respect to Existing Resources. Future exhibit(s) to Appendix 1 to "RATE SCHEDULE A" shall set forth any PCR for the Member and other members with respect to Future Resources. "Performance Default" shall be as defined in Section 10.3. "Person" shall mean an individual, partnership, limited liability company, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature. "Pool" shall be as defined in Section 4.1. "Power Marketing Transaction" shall be as defined in Section 19. "Power Purchase Resource" shall mean a purchase of capacity and energy or energy by the Seller with a contract term greater than one (1) year. "Power Sales Resource" shall mean a sale of capacity and energy or energy made by the Seller with a contract term greater than one (1) year. "Prudent Utility Practice" shall be as defined in Section 6.3.2. "REAct" shall be as defined in the seventh Recital. "RUS" shall be as defined in the second Recital. "Rated Capacity" shall mean the capacity rating of a Resource in effect from time to time, as determined by the Seller and used in Section 3.3 of Appendix 3 to "RATE SCHEDULE A." "Regulatory Asset" shall mean the sum of any amounts properly recordable as unrecovered plant and regulatory study costs or as other regulatory assets, as computed in accordance with Accounting Requirements. "Resource" shall mean one of the Generating Resources or Power Purchase Resources. "Resource Modification" shall be as defined in Section 3.4.3. "Resource Policies" shall be as defined in Section 3.3.1. "Scheduling Member" shall be as defined in Section 4.1. C-5 "Secured Obligations" shall be as defined in the fourth Recital. "Seller" shall mean Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation). "Seller Transaction" shall be as defined in Section 9.3.2. "Times Interest Earned Ratio" shall mean the ratio determined as follows: For each calendar year add (i) Patronage Capital or Margins and (ii) Interest Expense on Long-Term Debt, and divide the total so obtained by Interest Expense on Long-Term Debt, all as computed in accordance with Accounting Requirement. "Total Assets" shall mean an amount constituting the total assets, but excluding any Regulatory Assets, as computed in accordance with Accounting Requirements. "Transferee" shall mean the Person formed by any consolidation or that is the survivor of any merger or reorganization or the Person that acquires or leases all or substantially all of the electric assets of the Member. "Withdrawal Agreement" shall be as defined in 18.1. C-6 AMENDED AND RESTATED WHOLESALE POWER CONTRACT BETWEEN OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) AND OKEFENOKE RURAL ELECTRIC MEMBERSHIP CORPORATION DATED AS OF August 1, 1996 TABLE OF CONTENTS RECITALS.......................................................................1 1. DEFINITIONS.....................................................2 2. PURCHASE AND SALE OBLIGATION....................................2 2.1 Purchase and Sale........................................2 2.2 No Dedication of Resources...............................3 2.3 Member's Unconditional Obligation to Pay.................3 3. POWER SUPPLY PLANNING AND RESOURCE ALLOCATIONS..................3 3.1 Percentage Capacity Responsibilities; Power Sale Resources ..........................................3 3.2 Change of Certain Member Obligations.....................4 3.3 Planning and Resource Management.........................5 3.4 Future Resources, Power Sale Resources and Resource Modifications ..............................5 3.5 Cost Responsibility......................................7 3.6 Non-Recourse Resources...................................8 4. POOLING.........................................................8 4.1 Seller's Energy and Capacity Pool........................8 4.2 System Operator..........................................9 4.3 Operating Policies and Procedures........................9 4.4 Sale Transactions by Members in the Pool.................9 4.5 Scheduling Member........................................9 4.6 Right to Designate Agent.................................9 5. RATES..........................................................10 5.1 General.................................................10 5.2 Periodic Review.........................................10 5.3 Pool Settlement.........................................10 5.4 Functional Unbundling...................................10 5.5 Reasonable Rates........................................10 5.6 Allocation of Payment Defaults..........................10 5.7 Covenant of the Member..................................11 i 6. DELIVERY POINTS AND GENERAL TERMS AND CONDITIONS OF SERVICE...............................................................11 6.1 Delivery Points.........................................11 6.2 General Terms and Conditions. .........................11 6.3 Seller and Member Duties................................11 7. RIGHTS OF ACCESS, RECORDS AND ACCOUNTS.........................12 7.1 Rights of Access. .....................................12 7.2 Accounting Records. ...................................12 7.3 Access to Books and Records. ..........................12 8. REORGANIZATIONS, TRANSFERS AND SALES OF ASSETS BY THE MEMBER..................................................13 8.1 Dissolution or Liquidation. ...........................13 8.2 Permitted Transactions. ...............................13 8.3 Service Territory and Distribution System. ............14 8.4 Specific Performance. .................................14 9. ASSIGNMENTS....................................................14 9.1 General. ..............................................14 9.2 Assignment for Security.................................15 9.3 Corporate Reorganization. .............................15 9.4 Receiver or Trustee in Bankruptcy.......................16 9.5 Express Rejection of Implied Limitations................16 10. EVENTS OF DEFAULT AND REMEDIES.................................16 10.1 Payment Default. ......................................16 10.2 Seller's Failure to Deliver. ..........................17 10.3 Performance Default. ..................................17 10.4 Remedies................................................17 11. REASONABLENESS OF RATES........................................18 11.1 Fixed Rate Contract. ..................................18 11.2 Formulaic Rate. .......................................18 11.3 Regulatory Review.......................................18 12. EFFECTIVENESS AND TERM.........................................19 12.1 Effectiveness and Term..................................19 12.2 Reduction in Term.......................................19 ii 13. AMENDMENTS, ENTIRE AGREEMENT AND CONFLICTS.....................19 13.1 Amendments. ............................................19 13.2 Entire Agreement. .....................................19 13.3 Conflicts. ............................................20 13.4 Counterparts. .........................................20 14. SEVERABILITY...................................................20 15. AMENDMENT AND RESTATEMENT......................................20 16. GOVERNING LAW..................................................20 17. MEDIATION......................................................20 18. MEMBER'S WITHDRAWAL FROM SELLER................................21 18.1 Member Withdrawal. ....................................21 18.2 References..............................................21 19. MISCELLANEOUS..................................................21 19.1 No Retail Sales.........................................21 19.2 Indemnification. ......................................22 19.3 No Restriction on Revenue Allocation. .................22 19.4 Corporate Documents. ..................................22 19.5 Information Requirements. .............................22 19.6 No Third Party Beneficiaries. .........................23 19.7 Rules of Construction...................................23 20. NOTICES........................................................23 iii AMENDED AND RESTATED WHOLESALE POWER CONTRACT THIS AMENDED AND RESTATED WHOLESALE POWER CONTRACT, dated as of August 1, 1996 (together with permitted amendments hereto, this "Agreement"), is entered into by and between Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation), an electric membership corporation organized and existing under the laws of the State of Georgia (the "Seller"), and Okefenoke Electric Membership Corporation, an electric membership corporation organized and existing under the laws of the State of Georgia (the "Member"). R E C I T A L S: WHEREAS, the Seller's existing members, including the Member, are 39 electric membership corporations doing business in the State of Georgia, each of which joined with the others, beginning in 1974, to form the Seller in order to share the benefits and costs of ownership of an entity that would engage in providing electric capacity and energy for the benefit of its members; and WHEREAS, the Seller currently owns and operates electric generation plants and in the future may construct additional electric generation plants or purchase or otherwise obtain electric capacity and energy for the purpose, among others, of supplying electric capacity and energy to its members, several of which are borrowers from the Rural Utilities Service, as successor to the Rural Electrification Administration (the "RUS"), and others; and WHEREAS, the Seller has financed the construction of such generating plants in whole or in part through loans, and may in the future obtain additional loans, evidenced by mortgage notes (collectively, the "Notes") made or guaranteed by the United States of America (the "Government"), acting through the Administrator of the RUS (the "Administrator") and loans made by, or securities issued to, or obligations undertaken to, others; and WHEREAS, the Notes and certain of the loans made by, or securities issued to, or obligations undertaken to, others (collectively, with the Notes, the "Secured Obligations") are or may be secured by that certain Consolidated Mortgage and Security Agreement, dated as of September 1, 1994, made by and among the Seller; the Government; CoBank, ACB, as successor in interest to National Bank for Cooperatives; Credit Suisse, acting by and through its New York Branch; and SunTrust Bank, Atlanta, successor in interest to Trust Company Bank, as trustee, as it may hereafter be amended, supplemented, restated, or replaced or substituted for, including by a trust indenture, from time to time (the "Mortgage"); and WHEREAS, this Agreement and payments due to the Seller under this Agreement are pledged and assigned to secure the Secured Obligations as provided in the Mortgage; and WHEREAS, the Seller and the Member are parties to that certain Amended and Consolidated Wholesale Power Contract, dated as of December 1, 1988; and WHEREAS, the Government and the other holders of the Secured Obligations are relying on this Agreement and other wholesale power contracts between the Seller and its other members to assure that the Secured Obligations are repaid and the purposes of the Rural Electrification Act of 1936, as amended (the "REAct"), are carried out, and the Seller and the Member, by executing this Agreement, acknowledge that reliance; and WHEREAS, the Seller and the Member believe that, under current and foreseeable industry conditions, the continued ability of the Seller's members to operate as effective retail electric cooperatives in furtherance of the purposes of the REAct requires more flexibility in meeting their future needs for electric capacity and energy than would be available under the "all requirements" terms of the Existing Contracts, provided that adequate provision is made for the continued recovery by the Seller of all costs and expenses associated with electric capacity and energy to which the Seller has committed through the date of this Agreement; and WHEREAS, for the purpose of adjusting to changes in the electric industry, it is the intent of the parties that, as of the effective date of this Agreement, the Seller shall transfer its transmission and distribution assets substantially as an entirety to Georgia Transmission Corporation, a new electric membership corporation organized and existing under the laws of the State of Georgia ("GTC"); and WHEREAS, the Member has determined that its interests and the interests of its consumers will be best served by purchasing certain amounts of electric capacity and associated energy from *the Seller on the terms and conditions of this Agreement; and WHEREAS, the Member is undertaking to purchase from the Seller, and the Seller is undertaking to sell to the Member, certain amounts of electric capacity and associated energy on the terms and conditions herein set forth; NOW, THEREFORE, in consideration of the premises and the mutual undertakings herein contained, the Seller and the Member hereby agree as follows: 1. DEFINITIONS. All capitalized terms used herein shall have the respective meanings set forth in Schedule C attached hereto, unless the context in which such term is used clearly requires otherwise. 2. PURCHASE AND SALE OBLIGATION. 2.1 Purchase and Sale. The Seller shall sell and deliver to the Member, and the Member shall take and pay for or pay for, even if not available, delivered or taken, at the rates provided for in Section 5, all electric capacity allocated to the Member as reflected in the Member's 2 Percentage Capacity Responsibilities set forth in the Exhibits to Appendix 1 to "Rate Schedule A" (as amended from time to time in accordance with Section 3). The Seller shall sell and deliver to the Member, and the Member shall pay for, at the rates provided for in Section 5, any associated energy that the Member shall determine to purchase for its own use or for resale pursuant to this Agreement. The Member's payment obligations associated with its PCR in any Resource shall continue until all costs of such Resource are paid in full notwithstanding the occurrence of any event, or the taking of any action permitted by this Agreement, with respect to such Resources, including, without limitation, any event or action described in Section 2.3. 2.2 No Dedication of Resources. Neither the establishment of a PCR for a Member with respect to a Resource nor the sale by the Seller to the Member of electric capacity and associated energy under this Agreement shall constitute either (i) a sale, lease, transfer , dedication or conveyance of an ownership interest in or to any Resource or (ii) an entitlement to the electric capacity or associated energy from any specific Resource. The Seller shall have the sole authority, which it may exercise in its discretion, to manage, control and operate all of its Resources, subject to the Seller's obligations to provide available electric capacity and associated energy to the Member pursuant to this Agreement. 2.3 Member's Unconditional Obligation to Pay. The Member shall make all payments for electric capacity and energy that are required pursuant to this Agreement in a timely manner, whether or not (i) electric capacity and energy has or is being provided to the Member hereunder, (ii) Resources or any part thereof are completed, delayed, terminated, available, operable, operating, retired, sold, leased, transferred, or otherwise disposed of, (iii) the construction or operation of the Resources or any part thereof is suspended, interrupted, interfered with, reduced, curtailed or terminated, (iv) the Seller is able to purchase or otherwise obtain electric capacity and energy from any source or (v) any similar contract with any other member of the Seller is invalid, in each such case for any reason whatsoever and whether or not due to the conduct, acts or omissions of the Seller. Such payments by the Member shall not be subject to any reduction, whether by offset, recoupment or otherwise, and shall not be conditioned upon performance by the other members of the Seller or the Seller under this Agreement or any other agreement or instrument. This Section 2.3 shall not be construed to release the Seller from the performance of any of its obligations expressed in this Agreement or, except to the extent expressly provided in this Agreement, prevent or restrict the Member from asserting any rights that it may have against the Seller or any other person under this Agreement or any other agreement or under any provision of law or prevent or restrict the Member, at its own cost and expense, from prosecuting or defending any action or proceeding against or by third parties or taking any other action to secure or protect its rights under this Agreement. 3. POWER SUPPLY PLANNING AND RESOURCE ALLOCATIONS. 3.1 Percentage Capacity Responsibilities; Power Sale Resources. 3.1.1 Percentage Capacity Responsibilities. The Seller shall at all times 3 maintain Exhibits to Appendix 1 to "Rate Schedule A" which identify all Resources, all Percentage Capacity Responsibilities for the Member and all other members with respect to each Resource and the original projected useful life or the contract term for each Resource. (The identification of the original projected useful life or the contract term of a Resource is for the sole purpose of determining whether a Resource Modification constitutes a Major Resource Modification). The Seller shall not construct or acquire a Future Resource unless (i) the total of the PCRs allocated to the members of the Seller that have a PCR in the Future Resource equals one hundred percent (100%) at the time the Seller approves the principal documents necessary to commit the Seller to such Future Resource, and (ii) the members of the Seller which do not have a PCR with respect to such Future Resource are liable for a pro rata share of the costs and expenses of such Future Resource in the event of a Payment Default by all members which have a PCR with respect to such Future Resource as provided in Section 3.5.3. 3.1.2 Power Sales Resources. The Seller shall also identify in Exhibits to Appendix 1 to "Rate Schedule A" all Power Sales Resources and the allocations made by the Seller with respect thereto in accordance with Section 3.4.2. 3.2 Change of Certain Member Obligations. 3.2.1 Without the prior written consent of the Member, the Seller may not (i) allocate a PCR to the Member for a Future Resource, (ii) modify the Member's PCR for an Existing Resource or a Future Resource or (iii) otherwise add or modify an Exhibit to Appendix 1 to "Rate Schedule A," except as follows: (a) If the Seller is not then released by the Member from its responsibility set forth in clause (ii) of Section 3.3.1 to undertake future resource procurement, the Seller may allocate a PCR to the Member with respect to a Future Resource in accordance with Section 3.4.1; (b) If the Seller is not then released by the Member from its responsibility set forth in clause (iii) of Section 3.3.1 to sell electric capacity and energy, the Seller may make an allocation to the Member with respect to a Power Sale Resource in accordance with Section 3.4.2; and (c) The Seller may modify the Member's PCR in connection with a Major Resource Modification in accordance with Section 3.4.3. 3.2.2 Any addition of or modification to an Exhibit to Appendix 1 to "Rate Schedule A" made pursuant to Section 3.2.1 shall be prepared and approved by the Seller in accordance with this Agreement and shall be conclusively established by a resolution duly adopted by the Board of Directors of the Seller concurrently with the Board's authorization of the execution of the principal documents necessary to obligate the Seller to the transaction resulting in such 4 modification or addition. The Member's obligations shall thereupon be effective as to any allocation with respect to a Power Sale Resource or any PCR allocated to the Member in such additional or modified Exhibit, and the Member shall make all payments required pursuant to this Agreement with respect to such obligations. Such obligations of the Member shall not be affected by any subsequent release by the Member of the Seller of the responsibilities set forth in Section 3.3.1. 3.3 Planning and Resource Management. 3.3.1 Unless and until the Member provides an applicable written notice pursuant to Section 3.3.2, the Seller shall be responsible for (i) bulk power supply planning, (ii) future resource procurement, and (iii) sales of electric capacity and energy for the Member (all three services, collectively, "Joint Planning and Resource Management"). The Seller shall conduct Joint Planning and Resource Management in accordance with written policies in effect from time to time (the Seller's "Resource Policies"). The Member shall provide an annual written notice to the Seller of the Member's long-range forecast of load and any power supply resources the Member plans to acquire or dispose of on its own behalf (an "Annual Planning Report") at the time(s) required and in accordance with the Seller's Resource Policies. No change to the Seller's Resource Policies made subsequent to the due date of the Member's Annual Planning Report shall be effective, as to the Member, until January 1 of the calendar year following the due date of the Member's next Annual Planning Report. 3.3.2 The Member may elect to take individual responsibility for its own (i) bulk power supply planning, (ii) future resource procurement, or (iii) sales of electric capacity and energy by providing the Seller with written notice of its release of the Seller from all such responsibilities or any one or more of them. Any such notice shall be in the form provided in the Seller's Resource Policies, shall be given no later than the due date of the Member's Annual Planning Report, and shall be effective January 1 of the following year. Notwithstanding any notice given under this Section 3.3.2, the Member shall continue to provide its Annual Planning Report to the Seller unless the Member is a Scheduling Member pursuant to Section 4.1, and the Member shall pay its allocated share of the total cost of Joint Planning and Resource Management until the effective date on which the Member takes individual responsibility for all three services. If the Member has made any such election, the Seller shall reassume any such responsibilities only in accordance with the notice requirements and the terms set forth in the Seller's written policies and procedures, as the Seller may amend such policies and procedures from time to time. 3.4 Future Resources, Power Sale Resources and Resource Modifications. 3.4.1 If the Seller is not then released by the Member from its responsibility set forth in clause (ii) of Section 3.3.1 to undertake future resource procurement, the Seller may allocate to the Member, and the Member shall be responsible for, a PCR with respect to any Future Resource approved by the Seller in accordance with Section 3.2.2. Such allocation shall be made in accordance with the Seller's Resource Policies. 5 3.4.2 If the Seller is not then released by the Member from its responsibility set forth in clause (iii) of Section 3.3.1 to sell electric capacity and energy, the Seller may sell all or part of the electric capacity and associated energy allocated to the Member pursuant to its PCR with respect to any Resource. No such sale shall affect the Member's PCR with respect to any such Resource (even though such sale may reduce or eliminate the electric capacity and associated energy available to the Member during the term of the sale). Any such sale of electric capacity or energy by the Seller for a term of greater than one (1) year shall be allocated among the members of the Seller for whom the sale is made as a Power Sales Resource in accordance with the Seller's Resource Policies and shall be treated as a Resource in "Rate Schedule A." The Seller may, in its sole discretion, at any time and from time to time, modify, amend, extend, shorten or terminate any Power Sales Resource. 3.4.3 The Seller may, in its sole discretion, undertake from time to time capital expenditures for additions, improvements, repairs or modifications to a Generating Resource or modify or extend a Power Purchase Resource (a "Resource Modification"). The parties recognize that a Resource Modification may change the capacity of a Resource. In such event, a change may be required to be made with respect to an existing Exhibit, or a new Exhibit may be required, to Appendix 1 to "Rate Schedule A." Each such Resource Modification shall be determined by the Board of Directors of the Seller to be either a Major Resource Modification or a Minor Resource Modification. (a) A Minor Resource Modification shall not affect the Member's PCR with respect to such Resource (even though such modification may change the electric capacity and associated energy available to the Member or the contract term or useful life of the Resource). (b) If the Board of Directors of the Seller determines that a Major Resource Modification is required to comply with Legal Requirements, such Major Resource Modification shall not affect the Member's PCR with respect to such Resource (even though such modification may change the electric capacity and associated energy available to the Member or the contract term or useful life of the Resource). A determination that a Major Resource Modification is required to comply with Legal Requirements shall be made only by the vote of seventy-five percent (75%) of the Board of Directors of the Seller. (c) If the Seller has determined to make a Major Resource Modification and the Board of Directors of the Seller has not determined that such Major Resource Modification is required to comply with Legal Requirements, such Major Resource Modification shall be a Future Resource. If at the time the Board of Directors of the Seller authorizes such Major Resource Modification the Seller is then released by the Member from its responsibility set forth in clause (ii) of Section 3.3.1 to undertake future resource procurement, the Member may elect not to participate in a Major Resource Modification by providing the Seller with prior written notice in accordance with the Seller's Resource Policies. Such notice shall serve as the Member's prior written consent for the Seller to change the 6 Member's PCR to the extent, if any, required to allocate the increased capacity or extended life resulting from such Major Resource Modification solely to the members that are participating in such Major Resource Modification. (The Seller may also change the Member's PCR in connection with such a Major Resource Modification if at the time the Board of Directors of the Seller authorizes such Major Resource Modification, the Seller is not then released by the Member from its responsibility set forth in clause (ii) of Section 3.3.1 to undertake future resource procurement.) Any addition or modification of an Exhibit made by the Seller's Board of Directors to reflect the allocation of such additional capacity or extended useful life to participating Members shall be based on the study of an independent consulting engineer. If the Member elects not to participate in a Major Resource Modification that extends the useful life, the Board of Directors of the Seller shall also determine the date on which the PCR of the Member shall terminate, based on the expected useful life of the Resource prior to the Major Resource Modification. 3.5 Cost Responsibility. 3.5.1 In the event of a Payment Default by a member of the Seller, the Seller shall allocate the amount of the Payment Default to each Resource with respect to which the defaulting member has a PCR, and each non-defaulting member that has a PCR with respect to each such Resource shall bear the otherwise unrecovered costs resulting from such Payment Default in the proportion of its PCR to the aggregate of the PCRs of all non-defaulting members in each such Resource. 3.5.2 In the event any members of the Seller do not have a PCR with respect to an Existing Resource and there is a Payment Default by all members of the Seller that have a PCR with respect to such Existing Resource, all other members shall become liable for a pro rata share of the costs and expenses of such Existing Resource. The term "liable for a pro rata share" shall mean that each of the non-defaulting members shall have their liability based on the aggregate of Rated Capacity allocated to each of such members pursuant to its PCR with respect to all Resources of the Seller divided by the aggregate of such Rated Capacity of all non-defaulting members that share such pro rata liability. Such pro rata liability shall extend to any modification of an Existing Resource which is a Minor Resource Modification or a Major Resource Modification required to comply with Legal Requirements. 3.5.3 In the event of a Payment Default by all members of the Seller that have a PCR with respect to any Future Resource, the members of the Seller that do not have a PCR with respect to such Future Resource shall become liable for a pro rata share of the costs and expenses of such Future Resource if, and only if, (i) such Future Resource has been approved by seventy-five percent (75%) of the Seller's Board of Directors and seventy-five percent (75%) of the members of the Seller, or (ii) such Future Resource is acquired or constructed solely to meet the requirements of members of the Seller that continue to take capacity and energy under Existing Contracts. Such pro rata liability shall extend to any modification of a Future Resource which is a Minor Resource Modification or a Major Resource Modification required to comply with Legal Requirements. 7 3.6 Non-Recourse Resources. The Seller may, as provided in this Section 3.6, enter into an agreement for the purchase of capacity and energy or energy with a term greater than one (1) year, or acquire or construct a generating facility without such purchase agreement or generating facility constituting a Resource subject to the provisions of this Agreement. The Seller may enter into such a purchase agreement or acquire or construct such a generating facility if, and only if: (a) Any such purchase agreement shall be a Non-Recourse Obligation; (b) With respect to any such generating facility (including improvements and modifications): (i) Any Indebtedness incurred by the Seller to finance the estimated capitalized cost of such generating facility shall be a Non-Recourse Obligation; (ii) The Seller may not provide more than fifteen percent (15%) of the estimated capitalized cost of such generating facility from its funds (other than proceeds from Non-Recourse Obligations); and (iii) Any contract for the purchase of fuel, fuel transportation or pumping energy for such generating facility with a term greater than one (1) year shall be a Non-Recourse Obligation; and (c) The Seller shall enter into a separate power supply agreement or agreements with one or more of its members or others providing for the full recovery through rates charged to such parties of all costs of any such purchase agreement or the construction, acquisition and operation of any such generating facility. 4. POOLING. 4.1 Seller's Energy and Capacity Pool. From time to time, the Seller may elect to pool the electric capacity and energy associated with the PCR and other resources owned or contracted for by its members (including the allocated electric capacity and energy of the Member) in an energy and capacity pool (the "Pool") . The Member also may elect from time to time not to have the capacity represented by the Member's PCR and other resources and associated energy included in the Pool and to have such capacity and energy to be separately scheduled (during the effectiveness of any such election, the Member shall be a "Scheduling Member"). Such election to be a Scheduling Member shall be made by written notice given to the Seller no later than the due date of the Member's Annual Planning Report and shall be effective on January 1 of the following year, or such other date as the Seller and the Member shall agree in writing. If the Member has made such an election, the Member may re-commit its allocated electric capacity and energy to the Pool only in accordance with the notice requirements and the terms set forth in the Seller's written policies and procedures. 8 4.2 System Operator. The Seller may from time to time enter into an agreement with another entity to operate the Seller's system. Concurrently with the effective date of this Agreement, the Seller has contracted with Georgia System Operations Corporation ("GSOC") as the initial operator of the Seller's system and as the operator of the Pool. The Seller shall continue to utilize GSOC as the operator of the Seller's system and as operator of the Pool until (i) such time, if any, that the Seller and GSOC mutually agree otherwise or (ii) such contract is terminated in accordance with its terms. 4.3 Operating Policies and Procedures. The Seller shall itself, or pursuant to a contract require the system operator to, at all times maintain in effect written policies and procedures for system operations, energy settlements, reserve sharing and settlements, scheduling and dispatching of resources, sales of excess capacity and energy by the Seller or its members, load following and related matters, that treat on a comparable basis the utilization of all of the Seller's Resources by the Pool and by any members of the Seller which do not participate in the Pool (or if the Seller has not established a Pool that is continuing, the Seller shall treat on a comparable basis the utilization of the resources by the Member and other members). Comparable basis refers to the legal standard then employed by FERC for determining that there has been no undue discrimination as among the owner of a facility and others that have the right to use such facility. Any determination by GSOC or any other independent system operator with respect to application of its written policies and procedures shall be conclusive as to the Seller and the Member, subject to the resolution of disputes in accordance with such independent system operator's applicable tariffs and service agreement. 4.4 Sale Transactions by Members in the Pool. If it is a participant in the Pool, the Member shall be entitled to resell for its own account all or any part of the capacity and associated energy purchased hereunder to any person or entity in accordance with applicable operating policies and procedures in effect from time to time. 4.5 Scheduling Member. While the Member is a Scheduling Member, the Member shall be entitled to resell for its own account all or any part of the capacity and associated energy purchased hereunder to any person or entity and to schedule for its own account such capacity and energy in accordance with applicable operating policies and procedures in effect from time to time. 4.6 Right to Designate Agent. Whenever this Agreement requires or permits the Seller to provide information, schedules, notice or the like to, or to take direction from, the Member the Member may by written notice to the Seller, require the Seller to provide such information, schedules, notice or the like to, or to take direction from, the Member, its agent or both. The provisions of this Section does not create any right to assign this Agreement, such matters being governed exclusively by the provisions of Sections 8 and 9. 9 5. RATES. 5.1 General. The Member shall make all payments to the Seller that are required pursuant to this Agreement at the rates and on the terms and conditions set forth herein and in "Rate Schedule A," as amended from time to time as provided in Section 3 and this Section 5; provided, however, that no Exhibit to Appendix 1 to "Rate Schedule A" shall be amended in any manner inconsistent with Section 3. 5.2 Periodic Review. The Seller at such intervals as it shall deem appropriate, but in any event not less frequently than once in each calendar year, shall review the rates for electric capacity and energy furnished hereunder and under the wholesale power contracts with the Seller's other members and, if necessary, shall revise such rates so that such rates shall produce revenues that shall be sufficient, but only sufficient, with the revenues of the Seller from all other sources, to meet all of the Seller's costs, to cover all payments on account of indebtedness of the Seller (except any Non-Recourse Obligation), to provide for the establishment and maintenance of reasonable reserves, and to comply with all financial requirements contained in the Mortgage or in any indenture, mortgage, or contract relating to any indebtedness or other financial obligations of the Seller as they may exist from time to time (except any Non-Recourse Obligation). 5.3 Pool Settlement. The rates shall include credits and charges to the Member to reflect settlements related to the operation of the Seller's Resources, including the Member's PCR and associated energy and other resources in the Pool, unless the Member shall then be a Scheduling Member. 5.4 Functional Unbundling. The Seller shall account for its direct and indirect costs so that the rate for each Resource and the charge for each service that the Seller provides to one or more members recovers all direct costs and a share of indirect costs for each Resource and service, including administrative and general expenses and margins, allocated in accordance with Accounting Requirements. 5.5 Reasonable Rates. The rates and terms and conditions of service provided by the Seller hereunder, including changes from time to time in "Rate Schedule A," shall be just and reasonable and not unduly discriminatory, but shall at all times be sufficient to comply with the requirements of Section 5.2. 5.6 Allocation of Payment Defaults. The Seller shall at all times provide in "Rate Schedule A" a mechanism by which the Seller shall allocate all unrecovered costs resulting from a Payment Default by the Member or a Payment Default by any other member to each Resource with respect to which the defaulting member has a PCR and a mechanism for recovering such costs from the members that also have a PCR with respect to such Resource in accordance with the provisions of Section 3.5.1. Such rate provision shall further ensure that if the Member has no PCR with respect to a Resource, the Seller shall not seek to recover from the Member any of the costs of that Resource otherwise unrecovered as the result of a Payment Default by another member unless every 10 member that has a PCR in such Resource has defaulted. In the event of Payment Defaults by all members that have a PCR with respect to a Resource, the Seller may recover the amount of such Payment Defaults only in accordance with Sections 3.5.2 and 3.5.3. 5.7 Covenant of the Member. The Member covenants and agrees to establish, maintain and collect rates and charges for the service of its electric system, and to conduct its business, in a manner which shall produce revenues and receipts at least sufficient to enable the Member to pay to the Seller, when due, all amounts payable by the Member under this Agreement and to pay any and all other amounts payable from, or which might constitute a charge and a lien upon, the revenues and receipts derived from its electric system, including all operation and maintenance expenses and the principal of, premium, if any, and interest on all indebtedness related to the Member's electric system. 6. DELIVERY POINTS AND GENERAL TERMS AND CONDITIONS OF SERVICE. 6.1 Delivery Points. Subject to Section 6.3, the Seller shall furnish the electric capacity and deliver the energy purchased by the Member under this Agreement to the Member at (i) the high side of the step-up transformer at each Resource with respect to capacity and energy that is produced by a Resource that is interconnected with the Georgia Integrated Transmission System (the "ITS") and (ii) the interface of the ITS at which capacity is furnished and energy is delivered to Seller from a Resource that is not interconnected with the ITS. Title and risk of loss of such energy shall pass from the Seller to the Member at such delivery points. As between the parties hereto, the Seller shall be deemed to be in exclusive control (and responsible for any injury and damage caused thereby) of the electric capacity and energy prior to the delivery point, and the Member shall be deemed to be in exclusive control (and responsible for any damages or injury caused thereby) of the electric capacity and energy at and from the delivery point. 6.2 General Terms and Conditions. The general terms and conditions of service (which reflect implementing details of this Agreement) provided by the Seller to the Member hereunder are established in the General Terms and Conditions in "Rate Schedule A." 6.3 Seller and Member Duties. 6.3.1 The Seller and the Member shall use reasonable diligence to deliver and receive a constant and uninterrupted supply of electric capacity and energy. If the supply of electric capacity and energy shall fail or be interrupted, or become defective, as the result of an event of force majeure or its adverse effects, the Seller shall not be liable therefor or for damages caused thereby. "Force majeure" shall mean the occurrence or non-occurrence of any act or event that could not reasonably have been expected and avoided by exercise of due diligence and foresight and such act or event is beyond the reasonable control of the Seller. In the event of an interruption of service, the Seller and the Member shall use all due diligence to restore their respective systems to enable the delivery and receipt of electric capacity and energy. In the event of a power shortage, or an adverse condition or disturbance, the Seller may, without incurring liability, take such emergency 11 action as, in the judgment of the Seller, may be necessary. Such emergency action may include, but shall not be limited to, reduction or interruption of the supply of electricity to some points of delivery in order to compensate for an emergency condition on the system of the Seller, or on any other directly or indirectly interconnected system. 6.3.2 The Seller covenants and agrees that it will use its reasonable best efforts to operate, maintain and manage its Resources in accordance with Prudent Utility Practice. For purposes of this Agreement, "Prudent Utility Practice" shall mean any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry during the relevant time period, or any of the practices, methods and acts that, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at lowest reasonable cost consistent with good business practices, reliability, safety, and expedition. Prudent Utility Practice is not intended to be limited to the optimum practice, method, or act, to the exclusion of all others, but rather to include a spectrum of possible practices, methods, or acts generally acceptable in the region in light of the circumstances. 7. RIGHTS OF ACCESS, RECORDS AND ACCOUNTS. 7.1 Rights of Access. Duly authorized representatives of either party hereto shall be permitted to enter the premises of the other party hereto at all reasonable times in order to carry out the provisions hereof. 7.2 Accounting Records. The Seller shall keep accurate records and accounts in accordance with Accounting Requirements. Promptly after the close of each fiscal year (and not later than 120 days after the end of each fiscal year), the Seller shall cause such records and accounts of all transactions of the Seller with respect to such fiscal year to be subject to an annual audit by a firm of independent certified public accountants experienced in electric utility accounting and possessing a national reputation in accounting and auditing. The Seller shall without delay provide a copy of each such annual audit, including all written comments and recommendations of such accountants to the Member. 7.3 Access to Books and Records. The Member shall at all times have reasonable access during business hours to examine any and all and the books, records and supporting worksheets and data of the Seller as may be appropriate to determine the accuracy of any charges or payments required to be made by the Member to the Seller. If such books, records and supporting worksheets and data of the Seller contain information about another member of the Seller, the Seller shall excise any identification of a specific member or members or provide such information to an independent certified public accountant or other independent representative of the Member under a confidentiality agreement. If, after such examination of Seller's records, there is still a dispute as to the accuracy of any charge and the Member proceeds with mediation, arbitration or litigation, only requirements of confidentiality imposed by a mediator, arbitrator or court shall be applied. 12 8. REORGANIZATIONS, TRANSFERS AND SALES OF ASSETS BY THE MEMBER. 8.1 Dissolution or Liquidation. The Member shall not dissolve, liquidate or otherwise wind up its affairs without the approval in writing of the Seller. 8.2 Permitted Transactions. The Member shall not consolidate or merge with any other Person or reorganize or change the form of its business organization from an electric membership corporation or sell, transfer, lease or otherwise dispose of all or substantially all of its assets (each, a "Member Transaction") to any Person (or make any agreement therefor), whether in a single transaction or series of transactions, unless either: (a) Such Member Transaction is expressly approved in writing by the Seller; or (b) All of the following conditions are satisfied: (i) The Transferee shall be an entity organized and existing under the laws of the United States of America or any State or the District of Columbia; and (ii) No default or breach of this Agreement shall have occurred and be continuing; and (iii) If the Transferee is not the Member, the Transferee shall execute and deliver to the Seller an instrument supplemental hereto in form reasonably satisfactory to the Seller containing an assumption by the Transferee of the performance and observance of every covenant and condition of this Agreement required to be performed or observed by the Member; and (iv) A firm of independent certified public accountants shall prepare for the two calendar years immediately preceding the Member Transaction a set of pro forma financial statements that assume the consummation of the Member Transaction throughout the applicable determination period and that are prepared in accordance with generally accepted accounting principles. Based on such pro forma financial statements, such accountants must certify that: (A) the Transferee's Debt Service Coverage Ratio is at least 1.25 and Times Interest Earned Ratio is at least 1.50 for each of the two immediately preceding calendar years (assuming such Member Transaction had been consummated at the beginning of such two-year period); (B) the Transferee's Equity equals at least 27% of its Total Assets after giving effect to such Member Transaction; and 13 (C) the ratio of the Transferee's Net Utility Plant to its Long- Term Debt is at least 1.0 after giving effect to such Member Transaction. The specification of conditions in subsection 8.2(b) shall not be construed to establish minimum standards under which the Member may effect a Member Transaction, the purpose of such conditions being to establish when the Seller's approval need not be obtained. In the event the Member seeks the Seller's approval of a Member Transaction, the Seller may withhold such approval only upon a determination by the Board of Directors of the Seller that the Member Transaction could reasonably be expected to have a material adverse effect on the Member's ability to perform its obligations under this Agreement. 8.3 Service Territory and Distribution System. The Member shall not convey, transfer, lease, or otherwise dispose of any part of its electric distribution system or assigned service territory or voluntarily transfer or assign to another Person any customer of the Member (each, a "Conveyance") if such Conveyance, considered together with (i) all prior Conveyances, and (ii) all prior additions (by construction, conveyance, transfer or lease to the Member) to its electric distribution system, assigned service territory or customers could reasonably be expected to have a material adverse affect on the Member's ability to perform its obligations under this Agreement. 8.4 Specific Performance. The Member and the Seller agree that the failure or threatened failure of the Member to comply with the terms of this Section 8 will cause irreparable injury to the Seller, which cannot properly or adequately be compensated by the mere payment of money. The Member agrees, therefore, that in the event of a breach or threatened breach of this Section 8 by the Member, the Seller, in addition to any other remedies that may be available to the Seller, shall have the right to obtain from any competent court a decree enjoining such breach or threatened breach of this Section 8 or providing that the terms of this Section 8 be specifically enforced. 9. ASSIGNMENTS. 9.1 General. 9.1.1 This Agreement shall be binding upon and inure to the benefit of the permitted successors and permitted assigns of the parties, except that this Agreement may not be assigned by either party unless prior consent to such assignment is given in writing by the other party and, if either party is then an RUS borrower, the Administrator. Any assignment made without a consent required hereunder shall be void and of no force or effect as against the non-consenting party. 9.1.2 No sale, assignment, transfer or other disposition permitted by this Agreement shall affect, release or discharge either party from its rights or obligations under this Agreement, except as may be expressly provided by this Agreement. 14 9.2 Assignment for Security. 9.2.1 Notwithstanding any other provision of this Agreement, a party, without the other party's consent but, if such assigning party is then a borrower of the RUS, only with the consent of the Administrator, may assign, transfer, mortgage or pledge its interest in this Agreement as security (an "Assignment for Security") for any obligation secured by any indenture, mortgage or similar lien on its system assets without limitation on the right of the secured party to further assign this Agreement, including, without limitation, the assignment by the Member or the Seller to create a security interest for the benefit of the Government, acting through the Administrator, or for the benefit of any third party. 9.2.2 After any Assignment for Security to the Administrator or other secured party (including any indenture trustee under any indenture securing the obligations of the Seller), the Administrator or other secured party, without the approval of the other party to this Agreement, may (i) cause this Agreement to be sold, assigned, transferred or otherwise disposed of to a third party pursuant to the terms governing such Assignment for Security, or (ii) if the Administrator or other secured party first acquires this Agreement, sell, assign, transfer or otherwise dispose of this Agreement to a third party; provided, however, that in either case the party who made the Assignment for Security is in default of its obligations to the Administrator or other secured party that are secured by such security interest. 9.3 Corporate Reorganization. 9.3.1 The Seller may assign any or all of its rights and delegate any or all of its duties under this Agreement in connection with any reorganization, merger or consolidation of the Seller with another entity in which the Seller is not the surviving entity if (a) such merger or consolidation (i) is approved by seventy-five percent (75%) of the Board of Directors of Seller and seventy-five percent (75%) of the members of Seller, or (ii) is approved by a majority of the Board of Directors of the Seller and a majority of the members of the Seller if a payment default under the Mortgage shall have occurred and be continuing and (b) the surviving entity shall expressly assume by written agreement executed and delivered to the Member, the performance and observance of the provisions of this Agreement required to be performed or observed by the Seller. 9.3.2 The Seller may, in its sole discretion, at any time and from time to time, retire, sell, transfer, lease, terminate or otherwise dispose of any Resource (even though such transaction may reduce or eliminate the electric capacity and associated energy available to the Member with respect to such Resource); provided, that the Seller shall not sell, transfer, lease or otherwise dispose of all or substantially all of its Resources (each a "Seller Transaction") to any Person (or make any agreement therefor), whether in a single transaction or a series of transactions, unless such Seller Transaction is either: (a) approved by seventy-five percent (75%) of the Seller's Board of Directors and seventy-five percent (75%) of the members of the Seller, or (b) approved by a majority of the Board of Directors of the Seller and a majority of the members of the Seller if a payment default under the Mortgage shall have occurred and be continuing. The Seller may sell or 15 lease and leaseback any interest in a Resource (a "Leasehold Interest") in a sale-leaseback, lease-leaseback or similar transaction of any term or length (a "Lease Transaction") (even though such Lease Transaction may reduce the capacity and associated energy available to the Member with respect to such Resource). In connection with any Lease Transaction, the Leasehold Interest shall be considered the same Generating Resource and not a new Future Resource. 9.4 Receiver or Trustee in Bankruptcy. The parties intend that the obligations of the Member under this Agreement shall not be affected by a receiver, a trustee in bankruptcy, a mortgagee or an indenture trustee taking charge of the assets or business of the Seller, and that such receiver, trustee, mortgagee or indenture trustee may exercise all of the rights of, and make all of the determinations provided to be made in this Agreement by, the Board of the Directors of the Seller. 9.5 Express Rejection of Implied Limitations. The parties intend that this Agreement shall be assignable in accordance with the provisions of this Section 9 without regard to any other provisions of this Agreement, the nature of the Person to which this Agreement is assigned, or the issues raised in the case, In the Matter of Wabash Valley Power Ass'n., Inc., 72 F.3d. 1305 (7th Cir. 1995). Consequently, the parties agree that this Agreement may be assigned to any Person (including any receiver or trustee in bankruptcy) pursuant to this Section 9 without regard to the fact that (i) such Person is not a cooperative; (ii) the Board of Directors of such Person, if any, is not chosen by a vote in which the Member participates; or (iii) such Person is not operated on a not-for-profit basis. Further, no other provision of this Agreement shall restrict the assignment of this Agreement pursuant to this Section 9. In the event an assignment is made to a Person that is not an electric membership corporation (or other form of electric cooperative), all provisions of this Agreement requiring approval of the members or of the Board of Directors of the Seller shall cease to be applicable, and in such instances the Seller may act in its discretion. References in this Agreement to an assignment of this Agreement shall mean and include either or both of an assignment of rights or a delegation of duties. 10. EVENTS OF DEFAULT AND REMEDIES. 10.1 Payment Default. If the Member fails to make full payment to the Seller when required to be made under the provisions of this Agreement, and such failure continues for a period of ten (10) business days, the Seller shall give or cause to be given written notice to the Member. If the Member does not, within ten (10) business days from the date of the mailing of such notice, pay the full amount then due to the Seller, together with interest thereon, at the maximum legal rate of interest permitted by law from the date it became due, then such failure shall constitute a "Payment Default" on the part of the Member. The Seller shall promptly provide written notice to the other members of the Payment Default. 10.1.1 Upon a Payment Default, the Seller may suspend service to the Member for all or any part of the period of continuing default. The Seller's right to suspend service shall not be exclusive, but in addition to all other remedies available to the Seller at law or in equity. No suspension of service or termination of this Agreement or recovery of additional revenues from 16 other members pursuant to Section 5.6 shall relieve the Member of its obligations hereunder, which are absolute and unconditional. The Seller shall credit the obligations of the Member during any suspension of service with the monies actually received by the Seller from sales of capacity and energy that would have been available to serve the Member, but the Seller shall not be responsible for failure to mitigate the consequences of the Member's failure to pay in absence of gross negligence or willful misconduct. 10.1.2 The Seller may terminate this Agreement if (i) a Payment Default shall have occurred and be continuing and (ii) such termination is approved by seventy-five percent (75%) of the Seller's Board of Directors and seventy-five percent (75%) of the non-defaulting members of the Seller. 10.1.3 The fact that other members have paid increased rates and charges shall not relieve the Member of its liability for the amount owed by it to the Seller, and any member, either individually or as a member of a group, shall have such right of recovery from the Member as may be provided by law. The Seller or any member as their interests may appear, jointly or severally, may commence such suits, actions or proceedings, at law or in equity, including suits for specific performance, as may be necessary or appropriate to enforce the obligations of the Member under this Agreement. 10.2 Seller's Failure to Deliver. If the Seller fails to deliver electric capacity and energy as a result of the breach of the duties imposed on it under Section 6, the Seller shall promptly reimburse the Member for the cost of electric capacity and energy required to replace such capacity and energy, but the Member shall not be entitled to terminate this Agreement or to withhold payments required to be made pursuant to this Agreement. 10.3 Performance Default. If either party fails to comply with any of the terms, conditions and covenants of this Agreement (and such failure does not constitute a Payment Default by the Member), the non-defaulting party shall give the defaulting party written notice of the default (a "Performance Default"). The defaulting party shall have a period of thirty (30) days after receipt of such notice to commence reasonable efforts to cure such Performance Default, and it shall have an additional thirty (30) days to cure such Performance Default. Thereafter, if such Performance Default is continuing, the non-defaulting party, subject to the provisions of Section 10.4.1, shall have all of the rights and remedies provided at law and in equity, other than termination of this Agreement. 10.4 Remedies. 10.4.1 No remedy conferred upon or reserved to the Seller or the Member under this Agreement is intended to be exclusive of any other remedy or remedies available hereunder or now or hereafter existing and every such remedy shall be cumulative and shall be in addition to every other such remedy, provided that no Performance Default by the Seller shall permit the Member to terminate this Agreement or relieve the Member of its obligation to make payments 17 pursuant to this Agreement, which obligation shall be absolute and unconditional. 10.4.2 No waiver by either party hereto of any one or more defaults by the other party hereto in the performance of any provision of this Agreement shall be construed as a waiver of any other default or defaults, whether of a like kind or different nature. 10.4.3 Any action taken or determination made by the Board of Directors of the Seller as provided in Sections 3.2.2 and 3.4.3 shall be conclusive and binding as to the Member and all other members of the Seller. 10.4.4 To the fullest extent permitted by law, neither party shall be liable to the other for any indirect, consequential, multiple or punitive damages unless such damages are the result of the party's bad faith, gross negligence or willful misconduct. 11. REASONABLENESS OF RATES. 11.1 Fixed Rate Contract. The Seller was organized by the Member and 38 other electric membership corporations in Georgia to provide collectively for their electric capacity and energy requirements. This Agreement was established between the parties hereto, taking into account the present and projected needs for electric capacity and energy of the members of the Seller, the costs of the facilities subject to and contemplated by this Agreement and the alternatives thereto. The parties agree that the rates established hereunder are just and reasonable under the current circumstances and reflect their determination of what would be just and reasonable under future conditions reasonably contemplated by them. The rates take into account specific benefits achieved by the parties through this Agreement and not otherwise available to the parties, and reflect the sharing of those benefits without undue discrimination against any current or future customer of the Seller. 11.2 Formulaic Rate. The charges to be paid by the Member to the Seller for electric capacity and energy provided under this Agreement are intended to be adjusted only pursuant to and in accordance with the formulaic rates specified in "Rate Schedule A," as such formulae may be revised from time to time pursuant to the express terms of this Agreement. 11.3 Regulatory Review. 11.3.1 Nothing contained in this Agreement shall be construed as affecting in any way the right of the Seller unilaterally to file an application for a change in any part of "Rate Schedule A" to any governmental authority having jurisdiction, including the FERC under Section 205 of the Federal Power Act and pursuant to the FERC's rules and regulations promulgated thereunder, upon approval of the change by the Seller in a manner consistent with this Agreement. Other than an initial application filed by the Seller with the FERC to provide service pursuant to "Rate Schedule A," the Seller agrees that the Member may protest or contest the filings referred to in this Section 11.3 or any filings made by any member of Seller to change the formulary rate 18 mechanism contained in "Rate Schedule A," and the Member does not waive any rights it may have with respect to such filings. 11.3.2 It is the intent of the parties hereto that any such governmental authority having jurisdiction shall not, on its own motion or after petition by any person other than the Seller, replace the rates contained in "Rate Schedule A" with any other rate except upon finding that "Rate Schedule A" is contrary to the public interest. 11.3.3 If the Seller's rates are not established pursuant to a formulary rate mechanism, such as "Rate Schedule A" as changed from time to time, the Member shall have the right to file any applications relating to rates as may be permitted by law. 12. EFFECTIVENESS AND TERM. 12.1 Effectiveness and Term. This Agreement is dated as of the date specified in the introductory paragraph and shall become effective upon (i) execution and delivery hereof by the Seller and the Member, (ii) the approval in writing by the Administrator and (iii) the acquisition by GTC of the Seller's transmission and distribution assets substantially as an entirety. This Agreement shall remain in effect until December 31, 2025, and from year to year thereafter unless terminated on December 31, 2025, or any succeeding December 31, by either party's giving to the other not less than three years' prior written notice of its intention to terminate. 12.2 Reduction in Term. In the event the Seller prepays all of its obligations to the United States of America, the term of this Agreement will be shortened to coincide with the latest maturity of any then outstanding indebtedness, including any indebtedness issued to finance the amount of the prepayment, if such latest maturity occurs prior to December 31, 2025, provided, however, that in no event shall the term of this Agreement be shortened to a date prior to the expiration of any Lease Transaction, the performance of which depends upon the continued existence of this Agreement. 13. AMENDMENTS, ENTIRE AGREEMENT AND CONFLICTS. 13.1 Amendments. 13.1.1 No amendment to this Agreement shall be effective unless it has been approved or accepted for filing and permitted to go into effect by each governmental authority having jurisdiction. 13.1.2 This Agreement may be amended by agreement between the Seller and the Member, but no such amendment to this Agreement shall be effective unless it is in writing, executed by both parties; provided, however, that changes to "Rate Schedule A" shall be effective when made in accordance with the express provisions of this Agreement. 19 13.2 Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto relating to the subject matter contemplated by this Agreement and supersedes all prior agreements, whether oral or written. "Rate Schedule A", Schedule B and Schedule C are incorporated herein by reference. 13.3 Conflicts. 13.3.1 The Seller's Resource Policies, a current copy of which is attached hereto as Schedule B, may be modified from time to time by the Seller's Board of Directors. In the event of any conflict between the provisions of this Agreement and the Seller's Resource Policies, the provisions of this Agreement shall govern. 13.3.2 The provisions of this Agreement and "Rate Schedule A" incorporated by reference shall be interpreted to harmonize as a single instrument. In the event of any conflict between the provisions of this Agreement and the provisions of any amendments to "Rate Schedule A" or any future exhibits, appendices or schedules attached thereto and incorporated by reference herein, the provisions of this Agreement shall govern. 13.4 Counterparts. This Agreement may be executed in multiple counterparts to be construed as one. 14. SEVERABILITY. If any part, term, or provision of this Agreement is held by a court of competent jurisdiction to be unenforceable, the validity of the remaining portions or provisions shall not be affected, and the rights and obligations of the parties shall be construed and enforced as if this Agreement did not contain the particular part, term, or provision held to be unenforceable. 15. AMENDMENT AND RESTATEMENT. This Agreement restates into a single instrument the terms of the Existing Contract and the amendments made hereby. Prior to the amendments made hereby, the Existing Contract provided that "[t]he Seller shall sell and deliver to the Member and the Member shall purchase and receive from the Seller all electric power and energy which the Member shall require for the operation of the Member's system," subject to certain limited exceptions. The Seller and the Member acknowledge that their mutual intent in amending and restating the Existing Contract as provided in this Agreement is to change the all requirements obligation between them by fixing the Member's responsibility for electric capacity and associated energy committed to by the Seller pursuant to and in reliance upon the Existing Contract and similar contracts with its other members, and charges for such electric capacity and energy, in a manner such that the Seller can continue to meet its obligations with respect to such capacity and energy and to permit the Member to utilize electric capacity and energy from other sources on the terms and conditions set forth in this Agreement. 16. GOVERNING LAW. Except to the extent governed by applicable federal law, this Agreement shall be governed by, and construed in accordance with, the laws of the State of Georgia. 20 17. MEDIATION. If a dispute arises out of or relates to this Agreement, including all attachments hereto, or the breach thereof, the parties shall first in good faith seek to resolve the dispute through negotiation. If such dispute cannot be settled through negotiation, the parties agree to try in good faith to settle the dispute by mediation under the Commercial Mediation Rules of the American Arbitration Association, before resorting to arbitration, litigation, or some other dispute resolution procedure; provided that a party may not invoke mediation unless it has provided the other with written notice of the dispute and has attempted in good faith to resolve such dispute through negotiation. Notwithstanding the foregoing, any party may seek immediate equitable relief, without attempting to settle a dispute through mediation, in any case where such party is entitled to equitable relief by the terms of this Agreement or otherwise. 18. MEMBER'S WITHDRAWAL FROM SELLER. 18.1 Member Withdrawal. In the event the Member elects to withdraw as a member of Seller, the Member shall execute a copy of the Withdrawal Agreement (the "Withdrawal Agreement") in the form attached to the Member Agreement, dated as of August 1, 1996, among the Seller and its members, and deliver the same to Seller along with its Notice of Intent to Withdraw, including all required attachments to such Notice, as required by the Seller's bylaws. Such existing provisions of the Seller's bylaws and the form of the Withdrawal Agreement are incorporated by reference into this Agreement, and no amendment of such provision of the Seller's bylaws or the form of the Withdrawal Agreement shall reduce the rights of the Member (without its consent) as provided therein. The Member agrees that in the event of its withdrawal as a member of Seller, the performance by the Member in accordance with the terms of the Withdrawal Agreement shall be required in order to satisfy its obligations to Seller under this Agreement. The Member, by executing this Agreement, hereby stipulates and agrees that any other member of Seller may satisfy its obligations to the Seller, to the Member and to all other members of the Seller (current and former) by performing in accordance with the terms of the Withdrawal Agreement. 18.2 References. For the purposes of this Agreement, each reference to the "Member" shall mean (i) the withdrawn Member from and after the effective date of the Member's withdrawal from the Seller or (ii) any permitted assignee from and after the effective date of an assignment by the Member of this Agreement as provided in the Withdrawal Agreement. Further, for the purposes of this Agreement, each reference to a "member" or to the "members" of the Seller shall include any member or members which withdraw from the Seller or any permitted assignee of such member or members, except that any reference to an approval of the members shall not include any withdrawn member or members or such permitted assignees. 19. MISCELLANEOUS. 19.1 No Retail Sales. The Seller shall not, during the term of this Agreement, without the consent of the Member, (a) provide retail electric service in the State of Georgia within the Member's assigned geographic area established in accordance with the Georgia Territorial Electric Service Act, as such statute may be amended or replaced, or (b) offer to provide retail 21 electric service to any existing customer of the Member. 19.2 Indemnification. The Member shall indemnify and hold the Seller harmless from and against any and all losses, costs, liabilities, damages and expense (including without limitation attorneys' fees and expenses) of any kind incurred or suffered by the Seller pursuant to, as a result of or in connection with any resale by the Member of capacity, energy or both in the exercise of the Member's rights under Sections 4.4 or 4.5 except for losses, costs, liabilities, damages and expenses (including without limitation attorneys' fees and expenses) incurred or suffered by the Seller as a proximate cause of any action of the Seller that is not Prudent Utility Practice or is a breach of this Agreement. 19.3 No Restriction on Revenue Allocation. The Member's PCR and that of other members of the Seller for any or all Future Resources may be different from their respective percentages set forth on Exhibit 1 to Appendix 1 to "Rate Schedule A" with respect to Existing Resources, and may also vary among Future Resources or be zero as to any Future Resource. Recognizing the potential for such variation, and notwithstanding anything in any other agreement or document existing on the date of this Agreement, the Member agrees that the Seller shall not be restricted in its ability to apply revenues received from the Member or other amounts received by the Seller from the Member and others from or on account of the ownership or operation of its system or through or on account of the financing thereof, in such manner as the Seller shall determine to be in its best business interest. Likewise, the Member agrees that the Seller shall not be restricted in the Seller's ability to secure any and all indebtedness it may incur under instruments conveying security title to or creating a lien or other security interest in any or all of the Seller's assets, without regard to the purpose for which the indebtedness has been or may be incurred or the purpose for which the assets are used or are to be used, but the Member's contingent liability in the event of a Payment Default shall be governed by Section 3.5. 19.4 Corporate Documents. Whenever this Agreement authorizes the Seller to amend a schedule hereto, to develop and implement policies or to make other decisions or do other acts or things, at its sole discretion or otherwise, the Seller shall do so substantially in accordance with the applicable provisions of its duly adopted Articles, bylaws and corporate policies. Any failure on the part of the Seller to comply with this Section shall not relieve the Member of any obligation under this Agreement, but the Member shall not otherwise be prevented or limited in asserting any other rights it may have against the Seller in respect of such failure. 19.5 Information Requirements. The Seller and the Member shall each furnish to the other promptly upon request any and all information about itself, its financial condition, business and properties which may be necessary or desirable to facilitate any financing undertaken by the requesting party or any continuing disclosure obligation incurred by the requesting party in connection with any such financing. The supplying party shall be responsible only to the requesting party for the accuracy and completeness of the information furnished and shall have no responsibility or liability for the manner in which such information is used or its appropriateness for such use. The supplying party shall have no liability to any third party to which the requesting party may furnish 22 this information or any excerpt therefrom or summary thereof, and shall be entitled to receive appropriate assurances and indemnities from the requesting party to that effect as a condition to providing such information, provided that no such assurance or indemnity shall relieve the supplying party of liability to the requesting party for the accuracy and completeness of the information supplied. 19.6 No Third Party Beneficiaries. The Seller and the Member agree that no other member of the Seller or any other third party is an intended third-party beneficiary of this Agreement, except as may be provided in a separate instrument executed by each of the Seller and the Member. 19.7 Rules of Construction. (a) The descriptive headings of the various articles, sections and subsections of this Agreement and the Schedules attached hereto have been inserted for convenience of reference only and shall not be construed as to define, expand, or restrict the rights and obligations of the parties. (b) Wherever the term "including" is used in this Agreement and the Schedules attached hereto, such term shall not be construed as limiting the generality of any statement, clause, phrase or term. (c) The terms defined in this Agreement and the Schedules attached hereto shall include the plural as well as the singular and the singular as well as the plural. 20. NOTICES. All notices, requests, statements or payments provided for, required or permitted by this Agreement shall be sufficient for any and all purposes under this Agreement when transmitted by facsimile, first class United States Mail, hand delivery, or a private express delivery service to the facsimile numbers or addresses provided below. Seller: Oglethorpe Power Corporation 2100 East Exchange Place P. O. Box 1349 Tucker, Georgia 30085-1349 Attention: President and Chief Executive Officer FAX: (770) 270-7872 23 Member: Okefenoke Electric Membership Corporation P.O. Box 602 Nahunta, GA 31553-0602 Attention: FAX: (912) 462-6100 (Signatures on next page) 24 IN WITNESS WHEREOF, the Seller and the Member have caused this Agreement to be executed, attested, sealed and delivered by their respective duly authorized officers as of the day and year first written above. SELLER: OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) [CORPORATE SEAL] By: /s/ T.D. Kilgore ---------------------------------------- T. D. Kilgore, President and Chief Executive Officer ATTEST: /s/ Patricia N. Nash - ---------------------------------------- Patricia N. Nash, Assistant Secretary MEMBER: OKEFENOKE RURAL ELECTRIC MEMBERSHIP CORPORATION [CORPORATE SEAL] By: /s/ Robert W. Combs ---------------------------------------- Name: Robert W. Combs Title: President ATTEST: /s/ James L. Conner - ---------------------------------------- Name: James L. Conner Title: Secretary/Treasurer 25 Schedule A and Schedule B to the Amended and Restated Wholesale Power Contract are not filed herewith; however the Registrant hereby agrees that such Schedules will be provided to the Commission upon request. 26 SCHEDULE C All capitalized terms used in this Agreement, including in this Schedule C, in "RATE SCHEDULE A" and in Schedule B, and not otherwise defined shall have the respective meanings set forth below. "Accounting Requirements" shall mean the requirements of any system of accounts prescribed by the RUS as long as the Government is the holder, insurer or guarantor of any indebtedness of the Member or, in the absence thereof, the requirements of generally accepted accounting principles applicable from time to time to companies similar to the Member. "Administrator" shall be as defined in the third Recital. "Agreement" shall be as defined in the first sentence of this Agreement. "Annual Planning Report" shall be as defined in Section 3.3.1. "Assignment for Security" shall be as defined in Section 9.2.1. "Conveyance" shall be as defined in Section 8.3. "Debt Service Coverage Ratio" shall mean the ratio determined as follows: for each calendar year ADD (i) Patronage Capital or Margins, (ii) Interest Expense, and (iii) Depreciation and Amortization Expense AND DIVIDE the total so obtained by an amount equal to the sum of all payments of principal and interest required to be made on account of Long-Term Debt during such calendar year; provided, however, that in the event that any Long-Term Debt has been refinanced during such year, the payments of principal and interest required to be made during such year on account of such Long-Term Debt shall be based (in lieu of actual payments required to be made on such refinanced debt) upon the larger of (y) an annualization of the payments required to be made with respect to the refinancing debt during the portion of such year such refinancing debt is outstanding, or (z) the payment of principal and interest required to be made during the following year on account of such refinancing debt, all as computed in accordance with Accounting Requirements. "Depreciation and Amortization Expense" shall mean an amount constituting the depreciation and amortization, as computed pursuant to Accounting Requirements. "Equity" shall mean the total equities and margins (or, if not a cooperative, equity), excluding Regulatory Assets, as computed pursuant to Accounting Requirements. "Existing Contract" shall mean that certain Amended and Consolidated Wholesale Power Contract, dated as of December 1, 1988, between the Seller and the Member, and when used in C-1 the plural, shall mean such contract and the similar contracts dated as of the same date and between the Seller and any other member. "Existing Resources" shall mean the Resources as set forth in Exhibit 1 to Appendix 1 to "RATE SCHEDULE A", as changed as a result or any Minor Resource Modification and any Major Resource Modification required to comply with Legal Requirements pursuant to Section 3.4.3. "FERC" shall mean the Federal Energy Regulatory Commission. "Force majeure" shall have the meaning set forth in Section 6.3.1. "Future Resource" shall mean any (i) new Generating Resource, or (ii) Power Purchase Resource of the Seller or (iii) Major Resource Modification pursuant to Section 3.4.3(c). "GSOC" shall be as defined in Section 4.2. "GTC" shall be as defined in the ninth Recital. "Generating Resource" shall mean the Seller's interest in and to any existing, additional or repowered generating facilities, which may be owned (jointly or individually), leased or otherwise acquired, as changed as a result of any Minor Resource Modification and any Major Resource Modification required to comply with Legal Requirements pursuant to Section 3.4.3. A single unit or facility may be divided into one or more Generating Resources as the result of a Major Resource Modification. "Government" shall be as defined in the third Recital. "ITS" shall be as defined in Section 6.1. "Indebtedness" shall mean (1) debt incurred or assumed by the Seller for borrowed money or for the acquisition, construction or improvement of property other than goods or services that are acquired in the ordinary course of business of the Seller; (2) lease obligations of the Seller that, in accordance with generally accepted accounting principles are shown on the liability side of a balance sheet; (3) all debt (other than indebtedness otherwise treated as Indebtedness hereunder) for borrowed money or the acquisition, construction or improvement of property or capitalized lease obligations guaranteed, directly or indirectly, in any manner by the Seller, or in effect guaranteed, directly or indirectly, by the Seller through an agreement, contingent or otherwise, to purchase any such indebtedness or to advance or C-2 supply funds for the payment or purchase of any such indebtedness or to purchase property or services primarily for the purpose of enabling the debtor or seller to make payment of such indebtedness, or to assure the owner of the indebtedness against loss, or to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether or not such property is delivered or such services are rendered), or otherwise; or (4) any agreement by the Seller to purchase or lease power, supplies, property or services primarily for the purpose of enabling a debtor or seller to make payment of debt service on indebtedness, pursuant to which the Seller agrees to pay for power, supplies, property or services irrespective of whether or not such power, supplies or property are delivered or such services are rendered. "Interest Expense" shall mean an amount constituting the interest expense on Long-Term Debt, as computed in accordance with Accounting Requirements. "Joint Planning and Resource Management" shall be as defined in Section 3.3.1. "Leasehold Interest" shall be as defined in Section 9.3.2. "Lease Transaction" shall be as defined in Section 9.3.2. "Legal Requirements" shall mean: (1) obligations of the Seller under all laws, codes, ordinances, orders, judgments, decrees, injunctions, licenses, rules, permits, approvals, regulations, and requirements of every governmental authority having jurisdiction over the matter in question, whether federal, state or local, which may be applicable to the Seller; (2) obligations of the Seller under an existing joint ownership agreement or other existing contract with respect to Existing Resources; (3) requirements pursuant to Prudent Utility Practice to keep Existing Resources in good operating condition during the useful life or contract term of such Existing Resources; (4) obligations of the Seller under a joint ownership agreement or other agreement with respect to a Future Resource, which agreement has been approved by a vote of seventy-five percent (75%) of each of the members of the Seller's Board of Directors and the members of the Seller; or (5) requirements pursuant to Prudent Utility Practice to keep a Future Resource in good operating condition during the useful life or contract term of such C-3 Future Resource, if such Future Resource has been approved by a vote of seventy-five percent (75%) each of the members of the Seller's Board of Directors and the members of the Seller. "Long-Term Debt" shall mean an amount constituting long-term debt, as computed in accordance with Accounting Requirements. "Major Resource Modification" shall mean any of (i) a Resource Modification that is expected to result in an increase in the Rated Capacity of a Resource by five percent (5%) or more, (ii) a Resource Modification that results in the extension of the projected total useful life by five percent (5%) or more of the original projected useful life, or (iii) an extension of the contract term for a Power Purchase Resource by more than one (1) year; all as conclusively determined by the Seller's Board of Directors and, with respect to (i) and (ii), based upon a study by an independent consulting engineer. "member" shall mean a member of the Seller. "Member" shall mean the electric membership corporation identified as such in the first sentence of this Agreement. "Member Transaction" shall be as defined in Section 8.2. "Minor Resource Modification" shall mean any Resource Modification that is not a Major Resource Modification. "Mortgage" shall be as defined in the fourth Recital. "Non-Recourse Obligation" shall mean any indebtedness or other obligation, (a) liability for which is limited to (i) specific property of the Seller and (ii) the revenues and other rights under separate power supply agreements and (b) for which there is no recourse, directly or indirectly, to any other property, revenues or agreements of the Seller; provided that such indebtedness or other obligation is incurred solely in connection with the acquisition, construction or operation of the property or agreements to which the liability relates. "Notes" shall be as defined in the third Recital. "Patronage Capital or Margins" shall mean the amount of net patronage capital and margins (or, if not a cooperative, net income), as computed in accordance with Accounting Requirements. "Payment Default" shall be as defined in Section 10.1 or where the context requires similar payment default by another of the members of the Seller. C-4 "Percentage Capacity Responsibility" or "PCR" of the Member and of each other member shall mean the percentage allocation with respect to a Resource, including the allocation of electric capacity, cost responsibility and revenues, if applicable. Exhibit 1 to Appendix 1 to "RATE SCHEDULE A" sets forth the PCR for the Member with respect to Existing Resources. Future exhibit(s) to Appendix 1 to "RATE SCHEDULE A" shall set forth any PCR for the Member and other members with respect to Future Resources. "Performance Default" shall be as defined in Section 10.3. "Person" shall mean an individual, partnership, limited liability company, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature. "Pool" shall be as defined in Section 4.1. "Power Marketing Transaction" shall be as defined in Section 19. "Power Purchase Resource" shall mean a purchase of capacity and energy or energy by the Seller with a contract term greater than one (1) year. "Power Sales Resource" shall mean a sale of capacity and energy or energy made by the Seller with a contract term greater than one (1) year. "Prudent Utility Practice" shall be as defined in Section 6.3.2. "REAct" shall be as defined in the seventh Recital. "RUS" shall be as defined in the second Recital. "Rated Capacity" shall mean the capacity rating of a Resource in effect from time to time, as determined by the Seller and used in Section 3.3 of Appendix 3 to "RATE SCHEDULE A." "Regulatory Asset" shall mean the sum of any amounts properly recordable as unrecovered plant and regulatory study costs or as other regulatory assets, as computed in accordance with Accounting Requirements. "Resource" shall mean one of the Generating Resources or Power Purchase Resources. "Resource Modification" shall be as defined in Section 3.4.3. "Resource Policies" shall be as defined in Section 3.3.1. "Scheduling Member" shall be as defined in Section 4.1. C-5 "Secured Obligations" shall be as defined in the fourth Recital. "Seller" shall mean Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation). "Seller Transaction" shall be as defined in Section 9.3.2. "Times Interest Earned Ratio" shall mean the ratio determined as follows: For each calendar year add (i) Patronage Capital or Margins and (ii) Interest Expense on Long-Term Debt, and divide the total so obtained by Interest Expense on Long-Term Debt, all as computed in accordance with Accounting Requirement. "Total Assets" shall mean an amount constituting the total assets, but excluding any Regulatory Assets, as computed in accordance with Accounting Requirements. "Transferee" shall mean the Person formed by any consolidation or that is the survivor of any merger or reorganization or the Person that acquires or leases all or substantially all of the electric assets of the Member. "Withdrawal Agreement" shall be as defined in 18.1. C-6 EX-10.8-2 12 EXHIBIT 10.8.2 Exhibit 10.8.2 AMENDED AND RESTATED SUPPLEMENTAL AGREEMENT THIS AMENDED AND RESTATED SUPPLEMENTAL AGREEMENT, dated as of August 1, 1996 (this "Supplemental Agreement"), is entered into by and between Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation), an electric membership corporation organized and existing under the laws of the State of Georgia (the "Seller"), Altamaha Electric Membership Corporation, an electric membership corporation organized and existing under the laws of the State of Georgia (the "Member"), and the United States of America (the "Government"), acting through the Administrator (the "Administrator") of the Rural Utilities Service ("RUS"). WHEREAS, the Seller, the Member and the Government are parties to that certain Supplemental Agreement, dated September 5, 1974, as amended by that certain Amended and Consolidated Supplemental Agreement, dated as of December 1, 1988 (collectively, the "Existing Supplemental Agreement"); and WHEREAS, the Seller and the Member desire to amend their existing contract for the purchase and sale of electric power and energy by entering into an amended and restated contract which is attached (the "Amended and Restated Wholesale Power Contract"); and WHEREAS, the effectiveness of the Amended and Restated Wholesale Power Contract is subject to the approval of the Administrator under the terms of the loan agreement entered into between the Government and the Seller; NOW, THEREFORE, in consideration of the mutual undertakings herein contained, and the approval of the Administrator of the Amended and Restated Wholesale Power Contract, the parties hereto agree as follows: 1. The Seller, the Member and the Government agree that if the Member shall fail to comply with any provision of the Amended and Restated Wholesale Power Contract, the Seller, the Government (or the Administrator, if the Administrator so elects), shall have the right to enforce the obligations of the Member under the provisions of the Amended and Restated Wholesale Power Contract by instituting all necessary actions at law or suits in equity, including, without limitation, suits for specific performance. Such rights to enforce the provisions of the Amended and Restated Wholesale Power Contract are in addition to and shall not limit the rights that the Government (or the Administrator) shall otherwise have pursuant to the assignment of such Amended and Restated Wholesale Power Contract and the payments required to be made thereunder as provided in the "Mortgage" (as defined in Schedule C to the Amended and Restated Wholesale Power Contract). The Government shall not, under any circumstances, assume or be bound by the obligations of the Seller under the Amended and Restated Wholesale Power Contract except to the extent the Government shall agree in writing to accept and be bound by such obligations. 2. If the Seller shall fail to comply with Section 5.2 of the Amended and Restated Wholesale Power Contract, the Government (or the Administrator, if the Administrator so elects), shall have the right to enforce the obligations of the Seller under the provisions of the Amended and Restated Wholesale Power Contract by instituting all necessary actions at law or suits in equity, including, without limitation, suits for specific performance. Such rights to enforce the provisions of the Amended and Restated Wholesale Power Contract are in addition to and shall not limit the rights that the Government (or the Administrator) shall otherwise have pursuant to the assignment of such Amended and Restated Wholesale Power Contract and the payments required to be made thereunder as provided in the Mortgage. The Government shall not, under any circumstances, assume or be bound by the obligations of the Member under the Amended and Restated Wholesale Power Contract except to the extent the Government shall agree in writing to accept and be bound by such obligations. 3. If either the Seller or the Member is a borrower from RUS at the time an amendment to the Amended and Restated Wholesale Power Contract is executed, such amendment to the Amended and Restated Wholesale Power Contract shall not be effective until approved in writing by the Administrator. 4. The Member and the Seller agree that the failure or threatened failure of the Member to comply with the terms of Section 8 of the Amended and Restated Wholesale Power Contract will cause irreparable injury to the Government, which cannot properly or adequately be compensated by the mere payment of money. The Member agrees, therefore, that in the event of a breach or threatened breach of such Section 8 by the Member, the Government (or the Administrator), in addition to any other remedies that may be available to the Government (or the Administrator) judicially, shall have the right to obtain from any competent court a decree enjoining such breach or threatened breach of such Section 8 or providing that the terms of such Section 8 be specifically enforced. 5. The Government is an intended third party beneficiary as provided herein within the meaning of Section 19.6 of the Amended and Restated Wholesale Power Contract. 6. This Supplemental Agreement amends and restates the Existing Supplemental Agreement. 7. This Supplemental Agreement shall terminate when neither the Seller nor the Member is a borrower of RUS. 8. Except to the extent governed by applicable federal law, this Supplemental Agreement shall be governed by, and construed in accordance with, the laws of the State of Georgia. 2 9. This Supplemental Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. Neither the Member nor the Seller shall assign this Supplemental Agreement without the consent of the Administrator, except that this Supplemental Agreement may be assigned by the Seller or the Member without the consent of the Administrator in connection with any assignment of the Amended and Restated Wholesale Power Contract permitted by the Amended and Restated Wholesale Power Contract. 10. This Supplemental Agreement shall be effective when and if the Amended and Restated Wholesale Power Contract is effective pursuant to its terms. (Signatures on next page) 3 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Agreement to be duly executed as of the day and year first above mentioned. SELLER: OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) [CORPORATE SEAL] By: /s/ T.D. Kilgore --------------------------------- T. D. Kilgore, President and Chief Executive Officer ATTEST: /s/ Patricia N. Nash - ------------------------------------- Patricia N. Nash, Assistant Secretary MEMBER: ALTAMAHA ELECTRIC MEMBERSHIP CORPORATION [CORPORATE SEAL] By: /s/ Jmon Warnock --------------------------------- Name: Jmon Warnock Title: President ATTEST: /s/ Bernard Hart - ------------------------------------- Name: Bernard Hart Title: Secretary-Treasurer GOVERNMENT: UNITED STATES OF AMERICA By: /s/ Thomas L. Eddy --------------------------------- Title: Director, Power Supply Division 4 SCHEDULE TO EXHIBIT 10.8.2 AMENDED AND RESTATED SUPPLEMENTAL AGREEMENT Schedule of Substantially Identical Amended and Restated Supplemental Agreements for the Electric Membership Corporations dated August 1, 1996 1. Amicalola EMC 2. Canoochee EMC 3. Carroll EMC 4. Central Georgia EMC 5. Coastal EMC 6. Cobb EMC 7. Colquitt EMC 8. Coweta-Fayette EMC 9. Excelsior EMC 10. Flint EMC 11. Grady EMC 12. Greystone Power Corporation, an EMC 13. Habersham EMC 14. Hart EMC 15. Irwin EMC 16. Jackson EMC 17. Jefferson EMC 18. Lamar EMC 19. Little Ocmulgee EMC 20. Middle Georgia EMC 21. Mitchell EMC 22. Ocmulgee EMC 23. Oconee EMC 24. Okefenoke EMC 25. Pataula EMC 26. Planters EMC 27. Rayle EMC 28. Satilla Rural EMC 29. Sawnee EMC 30. Slash Pine EMC 31. Snapping Shoals EMC 32. Sumter EMC 33. Three Notch EMC 34. Tri-County EMC 35. Troup EMC 36. Upson EMC 37. Walton EMC 38. Washington EMC EX-10.8-3 13 EXHIBIT 10.8.3 Exhibit 10.8.3 SUPPLEMENTAL AGREEMENT TO THE AMENDED AND RESTATED WHOLESALE POWER CONTRACT THIS SUPPLEMENTAL AGREEMENT TO THE AMENDED AND RESTATED WHOLESALE POWER CONTRACT, dated as of January 1, 1997, is entered into by and among GEORGIA POWER COMPANY, a corporation organized and existing under the laws of the State of Georgia ("Georgia Power"), OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized and existing under the laws of the State of Georgia ("Oglethorpe"), and ALTAMAHA ELECTRIC MEMBERSHIP CORPORATION, an electric membership corporation organized and existing under the laws of the State of Georgia (the "Member"). R E C I T A L S: WHEREAS, Oglethorpe's existing members, including the Member, are the 39 electric membership corporations doing business in the State of Georgia, each of which joined with the others, beginning in 1974, to form Oglethorpe in order to share the benefits and costs of ownership of an entity that would engage in providing electric capacity and energy for the benefit of its members; WHEREAS, Oglethorpe, on behalf of its members, including the Member, owns an undivided interest in certain electric generating resources with Georgia Power and other ownership participants; WHEREAS, Georgia Power is the operating agent for certain of such electric generating resources; WHEREAS, Oglethorpe and the Member are parties to that certain Amended and Restated Wholesale Power Contract, dated as of August 1, 1996 ("New Wholesale Power Contract"); WHEREAS, in order to implement the New Wholesale Power Contract, Oglethorpe has requested that Georgia Power consent to the termination of Oglethorpe's sole and exclusive power supply relationship with the Member as required by certain of the agreements to which Oglethorpe and Georgia Power are parties, and Georgia Power, as a condition to such consent, has requested that Oglethorpe, the Member and each of the other members of Oglethorpe execute agreements in the form and content of this Agreement; NOW, THEREFORE, in consideration of the premises and the mutual undertakings herein contained and for other good and valuable consideration, the terms and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows: 1. Meanings of Certain Terms. For the purposes of this Agreement, any word or term which is used in this Agreement and defined in the New Wholesale Power Contract shall have the same meaning assigned to it in the New Wholesale Power Contract. All other capitalized terms used herein shall have the respective meanings set forth below, unless the context in which such term is used clearly requires otherwise. 1.1 Plant Co-Ownership Agreements shall mean the following listed agreements and any amendments thereto: 1.1.1 Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement between Georgia Power Company and Oglethorpe Electric Membership Corporation dated as of January 6, 1975 ("Hatch Ownership Agreement"). 1.1.2 Edwin I. Hatch Nuclear Plant Operating Agreement between Georgia Power Company and Oglethorpe Electric Membership Corporation dated as of January 6, 1975. 1.1.3 Alvin W. Vogtle Nuclear Units One and Two Purchase and Ownership Participation Agreement among Georgia Power Company, Oglethorpe Electric Membership Corporation, Municipal Electric Authority of Georgia and City of Dalton, Georgia dated as of August 27, 1976; Amendment No. 1 dated as of January 18, 1977, and Amendment No. 2 dated as of February 24, 1977 ("Vogtle Ownership Agreement"). 1.1.4 Alvin W. Vogtle Nuclear Units One and Two Operating Agreement among Georgia Power Company, Oglethorpe Electric Membership Corporation, Municipal Electric Authority of Georgia and City of Dalton, Georgia dated as of August 27, 1976. 1.1.5 Nuclear Managing Board Agreement among Georgia Power Company, Oglethorpe Power Corporation, Municipal Electric Authority of Georgia and City of Dalton, Georgia dated as of November 12, 1990. 1.1.6 Amended and Restated Nuclear Managing Board Agreement among Georgia Power Company, Oglethorpe Power Corporation, Municipal Electric Authority of Georgia and City Dalton, Georgia dated as of July 1, 1993. 1.1.7 Plant Hal Wansley Purchase and Ownership Participation Agreement between Georgia Power Company and Oglethorpe Electric Membership Corporation dated as of March 26, 1976 ("Wansley Ownership Agreement"). 1.1.8 Plant Hal Wansley Operating Agreement between Georgia Power Company and Oglethorpe Electric Membership Corporation dated as of March 26, 1976. 2 1.1.9 Amendment to the Plant Hal Wansley Operating Agreements by and among Georgia Power Company, Oglethorpe Power Corporation, Municipal Electric Authority of Georgia and City of Dalton, Georgia dated as of January 15, 1995. 1.1.10 Plant Hal Wansley Combustion Turbine Agreement between Georgia Power Company and Oglethorpe Power Corporation dated as of August 2, 1982; amended by certain Letter Agreements dated as of October 20, 1982 and May 7, 1992. 1.1.11 Plant Robert W. Scherer Units Numbers One and Two Purchase and Ownership Participation Agreement among Georgia Power Company, Oglethorpe Power Corporation, Municipal Electric Authority of Georgia and City of Dalton, Georgia dated as of May 15, 1980; Amendment No. 1 dated as of December 30, 1985; Amendment No. 2 dated as of July 1, 1986; Amendment No. 3 dated as of August 1, 1988; and Amendment No. 4 dated as of December 31, 1990 ("Scherer Ownership Agreement"). 1.1.12 Plant Robert W. Scherer Units Numbers One and Two Operating Agreement among Georgia Power Company, Oglethorpe Power Corporation, Municipal Electric Authority of Georgia and City of Dalton, Georgia dated as of May 15, 1980; Amendment No. 1 dated as of December 30, 1985; and Amendment No. 2 dated as of December 31, 1990. 1.1.13 Plant Scherer Managing Board Agreement among Georgia Power Company, Oglethorpe Power Corporation, Municipal Electric Authority of Georgia, City of Dalton, Georgia, Gulf Power Company, Florida Power & Light Company and Jacksonville Electric Authority dated as of December 31, 1990. 1.1.14 Rocky Mountain Pumped Storage Hydroelectric Project Ownership Participation Agreement by and between Oglethorpe Power Corporation and Georgia Power Company dated as of November 18, 1988 ("Rocky Mountain Ownership Agreement"). 1.1.15 Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement by and between Oglethorpe Power Corporation and Georgia Power Company dated as of November 18, 1988. 2. Waiver of Plant Co-Ownership Agreement Provisions and Consent. 2.1 Oglethorpe as Sole and Exclusive Power Supplier. The ITSA, Power Sale and Coordination Umbrella Agreement between Oglethorpe and Georgia Power dated as of November 12, 1990, the Hatch Ownership Agreement, the Vogtle Ownership Agreement, the Wansley Ownership Agreement, the Scherer Ownership Agreement, the Rocky Mountain Ownership Agreement and the Joint Committee Agreement dated as of August 27, 1976; as amended as of June 19, 1978 ("Joint Committee Agreement"), each contains a representation, warranty and covenant of Oglethorpe that Oglethorpe shall be the sole and exclusive power supplier for each of its 39 members for the term stated in the respective agreements. 3 2.2 Waiver of Requirement and Consent. Georgia Power acknowledges that the New Wholesale Power Contract allows a member to enter into arrangements for the supply of electricity from entities other than Oglethorpe. Georgia Power hereby waives the requirement that Oglethorpe remain the sole and exclusive power supplier for the Member, and consents to the termination of such arrangement. In addition, Georgia Power agrees not to terminate the Joint Committee Agreement pursuant to Section 10.1(D) thereof. 2.3 Oglethorpe Indemnification. Oglethorpe hereby indemnifies and holds Georgia Power harmless from and against any losses, costs, liability, damages, and expenses (including, without limitation, reasonable attorney's fees and expenses) of any kind suffered or incurred by Georgia Power pursuant to, as a result of or in connection with any claim, allegation, complaint, intervention, lawsuit, administrative action, or other proceeding brought or asserted by any co-owner of a co-owned generating resource which arises out of Georgia Power's waiver and consent set forth in Section 2.2 hereof. 3. Agreements Regarding Co-Owned Generating Resources. 3.1 Term of the New Wholesale Power Contract. Notwithstanding Section 12.2 of the New Wholesale Power Contract, the Member and Oglethorpe agree that the term of the New Wholesale Power Contract shall not be shortened to any date prior to December 31, 2025, without the consent of Georgia Power, unless the obligations of Oglethorpe under the existing Plant Co-Ownership Agreements have been satisfied or Oglethorpe has been released from such obligations. 3.2 Resource Modifications. Member agrees that if (a) a Resource Modification is made to a Generating Resource covered by the Plant Co-Ownership Agreements, and (b) Oglethorpe is obligated to participate in such Resource Modification pursuant to the provisions of the Plant Co-Ownership Agreements, then such Resource Modification shall be deemed to be required to comply with Legal Requirements notwithstanding Section 3.4.3(b) of the New Wholesale Power Contract. If Oglethorpe's consent to a Major Resource Modification is required, Oglethorpe agrees not to give such consent except after obtaining the requisite approvals required by Section 3.4.3(b) of the New Wholesale Power Contract. 3.3 Amendments to New Wholesale Power Contract. Oglethorpe will give Georgia Power written notice at least forty-five days prior to the proposed effective date of any proposed amendment to the New Wholesale Power Contract. Without the prior written consent of Georgia Power, Oglethorpe and the Member will not amend the New Wholesale Power Contract to lessen the responsibility of the Member under the provisions of Section 2.1 thereof to pay for the electric capacity allocated to the Member as set forth therein with respect to any Generating Resource covered by the Plant Co-Ownership Agreements. 3.4. Scheduling Member Requirement. Oglethorpe and the Member agree that in the event the Member elects to become a Withdrawing Member, the Withdrawing Member must schedule any entitlement to capacity and energy from any Resource through Oglethorpe or 4 Georgia System Operations Corporation unless Georgia Power provides written consent to another arrangement. 4. Member Notice Requirements for Withdrawal and Assignment . 4.1 Member Withdrawal From Oglethorpe. Oglethorpe shall deliver to Georgia Power a copy of the Member's Notice of Intent to Withdraw as a member of Oglethorpe within ten days of receipt of such notice by Oglethorpe. 4.2 Member Assignment of New Wholesale Power Contract. Oglethorpe shall deliver to Georgia Power written notice of any receipt by it of a proposal by the Member to assign its rights and duties under the New Wholesale Power Contract at least ten days prior to any consent by Oglethorpe to such assignment. 5. Miscellaneous. 5.1 Conditions Precedent to Effectiveness. The respective obligations of the parties under this Agreement are conditioned upon the execution of Supplemental Agreements to the Amended and Restated Wholesale Power Contract in the form of this Agreement by each of the members of Oglethorpe that have entered into a New Wholesale Power Contract. This Agreement shall become effective when all such Supplemental Agreements have been fully executed, and approved by the Administrator of the Rural Utilities Service. 5.2 References. For the purposes of this Agreement, each reference to the "Member" or "member" shall also include those entities specified in Section 18.2 of the New Wholesale Power Contract. 5.3 Waiver. No party shall be deemed to have waived any provision of this Agreement unless such waiver shall be in writing and signed by the party charged with the waiver. No waiver shall be deemed to be a continuing waiver unless so stated in writing. 5.4 Assignment. This Agreement and the rights and obligations under this Agreement shall be assigned or transferred by the Member to any assignee or transferee of the Member which succeeds to its rights and obligations under the New Wholesale Power Contract, and such assignee or transferee shall agree to be bound by the terms hereof. This Agreement shall be binding on and inure to the benefit of the permitted successors and permitted assigns of the other parties. 5.5 Applicable Law. This Agreement shall be governed by and construed in accordance with the law of the State of Georgia, excluding conflict of laws principles that might require application of the laws of another jurisdiction. 5.6 Amendments. No change, amendment or modification of this Agreement shall be 5 valid or binding upon the parties unless such change, amendment or modification shall be in writing and duly executed by the parties. 5.7 Severability. If any provision of this Agreement is void or unenforceable, the remainder of this Agreement shall not be affected thereby. 5.8 RUS Approvals. This Agreement shall be of no force or effect until it is approved in writing by the Administrator of the Rural Utilities Service. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.] 6 IN WITNESS WHEREOF, the undersigned parties have duly executed this Agreement as of the date first above written. GEORGIA POWER COMPANY [CORPORATE SEAL] By: /s/ Fred D. Williams -------------------------------- Fred D. Williams, Senior Vice President ATTEST: /s/ Cherry C. Hudgins - ------------------------------------- Name: Cherry C. Hudgins Title: Assistant Corporate Secretary OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) [CORPORATE SEAL] By: /s/ T.D. Kilgore -------------------------------- T.D. Kilgore, President and Chief Executive Officer ATTEST: /s/ Patricia N. Nash - ------------------------------------- Patricia N. Nash, Assistant Secretary ALTAMAHA ELECTRIC MEMBERSHIP CORPORATION [CORPORATE SEAL] By: /s/ Jmon Warnock -------------------------------- Name: Jmon Warnock Title: President ATTEST: /s/ Bernard Hart - ------------------------------------- Name: Bernard Hart Title: Secretary-Treasurer 7 SCHEDULE TO EXHIBIT 10.8.3 AMENDED AND RESTATED SUPPLEMENTAL AGREEMENT Schedule of Substantially Identical Amended and Restated Supplemental Agreements for the Electric Membership Corporations dated January 1, 1997 1. Amicalola EMC 2. Canoochee EMC 3. Carroll EMC 4. Central Georgia EMC 5. Coastal EMC 6. Cobb EMC 7. Colquitt EMC 8. Coweta-Fayette EMC 9. Excelsior EMC 10. Flint EMC 11. Grady EMC 12. Greystone Power Corporation, an EMC 13. Habersham EMC 14. Hart EMC 15. Irwin EMC 16. Jackson EMC 17. Jefferson EMC 18. Lamar EMC 19. Little Ocmulgee EMC 20. Middle Georgia EMC 21. Mitchell EMC 22. Ocmulgee EMC 23. Oconee EMC 24. Okefenoke EMC 25. Pataula EMC 26. Planters EMC 27. Rayle EMC 28. Satilla Rural EMC 29. Sawnee EMC 30. Slash Pine EMC 31. Snapping Shoals EMC 32. Sumter EMC 33. Three Notch EMC 34. Tri-County EMC 35. Troup EMC 36. Upson EMC 37. Walton EMC 38. Washington EMC EX-10.8-4 14 EXHIBIT 10.8.4 Exhibit 10.8.4 SUPPLEMENTAL AGREEMENT TO THE AMENDED AND RESTATED WHOLESALE POWER CONTRACT THIS SUPPLEMENTAL AGREEMENT TO THE AMENDED AND RESTATED WHOLESALE POWER CONTRACT, dated as of March 1, 1997 (together with permitted amendments hereto, this "Supplement"), is entered into by and between OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized and existing under the laws of the State of Georgia (the "Seller"), and ALTAMAHA ELECTRIC MEMBERSHIP CORPORATION, an electric membership corporation organized and existing under the laws of the State of Georgia (the "Member"). R E C I T A L S: WHEREAS, the Seller and the Member have entered into that certain Amended and Restated Wholesale Power Contract, dated as of August 1, 1996 (together with permitted amendments thereto, the "Wholesale Power Contract"), under which the Seller agrees to sell and the Member agrees to purchase certain quantities of electric capacity and energy; WHEREAS, for the benefit of the Member and 36 of the Seller's 38 other members (the "Participating Members"), the Seller has entered into that certain Power Purchase and Sale Agreement , dated as of November 19, 1996, among LG&E Power Marketing Inc. ("LPM"), LG&E Energy Corp. and the Seller (as supplemented by any arbitration, mediation, amendment, administrative procedure or other method of implementing and administering such contract permitted under the provisions of such contract, the "LPM Contract"); WHEREAS, the Seller has entered into that certain Power Purchase and Sale Agreement, dated as of January 1, 1997, among LPM, LG&E Power Inc. and the Seller (as supplemented by any arbitration, mediation, amendment, administrative procedure or other method of implementing and administering such contract permitted under the provisions of such contract, the "LPM2 Contract"), a contract similar to the LPM Contract, but for the benefit of the remaining two members of the Seller (the "LPM2 Members"); WHEREAS, under the LPM Contract the Seller will purchase electric capacity and energy from LPM for resale to the Participating Members and has agreed to sell to LPM certain electric energy that LPM schedules or is obligated to take; and WHEREAS, to effect such transaction, (i) the Member wishes to exercise its right not to include in the Seller's energy and capacity pool and separately to schedule the capacity and associated energy committed in the LPM Contract and (ii) the Seller and the Member desire to agree to other terms and conditions as provided herein; WHEREAS, to effect the LPM2 Contract transaction the Seller will be entering into an agreement with each of the LPM2 Members that is similar to this Supplement; NOW THEREFORE, in consideration of the premises and the mutual promises herein contained, the Seller and the Member hereby agree as follows: 1. DEFINITIONS. All capitalized terms used herein that are defined in the Wholesale Power Contract, as well as the term "member," shall have their respective meanings set forth in the Wholesale Power Contract, unless the context in which such term is used clearly requires otherwise. All other capitalized terms used herein shall have the respective meanings set forth below. "Customer Choice Load" shall have the meaning set forth in the LPM Contract. "Excluded Customer Choice Load" means the Member's Customer Choice Load that is not included in LPM's Share of Customer Choice Load. "Exhibit 3" is as defined in Section 3.1. "Law" shall have the meaning set forth in the LPM Contract. "LPM" is as defined in the Second Recital. "LPM Contract" is as defined in the Second Recital. "LPM Contract Date" means November 19, 1996. "LPM2 Contract" is as defined in the Third Recital. "LPM2 Members" is as defined in the Third Recital. "LPM Future Resource" is the Future Resource in which the Member is allocated a PCR in Exhibit 3. "LPM Power Sales Resource" is the Power Sales Resource in which an allocation is made to the Member in Exhibit 3. "LPM's Share of Customer Choice Load" shall have the meaning set forth in the LPM Contract. "Member Load" means, as of a particular interval, fifty percent (50%) of the total energy requirements of the Member (including the requirements of any retail customer with a choice of supplier under applicable Law, which customer is being served by the Member as of the LPM Contract Date), measured at the metering point, after reducing such requirements to reflect (i) the Member's purchases from SEPA (ii) the Seller's purchases under contracts with QFs entered into after the LPM Contract Date; provided, that Member Load shall not include requirements for sales for resale by the Member, other than to load physically located within the service territory assigned to the Member as of the LPM Contract Date. "Rate Schedule A" means Rate Schedule A to the Wholesale Power Contract. "Wholesale Power Contract" is defined in the First Recital. "Participating Members" is defined in the Second Recital. All Participating Members are allocated PCRs in Exhibit 3. "QF" means a qualifying small power production or cogeneration facility as defined in Section 210 of the Public Utilities Regulatory Policy Act of 1978, as amended, and applicable FERC regulations promulgated thereunder. "Supplement Schedule A" means Schedule A, "LPM Power Marketer Supplement Formulary Rate Application," attached hereto. "SEPA" means the Southeastern Power Administration and any successor agency thereto or any entity succeeding to all or substantially all of the assets and liabilities of SEPA. "SEPA Contract" means that certain Contract No. 983, executed as of September 30, 1996, by and between the Member and the United States of America, acting by and through the Administrator of SEPA, under which the Member is entitled to purchase capacity and energy produced from hydro-electric generating resources, and shall include any amendments, or modifications to, or restatements of said agreement and any new agreement in substitution of the original agreement. "Supplement Term" is defined in Section 2. 2. SUPPLEMENT TERM. This Supplement shall be effective as of the later of (i) the date on which the Wholesale Power Contract becomes effective and (ii) the date on which the Administrator's approval of this Supplement is effective and shall continue in effect until termination of the LPM Contract, whether as the result of early termination, cancellation in the event of default prior to the end of the fixed term, or otherwise (such period, the "Supplement Term"); provided, however, that any Party's cost or liability to the other Party hereunder, or as the result of the LPM Contract, that arises prior to such termination and certain rights and obligations, as expressly provided in Sections 3.3.2, 5.3 and 7 of this Supplement, shall survive the Supplement Term. 3. FUTURE RESOURCE AND POWER SALES RESOURCE OBLIGATIONS. 3.1. New PCRs. The LPM Contract shall be treated as a Future Resource for the purpose of the Seller's purchases thereunder and a Power Sales Resource for purposes of the Seller's sales thereunder. The Power Sales Resource represents the Seller's commitment of 44.178 percent of all of the capacity and associated energy relating to the Existing Resources. The Member hereby approves the LPM Contract and confirms that the requirements of Section 3.2.1 of the Wholesale Power Contract have been met with respect to the allocations to the Member set forth in Exhibit 3 to Appendix 1 to "Rate Schedule A" to the Wholesale Power Contract ("Exhibit 3"). The Member hereby acknowledges that neither the LPM Contract nor this Supplement affects the Member's PCR with respect to any of the Existing Resources or its allocation with respect to Power Sales Resources listed on Exhibit 1 to Appendix 1 to "Rate Schedule A". 3.2 Cost Responsibility. The Member hereby approves the LPM Contract for the purpose of the requirement that it be approved by seventy-five percent (75%) of the members of the Seller and acknowledges that the LPM Contract constitutes a Future Resource with respect to which all members of the Seller shall become liable for a pro rata share upon a Payment Default as provided in Section 3.5.3 of the Wholesale Power Contract. The Member acknowledges that "Rate Schedule A" shall provide for recovery of net costs incurred by the Seller as the result of the sales made under the LPM Contract. 3.3 Scheduling Member. 3.3.1 During the Supplement Term, the Member irrevocably elects and the Seller waives prior notice and consents to the Member being a Scheduling Member with respect to its PCR in the LPM Future Resource and its allocation in the LPM Power Sales Resource (and the fifty percent (50%) of its allocation in the underlying Existing Resources committed to such Power Sales Resource). The Member acknowledges that the other Participating Members have made the same elections and the Seller has consented to such elections and that the LPM Power Sales Resource and the LPM Future Resource (and the underlying Existing Resources committed to such Power Sales Resource) will not be included in the Pool. For purposes of the Wholesale Power Contract, the Member irrevocably designates its schedule of its allocation in the LPM Power Sales Resource (and the fifty percent (50%) of its allocation in the underlying Existing Resources committed to such Power Sales Resource) to be, in each hour, LPM's schedule of each Existing Resource dedicated to the LPM Power Sales Resource times the Member's Exhibit 3 PCR. Likewise, the Member irrevocably designates its schedule of capacity and associated energy from the LPM Future Resource to be in each hour the Member Load, less Excluded Customer Choice Load. 3.3.2 The Member's election set forth in Section 3.3.1 shall be limited to the Supplement Term and thereafter the Member's allocation of capacity and associated energy committed to and load served with the capacity and energy purchased under the LPM Contract shall be removed from separate scheduling and returned to the Pool, unless the Member has (i) previously elected to be a Scheduling Member with respect to fifty percent (50%) of its allocation in the underlying Existing Resources committed to the LPM Power Sale Resource and to the Member Load or (ii) so elects in writing within six (6) months of the unscheduled termination of the LPM Contract as the result of a default or by mutual agreement of the Seller and LPM. If the Member so elects to become a Scheduling Member, such election shall be effective without regard to whether the Member is a Scheduling Member with respect to the remainder of the Member's total energy requirements. 4. RATES. 4.1 Application of Formula. Supplement Schedule A attached hereto and incorporated herein by reference defines how the formulae contained in "Rate Schedule A" are to be applied to the costs incurred and revenues received under the LPM Contract. 4.2 Limit on Changes. The Seller may modify the definitions in Supplement Schedule A, but only to the extent necessary to ensure that all costs and revenues under the LPM Contract are recovered by and credited to those Members participating in the LPM Contract; provided, however, that during the Supplement Term, (i) the Seller shall not enter into an amendment of the LPM Contract which modifies the Member's individual rates established under the LPM Contract and set forth in Supplement Schedule A unless any such amendment of the LPM Contract is negotiated to comply with the provisions of Sections 9.4, 16.1 or 16.2 of the LPM Contract or is approved by seventy-five percent (75%) of the Participating Members, and (ii) the Seller shall not exercise its right to terminate the LPM Contract pursuant to Section 6.2(a) of the LPM Contract except with the approval of seventy-five percent (75%) of the Participating Members. 4.3 No Unilateral Filings. Notwithstanding Section 11.3.1 of the Wholesale Power Contract, during the Supplement Term, (i) the Seller shall not unilaterally file an application for a change in any part of "Rate Schedule A" that is expressly prohibited by Section 4.2 of this Supplement and (ii) the Member shall not protest or make any unilateral filing complaining of a change expressly permitted by Section 4.2 of this Supplement. 4.4 Continued Justness and Reasonableness of Rate. The Seller has provided the Member with a copy of "Rate Schedule A", as amended through February 24, 1997. The Member confirms that the rates, terms and conditions established under the Wholesale Power Contract, including "Rate Schedule A" are just and reasonable and not unduly discriminatory and remain fully consistent with the provisions of Section 11.1 of the Wholesale Power Contract. 5. PLANNING AND RESOURCE MANAGEMENT. 5.1 Member Purchases. During the Supplement Term, the Member irrevocably designates the Seller as its exclusive supplier of capacity and energy to meet the Member Load, less Excluded Customer Choice Load. For the purpose of determining the Member's energy charges, the Seller shall be deemed to have served the Member Load solely with energy purchased under the LPM Contract, to the extent such energy is delivered by or on behalf of LPM. 5.2 Member Sales. During the Supplement Term, the Member irrevocably waives its right to, and agrees not to, sell for resale any of the energy purchased by the Seller under the LPM Contract and thereafter sold by the Seller to the Member; provided, that such prohibition shall not apply to Member sales for resale to load physically located within the service territory assigned to the Member as of the LPM Contract Date. Likewise, during the Supplement Term, the energy and capacity associated with fifty percent (50%) of the Member's PCR in Existing Resources shall be unavailable for resale by the Member because it is committed to the LPM Power Sales Resource. 5.3 Annual Planning Report. Unless and until the Member has elected out of all Joint Planning and Resource Management services and has designated all capacity and energy associated with its PCRs for separate scheduling, the Member shall continue to provide its Annual Planning Report to the Seller during the term of the Wholesale Power Contract. This obligation shall survive the termination of this Supplement. 6. SEPA RIGHTS. 6.1 Scheduling. The Member confirms that the Seller is designated as the Member's scheduling agent under the SEPA Contract. The Member shall not designate a new scheduling agent during the Supplement Term. 6.2 Contract Modification. In the event the Member renegotiates its SEPA Contract, the Member agrees to use its best efforts to retain rights to schedule electric capacity and energy purchased from SEPA at least as favorable to the Member as those contained in the existing SEPA Contract. The Member agrees to give the Seller prompt written notice of (i) any modification to the SEPA Contract that reduces the allocation of electric capacity and energy available to the Member for a period at least through December 31, 2001, or (ii) the termination of the SEPA Contract. Such notice shall be given on the later to occur of one hundred twenty (120) days prior to the effectiveness of such modification or termination or, if undertaken unilaterally by SEPA, within ten (10) days of the date the Member received notice from SEPA of SEPA's action. 6.3 Replacement Power. If the SEPA Contract is terminated or modified to reduce the amount of capacity and energy available to the Member, the Member irrevocably designates the Seller as its sole supplier, during the Supplement Term, of fifty percent (50%) of the capacity and energy previously supplied by SEPA. The Seller shall provide such capacity and energy in accordance with the terms of the LPM Contract. 7. SELLER'S MARKETING AND ECONOMIC DEVELOPMENT. Section 5.4 of the Wholesale Power Contract obligates the Seller to unbundle its charges for services. The Member waives this obligation and agrees to pay its allocated share of the cost of the Seller's marketing and economic development services, including Seller's margin, notwithstanding the level of use of such services by the Member until December 31, 1999. Such services may be performed by the Seller, by a subsidiary of the Seller, by an affiliated company, or by a third party who contracts with the Seller to perform such services. The Member's allocated share shall be a percentage equal to its PCR in Existing Resources times the Seller's expenses of marketing and economic development which are not covered by usage-based fees and subscription agreements. The allocated share shall recover 75% of Seller's 1997 budget for expenses of marketing and economic development during the year beginning January 1, 1998 and 50% of such 1997 budget during the year beginning January 1, 1999. The waivers and obligations set forth in this Section 7 shall survive the termination of this Supplement. 8. NO THIRD PARTY BENEFICIARIES. Subject to the provisions of Section 11 below, the Seller and the Member agree that no other member of the Seller or any other third party is an intended third-party beneficiary of this Supplement, except as may be provided in a separate instrument executed by each of the Seller and the Member. 9. RULES OF CONSTRUCTION. 9.1 Headings. The descriptive headings of the various articles, sections and subsections of this Agreement and the Schedules attached hereto have been inserted for convenience of reference only and shall not be construed as to define, expand, or restrict the rights and obligations of the parties. 9.2 Including. Wherever the term "including" is used in this Agreement and the Schedules attached hereto, such term shall not be construed as limiting the generality of any statement, clause, phrase or term. 9.3 Plural and Singular. The terms defined in this Agreement and the Schedule attached hereto shall include the plural as well as the singular and the singular as well as the plural. 10. ASSIGNMENT. This Supplement and the rights and obligations hereunder are not assignable except when assigned by either Party (i) in an Assignment for Security along with the Wholesale Power Contract or (ii) to any assignee or transferee that succeeds to its rights and obligations under the Wholesale Power Contract. In each such case, this Supplement shall be assigned with the Wholesale Power Contract and such assignee or transferee shall agree in writing to be bound by the terms hereof. Any attempted assignment other than to the assignee of a Party's rights and obligations under the Wholesale Power Contract shall be void and unenforceable. This Supplement shall be binding on and inure to the benefit of the permitted successors and permitted assigns of the Parties. 11. RUS. This Supplement shall not be effective unless and until approved in writing by the Administrator. This Supplement is subject to the rights and obligations of the Parties under that certain Amended and Restated Supplemental Agreement, dated as of August 1, 1996, among the Seller, the Member, and the Government, acting through the Administrator, in the same manner and to the same extent as the Wholesale Power Contract. 12. GOVERNING LAW. Except to the extent governed by applicable federal law, this Agreement shall be governed by, and construed in accordance with, the law of the State of Georgia. 13. WAIVER. No Party shall be deemed to waive any provisions of this Supplement unless such waiver shall be in writing and signed by the Party charged with the waiver. No waiver shall be deemed to be a continuing waiver unless those stated in writing. 14. AMENDMENTS. Except as permitted in Section 4.2 of this Supplement, no change, amendment or modification of this Supplement shall be valid or binding upon the Parties unless such change, amendment or modification shall be in writing and duly executed by the Parties. 15. SEVERABILITY. If any provisions of this Supplement is void or enforceable, the remainder of this Supplement shall not be affected thereby. 16. APPROVAL OF LPM2 CONTRACT. The Member hereby approves the LPM2 Contract for the purpose of the requirement that it be approved by seventy-five percent (75%) of the members of the Seller and acknowledges that the LPM2 Contract constitutes a Future Resource with respect to which all members of the Seller shall become liable for a pro rata share upon a Payment Default as provided in Section 3.5.3 of the Wholesale Power Contract. The Member acknowledges that "Rate Schedule A" shall provide for recovery of net costs incurred by the Seller as the result of the sales made under the LPM2 Contract. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Seller and the Member have caused this Supplement to be executed, attested, sealed and delivered by their respective duly authorized officers as of the day and year first written above. SELLER: OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) [CORPORATE SEAL] By: /s/ T. D. Kilgore --------------------------------------- Title: President and Chief Executive Officer ATTEST: /s/ Patricia N. Nash - ---------------------------- Assistant Secretary MEMBER: ALTAMAHA ELECTRIC MEMBERSHIP CORPORATION [CORPORATE SEAL] By: /s/ Jmon Warnock --------------------------------------- Title: President -------------------------------- ATTEST: /s/ Bernard Hart - ---------------------------- Secretary-Treasurer SCHEDULE TO EXHIBIT 10.8.4 SUPPLEMENTAL AGREEMENT TO THE AMENDED AND RESTATED WHOLESALE POWER CONTRACT (LPM I) The following is a list of substantially identical Amended and Restated Supplemental Agreements for the Electric Membership Corporations, dated March 1, 1997: 1. Amicalola EMC 19. Middle Georgia EMC 2. Canoochee EMC 20. Mitchell EMC 3. Carroll EMC 21. Ocmulgee EMC 4. Central Georgia EMC 22. Oconee EMC 5. Coastal EMC 23. Pataula EMC 6. Cobb EMC 24. Planters EMC 7. Colquitt EMC 25. Rayle EMC 8. Excelsior EMC 26. Satilla Rural EMC 9. Flint EMC 27. Slash Pine EMC 10. Grady EMC 28. Snapping Shoals EMC 11. Greystone Power Corporation, 29. Sumter EMC an EMC 30. Three Notch EMC 12. Habersham EMC 31. Tri-County EMC 13. Hart EMC 32. Troup EMC 14. Irwin EMC 33. Upson EMC 15. Jackson EMC 34. Walton EMC 16. Jefferson EMC 35. Washington EMC 17. Lamar EMC 18. Little Ocmulgee EMC 19. Middle Georgia EMC The Schedule to the Supplemental Agreement is not filed herewith; however, the Registrant hereby agrees that such Schedule will be provided to the Commission upon request. SUPPLEMENTAL AGREEMENT TO THE AMENDED AND RESTATED WHOLESALE POWER CONTRACT THIS SUPPLEMENTAL AGREEMENT TO THE AMENDED AND RESTATED WHOLESALE POWER CONTRACT, dated as of March 1, 1997 (together with permitted amendments hereto, this "Supplement"), is entered into by and between OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized and existing under the laws of the State of Georgia (the "Seller"), and OKEFENOKE ELECTRIC MEMBERSHIP CORPORATION, an electric membership corporation organized and existing under the laws of the State of Georgia (the "Member"). R E C I T A L S: WHEREAS, the Seller and the Member have entered into that certain Amended and Restated Wholesale Power Contract, dated as of August 1, 1996 (together with permitted amendments thereto, the "Wholesale Power Contract"), under which the Seller agrees to sell and the Member agrees to purchase certain quantities of electric capacity and energy; WHEREAS, for the benefit of the Member and 36 of the Seller's 38 other members (the "Participating Members"), the Seller has entered into that certain Power Purchase and Sale Agreement , dated as of November 19, 1996, among LG&E Power Marketing Inc. ("LPM"), LG&E Energy Corp. and the Seller (as supplemented by any arbitration, mediation, amendment, administrative procedure or other method of implementing and administering such contract permitted under the provisions of such contract, the "LPM Contract"); WHEREAS, the Seller has entered into that certain Power Purchase and Sale Agreement, dated as of January 1, 1997, among LPM, LG&E Power Inc. and the Seller (as supplemented by any arbitration, mediation, amendment, administrative procedure or other method of implementing and administering such contract permitted under the provisions of such contract, the "LPM2 Contract"), a contract similar to the LPM Contract, but for the benefit of the remaining two members of the Seller (the "LPM2 Members"); WHEREAS, under the LPM Contract the Seller will purchase electric capacity and energy from LPM for resale to the Participating Members and has agreed to sell to LPM certain electric energy that LPM schedules or is obligated to take; and WHEREAS, to effect such transaction, (i) the Member wishes to exercise its right not to include in the Seller's energy and capacity pool and separately to schedule the capacity and associated energy committed in the LPM Contract and (ii) the Seller and the Member desire to agree to other terms and conditions as provided herein; WHEREAS, to effect the LPM2 Contract transaction the Seller will be entering into an agreement with each of the LPM2 Members that is similar to this Supplement; NOW THEREFORE, in consideration of the premises and the mutual promises herein contained, the Seller and the Member hereby agree as follows: 1. DEFINITIONS. All capitalized terms used herein that are defined in the Wholesale Power Contract, as well as the term "member," shall have their respective meanings set forth in the Wholesale Power Contract, unless the context in which such term is used clearly requires otherwise. All other capitalized terms used herein shall have the respective meanings set forth below. "Customer Choice Load" shall have the meaning set forth in the LPM Contract. "Excluded Customer Choice Load" means the Member's Customer Choice Load that is not included in LPM's Share of Customer Choice Load. "Exhibit 3" is as defined in Section 3.1. "Law" shall have the meaning set forth in the LPM Contract. "LPM" is as defined in the Second Recital. "LPM Contract" is as defined in the Second Recital. "LPM Contract Date" means November 19, 1996. "LPM2 Contract" is as defined in the Third Recital. "LPM2 Members" is as defined in the Third Recital. "LPM Future Resource" is the Future Resource in which the Member is allocated a PCR in Exhibit 3. "LPM Power Sales Resource" is the Power Sales Resource in which an allocation is made to the Member in Exhibit 3. "LPM's Share of Customer Choice Load" shall have the meaning set forth in the LPM Contract. "Member Load" means, as of a particular interval, fifty percent (50%) of the total energy requirements of the Member (including the requirements of any retail customer with a choice of supplier under applicable Law, which customer is being served by the Member as of the LPM Contract Date), measured at the metering point, after reducing such requirements to reflect (i) the Member's purchases from SEPA, (ii) the Seller's purchases under contracts with QFs entered into after the LPM Contract Date, and (iii) requirements served from facilities located in Florida, less all or any portion of such requirements as to which the Member has requested and the Seller is providing Joint Planning and Resource Management in accordance with Section 3.3.1 of the Wholesale Power Contract; provided, that Member Load shall not include requirements for sales for resale by the Member, other than to load physically located within the service territory assigned to the Member as of the LPM Contract Date. "Rate Schedule A" means Rate Schedule A to the Wholesale Power Contract. "Wholesale Power Contract" is defined in the First Recital. "Participating Members" is defined in the Second Recital. All Participating Members are allocated PCRs in Exhibit 3. "QF" means a qualifying small power production or cogeneration facility as defined in Section 210 of the Public Utilities Regulatory Policy Act of 1978, as amended, and applicable FERC regulations promulgated thereunder. "Supplement Schedule A" means Schedule A, "LPM Power Marketer Supplement Formulary Rate Application," attached hereto. "SEPA" means the Southeastern Power Administration and any successor agency thereto or any entity succeeding to all or substantially all of the assets and liabilities of SEPA. "SEPA Contract" means that certain Contract No. 1007, executed as of September 30, 1996, by and between the Member and the United States of America, acting by and through the Administrator of SEPA, under which the Member is entitled to purchase capacity and energy produced from hydro-electric generating resources, and shall include any amendments, or modifications to, or restatements of said agreement and any new agreement in substitution of the original agreement. "Supplement Term" is defined in Section 2. 2. SUPPLEMENT TERM. This Supplement shall be effective as of the later of (i) the date on which the Wholesale Power Contract becomes effective and (ii) the date on which the Administrator's approval of this Supplement is effective and shall continue in effect until termination of the LPM Contract, whether as the result of early termination, cancellation in the event of default prior to the end of the fixed term, or otherwise (such period, the "Supplement Term"); provided, however, that any Party's cost or liability to the other Party hereunder, or as the result of the LPM Contract, that arises prior to such termination and certain rights and obligations, as expressly provided in Sections 3.3.2, 5.3 and 7 of this Supplement, shall survive the Supplement Term. 3. FUTURE RESOURCE AND POWER SALES RESOURCE OBLIGATIONS. 3.1. New PCRs. The LPM Contract shall be treated as a Future Resource for the purpose of the Seller's purchases thereunder and a Power Sales Resource for purposes of the Seller's sales thereunder. The Power Sales Resource represents the Seller's commitment of 44.178 percent of all of the capacity and associated energy relating to the Existing Resources. The Member hereby approves the LPM Contract and confirms that the requirements of Section 3.2.1 of the Wholesale Power Contract have been met with respect to the allocations to the Member set forth in Exhibit 3 to Appendix 1 to "Rate Schedule A" to the Wholesale Power Contract ("Exhibit 3"). The Member hereby acknowledges that neither the LPM Contract nor this Supplement affects the Member's PCR with respect to any of the Existing Resources or its allocation with respect to Power Sales Resources listed on Exhibit 1 to Appendix 1 to "Rate Schedule A". 3.2 Cost Responsibility. The Member hereby approves the LPM Contract for the purpose of the requirement that it be approved by seventy-five percent (75%) of the members of the Seller and acknowledges that the LPM Contract constitutes a Future Resource with respect to which all members of the Seller shall become liable for a pro rata share upon a Payment Default as provided in Section 3.5.3 of the Wholesale Power Contract. The Member acknowledges that "Rate Schedule A" shall provide for recovery of net costs incurred by the Seller as the result of the sales made under the LPM Contract. 3.3 Scheduling Member. 3.3.1 During the Supplement Term, the Member irrevocably elects and the Seller waives prior notice and consents to the Member being a Scheduling Member with respect to its PCR in the LPM Future Resource and its allocation in the LPM Power Sales Resource (and the fifty percent (50%) of its allocation in the underlying Existing Resources committed to such Power Sales Resource). The Member acknowledges that the other Participating Members have made the same elections and the Seller has consented to such elections and that the LPM Power Sales Resource and the LPM Future Resource (and the underlying Existing Resources committed to such Power Sales Resource) will not be included in the Pool. For purposes of the Wholesale Power Contract, the Member irrevocably designates its schedule of its allocation in the LPM Power Sales Resource (and the fifty percent (50%) of its allocation in the underlying Existing Resources committed to such Power Sales Resource) to be, in each hour, LPM's schedule of each Existing Resource dedicated to the LPM Power Sales Resource times the Member's Exhibit 3 PCR. Likewise, the Member irrevocably designates its schedule of capacity and associated energy from the LPM Future Resource to be in each hour the Member Load, less Excluded Customer Choice Load. 3.3.2 The Member's election set forth in Section 3.3.1 shall be limited to the Supplement Term and thereafter the Member's allocation of capacity and associated energy committed to and load served with the capacity and energy purchased under the LPM Contract shall be removed from separate scheduling and returned to the Pool, unless the Member has (i) previously elected to be a Scheduling Member with respect to fifty percent (50%) of its allocation in the underlying Existing Resources committed to the LPM Power Sale Resource and to the Member Load or (ii) so elects in writing within six (6) months of the unscheduled termination of the LPM Contract as the result of a default or by mutual agreement of the Seller and LPM. If the Member so elects to become a Scheduling Member, such election shall be effective without regard to whether the Member is a Scheduling Member with respect to the remainder of the Member's total energy requirements. 4. RATES. 4.1 Application of Formula. Supplement Schedule A attached hereto and incorporated herein by reference defines how the formulae contained in "Rate Schedule A" are to be applied to the costs incurred and revenues received under the LPM Contract. 4.2 Limit on Changes. The Seller may modify the definitions in Supplement Schedule A, but only to the extent necessary to ensure that all costs and revenues under the LPM Contract are recovered by and credited to those Members participating in the LPM Contract; provided, however, that during the Supplement Term, (i) the Seller shall not enter into an amendment of the LPM Contract which modifies the Member's individual rates established under the LPM Contract and set forth in Supplement Schedule A unless any such amendment of the LPM Contract is negotiated to comply with the provisions of Sections 9.4, 16.1 or 16.2 of the LPM Contract or is approved by seventy-five percent (75%) of the Participating Members, and (ii) the Seller shall not exercise its right to terminate the LPM Contract pursuant to Section 6.2(a) of the LPM Contract except with the approval of seventy-five percent (75%) of the Participating Members. 4.3 No Unilateral Filings. Notwithstanding Section 11.3.1 of the Wholesale Power Contract, during the Supplement Term, (i) the Seller shall not unilaterally file an application for a change in any part of "Rate Schedule A" that is expressly prohibited by Section 4.2 of this Supplement and (ii) the Member shall not protest or make any unilateral filing complaining of a change expressly permitted by Section 4.2 of this Supplement. 4.4 Continued Justness and Reasonableness of Rate. The Seller has provided the Member with a copy of "Rate Schedule A", as amended through February 24, 1997. The Member confirms that the rates, terms and conditions established under the Wholesale Power Contract, including "Rate Schedule A" are just and reasonable and not unduly discriminatory and remain fully consistent with the provisions of Section 11.1 of the Wholesale Power Contract. 5. PLANNING AND RESOURCE MANAGEMENT. 5.1 Member Purchases. During the Supplement Term, the Member irrevocably designates the Seller as its exclusive supplier of capacity and energy to meet the Member Load, less Excluded Customer Choice Load. For the purpose of determining the Member's energy charges, the Seller shall be deemed to have served the Member Load solely with energy purchased under the LPM Contract, to the extent such energy is delivered by or on behalf of LPM. 5.2 Member Sales. During the Supplement Term, the Member irrevocably waives its right to, and agrees not to, sell for resale any of the energy purchased by the Seller under the LPM Contract and thereafter sold by the Seller to the Member; provided, that such prohibition shall not apply to Member sales for resale to load physically located within the service territory assigned to the Member as of the LPM Contract Date. Likewise, during the Supplement Term, the energy and capacity associated with fifty percent (50%) of the Member's PCR in Existing Resources shall be unavailable for resale by the Member because it is committed to the LPM Power Sales Resource. 5.3 Annual Planning Report. Unless and until the Member has elected out of all Joint Planning and Resource Management services and has designated all capacity and energy associated with its PCRs for separate scheduling, the Member shall continue to provide its Annual Planning Report to the Seller during the term of the Wholesale Power Contract. This obligation shall survive the termination of this Supplement. 6. SEPA RIGHTS. 6.1 Scheduling. The Member confirms that the Seller is designated as the Member's scheduling agent under the SEPA Contract. The Member shall not designate a new scheduling agent during the Supplement Term. 6.2 Contract Modification. In the event the Member renegotiates its SEPA Contract, the Member agrees to use its best efforts to retain rights to schedule electric capacity and energy purchased from SEPA at least as favorable to the Member as those contained in the existing SEPA Contract. The Member agrees to give the Seller prompt written notice of (i) any modification to the SEPA Contract that reduces the allocation of electric capacity and energy available to the Member for a period at least through December 31, 2001, or (ii) the termination of the SEPA Contract. Such notice shall be given on the later to occur of one hundred twenty (120) days' prior to the effectiveness of such modification or termination or, if undertaken unilaterally by SEPA, within ten (10) days of the date the Member received notice from SEPA of SEPA's action. 6.3 Replacement Power. If the SEPA Contract is terminated or modified to reduce the amount of capacity and energy available to the Member, the Member irrevocably designates the Seller as its sole supplier, during the Supplement Term, of fifty percent (50%) of the capacity and energy previously supplied by SEPA. The Seller shall provide such capacity and energy in accordance with the terms of the LPM Contract. 7. SELLER'S MARKETING AND ECONOMIC DEVELOPMENT. Section 5.4 of the Wholesale Power Contract obligates the Seller to unbundle its charges for services. The Member waives this obligation and agrees to pay its allocated share of the cost of the Seller's marketing and economic development services, including Seller's margin, notwithstanding the level of use of such services by the Member until December 31, 1999. Such services may be performed by the Seller, by a subsidiary of the Seller, by an affiliated company, or by a third party who contracts with the Seller to perform such services. The Member's allocated share shall be a percentage equal to its PCR in Existing Resources times the Seller's expenses of marketing and economic development which are not covered by usage-based fees and subscription agreements. The allocated share shall recover 75% of Seller's 1997 budget for expenses of marketing and economic development during the year beginning January 1, 1998 and 50% of such 1997 budget during the year beginning January 1, 1999. The waivers and obligations set forth in this Section 7 shall survive the termination of this Supplement. 8. NO THIRD PARTY BENEFICIARIES. Subject to the provisions of Section 11 below, the Seller and the Member agree that no other member of the Seller or any other third party is an intended third-party beneficiary of this Supplement, except as may be provided in a separate instrument executed by each of the Seller and the Member. 9. RULES OF CONSTRUCTION. 9.1 Headings. The descriptive headings of the various articles, sections and subsections of this Agreement and the Schedules attached hereto have been inserted for convenience of reference only and shall not be construed as to define, expand, or restrict the rights and obligations of the parties. 9.2 Including. Wherever the term "including" is used in this Agreement and the Schedules attached hereto, such term shall not be construed as limiting the generality of any statement, clause, phrase or term. 9.3 Plural and Singular. The terms defined in this Agreement and the Schedule attached hereto shall include the plural as well as the singular and the singular as well as the plural. 10. ASSIGNMENT. This Supplement and the rights and obligations hereunder are not assignable except when assigned by either Party (i) in an Assignment for Security along with the Wholesale Power Contract or (ii) to any assignee or transferee that succeeds to its rights and obligations under the Wholesale Power Contract. In each such case, this Supplement shall be assigned with the Wholesale Power Contract and such assignee or transferee shall agree in writing to be bound by the terms hereof. Any attempted assignment other than to the assignee of a Party's rights and obligations under the Wholesale Power Contract shall be void and unenforceable. This Supplement shall be binding on and inure to the benefit of the permitted successors and permitted assigns of the Parties. 11. RUS. This Supplement shall not be effective unless and until approved in writing by the Administrator. This Supplement is subject to the rights and obligations of the Parties under that certain Amended and Restated Supplemental Agreement, dated as of August 1, 1996, among the Seller, the Member, and the Government, acting through the Administrator, in the same manner and to the same extent as the Wholesale Power Contract. 12. GOVERNING LAW. Except to the extent governed by applicable federal law, this Agreement shall be governed by, and construed in accordance with, the law of the State of Georgia. 13. WAIVER. No Party shall be deemed to waive any provisions of this Supplement unless such waiver shall be in writing and signed by the Party charged with the waiver. No waiver shall be deemed to be a continuing waiver unless those stated in writing. 14. AMENDMENTS. Except as permitted in Section 4.2 of this Supplement, no change, amendment or modification of this Supplement shall be valid or binding upon the Parties unless such change, amendment or modification shall be in writing and duly executed by the Parties. 15. SEVERABILITY. If any provisions of this Supplement is void or enforceable, the remainder of this Supplement shall not be affected thereby. 16. APPROVAL OF LPM2 CONTRACT. The Member hereby approves the LPM2 Contract for the purpose of the requirement that it be approved by seventy-five percent (75%) of the members of the Seller and acknowledges that the LPM2 Contract constitutes a Future Resource with respect to which all members of the Seller shall become liable for a pro rata share upon a Payment Default as provided in Section 3.5.3 of the Wholesale Power Contract. The Member acknowledges that "Rate Schedule A" shall provide for recovery of net costs incurred by the Seller as the result of the sales made under the LPM2 Contract. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Seller and the Member have caused this Supplement to be executed, attested, sealed and delivered by their respective duly authorized officers as of the day and year first written above. SELLER: OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) [CORPORATE SEAL] By: /s/ T. D. Kilgore --------------------------------------- Title: President and Chief Executive Officer ATTEST: /s/ Patricia N. Nash - ---------------------------- Assistant Secretary MEMBER: OKEFENOKE ELECTRIC MEMBERSHIP CORPORATION [CORPORATE SEAL] By: /s/ Robert W. Coombs --------------------------------------- Title: President -------------------------------- ATTEST: /s/ James L. Connor - ---------------------------- Secretary/Treasurer EX-10.8-5 15 EXHIBIT 10.8.5 Exhibit 10.8.5 SUPPLEMENTAL AGREEMENT TO THE AMENDED AND RESTATED WHOLESALE POWER CONTRACT THIS SUPPLEMENTAL AGREEMENT TO THE AMENDED AND RESTATED WHOLESALE POWER CONTRACT, dated as of March 1, 1997 (together with permitted amendments hereto, this "Supplement"), is entered into by and between OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized and existing under the laws of the State of Georgia (the "Seller"), and COWETA-FAYETTE ELECTRIC MEMBERSHIP CORPORATION, an electric membership corporation organized and existing under the laws of the State of Georgia (the "Member"). R E C I T A L S: WHEREAS, the Seller and the Member have entered into that certain Amended and Restated Wholesale Power Contract, dated as of August 1, 1996 (together with permitted amendments thereto, the "Wholesale Power Contract"), under which the Seller agrees to sell and the Member agrees to purchase certain quantities of electric capacity and energy; WHEREAS, for the benefit of the Member and 36 of the Seller's 38 other members (the "Participating Members"), the Seller has entered into that certain Power Purchase and Sale Agreement , dated as of November 19, 1996, among LG&E Power Marketing Inc. ("LPM"), LG&E Energy Corp. and the Seller (as supplemented by any arbitration, mediation, amendment, administrative procedure or other method of implementing and administering such contract permitted under the provisions of such contract, the "LPM Contract"); WHEREAS, the Seller has entered into that certain Power Purchase and Sale Agreement, dated as of January 1, 1997, among LPM, LG&E Power Inc. and the Seller (as supplemented by any arbitration, mediation, amendment, administrative procedure or other method of implementing and administering such contract permitted under the provisions of such contract, the "LPM2 Contract"), a contract similar to the LPM Contract, but for the benefit of the remaining two members of the Seller (the "LPM2 Members"); WHEREAS, under the LPM Contract the Seller will purchase electric capacity and energy from LPM for resale to the Participating Members and has agreed to sell to LPM certain electric energy that LPM schedules or is obligated to take; and WHEREAS, to effect such transaction, (i) the Member wishes to exercise its right not to include in the Seller's energy and capacity pool and separately to schedule the capacity and associated energy committed in the LPM Contract and (ii) the Seller and the Member desire to agree to other terms and conditions as provided herein; WHEREAS, to effect the LPM2 Contract transaction the Seller will be entering into an agreement with each of the LPM2 Members that is similar to this Supplement; NOW THEREFORE, in consideration of the premises and the mutual promises herein contained, the Seller and the Member hereby agree as follows: 1. DEFINITIONS. All capitalized terms used herein that are defined in the Wholesale Power Contract, as well as the term "member," shall have their respective meanings set forth in the Wholesale Power Contract, unless the context in which such term is used clearly requires otherwise. All other capitalized terms used herein shall have the respective meanings set forth below. "Customer Choice Load" shall have the meaning set forth in the LPM Contract. "Excluded Customer Choice Load" means the Member's Customer Choice Load that is not included in LPM's Share of Customer Choice Load. "Exhibit 3" is as defined in Section 3.1. "Law" shall have the meaning set forth in the LPM Contract. "LPM" is as defined in the Second Recital. "LPM Contract" is as defined in the Second Recital. "LPM Contract Date" means November 19, 1996. "LPM2 Contract" is as defined in the Third Recital. "LPM2 Members" is as defined in the Third Recital. "LPM Future Resource" is the Future Resource in which the Member is allocated a PCR in Exhibit 3. "LPM Power Sales Resource" is the Power Sales Resource in which an allocation is made to the Member in Exhibit 3. "LPM's Share of Customer Choice Load" shall have the meaning set forth in the LPM Contract. "Member Load" means, as of a particular interval, fifty percent (50%) of the total energy requirements of the Member (including the requirements of any retail customer with a choice of supplier under applicable Law, which customer is being served by the Member as of the LPM Contract Date), measured at the metering point, after reducing such requirements to reflect (i) the Member's purchases from SEPA (ii) the Seller's purchases under contracts with QFs entered into after the LPM Contract Date; provided, that Member Load shall not include requirements for sales for resale by the Member, other than to load physically located within the service territory assigned to the Member as of the LPM Contract Date. "Rate Schedule A" means Rate Schedule A to the Wholesale Power Contract. "Wholesale Power Contract" is defined in the First Recital. "Participating Members" is defined in the Second Recital. All Participating Members are allocated PCRs in Exhibit 3. "QF" means a qualifying small power production or cogeneration facility as defined in Section 210 of the Public Utilities Regulatory Policy Act of 1978, as amended, and applicable FERC regulations promulgated thereunder. "Supplement Schedule A" means Schedule A, "LPM Power Marketer Supplement Formulary Rate Application," attached hereto. "SEPA" means the Southeastern Power Administration and any successor agency thereto or any entity succeeding to all or substantially all of the assets and liabilities of SEPA. "SEPA Contract" means that certain Contract No. 991, executed as of September 30, 1996, by and between the Member and the United States of America, acting by and through the Administrator of SEPA, under which the Member is entitled to purchase capacity and energy produced from hydro-electric generating resources, and shall include any amendments, or modifications to, or restatements of said agreement and any new agreement in substitution of the original agreement. "Supplement Term" is defined in Section 2. 2. SUPPLEMENT TERM. This Supplement shall be effective as of the later of (i) the date on which the Wholesale Power Contract becomes effective and (ii) the date on which the Administrator's approval of this Supplement is effective and shall continue in effect until termination of the LPM Contract, whether as the result of early termination, cancellation in the event of default prior to the end of the fixed term, or otherwise (such period, the "Supplement Term"); provided, however, that any Party's cost or liability to the other Party hereunder, or as the result of the LPM Contract, that arises prior to such termination and certain rights and obligations, as expressly provided in Sections 3.3.2, 5.3 and 7 of this Supplement, shall survive the Supplement Term. 3. FUTURE RESOURCE AND POWER SALES RESOURCE OBLIGATIONS. 3.1. New PCRs. The LPM Contract shall be treated as a Future Resource for the purpose of the Seller's purchases thereunder and a Power Sales Resource for purposes of the Seller's sales thereunder. The Power Sales Resource represents the Seller's commitment of 44.178 percent of all of the capacity and associated energy relating to the Existing Resources. The Member hereby approves the LPM Contract and confirms that the requirements of Section 3.2.1 of the Wholesale Power Contract have been met with respect to the allocations to the Member set forth in Exhibit 3 to Appendix 1 to "Rate Schedule A" to the Wholesale Power Contract ("Exhibit 3"). The Member hereby acknowledges that neither the LPM Contract nor this Supplement affects the Member's PCR with respect to any of the Existing Resources or its allocation with respect to Power Sales Resources listed on Exhibit 1 to Appendix 1 to "Rate Schedule A". 3.2 Cost Responsibility. The Member hereby approves the LPM Contract for the purpose of the requirement that it be approved by seventy-five percent (75%) of the members of the Seller and acknowledges that the LPM Contract constitutes a Future Resource with respect to which all members of the Seller shall become liable for a pro rata share upon a Payment Default as provided in Section 3.5.3 of the Wholesale Power Contract. The Member acknowledges that "Rate Schedule A" shall provide for recovery of net costs incurred by the Seller as the result of the sales made under the LPM Contract. 3.3 Scheduling Member. 3.3.1 During the Supplement Term, the Member irrevocably elects and the Seller waives prior notice and consents to the Member being a Scheduling Member with respect to its PCR in the LPM Future Resource and its allocation in the LPM Power Sales Resource (and the fifty percent (50%) of its allocation in the underlying Existing Resources committed to such Power Sales Resource). The Member acknowledges that the other Participating Members have made the same elections and the Seller has consented to such elections and that the LPM Power Sales Resource and the LPM Future Resource (and the underlying Existing Resources committed to such Power Sales Resource) will not be included in the Pool. For purposes of the Wholesale Power Contract, the Member irrevocably designates its schedule of its allocation in the LPM Power Sales Resource (and the fifty percent (50%) of its allocation in the underlying Existing Resources committed to such Power Sales Resource) to be, in each hour, LPM's schedule of each Existing Resource dedicated to the LPM Power Sales Resource times the Member's Exhibit 3 PCR. Likewise, the Member irrevocably designates its schedule of capacity and associated energy from the LPM Future Resource to be in each hour the Member Load, less Excluded Customer Choice Load. 3.3.2 The Member's election set forth in Section 3.3.1 shall be limited to the Supplement Term and thereafter the Member's allocation of capacity and associated energy committed to and load served with the capacity and energy purchased under the LPM Contract shall be removed from separate scheduling and returned to the Pool, unless the Member has (i) previously elected to be a Scheduling Member with respect to fifty percent (50%) of its allocation in the underlying Existing Resources committed to the LPM Power Sale Resource and to the Member Load or (ii) so elects in writing within six (6) months of the unscheduled termination of the LPM Contract as the result of a default or by mutual agreement of the Seller and LPM. If the Member so elects to become a Scheduling Member, such election shall be effective without regard to whether the Member is a Scheduling Member with respect to the remainder of the Member's total energy requirements. 4. RATES. 4.1 Application of Formula. Supplement Schedule A attached hereto and incorporated herein by reference defines how the formulae contained in "Rate Schedule A" are to be applied to the costs incurred and revenues received under the LPM Contract. 4.2 Limit on Changes. The Seller may modify the definitions in Supplement Schedule A, but only to the extent necessary to ensure that all costs and revenues under the LPM Contract are recovered by and credited to those Members participating in the LPM Contract; provided, however, that during the Supplement Term, (i) the Seller shall not enter into an amendment of the LPM Contract which modifies the Member's individual rates established under the LPM Contract and set forth in Supplement Schedule A unless any such amendment of the LPM Contract is negotiated to comply with the provisions of Sections 9.4, 16.1 or 16.2 of the LPM Contract or is approved by seventy-five percent (75%) of the Participating Members, and (ii) the Seller shall not exercise its right to terminate the LPM Contract pursuant to Section 6.2(a) of the LPM Contract except with the approval of seventy-five percent (75%) of the Participating Members. 4.3 No Unilateral Filings. Notwithstanding Section 11.3.1 of the Wholesale Power Contract, during the Supplement Term, (i) the Seller shall not unilaterally file an application for a change in any part of "Rate Schedule A" that is expressly prohibited by Section 4.2 of this Supplement and (ii) the Member shall not protest or make any unilateral filing complaining of a change expressly permitted by Section 4.2 of this Supplement. 4.4 Continued Justness and Reasonableness of Rate. The Seller has provided the Member with a copy of "Rate Schedule A", as amended through February 24, 1997. The Member confirms that the rates, terms and conditions established under the Wholesale Power Contract, including "Rate Schedule A" are just and reasonable and not unduly discriminatory and remain fully consistent with the provisions of Section 11.1 of the Wholesale Power Contract. 5. PLANNING AND RESOURCE MANAGEMENT. 5.1 Member Purchases. During the Supplement Term, the Member irrevocably designates the Seller as its exclusive supplier of capacity and energy to meet the Member Load, less Excluded Customer Choice Load. For the purpose of determining the Member's energy charges, the Seller shall be deemed to have served the Member Load solely with energy purchased under the LPM Contract, to the extent such energy is delivered by or on behalf of LPM. 5.2 Member Sales. During the Supplement Term, the Member irrevocably waives its right to, and agrees not to, sell for resale any of the energy purchased by the Seller under the LPM Contract and thereafter sold by the Seller to the Member; provided, that such prohibition shall not apply to Member sales for resale to load physically located within the service territory assigned to the Member as of the LPM Contract Date. Likewise, during the Supplement Term, the energy and capacity associated with fifty percent (50%) of the Member's PCR in Existing Resources shall be unavailable for resale by the Member because it is committed to the LPM Power Sales Resource. 5.3 Annual Planning Report. Unless and until the Member has elected out of all Joint Planning and Resource Management services and has designated all capacity and energy associated with its PCRs for separate scheduling, the Member shall continue to provide its Annual Planning Report to the Seller during the term of the Wholesale Power Contract. This obligation shall survive the termination of this Supplement. 6. SEPA RIGHTS. 6.1 Scheduling. The Member confirms that the Seller is designated as the Member's scheduling agent under the SEPA Contract. The Member shall not designate a new scheduling agent during the Supplement Term. 6.2 Contract Modification. In the event the Member renegotiates its SEPA Contract, the Member agrees to use its best efforts to retain rights to schedule electric capacity and energy purchased from SEPA at least as favorable to the Member as those contained in the existing SEPA Contract. The Member agrees to give the Seller prompt written notice of (i) any modification to the SEPA Contract that reduces the allocation of electric capacity and energy available to the Member for a period at least through December 31, 2001, or (ii) the termination of the SEPA Contract. Such notice shall be given on the later to occur of one hundred twenty (120) days prior to the effectiveness of such modification or termination or, if undertaken unilaterally by SEPA, within ten (10) days of the date the Member received notice from SEPA of SEPA's action. 6.3 Replacement Power. If the SEPA Contract is terminated or modified to reduce the amount of capacity and energy available to the Member, the Member irrevocably designates the Seller as its sole supplier, during the Supplement Term, of fifty percent (50%) of the capacity and energy previously supplied by SEPA. The Seller shall provide such capacity and energy in accordance with the terms of the LPM Contract. 7. SELLER'S MARKETING AND ECONOMIC DEVELOPMENT. Section 5.4 of the Wholesale Power Contract obligates the Seller to unbundle its charges for services. The Member waives this obligation and agrees to pay its allocated share of the cost of the Seller's marketing and economic development services, including Seller's margin, notwithstanding the level of use of such services by the Member until December 31, 1999. Such services may be performed by the Seller, by a subsidiary of the Seller, by an affiliated company, or by a third party who contracts with the Seller to perform such services. The Member's allocated share shall be a percentage equal to its PCR in Existing Resources. The waivers and obligations set forth in this Section 7 shall survive the termination of this Supplement. 8. NO THIRD PARTY BENEFICIARIES. Subject to the provisions of Section 11 below, the Seller and the Member agree that no other member of the Seller or any other third party is an intended third-party beneficiary of this Supplement, except as may be provided in a separate instrument executed by each of the Seller and the Member. 9. RULES OF CONSTRUCTION. 9.1 Headings. The descriptive headings of the various articles, sections and subsections of this Agreement and the Schedules attached hereto have been inserted for convenience of reference only and shall not be construed as to define, expand, or restrict the rights and obligations of the parties. 9.2 Including. Wherever the term "including" is used in this Agreement and the Schedules attached hereto, such term shall not be construed as limiting the generality of any statement, clause, phrase or term. 9.3 Plural and Singular. The terms defined in this Agreement and the Schedule attached hereto shall include the plural as well as the singular and the singular as well as the plural. 10. ASSIGNMENT. This Supplement and the rights and obligations hereunder are not assignable except when assigned by either Party (i) in an Assignment for Security along with the Wholesale Power Contract or (ii) to any assignee or transferee that succeeds to its rights and obligations under the Wholesale Power Contract. In each such case, this Supplement shall be assigned with the Wholesale Power Contract and such assignee or transferee shall agree in writing to be bound by the terms hereof. Any attempted assignment other than to the assignee of a Party's rights and obligations under the Wholesale Power Contract shall be void and unenforceable. This Supplement shall be binding on and inure to the benefit of the permitted successors and permitted assigns of the Parties. 11. RUS. This Supplement shall not be effective unless and until approved in writing by the Administrator. This Supplement is subject to the rights and obligations of the Parties under that certain Amended and Restated Supplemental Agreement, dated as of August 1, 1996, among the Seller, the Member, and the Government, acting through the Administrator, in the same manner and to the same extent as the Wholesale Power Contract. 12. GOVERNING LAW. Except to the extent governed by applicable federal law, this Agreement shall be governed by, and construed in accordance with, the law of the State of Georgia. 13. WAIVER. No Party shall be deemed to waive any provisions of this Supplement unless such waiver shall be in writing and signed by the Party charged with the waiver. No waiver shall be deemed to be a continuing waiver unless those stated in writing. 14. AMENDMENTS. Except as permitted in Section 4.2 of this Supplement, no change, amendment or modification of this Supplement shall be valid or binding upon the Parties unless such change, amendment or modification shall be in writing and duly executed by the Parties. 15. SEVERABILITY. If any provisions of this Supplement is void or enforceable, the remainder of this Supplement shall not be affected thereby. 16. APPROVAL OF LPM2 CONTRACT. The Member hereby approves the LPM2 Contract for the purpose of the requirement that it be approved by seventy-five percent (75%) of the members of the Seller and acknowledges that the LPM2 Contract constitutes a Future Resource with respect to which all members of the Seller shall become liable for a pro rata share upon a Payment Default as provided in Section 3.5.3 of the Wholesale Power Contract. The Member acknowledges that "Rate Schedule A" shall provide for recovery of net costs incurred by the Seller as the result of the sales made under the LPM2 Contract. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Seller and the Member have caused this Supplement to be executed, attested, sealed and delivered by their respective duly authorized officers as of the day and year first written above. SELLER: OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) [CORPORATE SEAL] By: /s/ T. D. Kilgore --------------------------- Title: President and Chief Executive Officer ATTEST: /s/ Patricia N. Nash - -------------------- Assistant Secretary MEMBER: COWETA-FAYETTE ELECTRIC MEMBERSHIP CORPORATION [CORPORATE SEAL] By: /s/ Thomas C. Parker --------------------------- Title: President ATTEST: /s/ Elwood Thompson - ------------------- Secretary SCHEDULE TO EXHIBIT 10.8.5 SUPPLEMENTAL AGREEMENT TO THE AMENDED AND RESTATED WHOLESALE POWER CONTRACT (LPM II) The following is a list of substantially identical Amended and Restated Supplemental Agreements for the Electric Membership Corporations, dated March 1, 1997: 1. Sawnee EMC The Schedule to the Supplemental Agreement is not filed herewith; however, the Registrant hereby agrees that such Schedule will be provided to the Commission upon request. EX-10.30 16 EXHIBIT 10.30 Exhibit 10.30 POWER PURCHASE AND SALE AGREEMENT AMONG LG&E POWER MARKETING INC., LG&E ENERGY CORP. AND OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION AND TRANSMISSION CORPORATION) Dated as of November 19, 1996 ACKNOWLEDGMENT REGARDING CONFIDENTIAL INFORMATION: Oglethorpe Power Corporation (An Electric Membership Corporation) (the "Company") acknowledges that certain confidential information is contained throughout the Power Purchase and Sale Agreement and the Exhibits attached thereto and therefore such confidential information has been omitted from the copy filed with this Annual Report on Form 10-K for the fiscal year ended December 31, 1996, and an asterisk (*) has been inserted indicating such omission at the exact place in the Agreement and the Exhibits where such confidential information has been omitted. A copy of this Agreement without any omission of confidential information has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. POWER PURCHASE AND SALE AGREEMENT AMONG LG&E POWER MARKETING INC., LG&E ENERGY CORP. AND OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION AND TRANSMISSION CORPORATION) Table of Contents Page Article 1 Definitions............................................................ 2 Article 2 Purchases and Sales.................................................... 3 2.1 Sales by LPM............................................... 3 2.2 Sales by OPC............................................... 4 2.2.1 Must Run Resources............................... 4 2.2.2 Dispatchable OPC Resources....................... 4 2.2.3 Manner of Request. ............................. 5 2.3 Remedy for Breach of MW Representation..................... 5 2.4 Customer Choice Load....................................... 5 2.5 Failure to Deliver or Receive.............................. 6 2.6 Stranded Costs............................................. 7 Article 3 OPC Resources.......................................................... 7 3.1 OPC Contracts.............................................. 7 3.2 Information on OPC Resources and System.................... 8 3.3 Allocation of OPC Resources................................ 8 3.4 RESERVED................................................... 8 3.5 Dispersed Generation....................................... 8 3.6 Load Management............................................ 8 3.7 Hartwell Fuel.............................................. 9 3.8 Coal....................................................... 9 3.8.1 [_____]* 3.8.2 [_____]* 3.8.3 [_____]* 3.9 SEPA Energy................................................ 10 3.10 Block Power Sale Agreements................................ 10 3.11 New Resources.............................................. 10 3.12 Emission Allowances........................................ 10 - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -i- Article 4 Transmission........................................................... 10 4.1 Transmission and Scheduling................................ 10 4.2 Title and Risk of Loss..................................... 11 4.3 Scheduling................................................. 11 4.4 Delivery Points............................................ 11 4.5 Transformer and Transmission Loss Adjustments.............. 12 4.6 Imbalances and Regulation Deviation Errors................. 13 4.7 Non-Territorial Contractual Delivery Obligations........... 13 4.8 Control Area............................................... 14 4.9 Other OPC or GTC Responsibilities.......................... 14 Article 5 Price.................................................................. 14 5.1 OPC's Contract Price....................................... 14 5.2 [_____]* 5.3 LPM's Contract Price....................................... 14 5.4 Amounts Due to OPC and LPM................................. 15 5.4.1 [_____]* 5.4.2 RESERVED......................................... 15 5.4.3 Rocky Mountain "True-Up" Adjustment.............. 15 5.4.4 RESERVED......................................... 16 5.4.5 [_____]* 5.4.6 [_____]* 5.4.7 [_____]* 5.4.8 [_____]* 5.5 RESERVED................................................... 18 5.6 Levelized Payments......................................... 18 Article 6 Term................................................................... 18 6.1 Term....................................................... 18 6.2 [_____]* Article 7 Confidential Information............................................... 19 7.1 Prior Confidentiality Agreement Superseded; Authorization to Use Information................................................ 19 7.2 Authorized Disclosure...................................... 19 7.3 Return of Confidential Information......................... 20 7.4 Right to Remedies.......................................... 20 7.5 Georgia Trade Secrets Act.................................. 20 - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -ii- Article 8 Billing, Payment and Records........................................... 20 8.1 Billing Statements......................................... 20 8.2 Offset of Payment Obligations.............................. 20 8.3 Payments................................................... 21 8.4 Audit Rights............................................... 21 8.5 Subsequent Payment Adjustments............................. 21 8.6 Records.................................................... 22 Article 9 Taxes.................................................................. 22 9.1 Seller's Obligation........................................ 22 9.2 Buyer's Obligation......................................... 22 9.3 Exemption Certificates..................................... 22 9.4 [_____]* Article 10 Indemnification and Remedies........................................... 23 10.1 General Indemnity.......................................... 23 10.2 Limitation on Remedies..................................... 23 10.3 Duty to Mitigate........................................... 23 10.4 DISCLAIMER................................................. 23 10.5 [_____]* Article 11 Conditions Precedent to Extension of Term.............................. 24 11.1 Regulatory Authorizations.................................. 24 11.2 OPC Restructuring.......................................... 24 11.3 Administrative Procedures.................................. 24 Article 12 Representations and Warranties......................................... 24 12.1 Mutual Representations..................................... 24 12.2 Additional OPC Representations............................. 25 12.3 Additional LG&E Parties Representations.................... 25 12.4 Mutual Assistance.......................................... 26 12.5 Good Title................................................. 26 12.6 Power Quality.............................................. 26 12.7 Other Contracts............................................ 26 12.8 Continuing Representations and Warranties.................. 26 - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -iii- Article 13 Defaults and Remedies.................................................. 27 13.1 Events of Default.......................................... 27 13.2 Early Termination; Remedies................................ 27 13.3 [ ]* 13.4 Failure to Pay............................................. 28 13.5 Effect of Regulation....................................... 28 13.6 Notice to LEC.............................................. 28 Article 14 Arbitration............................................................ 28 14.1 Applicability; Selection of Arbitrators.................... 28 14.2 Discovery, Hearing......................................... 29 14.3 Decision................................................... 30 14.4 Expenses................................................... 30 Article 15 Force Majeure.......................................................... 30 15.1 Effect of Force Majeure.................................... 30 Article 16 Material Changes....................................................... 30 16.1 [_____]* 16.2 [_____]* Article 17 Miscellaneous.......................................................... 32 17.1 Assignment................................................. 32 17.1.1 General.......................................... 32 17.1.2 Assignment for Security.......................... 32 17.2 Notices.................................................... 32 17.3 Applicable Law............................................. 33 17.4 Survival of Obligations.................................... 33 17.5 Entire Agreement........................................... 33 17.6 No Partnership............................................. 33 17.7 Amendment.................................................. 33 17.8 Third Parties.............................................. 33 17.9 Waiver..................................................... 33 17.10 Character of Sales by OPC.................................. 33 17.11 Severability............................................... 33 17.12 RESERVED................................................... 34 17.13 Headings................................................... 34 17.14 Counterparts............................................... 34 17.15 LEC Obligations............................................ 34 17.15.1 Failure of Performance of LPM................... 34 17.15.2 Further Covenants of LEC........................ 34 17.15.3 No Discharge.................................... 35 - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -iv- 17.16 Administration............................................. 35 17.17 Scheduling Members......................................... 35 17.18 Further Assurances......................................... 35 17.19 RUS Approval............................................... 36 17.20 Other...................................................... 36 -v- Schedule A Exhibits 1.25(iii) Energy Costs for Certain OPC Resources 1.25(iv) Energy Costs for Qualifying Facilities 1.43 Level B-1 Diagram 1.62 EMC Customers 2.1 Off-System Sales Contracts 2.2.1 [_____]* 2.2.2 [_____]* 3.2(i) OPC Resources 3.2(ii) [_____]* 3.3 LPM's Share of OPC Resources 3.8.1 [_____]* 3.8.3 [_____]* 4.1(b) [_____]* 5.3 LPM Sales Price 5.4.1(a) [_____]* 5.4.1(b) [_____]* 5.4.5 [_____]* 5.4.6 [_____]* 5.4.7(a) [_____]* 5.4.7(b) [_____]* 5.4.8(a) [_____]* 5.4.8(b) [_____]* 17.2 Notices and Payment 17.17 Lists of Scheduling Members 18 Map of EMC Service Territory - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -vi- POWER PURCHASE AND SALE AGREEMENT AMONG LG&E POWER MARKETING INC. LG&E ENERGY CORP. AND OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION AND TRANSMISSION CORPORATION) This Power Purchase and Sale Agreement dated as of November 19, 1996, together with permitted amendments ("Agreement") is entered into by and among Oglethorpe Power Corporation (An Electric Membership Generation and Transmission Corporation), a corporation organized and existing under Title 46 of the Official Code of Georgia Annotated, together with any permitted successor or assign ("OPC"), LG&E Energy Corp., a corporation organized and existing under the laws of the Commonwealth of Kentucky, together with any permitted successor or assign ("LEC"), and LG&E Power Marketing Inc., a corporation organized and existing under the laws of the State of California, together with any permitted successor or assign ("LPM") (collectively, LEC and LPM are referred to herein as "LG&E Parties"). WITNESSETH WHEREAS, OPC is an electric generation corporation which operates on a cooperative basis and which supplies certain electric requirements of its member cooperatives for electric power and energy supplied to their wholesale and retail customers; WHEREAS, LPM is a power marketer authorized by the Federal Energy Regulatory Commission to purchase and sell electric energy for resale at negotiated, market-based rates; WHEREAS, LPM is an indirect, wholly owned subsidiary of LEC; WHEREAS, the existing OPC Resources are demonstrably insufficient to supply the anticipated peak electric requirements of OPC and its member cooperatives in 1998, in light of the 1996 Official Load Forecast, and the termination of uneconomic existing power purchase resources; WHEREAS, OPC has reasonably determined that it is not economically efficient at this time for OPC to plan for the construction or acquisition of additional generating facilities to supply the electric requirements of OPC and its member cooperatives, and that the native load electric requirements of its cooperative members can economically and efficiently be supplied through the purchase from a power marketer of such requirements for electric energy; WHEREAS, in accordance with such strategic plan for serving its member cooperatives, OPC has requested bids from various power marketers, and LPM has been selected as a successful bidder to supply certain electric requirements of its member cooperatives; WHEREAS, the Parties recognize that OPC's right to require LPM to procure coal for OPC's fossil resources in accordance with the terms contemplated herein represents a material part of the consideration to OPC for execution of this Agreement; WHEREAS, LPM desires to purchase Electric Energy from OPC for resale (i) to OPC at prices consistent with this Agreement and (ii) to third parties at such prices as LPM shall determine; WHEREAS, the Parties believe that their respective objectives can be achieved if OPC sells to LPM a portion of the Electric Energy that OPC is obligated to take or purchase from Must Run Resources and offers to sell to LPM certain other Electric Energy which OPC is entitled to take or purchase, as more specifically set forth herein, and LPM agrees to supply OPC at wholesale with Electric Energy it has purchased from OPC or from other sources; WHEREAS, the Parties recognize that this Agreement is one of two power purchase and sales agreements OPC is currently arranging with power marketers in order to supply certain electric requirements of its member cooperatives, and that the administration and implementation of this Agreement will require coordination with the administration and implementation under the other agreement; and WHEREAS, the Parties recognize that Scheduling Members may enter into purchase and sale agreements with power marketers; WHEREAS, the Parties recognize that OPC may in the future enter into additional agreements with power marketers to serve Customer Choice Load or other load growth not served under this Agreement; provided, that such additional agreements shall not interfere with OPC's ability to perform under this Agreement. NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, and for other good and valuable consideration, OPC and the LG&E Parties hereby agree as follows: Article 1 Definitions All capitalized terms used herein and not otherwise defined, whether singular or plural, shall have the respective meanings set forth in Schedule A. Defined terms in this Agreement shall include in the singular number the plural and in the plural number the singular. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. Any reference in this Agreement to "Section," "Article," "Exhibit" or "Schedule" shall be references to this Agreement. Unless the context requires otherwise, any reference in this Agreement to any document shall mean such document and all schedules, exhibits, and attachments thereto as amended and in effect from time to time. Unless otherwise stated, any reference in this Agreement to any person shall include its permitted successors and assigns and, in the case of any governmental authority, any person succeeding to its functions and capacities. The words "hereof," "herein," "hereto" and "hereunder" and words of similar import when used in this Agreement shall, unless otherwise expressly specified, refer to this Agreement as a whole and not to any particular provision of this Agreement. Whenever the term "including" is used herein in connection with a listing of items included within a prior reference, such listing shall be interpreted to be illustrative only, and -2- shall not be interpreted as a limitation on or exclusive listing of the items included within the prior reference. In the event of a conflict between the text of this Agreement and any Exhibit or Schedule, the terms of the Agreement shall prevail. The Parties acknowledge that each Party and its counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. Article 2 Purchases and Sales 2.1 Sales by LPM. (a) In each Interval of the Term, LPM shall sell and deliver, or cause to be delivered, and OPC shall purchase and receive, or cause to be received, an amount of Electric Energy equal to the sum of (i) LPM's Share of OPC Load in that Interval, plus (ii) LPM's Share of OPC Off-System Sales in that Interval, plus (iii) LPM's Share of Customer Choice Load in that Interval. This Agreement shall constitute the single agreement under which LPM is obligated to supply at wholesale Electric Energy to serve LPM's Share of OPC Load, LPM's Share of Customer Choice Load, and LPM's Share of OPC Off-System Sales in accordance with the terms hereof, and no further request, schedule or agreement by OPC is needed. (b) The Parties recognize and agree that (i) [ ]* (iii) neither of the foregoing shall entitle LPM to avoid its obligations hereunder or to adjust the LPM Sales Price, except as expressly permitted under the provisions of this Agreement. (c) In lieu of selling or buying Electric Energy, LPM reserves the right to broker Electric Energy from or to Louisville Gas and Electric Company and OPC agrees to accept or supply such Electric Energy pursuant to its Interchange Agreement or other existing contracts with Louisville Gas and Electric Company in complete satisfaction of LPM's obligations hereunder; provided, that any such arrangements shall be performed at a price and under terms and conditions that are the same as those specified herein; and provided, further, that OPC shall have no obligation to participate in any such arrangement unless LPM establishes to OPC's satisfaction that Louisville Gas and Electric Company has all requisite regulatory authorization to perform in accordance with the foregoing. (d) LPM shall be obligated within [____]* hours after OPC's request to bid on a case by case basis to serve all of the requirements of [____]* and in excess of the [____]* referenced in Section 2.1(e). To the extent OPC accepts such bid, then LPM shall be obligated to serve 100% of such excess requirements in accordance with such bid, and such excess requirements shall be - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -3- included in LPM's Share of OPC Load. Notwithstanding anything to the contrary contained in this Agreement, OPC or [____]* shall have the right to seek and accept bids from third parties to serve all the excess requirements described in this paragraph (d). (e) LPM shall be obligated to supply at the LPM Sales Price up to 100% of [____]*. Such load may be served by OPC through sales directly to [____]* or indirectly through sales by OPC to [____]*. Such sales shall be included in LPM's Share of OPC Load. 2.2 Sales by OPC. OPC shall on a real time basis inform LPM of LPM's Share of OPC Resources, including Must Run Resources and Dispatchable Resources, that are available for the delivery of OPC Energy, in accordance with the terms of this Agreement, the OPC Contracts and the Administrative Procedures. 2.2.1 Must Run Resources. In each Interval of the Term, OPC shall sell and LPM shall purchase all of the OPC Energy from LPM's Share of OPC Resources associated with Must Run Resources (other than purchased power resources) that are actually available during such Interval. OPC represents that the Must Run Resources are currently as of the Effective Date and shall, except for Allowed Must Run Outage Hours, remain during each Interval of the Term capable of the production and sale of at least [____]* set forth in Exhibit 3.2(i). Exhibit 2.2.1 sets forth by calendar quarter, the number of hours ("Allowed Must Run Outage Hours") for which the Must Run Resources may generate [_____]* set forth in Exhibit 3.2(i). 2.2.2 Dispatchable OPC Resources. (a) With respect to Dispatchable Resources, OPC hereby offers to sell to LPM on an exclusive basis, and LPM has the exclusive right, but not the obligation, to purchase from OPC any OPC Energy from LPM's Share of OPC Resources associated with Dispatchable Resources which is available during each Interval of the Term. OPC represents that the Dispatchable Resources (other than purchased power resources) are currently as of the Effective Date and shall, except for Allowed Dispatchable Outage Hours, remain during each Interval of the Term capable of the production and sale [_____]* set forth in Exhibit 3.2(i), and that LPM shall have the right, during each Interval during the Term to Schedule Electric Energy from each Dispatchable Resource to the extent of its availability. Exhibit 2.2.2 sets forth by Summer and Non-Summer Period designation the number of hours ("Allowed Dispatchable Outage Hours") for which the Dispatchable Resources may generate [_____]* set forth in Exhibit 3.2(i). (b) LPM shall effect the acceptance of an OPC offer made pursuant to paragraph (a) of this Section 2.2.2 by complying with the provisions of 2.2.3 and the Scheduling procedures set forth in Article 4. OPC shall sell and LPM shall purchase all such Electric Energy Properly Requested by LPM. 2.2.3 Manner of Request. LPM shall Properly Request OPC Energy from LPM's Share of OPC Resources through (i) a recorded telephone conversation between the Parties, - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -4- or (ii) such other method of communication, including electronic communication, as the Administrative Committee may determine is appropriate. Such requests shall be confirmed in the manner, if any, established by the Administrative Committee for the type of communication in question. The Parties agree not to contest or assert any defense to the validity or enforceability of telephonic requests under Laws relating to whether certain agreements are to be in writing or signed by the party to be thereby bound, or the authority of any employee of such Party to make such communication. Each Party consents to the recording of its representatives' telephone conversations without any further notice. All recordings or electronic communications may be introduced into evidence to prove oral agreements between the Parties. 2.3 Remedy for Breach of MW Representation. If at any time during the Term either OPC's representation set forth in Section 2.2.1 or Section 2.2.2(a) ceases to be correct (i.e. the OPC Resource is not capable of producing the required Mws), [_____]* 2.4 Customer Choice Load. (a) Subject to paragraph (b) below, LPM shall be obligated to serve [_____]* of the requirements for Electric Energy of any Customer Choice Customer [_____]*; provided, that such obligation shall not entitle LPM to serve any portion of such requirements, and OPC or the EMC Customers shall have the right to seek and accept bids from third parties for all or any portion of such requirements; and provided further, that LPM shall have the option but not the obligation to submit a bid to serve a greater percentage than that designated above of any such Customer Choice Customer's requirements on such price and other terms as may be mutually agreeable with OPC or the affected EMC. (b) LPM shall be obligated within [_____]* hours after OPC's request to bid on a case by case basis to serve all of the requirements of (i) any Customer Choice Customer [_____]* and (ii) any Customer Choice Customer whose load is [_____]*, at such price and on such other terms as may be acceptable to LPM. To the extent OPC accepts such bid, then LPM shall be obligated to serve 100% of such Customer Choice Customer's requirements in accordance with such bid, and such requirements shall be included in LPM's Share of Customer Choice Load. Notwithstanding anything to the contrary contained in this Agreement, OPC or an EMC shall have the right to seek and accept bids from third parties to serve all of the requirements of the Customer Choice Customers described in this paragraph (b). (c) The aggregate of all Customer Choice Load that LPM either is obligated to serve, or agrees to serve, as the case may be, shall be LPM's Share of Customer Choice Load. (d) The price applicable to LPM's Share of Customer Choice Load shall be the Customer Choice Price; provided, that if LPM offers, other than pursuant to this Agreement, to directly serve a Customer Choice Customer at a price that is less than the applicable Customer Choice Price, then LPM shall be obligated to serve 100% of the requirements of such Customer Choice Customer under this Agreement at a comparable price. - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -5- 2.5 Failure to Deliver or Receive. (a) Unless excused by Force Majeure or the unexcused failure of Buyer's performance, if Seller fails to deliver, or cause to be delivered, the Contract Quantity, [_____]* (b) Unless excused by Force Majeure or the unexcused failure of Seller's performance, if Buyer fails to receive, or cause to be received, the Contract Quantity, [_____]* (c) The parties recognize that GSOC shall be responsible for maintaining the stability and reliability of OPC's generation and GTC's transmission system. OPC or its designee, GSOC, shall use commercially reasonable efforts to provide LPM with advance notice of possible transmission constraints, voltage deterioration, or similar system events or occurrences that might result in a prospective failure by, or inability of OPC to Schedule or deliver Electric Energy Properly Requested by LPM, such that LPM, to the extent practicable, shall be able to determine whether or not to modify the OPC Resources from which it desires to receive Electric Energy or the amount thereof or to bear the risk associated with its original request, and OPC and LPM shall each use commercially reasonable efforts to discuss and agree upon the necessary redispatching. In the event OPC and LPM are unable to agree in advance, and OPC or its designee determines in good faith that in order to assure the stability and reliability of OPC's generation and GTC's transmission system, it is necessary in accordance with Prudent Utility Practice to deliver Electric Energy from an OPC Resource other than the OPC Resource associated with Electric Energy Properly Requested by LPM, then the further provisions of this paragraph 2.5(c) shall apply. The Administrative Committee shall review all relevant facts concerning the alternative delivery Scheduled and dispatched by OPC or its designee. If the Administrative Committee determines unanimously that the actions taken by both OPC and LPM were consistent with Prudent Utility Practice and their respective obligations under this Section 2.5(c), then any additional costs associated [_____]*. If the Administrative Committee does not so determine, then the Party determined unanimously by the Administrative Committee to be at fault shall bear [_____]*. If the Administrative Committee cannot in good faith reach a unanimous decision, then the matter shall be subject to arbitration under Article 14. (d) The provisions of this Section 2.5 shall not apply to the circumstances in which adjustments have been made pursuant to Section 5.4. 2.6 Stranded Costs. In the event retail wheeling is instituted in Georgia, for whatever reason, and OPC or the EMC Customers may be entitled to receive compensation associated with stranded generating or other assets, the LG&E Parties shall have no claim or entitlement to any such compensation, nor shall the LG&E Parties have any obligation or liability for the payment of any such compensation, attributable to OPC Resources. Article 3 OPC Resources 3.1 OPC Contracts. (a) OPC shall be responsible for compliance with the OPC Contracts. In connection therewith, OPC shall be permitted to make OPC Off-System Sales to - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -6- comply with the OPC Off-System Sales Contracts, which Electric Energy for LPM's Share of OPC Off-System Sales shall be provided to OPC by LPM pursuant to Section 2.1 and at the prices set forth in Section 5.3. OPC shall have the right during the Term to enter into new contracts or other agreements to make sales, purchases or exchanges of Electric Energy, without the prior consent of LPM, including new contracts for (i) sales of capacity and Electric Energy from resources not included within OPC Resources, (ii) purchases and sales of capacity and Electric Energy to serve Customer Choice Customers as provided in Section 2.4, (iii) sales of capacity and Electric Energy under the EMC Contracts, and (iv) purchases and sales of capacity and Electric Energy as required to serve OPC Load not included within LPM's Share of OPC Load, or to serve LPM's Share of OPC Load after the Term, and (v) as expressly set forth elsewhere in this Agreement; provided, that such contracts or agreements shall not adversely affect or otherwise interfere with OPC's ability to perform its obligation to sell Electric Energy to or to purchase Electric Energy from LPM hereunder. (b) Nothing in this Agreement shall be construed to assign, impose or otherwise transfer any rights or obligations under the OPC Off-System Sales Contracts to the LG&E Parties, and OPC shall retain all of its rights and obligations, including its obligation to maintain, or cause to be maintained, generation and transmission system stability and reliability. Notwithstanding any other provision of this Agreement, OPC shall not be required to take any action inconsistent with its rights and obligations under the OPC Contracts. Notwithstanding any other provision of this Agreement, no Party shall be required to take any action inconsistent with its rights and obligations under the NERC or SERC guidelines. Nothing in this Agreement shall affect the rights or obligations of the parties to the EMC Contracts. OPC shall have the right to terminate, amend, or otherwise modify the OPC Contracts, subject to the provisions of Section 16.1. 3.2 Information on OPC Resources and System. (a) OPC acknowledges and agrees that LPM requires information concerning OPC Contracts, OPC Resources, OPC Load and Energy Cost in order to satisfy LPM's obligations hereunder. (b) OPC has delivered to LPM the following information: (i) a list of all OPC Resources and OPC Contracts, which list is attached as Exhibit 3.2(i); (ii) a statement of the expected availability and current transformer loss factor of each OPC Resource, including nuclear generating units, which statement is attached as Exhibit 3.2(ii); and (iii) a schedule of forecast OPC Load, which was delivered to LPM on February 7, 1996. OPC hereby agrees to update such information promptly as new information becomes available to OPC during the Term and to promptly provide such updated information to LPM. 3.3 Allocation of OPC Resources. (a) LPM's Share of OPC Resources is specified in Exhibit 3.3. LPM shall not be entitled to purchase OPC Energy in excess of the quantity of Electric Energy associated with the OPC Resource, or portion thereof (in the case of certain OPC Resources comprised of more than one generating unit) designated in such Exhibit; provided, that with respect to any OPC Resource with a minimum operating level under the applicable OPC Contracts that exceeds the amount of Electric Energy associated with such percentage, LPM shall be entitled to purchase such minimum level under the terms of this Agreement, but only if such purchase is in accordance with the Administrative Procedures and necessary to commit such OPC Resource. -7- (b) OPC shall have the right to expand, retrofit, upgrade, or otherwise modify the OPC Resources, subject to the provisions of Section 16.1; provided, that such expansion, retrofit, upgrade, or other modification shall not adversely affect or otherwise interfere with OPC's ability to perform its obligation to sell Electric Energy to or to purchase Electric Energy from LPM hereunder. OPC shall bear the costs of such expansion, retrofit, upgrade, or other modification, and any incremental or expanded capacity and Electric Energy associated with such activity, shall not be included within OPC Resources. 3.4 RESERVED. 3.5 Dispersed Generation. Generating facilities currently owned by individual EMCs will not be an OPC Resource, but will remain the property of each such EMC which may use such generating facilities as it shall determine from time to time. 3.6 Load Management. Load management switching equipment and any other demand side management of individual EMCs will not be an OPC Resource, but will remain the property of such EMCs which may use, or direct OPC on such EMC's behalf to coordinate the use of such load management switching equipment or other demand side management as it shall determine from time to time. 3.7 Hartwell Fuel. LPM will provide fuel to generate the Electric Energy it purchases associated with Hartwell, in accordance with the fuel procurement provisions of that certain agreement between OPC and Hartwell Energy Limited Partnership, dated June 12, 1992. 3.8 Coal. Coal for Plant Scherer and/or for Plant Wansley shall be procured in accordance with this Section 3.8. [_____]* [_____]* [_____]* 3.9 SEPA Energy. Each of the EMC Customers is presently entitled to an allocation of hydro-electric power from SEPA, the cost of which is billed directly by SEPA to each EMC. As provided in the definition of OPC Load in Schedule A, LPM's Share of OPC Load does not include requirements supplied by SEPA Energy Scheduled for delivery to the EMC Customers pursuant to the SEPA Contracts; provided, however, that OPC shall Schedule delivery of SEPA Energy to the EMC Customers as requested by LPM, to the extent permitted by SEPA under the SEPA Contracts and consistent with the CSA. - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -8- 3.10 Block Power Sale Agreements. OPC has canceled Block 3 of the Georgia Power Block Power Sale Agreement, and OPC has given timely notice to Georgia Power to cancel Block 4 as of August 31, 1997 and Block 2 as of August 31, 1998. [_____]* 3.11 New Resources. OPC shall have the right during the Term to construct, purchase, lease, or otherwise acquire additional generating or purchased power resources, including entering into agreements with Qualifying Facilities, which resources shall not be included within OPC Resources; provided, that such construction, purchase, lease or other arrangement shall not adversely affect or otherwise interfere with OPC's ability to perform its obligation to sell Electric Energy to or to purchase Electric Energy from LPM hereunder. 3.12 Emission Allowances. [_____]* Article 4 Transmission 4.1 Transmission and Scheduling. (a) [_____]* (b) [_____]* 4.2 Title and Risk of Loss. As between LPM and OPC, Seller shall be deemed to be in exclusive control (and responsible for any damages or injury caused thereby) of the Contract Quantity prior to the Delivery Point, and Buyer shall be deemed to be in exclusive control (and responsible for any damages or injury caused thereby) of the Contract Quantity at and from the Delivery Point. Title to and risk of loss of Electric Energy shall transfer from Seller to Buyer at and from the Delivery Point. 4.3 Scheduling. OPC and LPM agree to adopt and maintain reasonable procedures to facilitate LPM's ability on an hourly basis to (i) supply LPM's Share of OPC Load and (ii) purchase OPC Energy associated with LPM's Share of OPC Resources. The Parties shall also establish procedures whereby (a) OPC shall communicate to LPM on a same-time basis the availability of, and estimated Energy Cost for, each OPC Resource, as such availability and Energy Cost may change from time to time, and the projected LPM's Share of OPC Load; and (b) LPM shall provide all necessary Scheduling information, including the duration of proposed transactions, [_____]*. Upon communication of such information, LPM shall Properly Request the amounts of Electric Energy that LPM desires to purchase from each such OPC Resource within LPM's Share of OPC Resources. [_____]* 4.4 Delivery Points. (a) LPM shall specify one or more Delivery Points for (i) OPC Energy Scheduled and purchased by LPM from OPC and (ii) Electric Energy Scheduled and sold by LPM to OPC. [ - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -9- ]* (b) [_____]* 4.5 Transformer and Transmission Loss Adjustments. (a) With respect to LPM purchases of OPC Energy from an OPC Resource that is a generating plant which interconnects directly into the ITS, [_____]* (b) For purposes of supplying OPC with Electric Energy to serve LPM's Share of OPC Load and LPM's Share of Customer Choice Load, [_____]* (c) For purposes of supplying OPC with Electric Energy to satisfy LPM's Share of OPC's Off-System Sales obligations, [_____]* (d) For purposes of supplying Electric Energy to satisfy LPM's sales to third parties that accept delivery on the ITS or for delivery at Points of Interconnection, [_____]* (e) For purposes of supplying Electric Energy to permit OPC to pump water to the upper reservoir at the Rocky Mountain Pumped Storage Hydroelectric Generating Facility ("Rocky Mountain"), [_____]* (f) The Parties agree and understand [_____]* 4.6 Imbalances and Regulation Deviation Errors. (a) The Parties recognize that actual LPM's Share of OPC Load, LPM's Share of Customer Choice Load, and LPM's Share of OPC Off- System Sales may vary in any Interval even when the foregoing have been reasonably forecast by LPM and Electric Energy has been Scheduled as Properly Requested by LPM. [_____]* (b) [_____]* 4.7 Non-Territorial Contractual Delivery Obligations. For purposes of supplying Electric Energy to satisfy OPC's sales obligations to LPM of Electric Energy to be resold by LPM to third parties that accept delivery on the ITS or delivery at Points of Interconnection, [_____]* 4.8 Control Area. OPC reserves the right, at any point during the Term, to establish and operate a Control Area, or to contract with others to establish and operate a Control Area. Such Control Area would be utilized pursuant to 18 C.F.R. Part 35 to match Electric Energy input and output within the electric system, maintain scheduled interchange with other Control Areas, maintain the frequency of the Electric Energy system within reasonable limits and provide sufficient generating capacity to maintain operating services. - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -10- 4.9 Other OPC or GTC Responsibilities. In addition to the above, OPC or GTC shall also be responsible for the following: (a) all communications with other owners of the ITS and for discharging all obligations for the Oglethorpe Power System under the ITSA, except for ITS related costs otherwise expressly addressed herein. (b) OPC, or GTC, as the case may be, shall be responsible for responding to any transmission requests filed under its open access transmission tariff or pursuant to Section 211 of the Federal Power Act, or other applicable legal requirements. OPC, or GTC, as the case may be, shall represent such interest before FERC or any other regulatory agency or court. Article 5 Price 5.1 OPC's Contract Price. Subject to Section 5.4, the Contract Price for Electric Energy sold by OPC to LPM shall be the Energy Cost for OPC Energy that LPM Properly Requests. 5.2 [_____]* 5.3 LPM's Contract Price. Subject to Section 5.4, (i) with respect to sales of Electric Energy by LPM to OPC relating to LPM's Share of OPC Load, the Contract Price shall be, during each calendar year of the Term, the LPM Sales Price [ ]* as set forth in Exhibit 5.3; (ii) with respect to LPM's Share of Customer Choice Load which LPM is required to serve, the Contract Price shall be the Customer Choice Price; (iii) with respect to LPM's Share of Customer Choice Load served at a price quoted by LPM, the Contract Price shall be the price quoted by LPM; and (iv) with respect to sales of Electric Energy by LPM to OPC relating to LPM's Share of OPC Off-System Sales, the Contract Price shall be as agreed to by the Parties (the "LPM Off-System Sales Price"); provided, [_____]* 5.4 Amounts Due to OPC and LPM. Each month OPC shall charge LPM an amount equal to the aggregate Energy Costs attributable to the OPC Energy that is Properly Requested by and delivered to LPM. Each month LPM shall charge OPC an amount equal to the sum of the following products: (i) the LPM's Share of OPC Load [ ]* purchased by and delivered to OPC during the month, multiplied by the LPM Sales Price applicable to the respective EMC Customer, as set forth in Exhibit 5.3; (ii) LPM's share of Customer Choice Load attributable to a Customer Choice Customer and purchased by and delivered to OPC during the month, multiplied by the applicable Customer Choice Price; (iii) each OPC Off-System Sales quantity purchased by and delivered to OPC from LPM during the month, multiplied by the LPM Off-System Sales Price applicable to each such OPC Off-System Sale; provided, that the amounts so determined shall be subject to the following adjustments: - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -11- 5.4.1 [_____]* (b) Exhibit 5.4.1(b) sets forth an example of the intended operation of this Section. (c) [_____]* 5.4.2 RESERVED. 5.4.3 Rocky Mountain "True-Up" Adjustment. On January 1, 1997 OPC shall determine the water level in the upper reservoir of Rocky Mountain. On the date of termination of this Agreement LPM shall be responsible for replacing to the same level as on January 1, 1997 its proportionate share of such water; provided, that if such replacement is not physically possible prior to termination, [_____]* 5.4.4 RESERVED. 5.4.5 [_____]* 5.4.6 [_____]* 5.4.7 [_____]* (b) Exhibit 5.4.7(b) sets forth an example of the intended operation of this Section. (c) [_____]* 5.4.8 [_____]* (b) Exhibit 5.4.8(b) sets forth an example of the intended operation of this Section. (c) [_____]* 5.5 RESERVED. 5.6 Levelized Payments. The Parties recognize that an important objective of OPC and the EMC Customers is to spread cost savings associated with an extension of this Agreement across the Term. If the Term is extended, as provided in Section 6.1(b), then to accomplish this objective, the individual LPM Sales Price applicable to each EMC Customer as set forth in Exhibit 5.3 may be levelized. [_____]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -12- Article 6 Term 6.1 Term. (a) This Agreement shall become effective on the date first written above (the "Effective Date"), provided that the delivery of Electric Energy pursuant to this Agreement shall commence at 00:00:01 CPT on January 1, 1997, and shall remain in effect until 24:00 CPT on December 31, 1997 (the "Termination Date"), subject to Section 6.1(b), [_____]* (the "Term"). The applicable provisions of this Agreement shall continue in effect after the Termination Date in accordance with the provisions of Section 17.4. (b) In the event the conditions precedent set forth in Article 11 are satisfied on or before June 1, 1997, then the Term shall be extended until 24:00 CPT on December 31, 2011, [_____]* and the Term shall be deemed to include any such extension. OPC shall provide LPM with written notice promptly following the satisfaction of the conditions precedent described in Article 11, which notice shall specify the date ("Long Term Commencement Date") on which such conditions precedent were satisfied. In the event a condition precedent set forth in Article 11 has not been satisfied on or before June 1, 1997, then the extension provision in this Section 6.1(b) shall be of no further force and effect, [_____]* 6.2 [_____]* (b) [_____]* Article 7 Confidential Information 7.1 Prior Confidentiality Agreement Superseded; Authorization to Use Information. The Parties expressly agree that the Confidentiality Agreement entered into by OPC, LPM and Cooperative Power, Inc. ("CPI") dated as of February 6, 1996, as amended, automatically and immediately and with no further action by the Parties shall terminate as of the Effective Date of this Agreement. OPC represents that in connection with such termination it is duly authorized to act on behalf of and to bind CPI. OPC expressly authorizes and grants its consent to LPM to use Confidential Information, whether acquired before or after the Effective Date, pertaining to, without limitation, OPC, OPC Resources, OPC Load, OPC Off-System Sales and the EMC Customers, for the purpose of exercising LPM's rights under this Agreement, including LPM's right to buy Electric Energy from OPC or any other person and to sell Electric Energy to OPC or any other person, whether Electric Energy is produced by or attributable to OPC Resources or other resources. Each Party agrees that it shall not disclose Confidential Information whether acquired before or after the Effective Date, to any third party other than each Party's officers, directors, employees, advisors or representatives, or each Party's Affiliates (or as to OPC, the EMCs), their officers, directors, employees, advisors or representatives who need to know and agree to maintain the confidentiality of the Confidential Information (collectively, "Representatives") during the Term and for a period of not more than three (3) years after the Termination Date. Each Party shall be responsible for any breach of this Agreement by its Representatives. - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -13- 7.2 Authorized Disclosure. Notwithstanding anything contained in this Article 7, Confidential Information may be disclosed to any governmental, judicial or regulatory authority requiring such Confidential Information, provided that: (i) such Confidential Information is submitted under applicable provisions, if any, for confidential treatment by such governmental, judicial or regulatory authority; (ii) prior to such disclosure, the Party who supplied the information is given notice of the disclosure requirement so that it may take whatever action it deems appropriate, including intervention in any proceeding and the seeking of an injunction to prohibit such disclosure; and (iii) the Party subject to the governmental, judicial or regulatory authority endeavors to protect the confidentiality of any Confidential Information to the extent reasonable under the circumstances and to use its good faith efforts to prevent the further disclosure of any Confidential Information provided to any governmental judicial or regulatory authority. 7.3 Return of Confidential Information. Upon (i) the termination of this Agreement and (ii) the request of a Party, the other Party shall return all written Confidential Information (including written confirmation of oral communications) provided by the requesting Party which was stamped "confidential" and shall not retain any copies of such written Confidential Information. In the event of such request, all documents, analyses, compilations, studies or other materials prepared by the returning Party or its Representatives that contain or reflect Confidential Information (other than computer archival and backup tapes or archival and backup files (collectively "Computer Tapes") and billing and trading records (collectively, "Other Records")) shall be destroyed and no copy thereof shall be retained (such destruction to be confirmed in writing by a duly authorized officer of the returning Party). Computer Tapes and Other Records shall be kept confidential in accordance with the terms of this Agreement. 7.4 Right to Remedies. In the event of an unauthorized disclosure to a third party, the limitations on remedies contained in Section 10.2 shall not apply, and in the event of a breach no Party will have an adequate remedy at law and accordingly shall, in addition to any other available legal or equitable remedies, be entitled to an injunction against such breach without any requirement to post a bond as a condition of such relief. 7.5 Georgia Trade Secrets Act. Except as expressly provided in Article 7 of this Agreement, including OPC's consent to the use by LPM of Confidential Information in its trading operations pursuant to this Agreement, the rights of the Parties under this Agreement are in addition to and not in lieu of their rights under Georgia law, including the Georgia Trade Secrets Act of 1990. Nothing in this Article 7 shall be construed as a waiver on the part of any Party of any privilege or objection of any kind to the disclosure or use of Confidential Information. Article 8 Billing, Payment and Records 8.1 Billing Statements. OPC shall deliver to LPM no later than on the tenth (10th) day of each month (or the first Business Day thereafter), a statement (the "Statement") setting forth for the immediately prior month the amounts of Electric Energy purchased by OPC from LPM at the -14- applicable LPM Sales Price, the respective LPM Off-System Sales Prices, and the respective Customer Choice Prices, all as adjusted pursuant to Section 5.4, and the amounts of Electric Energy purchased by LPM from OPC at the applicable Energy Cost. To the extent that OPC has not yet received or been able to compile the applicable Energy Cost figures as of such date, OPC may set forth on such Statement its good-faith estimate of the Energy Cost of an OPC Resource, for such OPC Resource; and provided, that OPC shall compile the actual Energy Costs and "true-up" such estimates as promptly as practicable pursuant to Section 8.5. 8.2 Offset of Payment Obligations. The Parties shall discharge their obligations to pay through netting, in which case the Party, if any, owing the greater aggregate amount shall pay to the other Party the difference between the amounts owed, as set forth in Section 8.3. Each Party reserves to itself all rights, setoffs, counterclaims and other remedies and defenses, consistent with Article 10, which such Party has or may be entitled to arising from or out of this Agreement. All outstanding obligations to make payments under this Agreement may be offset against each other, set-off or recouped therefrom. 8.3 Payments. The Party owing the other shall pay the amount owing under the Statement, which payment shall be due on or before the later of the following: (i) the tenth (10th) Business Day after receipt of the Statement or (ii) the twentieth (20th) day of the month in which the Statement is received (or the first Business Day thereafter). Payment shall be made by wire transfer to the payment address provided in Exhibit 17.2. If either Party, in good faith, disputes any part of any Statement, it shall provide a written explanation of the basis for the dispute and pay the portion of such Statement conceded to be correct no later than the due date as calculated in accordance with the preceding sentence. If any amount disputed is determined to be due to the other Party, it shall be paid within ten (10) days of such determination, along with interest calculated at the Interest Rate from the original due date until the date paid. Absent such a good faith dispute, overdue payments shall bear interest from, and including, the due date to, but excluding, the date of payment at a rate equal to the Interest Rate. 8.4 Audit Rights. (a) Each Party or any third party representative of a Party shall have the right, at its sole expense and during normal working hours, to examine the records of the other Party to the extent reasonably necessary to verify the accuracy of any Statement, charge or computation made pursuant to this Agreement. If requested, a Party shall provide to the other Party statements evidencing the quantities of Electric Energy delivered at the Delivery Point. With respect to records held in the custody of a third party pursuant to a confidentiality provision of an OPC Contract, if an audit is requested by a Party, the Parties shall select an independent auditor to perform the audit consistent with the rights of OPC under the contract and such confidentiality arrangements as may be required by the contract in question. Subject to any additional limitations that may be imposed under the OPC Contract in question, such examinations by an independent auditor shall not be performed more frequently than once each calendar year. The Party requesting the audit shall pay all costs, including those of the independent auditor, associated with the audit. (b) If any such examination reveals any inaccuracy in any statement, the necessary adjustments in such statement and the payments thereof will be promptly made and shall bear -15- interest calculated at the Interest Rate from the date the overpayment or underpayment was made; provided, however, that no adjustment for any statement or payment will be made unless objection to the accuracy thereof was made prior to the lapse of two (2) years from the rendition thereof; and provided, further, that this provision of this Agreement will survive any termination of this Agreement for a period of two (2) years from the date of such termination for the purpose of such statement and payment objections. 8.5 Subsequent Payment Adjustments. The Parties understand that in certain cases monthly billings will need to be made on an estimated basis, including with respect to the calculation of Energy Cost for each of the OPC Resources. In addition, the Parties understand that after the fact adjustments to amounts owed or revenues received may be made pursuant to the CSA or other OPC Contracts, which adjustments may affect the Energy Cost and associated amounts payable by LPM to OPC under this Agreement. Each Party shall cooperate in good-faith with the other Party to obtain the requisite information and perform the necessary computations so as to "true-up" or otherwise adjust any estimated or adjusted billings promptly. 8.6 Records. Each Party shall keep such records as may be needed to afford a clear history of the Scheduled purchases and sales hereunder. In maintaining such records, OPC and LPM may rely upon the logs and other meter information routinely recorded by Transmission Providers or utilities responsible for coordination of the purchases and sales. Article 9 Taxes 9.1 Seller's Obligation. Seller is liable for and shall pay, or cause to be paid, or reimburse Buyer if Buyer has paid, all Taxes applicable to the sale of Electric Energy arising prior to the Delivery Point(s). If Buyer is required to remit any such Tax, the amount shall be deducted from any sums becoming due to Seller. Seller shall indemnify, defend and hold harmless Buyer from any Claims for such Taxes. 9.2 Buyer's Obligation. Buyer is liable for and shall pay, cause to be paid, or reimburse Seller if Seller has paid, all Taxes applicable to a purchase of Electric Energy arising at and from the Delivery Point(s), including any Taxes imposed or collected by a taxing authority with jurisdiction over Buyer. Buyer shall indemnify, defend and hold harmless Seller from any Claims for such Taxes. 9.3 Exemption Certificates. Either Party, upon written request of the other, shall provide a certificate of exemption or other reasonably satisfactory evidence of exemption if either Party or a purchase or sale is exempt from Taxes, and shall use reasonable efforts to obtain and cooperate with obtaining any exemption from or reduction of any Taxes. Each Party shall use reasonable efforts to administer this Agreement and implement the provisions in accordance with the intent to minimize Taxes. -16- 9.4 [_____]* Article 10 Indemnification and Remedies 10.1 General Indemnity. Subject to Section 10.2, Seller and Buyer shall each indemnify, defend and hold harmless the other Party from any Claims or other losses arising from (i) any act or incident occurring when title to the Contract Quantity is vested in the indemnifying Party pursuant to Section 4.2 and (ii) any Event of Default. 10.2 Limitation on Remedies. THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE RESPONSIBLE PARTY'S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED REGARDLESS OF THE FAULT, NEGLIGENCE OR STRICT LIABILITY OF THE PARTY WHOSE LIABILITY IS RELEASED OR LIMITED THEREBY. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY HEREIN PROVIDED, THE RESPONSIBLE PARTY'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES (INCLUDING INTEREST AS PERMITTED BY APPLICABLE LAW) ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED, NO PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, MULTIPLE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR IN CONTRACT UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, INCLUDING DAMAGES PROVIDED IN SECTION 2.5 AND 4.4, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT, AND THE LIQUIDATED DAMAGES CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS. 10.3 Duty to Mitigate. Each Party agrees that it has a duty to mitigate damages and covenants that it will use commercially reasonable efforts to minimize any damages it may incur as a result of the other Party's performance or nonperformance of this Agreement. - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -17- 10.4 DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH HEREIN, OPC, WITH RESPECT TO THE SALE OF ELECTRIC ENERGY TO LPM, AND LPM, WITH RESPECT TO THE SALE OF ELECTRIC ENERGY TO OPC, EXPRESSLY NEGATES ANY OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY WITH RESPECT TO CONFORMITY TO MODELS OR SAMPLES, MERCHANTABILITY, OR FITNESS FOR ANY PARTICULAR PURPOSE. 10.5 [_____]* Article 11 Conditions Precedent to Extension of Term 11.1 Regulatory Authorizations. The Parties' obligations to commence delivery of Electric Energy under the long term arrangement contemplated by Section 6.1(b) of this Agreement shall be subject to receipt of any governmental consents or approvals required to perform this Agreement, including approval by the RUS without modification of this Agreement and the OPC Restructuring. 11.2 OPC Restructuring. The Parties' obligations to commence delivery of Electric Energy under the long term arrangement contemplated by Section 6.1(b) of this Agreement shall be subject to completion of the OPC Restructuring, and execution of new wholesale power contracts with OPC, as contemplated pursuant to such OPC Restructuring, by EMCs (whose total requirements in the aggregate represent at least eighty (80) percent of OPC Load). 11.3 Administrative Procedures. The Parties' obligations to commence delivery of Electric Energy under this Agreement shall be subject to the development of mutually acceptable Administrative Procedures on or before January 1, 1997. The Parties agree to use good faith efforts to promptly develop the Administrative Procedures. Article 12 Representations and Warranties 12.1 Mutual Representations. On the Effective Date, January 1, 1997, the Long Term Commencement Date, and the date of entering into each purchase or sale of Electric Energy, each Party represents and warrants to the other Party: (i) it is duly organized, validly existing and in good standing under the laws of the state of its incorporation and, in the case of LPM, is doing business as a foreign corporation in the State of Georgia; (ii) it has all requisite corporate power to own, operate and lease its properties and carry on its business as now conducted; (iii) it has all regulatory authorizations, including any required authorization from the Rural Utilities Service of the United States Department of Agriculture ("RUS"), necessary for it to legally perform its obligations under this Agreement; (iv) the execution, delivery and performance of this Agreement are within its powers, have been duly authorized by all necessary action and do not violate any of the terms or - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -18- conditions in its governing documents, any contract or other agreement to which it is a party or any Law applicable to it; (v) this Agreement constitutes each Party's legally valid and binding obligation enforceable against it in accordance with the terms thereof, subject to any Equitable Defenses; (vi) there are no Bankruptcy Proceedings pending or being contemplated by it or, to its knowledge, threatened against it; (vii) there are no Legal Proceedings that would be reasonably likely to materially adversely affect its ability to perform this Agreement; and (viii) it has knowledge and experience in financial matters and in the electric industry that enable it to evaluate the merits and risks of this Agreement. 12.2 Additional OPC Representations. (a) OPC further represents and warrants that on the Effective Date, January 1, 1997, the Long Term Commencement Date and the date of entering into each purchase or sale of Electric Energy hereunder: (i) the EMC Contracts are and will be in full force and effect throughout the Term and will not be amended so as to adversely affect OPC's ability to perform its obligations under this Agreement; (ii) Exhibit 3.2(i) sets forth a true and complete list of each OPC Resource and each material written OPC Contract; (iii) correct and complete copies of the OPC Contracts listed on Exhibit 3.2(i) have previously been delivered to LPM by OPC; (iv) except as stated on Exhibit 3.2(i), no amendments to the OPC Contracts are proposed or pending as of the Effective Date; (v) each OPC Contract is valid, binding and in full force and effect and enforceable by or against the respective parties thereto in accordance with its terms; (vi) OPC has fulfilled, and will continue to fulfill during the Term, all of its obligations under each OPC Contract; (vii) there has not occurred any default by OPC or any event which, with the lapse of time or the giving of notice or both will become a default of OPC under any of the OPC Contracts; (viii) OPC is not in arrears in respect of the performance or satisfaction of the terms or conditions to be performed or satisfied by it under any of the OPC Contracts, and, to the best knowledge of OPC, no waiver of any of such terms or conditions has been granted thereunder by any of the parties thereto; and (ix) OPC shall maintain or cause to be maintained the OPC Resources which are generating facilities owned by OPC, in accordance with Prudent Utility Practice. (b) OPC further represents and warrants that Exhibit 3.2(ii) and the schedule of forecast load described in Section 3.2(b) reflect its best RUS-approved forecasts and estimates as of the Effective Date of the matters reflected therein and that any updates of such Exhibits required to be provided hereunder shall be its best forecasts and estimates of the matters reflected therein as of the date that the same are updated from time to time. (c) OPC further represents and warrants that the power purchase and sales agreement with Power Marketer shall contain (i) a representation and warranty at least as favorable to LPM as the representation set forth in Section 12.3(b), (ii) a covenant on the part of Power Marketer to act in good faith in the development of the Administrative Procedures, and (iii) no terms, conditions or covenants that are inconsistent with OPC's obligations hereunder or which would reasonably be expected to adversely affect LPM's ability to perform hereunder. 12.3 Additional LG&E Parties Representations. (a) LPM further represents and warrants that on the Effective Date, January 1, 1997, the Long Term Commencement Date, and the date of entering into each purchase or sale of Electric Energy hereunder (i) LPM is a power marketer -19- authorized by the FERC to purchase and sell Electric Energy at negotiated, market-based rates pursuant to its Rate Schedule on file with and approved by the FERC; (ii) neither LPM nor any of its Affiliates or subsidiaries will, during the Term, take any action that could reasonably be anticipated to cause LPM to lose its authority as a power marketer under the Federal Power Act to make wholesale sales of power at market-based, negotiated rates; and (iii) LPM will, at all times during the Term, act in accordance with Prudent Utility Practice and will comply with all applicable regulatory requirements including SERC/NERC guidelines. (b) LPM represents and warrants that it will cooperate with the Power Marketer regarding administrative matters during the Term. (c) LEC represents that neither it nor any of its affiliates or subsidiaries will, during the Term, take any action that could reasonably be anticipated to (i) cause LPM to lose its authority as a power marketer under the Federal Power Act to make wholesale sales of power at market-based, negotiated rates; or (ii) impair LPM's ability to perform its obligations under this Agreement, or LEC's ability to perform its obligations under Section 17.15. (d) LEC further represents and warrants that as of the Effective Date and January 1, 1997, it is not a "public utility" within the meaning of the Federal Power Act, as amended. 12.4 Mutual Assistance. Each Party represents and warrants that it will assist the other to the extent practicable with (i) obtaining all required Regulatory Approvals associated with this Agreement; (ii) defending transmission capacity reservations; and (iii) defending Qualifying Facility avoided cost calculations. 12.5 Good Title. Each of OPC and LPM represents and warrants that it will deliver to the other good title to Electric Energy delivered hereunder, free and clear of all liens, claims and encumbrances arising prior to transfer of title at the Delivery Point. 12.6 Power Quality. Each of OPC and LPM represents and warrants that it will deliver to the other Electric Energy at the Delivery Point that is three phase, sixty hertz, and at system nominal voltages. 12.7 Other Contracts. Neither OPC nor LPM nor any of its Affiliates or subsidiaries will, during the Term, take any action, enter into any contracts or otherwise incur obligations that could reasonably be anticipated to interfere with or adversely affect its ability to perform its obligations under this Agreement. 12.8 Continuing Representations and Warranties. Each Party covenants that it will cause these representations and warranties to be materially true and correct throughout the Term. -20- Article 13 Defaults and Remedies 13.1 Events of Default. An "Event of Default" shall mean with respect to a Party ("Defaulting Party"): 13.1.1 The failure by the Defaulting Party to make, when due, any payment required if such failure is not remedied within five (5) Business Days after written notice of such failure is given to the Defaulting Party by the other Party ("Notifying Party"); provided, that the payment is not the subject of a good faith dispute as described in Section 8.3; or 13.1.2 Any representation or warranty made by the Defaulting Party herein shall prove to have been false or misleading in any material respect when made or deemed to be repeated; or 13.1.3 The failure by the Defaulting Party to perform any obligation or covenant set forth in this Agreement (other than its obligations to make any payment or obligations which are otherwise specifically covered in this Section 13.1 as a separate Event of Default, or its obligations to deliver or receive Electric Energy, a remedy for which is provided in Section 2.5) and such failure is not excused by Force Majeure or cured within five (5) Business Days after written notice thereof to the Defaulting Party; 13.1.4 The Defaulting Party shall be subject to a Bankruptcy Proceeding; or 13.1.5 LPM's loss of FERC authorization to charge the prices for the sale of Electric Energy included in this Agreement or otherwise to perform its obligations hereunder in accordance with the terms of this Agreement. 13.2 Early Termination; Remedies. If an Event of Default occurs with respect to a Defaulting Party at any time during the Term, the other party ("Non-Defaulting Party") may, for so long as the Event of Default is continuing, (i) establish a date (which date shall be between five (5) and ten (10) Business Days after the Non-Defaulting Party delivers notice to the Defaulting Party) ("Early Termination Date") on which this Agreement shall terminate and (ii) withhold any payments due to the Defaulting Party under this Agreement; provided, however, that if the Event of Default is that the Defaulting Party becomes subject to a Bankruptcy Proceeding, then this Agreement shall automatically terminate without notice and without any other action by either Party as if an Early Termination Date had been immediately declared prior to such Event of Default. Regardless of whether an Early Termination Date is declared, if an Event of Default shall have occurred, the Non-Defaulting Party shall be entitled to exercise any remedy available at law or equity consistent with Article 10 to recover its damages, including attorneys' fees, resulting from any Event of Default. 13.3 [_____]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -21- 13.4 Failure to Pay. Notwithstanding any other provision of this Agreement, if either Party fails to pay the other any amounts when due, the other Party shall have the right to (i) suspend performance under this Agreement until such amounts plus interest have been paid and/or (ii) exercise any remedy available at law or in equity to enforce payment of such amount plus interest; provided, however, that if the Defaulting Party, in good faith, shall dispute the amount of any such billing or part thereof and shall pay such amounts as it concedes to be correct, no suspension shall be permitted. 13.5 Effect of Regulation. In the event OPC is or becomes regulated by a federal, state or local regulatory body, and (i) such body shall disallow all or any portion of any costs incurred or yet to be incurred by OPC under any provision of this Agreement, such action shall not operate to excuse OPC from performance of any obligation nor shall such action give rise to any right of OPC to any refund or retroactive adjustment of any amounts payable hereunder; or (ii) [_____]* then the sole and exclusive remedy for such default in performance shall be as set forth in Section 4.4(b). 13.6 Notice to LEC. OPC shall provide a copy to LEC of any notice OPC gives LPM under the provisions of this Article. Article 14 Arbitration 14.1 Applicability; Selection of Arbitrators. (a) Except as otherwise expressly provided in Sections 2.5, 4.4, 7.4 and Article 13 of this Agreement, any dispute arising out of or in connection with this Agreement, or its performance including the existence and validity of this Agreement, which cannot be resolved after discussion between the Parties as set forth herein shall be submitted to binding arbitration. (b) Prior to initiating arbitration hereunder, a Party shall provide the other Party with a written notice of the dispute, a proposed means for resolving the same, and the support for such position. Thereafter, representatives of the Parties shall meet to discuss the matter and attempt in good faith to reach a negotiated resolution of the dispute. If the Parties have not agreed upon a resolution of the dispute within ninety (90) days after the date of the original notice provided under this paragraph, or such other time period as the Parties may agree in writing to allow for discussions ("Negotiation Period"), then at any time after the end of the Negotiation Period, a Party may provide written notice to the other declaring an impasse ("Impasse Notice") and initiating binding arbitration in accordance with the further provisions of this Article 14. (c) Arbitration will be deemed to be initiated when an Impasse Notice, properly addressed and stamped, is deposited with the United States Postal Service. The Party initiating arbitration shall nominate one (1) arbitrator at the same time it initiates arbitration. The other Party shall nominate one (1) arbitrator within ten (10) calendar days of receiving the notice of arbitration. The two arbitrators shall appoint a third, neutral arbitrator. The third, neutral arbitrator shall be - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -22- competent and experienced in matters involving the energy business in the United States, with at least 15 years of electric industry experience as a practicing attorney, and shall be unaffiliated and without prior financial alliances with any Party, or either of the other arbitrators. (d) If the two arbitrators are unable to agree on a third arbitrator within thirty (30) calendar days from initiation of arbitration, then a third arbitrator shall be selected by the CPR Institute for Dispute Resolution ("CPR") with due regard given to the selection criteria above and input from the Parties and other arbitrators. Parties shall undertake to request CPR to complete selection of the third arbitrator no later than sixty (60) calendar days from initiation of arbitration. Costs charged by CPR for this service shall be borne equally by OPC and the LG&E Parties. (e) In the event CPR should fail to select the third arbitrator within sixty (60) calendar days from initiation of arbitration, then any Party may petition a court of competent jurisdiction in Georgia to select the third arbitrator. Due regard shall be given to the selection criteria above and input from the Parties and other arbitrators. (f) If prior to the conclusion of the arbitration any arbitrator becomes incapacitated or otherwise unable to serve, then a replacement arbitrator shall be appointed in the manner described above and applicable to the original arbitrator being replaced. 14.2 Discovery, Hearing. Discovery and other pre-hearing procedures shall be conducted as agreed by the parties, or if they cannot agree, as determined by a majority of the arbitrators. Within fifteen (15) days after completion of discovery, the Party submitting the Impasse Notice initiating arbitration shall submit by overnight delivery to the other Party and the arbitrators a precise statement of the dispute, means of resolving the dispute, and the factual and/or legal support therefor. Within ten (10) days after receiving such statement, the other Party shall submit by overnight mail to the first Party and the arbitrators a precise statement of the alternative means of resolving the dispute and the factual and/or legal support therefor. The Parties shall conduct a hearing in Atlanta no later than sixty (60) days following selection of the third arbitrator, or thirty (30) days after all prehearing discovery has been completed, whichever is later, at which the Parties shall present such evidence and witnesses as they may choose. Arbitration shall be conducted in accordance with the non-administered arbitration rules and procedures of the CPR, except where specifically modified by this Agreement. 14.3 Decision. The arbitrators shall consider the terms and conditions of this Agreement, and any relevant evidence and testimony, and shall render their decision within thirty (30) calendar days following conclusion of the hearing. The arbitrators' decision will be limited to selecting one of the alternatives specified in the statements of the Parties referred to in Section 14.2. The decision rendered by a majority of the arbitrators, made in writing, shall be final and binding upon the Parties. Any such decision may be filed in a court of competent jurisdiction and may be enforced by any Party as a final judgment in such court. The arbitrators shall have no authority to award special, exemplary, or consequential damages. -23- 14.4 Expenses. The expenses of arbitration shall be borne equally by OPC and the LG&E Parties, except that each Party shall bear the compensation and expenses of its nominated arbitrator, own counsel, witnesses and employees; provided further, that any costs incurred by a Party in seeking judicial enforcement of any decision rendered in writing by the arbitrators, or a majority of the arbitrators, shall be chargeable to and borne exclusively by the Party against whom such court order is obtained. Article 15 Force Majeure 15.1 Effect of Force Majeure. (a) If either OPC or LPM is rendered unable by an event of Force Majeure to carry out, in whole or part, its obligations hereunder and such Party gives notice and full details of the event to the other Party as soon as practicable after the occurrence of the event, then during the pendency of such Force Majeure but for no longer period, the obligations of the Party affected by the event (other than the obligation to make payments then due or becoming due with respect to performance prior to the event) shall be canceled to the extent required, and if applicable subject to the provisions of Section 15.1(b). The Party affected by the Force Majeure shall remedy the Force Majeure with all reasonable dispatch. (b) If due to Force Majeure, any portion of LPM's Share of OPC Resources is not available, then LPM shall not be obligated to deliver the amount of Electric Energy which is not available to LPM from LPM's Share of OPC Resources, and at OPC's option, exercisable at the time OPC gives or receives notice of the Force Majeure, either (i) [_____]* Article 16 Material Changes 16.1 [_____]* [_____]* Article 17 Miscellaneous 17.1 Assignment. 17.1.1 General. (a) This Agreement shall be binding upon and inure to the benefit of the permitted successors and permitted assigns of the Parties, except that this Agreement may not be assigned by any Party unless prior consent to such assignment is given in writing by the other Parties and, if any Party is then an RUS borrower, the Administrator. Any assignment made without a consent required hereunder shall be void and of no force or effect as against the non-consenting party. - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -24- (b) No sale, assignment, transfer or other disposition permitted by this Agreement shall affect, release or discharge any Party from its rights or obligations under this Agreement, except as may be expressly provided by this Agreement. 17.1.2 Assignment for Security. (a) Notwithstanding any other provision of this Agreement, a Party, without the other Parties' consent but, if such assigning Party is then a borrower of the RUS, only with the consent of the Administrator, may assign, transfer, mortgage or pledge its interest in this Agreement as security (an "Assignment for Security") for any obligation secured by any indenture, mortgage or similar lien on its system assets without limitation on the right of the secured party to further assign this Agreement, including the assignment to create a security interest for the benefit of the Government, acting through the Administrator, or for the benefit of any third party. (b) After any Assignment for Security to the Administrator or other secured party (including any indenture trustee under any indenture securing the obligations of the Seller), the Administrator or other secured party, without the approval of the other Parties to this Agreement, may (i) cause this Agreement to be sold, assigned, transferred or otherwise disposed of to a third party pursuant to the terms governing such Assignment for Security, or (ii) if the Administrator or other secured party first acquires this Agreement, sell, assign, transfer or otherwise dispose of this Agreement to a third party; provided, however, that in either case the Party who made the Assignment for Security is in default of its obligations to the Administrator or other secured party that are secured by such security interest. 17.2 Notices. All notices, requests, statements or payments shall be made as specified in Exhibit 17.2. Notices required to be in writing shall be delivered by letter, facsimile or other documentary form. Notice by facsimile or hand delivery shall be deemed to have been received by the close of the Business Day on which it was transmitted or hand delivered (unless transmitted or hand delivered after close, in which case it shall be deemed received at the close of the next Business Day). Notice by overnight mail or courier shall be deemed to have been received two (2) Business Days after it was sent. A Party may change its address by providing notice of same in accordance herewith. 17.3 Applicable Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES ARISING OUT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 17.4 Survival of Obligations. Upon the expiration of the Parties' sale and purchase obligations under this Agreement, any monies, penalties or other charges due and owing Seller shall be paid, any corrections or adjustments to payments previously made shall be determined, and any refunds due Buyer made, as soon as practicable. All indemnity and confidentiality obligations and audit rights shall survive the termination of this Agreement in accordance with their respective terms. The Parties' obligations provided in this Agreement shall remain in effect for the purpose of complying with the provisions of this Section. -25- 17.5 Entire Agreement. This Agreement, together with the attached Exhibits, constitutes the entire agreement between the Parties relating to the subject matter contemplated by this Agreement and supersedes all prior agreements, whether oral or written. 17.6 No Partnership. Nothing in this Agreement shall ever be deemed to create or constitute a partnership, joint venture or association between the Parties, or to impose a trust or partnership duty, obligation or liability on or with regard to the Parties. 17.7 Amendment. No amendment or modification to this Agreement shall be enforceable unless reduced to writing and executed by both Parties. 17.8 Third Parties. The provisions of this Agreement shall not impart rights enforceable by any person or entity not a Party or not a permitted successor or assignee of a Party bound by this Agreement. 17.9 Waiver. No waiver by any Party of any one or more defaults by the other in the performance of any of the provisions of this Agreement shall be construed as a waiver of any other default or defaults, whether of a like kind or different nature. 17.10 Character of Sales by OPC. The sale by OPC to LPM of OPC Energy under this Agreement does not constitute either a sale, lease, or the dedication of ownership of any OPC Resource. 17.11 Severability. (a) Subject to the provisions of Article 16, should any provision of this Agreement for any reason be declared invalid or unenforceable by a final, non-appealable order of any court or regulatory body having jurisdiction, such decision shall not affect the validity of the remaining portions of the Agreement, and such portions shall remain in full force and effect as if this Agreement had been executed without the invalid portion. In the event any provision of this Agreement is declared invalid, the Parties shall promptly renegotiate to restore this Agreement as near as possible to its original intent and effect. (b) The obligations of LEC and LPM are severable under this Agreement, such that the invalidity or unenforceability of all or any portion of the obligations of LPM or LEC under this Agreement shall not affect the validity or enforceability of the obligations of the other. 17.12 RESERVED. 17.13 Headings. The headings used for the Articles are for convenience and reference purposes only, and shall not be construed to modify, expand, or restrict the provisions of this Agreement. 17.14 Counterparts. This Agreement may be executed in multiple counterparts to be construed as one effective as of the Effective Date. -26- 17.15 LEC Obligations. 17.15.1 Failure of Performance of LPM. (a) In the event LPM fails, refuses, or is otherwise unable to make full and timely performance of all obligations under this Agreement, LEC unconditionally and irrevocably agrees to indemnify and hold harmless OPC from and against any cost, expense or loss associated with such breach in excess of the amounts contemplated under the Agreement. Subject to Section 10.3, OPC shall have the right to seek replacement service from any available source. Nor shall it be necessary for OPC, in order to enforce the performance of LEC under this Section, to first pursue its remedies respecting the LPM obligations under the Agreement against LPM or any other person. (b) Alternatively, if OPC consents and LEC has previously obtained market rate authority from FERC, LEC may assume LPM's rights, duties, and obligations under this Agreement. OPC's approval of this alternative does not waive LEC's obligation under Section 17.15.1(a) to indemnify and hold harmless OPC from and against any cost, expense or loss associated with such breach by LPM in excess of the amounts contemplated under the Agreement. (c) LEC acknowledges and agrees that it has received reasonable consideration for its guarantee of LPM's performance, and the Parties acknowledge that this consideration is unrelated to the revenue or profits earned by LPM under this Agreement. 17.15.2 Further Covenants of LEC. (a) Any other provision of this Agreement notwithstanding, LEC shall have neither the obligation nor the right to engage in, control or otherwise influence any FERC jurisdictional transactions under this Agreement unless LEC shall have previously obtained market rate authority from FERC and approval from OPC. Except as provided by Section 17.15.1(c) and Section 17.15.1(b) above, LEC shall not directly derive any income from any transaction under this Agreement. (b) LEC agrees to indemnify and hold harmless OPC from and against any and all cost, expense, or loss in excess of amounts contemplated to be paid by OPC under this Agreement, and which arises from any or all regulatory consequences of LEC becoming a "public utility" within the meaning of the Federal Power Act, as amended. (c) In the event the FERC determines that LEC is a public utility responsible for delivering Electric Energy to OPC under the terms of this Agreement, then LEC agrees to take all necessary and appropriate steps to obtain all authorizations required to perform this Agreement in accordance with its terms, and shall indemnify and hold harmless OPC for the difference, if any, between the Contract Price applicable for purchases by OPC of Electric Energy under this Agreement and the rate approved by FERC. -27- (d) LEC acknowledges that the provisions of this Section 17.15 constitute a material portion of the consideration to OPC for entering into this Agreement, and that OPC is executing this agreement in reliance on the enforceability and legality of such provisions. LEC unconditionally and irrevocably agrees not to challenge, question, or otherwise seek to undermine in any manner the enforceability or legality of this Section 17.15, and agrees to file and diligently prosecute such applications, briefs, testimony, or other pleadings as may be necessary or appropriate in connection with any Legal Proceeding to support the enforceability and legality of this Section 17.15. 17.15.3 No Discharge. The obligations of LEC under this Section 17.15 shall, to the fullest extent permitted by law, remain in full force and effect without regard to , and shall not be released, discharged or in any way affected by, (i) an amendment to the Agreement; (ii) the merger or consolidation of LEC or OPC with or into any entity, or (iii) any sale, lease or transfer of all of the assets of LEC or OPC. 17.16 Administration. OPC and LPM recognize that Administrative Procedures need to be developed to govern operations, such as those described in Section 4.3, under this Agreement that require coordination among OPC; LPM, and Power Marketer, or their designees. The Administrative Committee shall be composed of one representative of each of the foregoing, and shall meet at such times and locations as are mutually agreed, but at least once a calendar quarter to address all matters relating to such coordination of operations. The Administrative Committee may also meet by conference telephone or other similar communications method that permits all persons participating to hear each other clearly. The Administrative Committee shall have the authority, by unanimous vote of its members, to make such changes to the Administrative Procedures as it deems appropriate and in accordance with Prudent Utility Practice, and to resolve disputes concerning the application of the Administrative Procedures; provided, however, that the Administrative Committee shall not take any action in conflict with the terms of this Agreement or the OPC Contracts, nor otherwise modify the terms of this Agreement. 17.17 Scheduling Members. Exhibit 17.17 lists the EMCs that are Scheduling Members. Scheduling Members shall be allocated a portion of OPC Resources and shall have such scheduling and other rights pertaining thereto as are provided in the EMC Contracts. 17.18 Further Assurances. If any Party reasonably determines or is reasonably advised that any further instruments or any other things are necessary or desirable to carry out the terms of the Agreement, the other Parties shall execute and deliver all such instruments and assurances and do all things reasonably necessary and proper to carry out the terms of this Agreement. 17.19 RUS Approval. OPC shall use its best reasonable efforts to obtain RUS approval of the long term arrangement contemplated in Section 6.1(b). 17.20 Other. LPM agrees that if at any time during the Term it is asked to supply Electric Energy to any OPC member cooperative (other than indirectly as contemplated herein, including -28- supplies to Customer Choice Customers under Section 2.4) then LPM shall either (i) decline to supply such Electric Energy or (ii) offer to supply such Electric Energy through OPC or its designee. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized officers and copies delivered to each Party. OGLETHORPE POWER CORPORATION By: /s/ T. D. Kilgore Attest: /s/ Patricia Nash ----------------------------------------- ------------------------ T. D. Kilgore Patricia Nash Title: President and Chief Executive Officer Title: Assistant Secretary LG&E POWER MARKETING INC. By: /s/ Larry K. Watson, Jr. Attest: /s/ David G. Schwartz ----------------------------------------- ------------------------ Larry K. Watson, Jr. David G. Schwartz Title: Director, Valuation & Title: Secretary Competitive Analysis LG&E ENERGY CORP. By: /s/ Roger W. Hale Attest: /s/ John R. McCall ----------------------------------------- ------------------------ Roger W. Hale John R. McCall Title: Chairman of the Board Title: Corporate Secretary, Chief Executive Officer General Counsel, Executive Vice President -29- SCHEDULE A Definitions [_____]* [_____]* "Administrative Committee" means the committee described in Section 17.16. "Administrative Procedures" mean the procedures to be developed by LPM, OPC and Power Marketer in accordance with Section 11.3, as such procedures may be modified from time to time pursuant to Section 17.16, which procedures will address the Scheduling and dispatch of the OPC Resources. "Affiliate" means, with respect to any person, any other person (other than an individual) that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such person. For this purpose, "control" means the direct or indirect ownership interest of more than fifty (50) percent of the outstanding capital stock or other equity interests having ordinary voting power. [_____]* [_____]* "Assignment for Security" has the meaning specified in Section 17.1.2. "Bankruptcy Proceeding" means, with respect to a Party, that such Party (i) makes any general assignment or any general arrangement for the benefit of creditors, (ii) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy or similar law for the protection of creditors, or has such a petition involuntarily filed against it and such petition is not withdrawn or dismissed within thirty (30) days after such filing, (iii) otherwise becomes bankrupt or insolvent (however evidenced), or (iv) is unable to pay its debts as they fall due. "Business Day" means a day on which the Federal Reserve Member Banks in New York City are open for business; and a Business Day shall open at 8:00 a.m. and close at 5:00 p.m. local time for each Party's principal place of business. "Buyer" means either LPM or OPC, as the case may be, when it is the Party who is obligated to purchase and receive, or cause to be received, Electric Energy in connection with a sale hereunder. - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -30- "Claims" means all claims or actions, threatened or filed and whether groundless, false or fraudulent, that directly or indirectly relate to the subject matter of an indemnity, and the resulting losses, damages, expenses, attorneys' fees and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement. "Computer Tapes" has the meaning specified in Section 7.3. "Confidential Information" means this Agreement and any other written data or information (or an oral communication if the party requesting confidentiality for such oral communication promptly confirms such communication in writing) which is privileged, confidential or proprietary or which constitutes a trade secret under the Georgia Trade Secrets Act of 1990, except information which (i) is a matter of public knowledge at the time of its disclosure or is thereafter published in or otherwise ascertainable from any source available to the public without breach of this Agreement, (ii) constitutes information which is obtained from a third party (who or which is not an Affiliate of one of the Parties) other than by or as a result of unauthorized disclosure, or (iii) prior to the time of disclosure had been independently developed by the receiving Party or its Affiliates not utilizing improper means. "Contract Price" means the price in United States dollars (per MWh) to be paid by Buyer to Seller for the purchase of Electric Energy that is Scheduled or Properly Requested pursuant to this Agreement. "Contract Quantity" means the amount of Electric Energy that Seller agrees to sell and deliver, or cause to be delivered, to Buyer and Buyer agrees to purchase and receive, or cause to be received, from Seller pursuant to the terms of this Agreement. "Control Area" means an electric power system or combination of electric power systems to which a common automatic generation control scheme is applied. "CPR" has the meaning specified in Section 14.1(d). "CPT" means Central Prevailing Time and refers to the time in effect in the Central Time Zone of the United States, whether Central Standard Time or Central Daylight Savings Time. "CSA" means that certain Coordination Services Agreement between Georgia Power Company and Oglethorpe Power Corporation (An Electric Membership Generation and Transmission Corporation), dated as of November 12, 1990, as amended from time to time. "Customer Choice Customer" means a retail customer or prospective customer of an EMC Customer which has a choice of supplier under Georgia law as defined under the Georgia Territorial Electric Services Act, whether or not such customer exercises its rights under the applicable statute on or after the Effective Date of this Agreement, but shall not include any such retail customer -31- whose requirements are being served by an EMC Customer, under an existing agreement or rate schedule as of the Effective Date until after expiration of the applicable agreement or rate schedule. "Customer Choice Load" means the Electric Energy requirements of Customer Choice Customers. "Customer Choice Price" means the price at which LPM will serve LPM's Share of Customer Choice Load, as set forth in Exhibit 5.3 in the case of Customer Choice Customers described in Section 2.4(a), and as set forth in the applicable bid accepted by OPC in the case of Customer Choice Customers described in Section 2.4(b). In the case of the Customer Choice Customers described in Section 2.4(a), the applicable price set forth in Exhibit 5.3 shall be the price stated for the EMC listed in such Exhibit in whose service territory, as depicted in Exhibit 18, the Customer Choice Customer is located. If a Customer Choice Customer described in Section 2.4(a) is not located in the service territory of an EMC listed on Exhibit 5.3, including a Customer Choice Customer within another supplier's service territory that is physically within the boundaries of an EMC's service territory, the applicable Customer Choice Customer Price shall be the OPC price listed in Exhibit 5.3. "Defaulting Party" has the meaning specified Section 13.1. [ ]* "Dispatchable Resources" means the OPC Resources that are so designated in Exhibit 3.2(i). [_____]* "Effective Date" has the meaning specified in Section 6.1. "Electric Energy" means energy in the form of electricity expressed in megawatt-hours (MWh) (or in kilowatt-hours when energy is measured at the points of delivery to the EMCs). "EMC" means an electric membership corporation as defined in Section 46-3-171(3) of the Georgia Electric Membership Corporation Act. - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -32- "EMC Contract" means one of those certain Wholesale Power Contracts between OPC and an EMC, which contract is dated on or after December 1, 1988, as restated and/or amended from time to time, pursuant to which OPC sells and such EMC purchases certain Electric Energy required to meet the energy requirements of its customers for the operation of its system. "EMC Customer" means an electric corporation that is a member of OPC and which is not a Scheduling Member. EMC Customers are listed in Exhibit 1.62. "EMC Metering Point" means that certain point at which deliveries of Electric Energy to each EMC, respectively, are measured and received pursuant to the EMC Contracts. "Energy Cost" with respect to the OPC Energy in question means [_____]* "Equitable Defenses" means bankruptcy, insolvency, reorganization and other laws affecting creditors' rights generally, and with regard to equitable remedies, the discretion of the court before which proceedings to obtain the same may be pending. "Event of Default" has the meaning specified in Section 13.1. "FERC" means the Federal Energy Regulatory Commission or any successor agency which enforces the Federal Power Act, as amended from time to time. "FOB the Plant" means FOB railcar or FOB truck at Plant Wansley or Plant Scherer, as applicable, at LPM's expense for unloading by OPC at OPC's expense. "Force Majeure" means an event which is not within the reasonable control of the Party (or, in the case of third party obligations or facilities, the third party) claiming suspension (the "Claiming Party"), and which by the exercise of due diligence the Claiming Party is unable to overcome in a commercially reasonable manner or obtain or cause to be obtained a commercially reasonable substitute performance therefor. Force Majeure includes, but is not restricted to: [_____]* [_____]* "GPC" means Georgia Power Company. "GSOC" means Georgia System Operations Corporation, a non-profit corporation organized under the laws of the State of Georgia, or any successor thereto. "GTC" means Georgia Transmission Corporation, an electric membership corporation organized and existing under Title 46 of the Official Code of Georgia Annotated, or any successor thereto. "Hartwell" means the simple cycle gas turbine Units 1 and 2, as described in the power purchase agreement between OPC and Hartwell Energy Limited Partnership, which is listed on Exhibit 3.2(i). "Impasse Notice" has the meaning specified in Section 14.1(b). "Integrated Transmission System" or "ITS" means the Transmission Facilities as defined in the Revised and Restated Integrated Transmission System Agreement between Oglethorpe Power - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -33- Corporation (An Electric Membership Generation & Transmission Corporation) and Georgia Power Company, dated as of November 12, 1990, as amended from time to time. "Interest Rate" means the Prime Rate plus two percent, or the maximum lawful rate permitted by applicable Law, whichever is less. "Interruptible Load" means any load that can be interrupted in a power control center. "Interval" means an hour, or such other period of time as the Administrative Committee may determine is appropriate in accordance with the provisions of Section 17.16. "ITS Loss Factor" means the EMC transmission loss factor determined from time to time pursuant to the ITSA applicable to deliveries of Electric Energy from any point on the ITS to any EMC Metering Point, [_____]* "ITSA" means the Revised and Restated Integrated Transmission System Agreement between Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) and Georgia Power Company, dated as of November 12, 1980, as amended from time to time. "Law" means any law, rule, regulation, order, writ, judgment, decree or other legal or regulatory determination by a court, regulatory agency or governmental authority of competent jurisdiction. "LEC" means LG&E Energy Corp., or any successor thereto. "Legal Proceeding" means any suit, proceeding, judgment, ruling or order by or before any court or any governmental authority. "Level B-1" means the high side of the step-up transformer of a generating plant that is an OPC Resource, or other input to the transmission system (other than Points of Interconnection), either of which interconnects directly into the ITS. Exhibit 1.43 illustrates Level B-1. "LG&E Parties" means LPM and LEC. "Long Term Commencement Date" has the meaning specified in Section 6.1(b). "LPM" means LG&E Power Marketing Inc., or any successor thereto. "LPM Off-System Sales Price" has the meaning specified in Section 5.3. "LPM Sales Price" means, [ ]* the price for Electric Energy set forth for the applicable period in Exhibit 5.3. - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -34- "LPM's Share of Customer Choice Load" means the applicable percentage of Customer Choice Load served by the EMC Customers with Electric Energy acquired by OPC at the Contract Price established in Section 5.3(ii) or 5.3(iii), as determined in accordance with the provisions of Section 2.4. "LPM's Share of OPC Load" means the percentage reflected in Exhibit 1.62 of each EMC Customer's requirements for Electric Energy. "LPM's Share of OPC Off-System Sales" means 44.178% of OPC's Off-System Sales under the OPC Off-System Sales Contract listed in Exhibit 2.2.2, and the applicable percentage to which LPM commits for OPC Off-System Sales under other OPC Off-System Sales Contracts. "LPM's Share of OPC Resources" means the percentage of each OPC Resource, or portion thereof, shown on Exhibit 3.3, excluding any portion of such OPC Resources allocated to a Scheduling Member. "Must Run Resources" means the OPC Resources that are so designated in Exhibit 3.2(i). "MWh" means megawatt-hour. "Negotiation Period" has the meaning specified in Section 14.1(b). "NERC" means the North American Electric Reliability Council. "Non-Defaulting Party" has the meaning specified in Section 13.2. "Non-Summer Period" has the meaning specified in Section 5.4.7. "Non-Territorial Contractual Delivery Obligations" means an obligation, based on a quantity of capacity, energy, or both, which an ITS participant is contractually committed to deliver or make available from or through the ITS to a nonterritorial entity, as further defined in the ITSA. "Notifying Party" has the meaning specified in Section 13.1.1. [_____]* "OASIS" means Open Access Same-Time Information System, the information system and standards of conduct contained in Part 37 of the FERC's regulations (18 C.F.R. Part 37), as amended from time to time. "OPC Contracts" means, as of a particular date, all EMC Contracts, the CSA, other contracts, operating procedures and understandings (whether written or oral, and if oral, written statements of - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -35- the terms thereof) in effect on such date affecting OPC's rights and obligations with respect to OPC Resources and to the ITS. "OPC Energy" means all of the available Electric Energy which OPC owns, purchases or otherwise has a right to take from OPC Resources. "OPC Load" means, as of a particular Interval, the entire Electric Energy requirements (including the requirements of any retail customer with a choice of supplier under applicable Law, which customer is being served by an EMC Customer as of the Effective Date) of the EMC Customers listed in Exhibit 1.62, measured at each EMC Metering Point [ ]* "OPC Off-System Sales" means transactions undertaken by OPC or any EMC Customer pursuant to the OPC Off-System Sales Contracts. "OPC Off-System Sales Contracts" means the contract listed on Exhibit 2.2.1 and, subject to the consent of LPM as to those contracts for which LPM will supply Electric Energy under this Agreement, contracts entered into after the Effective Date, between OPC or an EMC Customer and third parties whose facilities are not directly inter-connected to the facilities of either GTC or an EMC Customer, pursuant to which OPC or an EMC Customer sells Electric Energy to such third parties. "OPC Resources" means the capacity entitlement or other rights with respect to generating facilities from which, or power purchase contracts, or other contracts or agreements, under which OPC is required or has the right to take, purchase or otherwise acquire Electric Energy during the Term and which, are listed in Exhibit 3.2(i). "OPC Restructuring" means the transaction by which OPC shall restructure to divide its business and assets into three specialized companies and, among other things, place its transmission assets into GTC. "Other Records" has the meaning specified in Section 7.3. "Party" means OPC, LPM, or LEC, as applicable, including permitted assignees of each pursuant to this Agreement. "Plant Hatch" means the Edwin I. Hatch Nuclear Plant, consisting of two nuclear generating facilities (and associated common facilities) having a current name plate capacity of 810 MW for Unit 1 and 820 MW for Unit 2. "Plant Scherer" means the Robert W. Scherer Plant, consisting of two coal generating facilities (and associated common facilities) having a current total name plate capacity (including interests of all owners) of 818 MW for Unit 1 and 818 MW for Unit 2. - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -36- "Plant Vogtle" means the Alvin W. Vogtle Nuclear Plant, consisting of two nuclear generating facilities (and associated common facilities) having a current total name plate capacity (including interests of all owners) of 1160 MW for Unit 1 and 1160 MW for Unit 2. "Plant Wansley" means the Hal B. Wansley Plant, consisting of two coal generating facilities (and associated common facilities) having a current total name plate capacity (including interests of all owners) of 865 MW for Unit 1 and 865 MW for Unit 2. [ ]* "Power Marketer" means a third party who is authorized by the FERC to sell Electric Energy at market-based, negotiated rates, and with whom OPC contracts on a long-term basis for the purchase of Electric Energy required to supply the portion of OPC Load not supplied under this Agreement. "Prime Rate" means for any date, the per annum rate of interest announced from time to time by Citibank, N.A., as its "prime" rate for commercial loans, effective for such date as established from time to time by such bank. "Properly Requested" or "Properly Requests" means that LPM has notified or notifies OPC of specified amounts of OPC Energy that LPM desires to purchase from specific OPC Resources at specified times during the Term in accordance with Section 4.3; provided, that any such request must be consistent with the terms of this Agreement, the OPC Contracts, and the Administrative Procedures; and provided, further, that all Electric Energy attributable to LPM's Share of OPC Resources that are Must Run Resources (which LPM is obligated to purchase pursuant to Section 2.2.1) shall be deemed to be Properly Requested for purposes of this Agreement. "Prudent Utility Practice" means any of the practices, methods and acts engaged in or approved by a significant portion of the electric industry during the relevant time period, or any of the practices, methods and acts that, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at lowest reasonable cost consistent with good business practices, reliability, safety, and expedition. Prudent Utility Practice is not intended to be limited to the optimum practice, method or act, to the exclusion of all others, but rather to include a spectrum of possible practices, methods, or acts generally acceptable in the region in light of the circumstances. "Qualifying Facility" means a facility as defined in Section 210 of the Public Utilities Regulatory Policy Act of 1978, as amended, and applicable FERC regulations promulgated thereunder. - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -37- "Regulatory Approvals" means all current and future valid and applicable orders, approvals, consents, authorizations, permits or certificates issued by any courts or regulatory bodies (state or federal) having jurisdiction over a Party, this Agreement, or the performance hereof. [_____]* "Representatives" has the meaning specified in Section 7.1. "Rocky Mountain" means the Rocky Mountain Pumped Storage Hydroelectric Generating Facility. "RUS" has the meaning specified in Section 12.l(iii). "Sales Price" has the meaning specified in Section 2.5(b). "Scheduling," "Scheduled" or "Schedule" means or relates to the acts of Seller, Buyer and their designated representatives, including each Party's Transmission Providers, if applicable, of notifying, requesting and confirming to each other the quantity of Electric Energy to be delivered in each Interval on any given day or days at a specified Delivery Point. "Scheduling Member" means any of the EMCs listed in Exhibit 17.17. "Seller" means either LPM or OPC, as the case may be, when it is the Party who is obligated to sell and deliver, or cause to be delivered, Electric Energy. "SEPA" means the Southeastern Power Administration, a federal agency of the United States Government, or any successor. "SEPA Contracts" means those certain power purchase and sale agreements between each EMC and SEPA pursuant to which each EMC Customer purchases Electric Energy from SEPA. "SEPA Energy" means the aggregate amount of Electric Energy Scheduled for delivery to the EMC Customers pursuant to the SEPA Contracts. "SERC" means the Southeastern Electric Reliability Council or any successor. "Statement" has the meaning specified in Section 8.1. [_____]* "Taxes" means any or all ad valorem, property, occupation, severance, generation, first use, conservation, Btu or energy, transmission, utility, gross receipts, privilege, sales, use, consumption, - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -38- excise, lease, transaction, and other or new Taxes, governmental charges, licenses, fees, permits and assessments, or increases therein, other than taxes based on net income or net worth. "Term" has the meaning specified in Section 6.1. [_____]* [_____]* [_____]* "Transmission Provider" means the entity or entities transmitting Electric Energy on behalf of Seller or Buyer to or from the Delivery Point(s) in connection with a particular purchase or sale. - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -39- EXHIBIT 1.25(iii) Energy Costs for Certain OPC Resources OPC Resource Costs Included in Energy Cost - ------------ ----------------------------- Big Rivers [ ]* GPC [ ]* Block 1 Block 2 Block 4 Block 5 Block 6 Florida Power Corp. [ ]* Entergy Power Inc. [ ]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 1.25(iv) Energy Costs Paid by LPM for Certain Qualifying Facilities[_____]* Year Energy Charges ($/MWh) ---- ---------------------- 1997 [_____]* 1998 [_____]* 1999 [_____]* 2000 [_____]* 2001 [_____]* 2002 [_____]* 2003 [_____]* 2004 [_____]* 2005 [_____]* 2006 [_____]* 2007 [_____]* 2006 [_____]* 2009 [_____]* 2010 [_____]* 2011 [_____]* [_____]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 1.43 Level B-1 Diagram EXHIBIT 1.62 EMC Customers EMC Percent of Requirements - --- ----------------------- ALTAMAHA EMC 50% AMICALOLA EMC 50% CANOOCHEE EMC 50% CARROLL EMC 50% CENTRAL GEORGIA EMC 50% COASTAL EMC 50% COBB EMC 50% COLQUITT EMC 50% COWETA-FAYETTE EMC 0% EXCELSIOR EMC 50% FLINT EMC 50% GRADY EMC 50% GREYSTONE POWER CORPORATION, AN EMC 50% HABERSHAM EMC 50% HART EMC 50% IRWIN EMC 50% JACKSON EMC 50% JEFFERSON EMC 50% LAMAR EMC 50% LITTLE OCMULGEE EMC 50% MIDDLE GEORGIA EMC 50% MITCHELL EMC 50% OCMULGEE EMC 50% OCONEE EMC 50% OKEFENOKE RURAL EMC* 50% PATAULA EMC 50% PLANTERS EMC 50% RAYLE EMC 50% SATILLA RURAL EMC 50% SAWNEE EMC 0% SLASH PINE EMC 50% SNAPPING SHOALS EMC 50% SUMTER EMC 50% THREE NOTCH EMC 50% TRI-COUNTY EMC 50% TROUP EMC 50% UPSON COUNTY EMC 50% WALTON EMC 50% WASHINGTON EMC 50% *Subject to Sections 2.1(d) and (e). EXHIBIT 2.1 Off-System Sales Contracts Sales Agreement with Alabama Electric Cooperation ("AEC"), dated March 31, 1994. EXHIBIT 2.2.1 [_____]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 2.2.2 [_____]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 3.2(i) OPC Resources(1) Type of Resource OPC Resources ----------------------------------- that are Dispatch- Minimum Maximum able (OPC Resource) (OPC Resource) Resources (MW) (MW) ----------------------------------- Generating Units Rocky Mountain 1 110.0 212.0 ----------------------------------- Rocky Mountain 2 110.0 212.0 ----------------------------------- Rocky Mountain 3 110.0 212.0 ----------------------------------- Scherer1(2) 195.0 496.2 ----------------------------------- Scherer1(2) 195.0 498.0 ----------------------------------- Tallassee N/A 2.0 ----------------------------------- Wansley 1(3) 121.0 253.8 ----------------------------------- Wansley 2(3) 122.0 253.8 ----------------------------------- 16.2 (summer) ----------------------------------- Wansley CT N/A 19.8 (winter) ----------------------------------- ----------------------------------- Minimum Minimum (OPC Resource) (OPC Resource) (MW) (MW) ----------------------------------- Purchased Power GPC Block 1(4) 100 215 ----------------------------------- GPC Block 2(4) 100 215 ----------------------------------- GPC Block 4(4) 100 215 ----------------------------------- GPC Block 5(4) 0 107 ----------------------------------- - ---------- (1) The figures contained in this Exhibit shall not serve to limit the actual output available from any OPC Resource. (2) Scherer minimum could be 330 MW if Georgia Power is not taking electric energy from its ownership share of the generating facility. (3) Wansley minimum could be 430 if other co-owners are not taking electric energy from their ownership share of the generating facility. (4) 100% availability - minimum applies when energy is being scheduled under the particular block. EXHIBIT 3.2(i) (continued) ----------------------------------- GPC Block 6(4) 0 108 ----------------------------------- Big Rivers 25 100 ----------------------------------- Entergy 25 100 ----------------------------------- 74 (summer) 148 (summer) ----------------------------------- Hartwell 1(5) 91 (winter) 182 (winter) ----------------------------------- 74 (summer) 148 (summer) ----------------------------------- Hartwell 2(5) 91 (winter) 182 (winter) ----------------------------------- Florida Power(6) 0 50 (1997) 275 (1998) ----------------------------------- ----------------------------------- OPC Resources that are Minimum Maximum Must Run (OPC Resource) (OPC Resource) Resources (MW) (MW) ----------------------------------- Generating Units Hatch(1) N/A 234.9 ----------------------------------- Hatch(2) N/A 242.1 ----------------------------------- Vogtle(1) N/A 348.6 ----------------------------------- Vogtle(2) N/A 348.6 ----------------------------------- Purchased Power QF N/A 15.6 ----------------------------------- - ---------- (5) Unit minimums are governed by Section 7.2.1 of PPA: "Unit to be dispatched at a level no less than 50% of the maximum operating levels." See Schedule K of the Hartwell PPA for minimum and maximum capacities at certain temperatures. If unit is on AGC, unit minimum is 100 MW and maximum is 150 MW. Hartwell unit operation constrained to no more than 2500 hours per unit annually. (6) Available only during 1997 and 1998 in the months of June through September. EXHIBIT 3.2(i) (continued) OPC Resources and OPC Contracts OPC Resource Operations Governed By - ------------ ---------------------- Georgia Power Blocks Block Power Sale Agreement between Georgia Power Company and OPC, dated as of November 12, 1990. Letters dated as of December 30, 1992 and December 8, 1993, extending term of Block Power Sale Agreement. Letter dated as of August 30, 1994, electing to reduce capacity OPC is obligated to purchase under Block Power Sale Agreement. Vogtle, Units 1 & 2 Alvin W. Vogtle Nuclear Units Numbers One and Two Purchase and Ownership Participation Agreement among Georgia Power Company, OPC, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated as of August 27, 1976; Amendment, dated as of January 18, 1977; Amendment Number Two, dated as of February 24, 1977. Alvin W. Vogtle Nuclear Units One and Two Operating Agreement among Georgia Power Company, OPC, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated as of August 27, 1976. Hatch, Units 1 & 2 Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement between Georgia Power Company and OPC, dated as of January 6, 1975. Hatch Operating Agreement between Georgia Power Company and OPC, dated as of January 6, 1975. Scherer, Units 1 & 2 Plant Robert W. Scherer Units Numbers One and Two Purchase and Ownership Participation Agreement among Georgia Power Company, OPC, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated as of May 15, 1980; Amendment, dated as of December 30, 1985; Amendment Number Two, dated as of July 1, 1986; Amendment Number Three, dated as of August 1, 1988; Amendment Number Four, dated as of December 31, 1990. Plant Robert W. Scherer Units Numbers One and Two Operating Agreement among Georgia Power Company, OPC, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated as of May 15, 1980; Amendment, dated as of December 30, 1985; Amendment Number Two, dated as of December 31, 1990. Plant Scherer Managing Board Agreement among Georgia Power Company, OPC, Municipal Electric Authority of Georgia and City of Dalton, Georgia, EXHIBIT 3.2(i) (continued) dated as of December 31, 1990. Letter of Intent re: Use of Eastern and Western Coal at Scherer, dated as of January 16, 1992; Letter Agreement re: Capital Modifications and Expenditures for the use of Western Coal at Plant Scherer, dated as of July 7, 1992 (partially executed). Letter Agreement re: Additional Amendments to the Scherer and Wansley Agreements, dated as of December 31, 1990. Wansley, Units 1, 2, & CT Plant Hal B. Wansley Purchase and Ownership Participation Agreement between Georgia Power Company and OPC, dated as of March 26, 1976; Plant Hal Wansley Operating Agreement between Georgia Power Company and OPC, dated as of March 26, 1976. Plant Hal Wansley Combustion Turbine Agreement between Georgia Power Company and OPC, dated as of August 2, 1982; Amendment dated as of October 20, 1982. Tallassee, Units 1 & 2 No Operative Documents. Big Rivers Purchase Long Term Firm Power Purchase Agreement between Big Rivers Electric Corporation and OPC, dated as of December 17, 1990. Letter dated March 12, 1992. Long Term Firm Power Purchase Agreement, dated as of July 19, 1989, by and between OPC and Big Rivers Electric Corporation. Entergy Purchase Unit Capacity and Entergy Purchase Agreement between OPC and Entergy Power, Incorporated, dated as of October 11, 1990, Amendment dated September 29, 1992. Hartwell Energy Limited Partnership Purchase Power Purchase Agreement between OPC and Hartwell Energy Limited Partnership, dated as of June 12, 1992. Agreement for Purchase of 230KVS Switchyard and ITS Interconnection Facilities Agreement, dated as of August 31, 1992. EXHIBIT 3.2(i) (continued) Rocky Mountain Pumped Storage Resource Rocky Mountain Pumped Storage Hydroelectric Project Ownership Participation Agreement, dated as of November 18, 1988, by and between OPC and Georgia Power Company. Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement by and between OPC and Georgia Power Company, dated as of November 18, 1988. Pumped Storage Hydroelectric Project Option Agreement, dated as of November 18, 1988. Reciprocity Letter Agreement, dated as of November 18, 1988. Letters Relating to Rocky Mountain (Title Defects Letter; Floyd County Prepayment Letter; Letter Re: Other Commitments; Letter Re: Cost of Construction). QF Agreements Interconnection Policy of OPC and Members for Cogeneration and Small Power Producers, dated as of January, 1994. Agreement for Purchase of Power from Georgia Waste Systems, Inc., dated January 1993. Agreement for Purchase of Power from Southeast Paper Manufacturing Co., dated as of February 29, 1988; Amendment, dated as of November 11, 1991. Agreement for Purchase of Power from Spartan Mills, dated as of April 6, 1992. Agreement for Purchase of Power from Buckeye Cellulose Corporation, executed August 6, 1983. Amendment dated September 21, 1993; Second Amendment dated February 11, 1985; Third Amendment dated December 10, 1991; and Fourth Amendment dated September 1, 1996. EXHIBIT 3.2(i) (continued) Other Agreements Integrated Transmission System Agreement Revised and Restated Integrated Transmission System Agreement between OPC and Georgia Power Company, dated as of November 12, 1990. ITSA, Power Sale and Coordination Umbrella Agreement between OPC and Georgia Power Company, dated as of November 12, 1990. Coordination Services Coordination Services Agreement between Georgia Power Company and OPC, dated as of November 12, 1990. Transmission O&M Transmission Facilities Operation and Maintenance Contract between Georgia Power Company and OPC, dated as of June 9, 1986. ITS Transfer Capability Purchase of TVA ITS Interface capability from Municipal Electric Authority of Georgia to OPC dated December 17, 1990. Purchase of TVA ITS Interface capability from GPC to OPC dated November 12, 1990. Sale of FLA ITS Interface capability to GPC and from OPC dated May 30, 1995. SEPA SEPA Contract No. 89-00-1501-912 between SEPA and OPC dated May 28, 1991 and amended in Supplemental Agreement No. 1 dated November 26, 1991, Supplemental Agreement No. 2 dated May 23, 1994, Supplemental Agreement No. 3 dated January 30, 1995. SEPA Contract No. 89-00-1501-916 between SEPA and OPC dated December 29, 1993 and amended in Supplemental Agreement No. 1 dated June 17, 1994, Supplemental Agreement No. 2 dated July 28, 1995, Supplemental Agreement No. 3 dated November 24, 1995. Operating Procedures Rocky Mountain Pumped Storage Hydroelectric Plant Coordination Procedures Agreement between Oglethorpe Power Corporation and Georgia Power Company effective June 1, 1995. Plant Scherer Units #1 and #2 Dispatch Procedures Rev. 6. Hartwell Energy Facility Operation and Maintenance Procedure for Unit Dispatch effective June 6, 1994. Operating Procedures for use between System Control Center and Rocky Mountain Plant effective November 18, 1994. EXHIBIT 3.2(ii) [_____]* OPC Resource Total Forced Loss Factor and Scheduled Outage Rate ------------------------------------- Hatch 17 [ ]* [ ]* ------------------------------------- Hatch 27 [ ]* [ ]* ------------------------------------- Rocky Mountain ------------------------------------- o Unit 1 [ ]* [ ]* ------------------------------------- o Unit 2 [ ]* [ ]* ------------------------------------- o Unit 3 [ ]* [ ]* ------------------------------------- Scherer 1 [ ]* [ ]* ------------------------------------- Scherer 2 [ ]* [ ]* ------------------------------------- Tallassee 1 & 2 [ ]* [ ]* ------------------------------------- Vogtle 1(7) [ ]* [ ]* ------------------------------------- Vogtle 2(7) [ ]* [ ]* ------------------------------------- Wansley 1 [ ]* [ ]* ------------------------------------- Wansley 2 [ ]* [ ]* ------------------------------------- Wansley CT [ ]* [ ]* ------------------------------------- - ---------- (7) Nuclear planned outages exclude ramp down period prior to full expected planned outages above. - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 3.3 LPM's Share of OPC Resources Resource Percentage Share Plant Hatch Unit 1 44.178% of unit Unit 2 44.178% of unit Plant Vogtle Unit 1 44.178% of unit Unit 2 44.178% of unit Plant Scherer Unit 1 44.178% of unit Unit 2 44.178% of unit Plant Wansley Unit 1 44.178% of unit Unit 2 44.178% of unit CT 44.178% of unit Rocky Mountain Unit 1 44.178% of unit Unit 2 44.178% of unit Unit 3 44.178% of unit Tallassee 44.178% of total plant Hartwell-Units 1 and 2 44.178% of total plant Big Rivers Contract 44.178% of contract entitlement Entergy 44.178% of contract entitlement GPC Block 1 44.178% of contract entitlement GPC Block 2 44.178% of contract entitlement GPC Block 4 44.178% of contract entitlement GPC Block 5 44.178% of contract entitlement GPC Block 6 44.178% of contract entitlement Florida Power Corp. 44.178% of contract entitlement Southwire Company (QF) 44.178% of contract entitlement Herschel Webster (QF) 44.178% of contract entitlement Georgia Waste Systems, Inc. (QF) 44.178% of contract entitlement Southeast Paper Manufacturing Co. (QF) 44.178% of contract entitlement Spartan Mills (QF) 44.178% of contract entitlement EXHIBIT 3.8.1 [_____]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 3.8.3 [4 pages of omitted text]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 4.1(b) [_____]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 5.3 [1 page of omitted text]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 5.4.1(a) [4 pages of omitted text]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 5.4.1(b) [1 page of omitted text]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 5.4.5 [1 page of omitted text]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 5.4.6 [1 page of omitted text]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 5.4.7(a) [4 pages of omitted text]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBTI 5.4.7(b) [1 page of omitted text]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 5.4.8(a) [3 pages of omitted text]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 5.4.8(b) [1 page of omitted text]* - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 17.2 Notices and Payment LG&E Power Marketing, Inc.: NOTICES AND CORRESPONDENCE PAYMENTS LG&E Power Marketing Inc. PNC Bank, KY 12500 Fair Lake Circle, Ste. 350 for LG&E Power Marketing, Inc. Fairfax, VA 22033-3804 [_____]* Attn: President [_____]* FAX # (703) 968-7145 Confirmation: LG&E Power Marketing Inc. Credit and Collections Attn: Accounts Payable FAX # (502) 627-4177 [_____]* INVOICES LG&E Power Marketing, Inc. 220 West Main Street Louisville, KY 40202 Attn: Trading Accounts Payable, 7th Floor FAX # (502) 627-4177 - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. Oglethorpe Power Corporation: NOTICES AND CORRESPONDENCE PAYMENTS 2100 East Exchange Place SunTrust Bank Atlanta P.O. Box 1349 for Oglethorpe Power Corporation Master Tucker, Georgia 30085-1349 Account Attn: Manager, System Control [_____]* FAX# (404) 270-7663 [_____]* Confirmation: Oglethorpe Power Corporation Samantha Cofield Phone:(770) 270-7191 Fax: (770) 270-7872 - ---------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 17.17 List of Scheduling Members Coweta-Fayette EMC Sawnee EMC EX-10.31 17 EXHIBIT 10.31 Exhibit 10.31 POWER PURCHASE AND SALE AGREEMENT AMONG LG&E POWER MARKETING INC., LG&E POWER INC. AND OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION AND TRANSMISSION CORPORATION) Dated as of January 1, 1997 ACKNOWLEDGMENT REGARDING CONFIDENTIAL INFORMATION: Oglethorpe Power Corporation (An Electric Membership Corporation) (the "Company") acknowledges that certain confidential information is contained throughout the Power Purchase and Sale Agreement and the Exhibits attached thereto and therefore such confidential information has been omitted from the copy filed with this Annual Report on Form 10-K for the fiscal year ended December 31, 1996, and an asterisk (*) has been inserted indicating such omission at the exact place in the Agreement and the Exhibits where such confidential information has been omitted. A copy of this Agreement without any omission of confidential information has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. POWER PURCHASE AND SALE AGREEMENT AMONG LG&E POWER MARKETING INC., LG&E POWER INC. AND OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION AND TRANSMISSION CORPORATION) Table of Contents Page Article 1 Definitions and Construction .........................................3 Article 2 Purchases and Sales...................................................4 2.1 Sales by LPM............................................4 2.2 Sales by OPC............................................4 2.2.1 Must Run Resources........................4 2.2.2 Dispatchable OPC Resources................5 2.2.3 Manner of Request. ......................5 2.3 Remedy for Breach of MW Representation..................5 2.4 Customer Choice Load....................................5 2.5 Failure to Deliver or Receive...........................6 2.6 Stranded Costs..........................................7 Article 3 OPC Resources.........................................................8 3.1 OPC Contracts...........................................8 3.2 Information on OPC Resources and System.................8 3.3 Allocation of OPC Resources.............................8 3.4 RESERVED................................................9 3.5 Dispersed Generation....................................9 3.6 Load Management.........................................9 3.7 Hartwell Fuel...........................................9 3.8 Coal....................................................9 3.9 SEPA Energy.............................................9 3.10 Block Power Sale Agreements............................10 3.11 New Resources..........................................10 3.12 Emission Allowances....................................10 Article 4 Transmission.........................................................10 4.1 Transmission and Scheduling............................10 4.2 Title and Risk of Loss.................................11 -i- 4.3 Scheduling.............................................11 4.4 Delivery Points........................................11 4.5 Transformer and Transmission Loss Adjustments..........12 4.6 Imbalances and Regulation Deviation Errors.............13 4.7 Non-Territorial Contractual Delivery Obligations.......13 4.8 Control Area...........................................13 4.9 Other OPC or GTC Responsibilities......................13 Article 5 Price................................................................14 5.1 OPC's Contract Price...................................14 5.2 RESERVED 5.3 LPM's Contract Price...................................14 5.4 Amounts Due to OPC and LPM.............................14 5.4.1 [ ]* 5.4.2 RESERVED.................................15 5.4.3 RESERVED.................................15 5.4.4 RESERVED.................................15 5.4.5 [ ]* 5.4.6 [ ]* 5.4.7 [ ]* 5.4.8 [ ]* 5.5 RESERVED...............................................17 5.6 RESERVED...............................................17 Article 6 Term.................................................................17 6.1 Term...................................................17 6.2 RESERVED Article 7 Confidential Information.............................................18 7.1 Confidentiality and Authorization to Use Information...18 7.2 Authorized Disclosure..................................18 7.3 Return of Confidential Information.....................18 7.4 Right to Remedies......................................19 7.5 Georgia Trade Secrets Act..............................19 Article 8 Billing, Payment and Records.........................................19 8.1 Billing Statements.....................................19 8.2 Offset of Payment Obligations..........................19 8.3 Payments...............................................19 - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. 8.4 Audit Rights...........................................20 8.5 Subsequent Payment Adjustments.........................20 8.6 Records................................................20 Article 9 Taxes................................................................21 9.1 Seller's Obligation....................................21 9.2 Buyer's Obligation.....................................21 9.3 Exemption Certificates.................................21 9.4 [ ]* Article 10 Indemnification and Remedies.........................................21 10.1 General Indemnity......................................21 10.2 Limitation on Remedies.................................21 10.3 Duty to Mitigate.......................................22 10.4 DISCLAIMER.............................................22 10.5 [ ]* 10.6 Relation with November 1996 Agreement..................23 Article 11 Conditions Precedent to Extension of Term............................23 11.1 Regulatory Authorizations..............................23 11.2 OPC Restructuring......................................23 11.3 Board Approval.........................................23 Article 12 Representations and Warranties.......................................23 12.1 Mutual Representations.................................23 12.2 Additional OPC Representations.........................24 12.3 Additional LG&E Parties Representations................24 12.4 Mutual Assistance......................................25 12.5 Good Title.............................................25 12.6 Power Quality..........................................25 12.7 Other Contracts........................................25 12.8 Continuing Representations and Warranties..............25 Article 13 Defaults and Remedies................................................25 13.1 Events of Default......................................25 13.2 Early Termination; Remedies............................26 13.3 [ ]* 13.4 Failure to Pay.........................................27 - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. 13.5 Effect of Regulation...................................27 13.6 Notice to LPI..........................................27 Article 14 Arbitration..........................................................27 14.1 Applicability; Selection of Arbitrators................27 14.2 Discovery, Hearing.....................................28 14.3 Decision...............................................28 14.4 Expenses...............................................28 Article 15 Force Majeure........................................................29 15.1 Effect of Force Majeure................................29 Article 16 Material Changes.....................................................29 16.1 [ ]* 16.2 [ ]* Article 17 Miscellaneous........................................................30 17.1 Assignment.............................................30 17.1.1 General..................................30 17.1.2 Assignment for Security..................31 17.2 Notices................................................31 17.3 Applicable Law.........................................31 17.4 Survival of Obligations................................31 17.5 Entire Agreement.......................................32 17.6 No Partnership.........................................32 17.7 Amendment..............................................32 17.8 Third Parties..........................................32 17.9 Waiver.................................................32 17.10 Character of Sales by OPC..............................32 17.11 Severability...........................................32 17.12 RESERVED...............................................32 17.13 Headings...............................................32 17.14 Counterparts...........................................32 17.15 LPI Obligations........................................33 17.15.1 Failure of Performance of LPM....33 17.15.2 Further Covenants of LPI.........33 17.15.3 No Discharge.....................34 17.16 Administration.........................................34 17.17 RESERVED...............................................34 17.18 Further Assurances.....................................34 - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. 17.19 RUS Approval...........................................34 17.20 Other..................................................34 17.21 Novation of Interim Agreement..........................34 Schedule A Exhibits 1.25(iii) Energy Costs for Certain OPC Resources 1.25(iv) Energy Costs for Qualifying Facilities 1.43 Level B-1 Diagram 1.62 Participating Members 2.1 Off-System Sales Contracts 2.2.1 [ ]* 2.2.2 [ ]* 3.2(i) OPC Resources 3.2(ii) [ ]* 3.3 LPM's Share of Participating Member OPC Resources 4.1(b) [ ]* 5.3 LPM Sales Price 5.4.1(a) [ ]* 5.4.1(b) [ ]* 5.4.5 [ ]* 5.4.6 [ ]* 5.4.7(a) [ ]* 5.4.7(b) [ ]* 5.4.8(a) [ ]* 5.4.8(b) [ ]* 17.2 Notices and Payment 18 Map of EMC Service Territory - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. POWER PURCHASE AND SALE AGREEMENT AMONG LG&E POWER MARKETING INC. LG&E POWER INC. AND OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION AND TRANSMISSION CORPORATION) This Power Purchase and Sale Agreement dated as of January 1, 1997, together with any permitted future amendments ("Agreement") is entered into by and among Oglethorpe Power Corporation (An Electric Membership Generation and Transmission Corporation), a corporation organized and existing under Title 46 of the Official Code of Georgia Annotated, together with any permitted successor or assign ("OPC"), LG&E Power Inc., a corporation organized and existing under the laws of the State of Delaware, together with any permitted successor or assign ("LPI"), and LG&E Power Marketing Inc., a corporation organized and existing under the laws of the State of California, together with any permitted successor or assign ("LPM") (collectively, LPI and LPM are referred to herein as "LG&E Parties"). WITNESSETH WHEREAS, OPC is an electric generation corporation which operates on a cooperative basis and which supplies certain electric requirements of its member cooperatives for electric power and energy supplied to their wholesale and retail customers; WHEREAS, LPM is a power marketer authorized by the Federal Energy Regulatory Commission to purchase and sell electric energy for resale at negotiated, market-based rates; WHEREAS, LPM is an indirect, wholly owned subsidiary of LPI; WHEREAS, the existing OPC Resources are demonstrably insufficient to supply the anticipated peak electric requirements of OPC and its member cooperatives in 1998, in light of the 1996 Official Load Forecast, and the termination of uneconomic existing power purchase resources; WHEREAS, OPC has reasonably determined that it is not economically efficient at this time for OPC to plan for the construction or acquisition of additional generating facilities to supply the electric requirements of OPC and its member cooperatives, and that the native load electric requirements of its cooperative members can economically and efficiently be supplied through the purchase from a power marketer of such requirements for electric energy; WHEREAS, in accordance with such strategic plan for serving its member cooperatives, OPC has requested bids from various power marketers, and LPM has been selected as a successful bidder to supply certain electric requirements of its member cooperatives; WHEREAS, LPM desires to purchase Electric Energy from OPC for resale (i) to OPC at prices consistent with this Agreement and (ii) to third parties at such prices as LPM shall determine; WHEREAS, the Parties believe that their respective objectives can be achieved if OPC sells to LPM a portion of the Electric Energy that OPC is obligated to take or purchase from Must Run Resources and offers to sell to LPM certain other Electric Energy which OPC is entitled to take or purchase, as more specifically set forth herein, and LPM agrees to supply OPC at wholesale with Electric Energy it has purchased from OPC or from other sources; WHEREAS, on November 19, 1996, LPM, LG&E Energy Corp., and OPC entered into a long-term power purchase and sales agreement pursuant to which LPM has agreed to sell Electric Energy to OPC to satisfy certain of OPC's requirements for Electric Energy (the "November 1996 Agreement"); WHEREAS, in the November 1996 Agreement, OPC agreed to sell to LPM a portion of the Electric Energy that OPC is obligated to take or purchase from Must Run Resources (as defined in the November 1996 Agreement) and to offer and to sell to LPM certain other Electric Energy which OPC is entitled to take or purchase, as more specifically set forth therein; WHEREAS, Sawnee EMC and Coweta-Fayette EMC chose not to participate in the November 1996 Agreement; WHEREAS, the Parties entered into an Interim Agreement on December 31, 1996, ("Interim Agreement") under which OPC is required to sell or to offer to sell, and LPM shall be required to purchase or entitled to purchase, certain of the OPC Resources; WHEREAS, under the Interim Agreement, LPM is required to sell to OPC at certain prices Electric Energy it has purchased from OPC or from other sources; WHEREAS, the Interim Agreement will terminate upon the execution of this Agreement or on 24:00 CPT on January 23, 1997, whichever is earlier; WHEREAS, the Parties intend this Agreement to cover the purchase and sale of Electric Energy by LPM to OPC to satisfy certain OPC requirements for Electric Energy; specifically for Sawnee EMC and Coweta-Fayette EMC, which were not included in the November 1996 Agreement; WHEREAS, the Parties intend this Agreement to operate as a novation of the Interim Agreement and to be interpreted as if it was in full force and effect as of January 1, 1997; WHEREAS, OPC intends to enter into a second long-term contract with another power marketer to provide on a long-term basis all or a portion of OPC's requirements for Electric Energy that are not provided under the November 1996 Agreement or this Agreement, but which is not in place at the time of execution of this Agreement; -2- WHEREAS, the Parties recognize that until implementation of the second long-term contract with another power marketer, OPC will operate portions of the OPC Resources that are not allocated to LPM under either the November 1996 Agreement or under this Agreement, and that after implementation of the second long-term contract with another power marketer LPM will be one of two power marketers supplying certain electric requirements of OPC's member cooperatives, and that the administration and implementation of this Agreement will require coordination with OPC and the administration and implementation of the second long-term contract with another power marketer and OPC; WHEREAS, the Parties recognize that OPC may in the future enter into additional agreements with power marketers to serve Customer Choice Load or other load growth not served under this Agreement; provided, that such additional agreements shall not interfere with OPC's ability to perform under this Agreement. NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, and for other good and valuable consideration, OPC and the LG&E Parties hereby agree as follows: Article 1 Definitions and Construction All capitalized terms used herein and not otherwise defined, whether singular or plural, shall have the respective meanings set forth in Schedule A. Defined terms in this Agreement shall include in the singular number the plural and in the plural number the singular. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. Any reference in this Agreement to "Section," "Article," "Exhibit" or "Schedule" shall be references to this Agreement. Unless the context requires otherwise, any reference in this Agreement to any document shall mean such document and all schedules, exhibits, and attachments thereto as amended and in effect from time to time. Unless otherwise stated, any reference in this Agreement to any person shall include its permitted successors and assigns and, in the case of any governmental authority, any person succeeding to its functions and capacities. The words "hereof," "herein," "hereto" and "hereunder" and words of similar import when used in this Agreement shall, unless otherwise expressly specified, refer to this Agreement as a whole and not to any particular provision of this Agreement. Whenever the term "including" is used herein in connection with a listing of items included within a prior reference, such listing shall be interpreted to be illustrative only, and shall not be interpreted as a limitation on or exclusive listing of the items included within the prior reference. In the event of a conflict between the text of this Agreement and any Exhibit or Schedule, the terms of the Agreement shall prevail. The Parties acknowledge that each Party and its counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. -3- Article 2 Purchases and Sales 2.1 Sales by LPM. (a) In each Interval of the Term, LPM shall sell and deliver, or cause to be delivered, and OPC shall purchase and receive, or cause to be received, an amount of Electric Energy equal to the sum of (i) LPM's Share of Participating Member Load in that Interval, plus (ii) LPM's Share of Participating Member Off-System Sales in that Interval, plus (iii) LPM's Share of Participating Member Customer Choice Load in that Interval. This Agreement shall constitute the single agreement under which LPM is obligated to supply at wholesale Electric Energy to serve LPM's Share of Participating Member Load, LPM's Share of Participating Member Customer Choice Load, and LPM's Share of Participating Member Off-System Sales in accordance with the terms hereof, and no further request, schedule or agreement by OPC is needed. (b) The Parties recognize and agree that [ ]* (iii) neither of the foregoing shall entitle LPM to avoid its obligations hereunder or to adjust the LPM Sales Price, except as expressly permitted under the provisions of this Agreement. (c) In lieu of selling or buying Electric Energy, LPM reserves the right to broker Electric Energy from or to Louisville Gas and Electric Company and OPC agrees to accept or supply such Electric Energy pursuant to its Interchange Agreement or other existing contracts with Louisville Gas and Electric Company in complete satisfaction of LPM's obligations hereunder; provided, that any such arrangements shall be performed at a price and under terms and conditions that are the same as those specified herein; and provided, further, that OPC shall have no obligation to participate in any such arrangement unless LPM establishes to OPC's satisfaction that Louisville Gas and Electric Company has all requisite regulatory authorization to perform in accordance with the foregoing. 2.2 Sales by OPC. OPC shall on a real time basis inform LPM of LPM's Share of Participating Member OPC Resources, including Must Run Resources and Dispatchable Resources, that are available for the delivery of OPC Energy, in accordance with the terms of this Agreement, the OPC Contracts and the Administrative Procedures. 2.2.1 Must Run Resources. In each Interval of the Term, OPC shall sell and LPM shall purchase all of the OPC Energy from LPM's Share of Participating Member OPC Resources associated with Must Run Resources (other than purchased power resources) that are actually available during such Interval. OPC represents that the Must Run Resources are - ----------------- * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -4- currently as of the Effective Date and shall, except for Allowed Must Run Outage Hours, remain during each Interval of the Term capable of the production and sale of at least [ ]* set forth in Exhibit 3.2(i). Exhibit 2.2.1 sets forth by calendar quarter, the number of hours ("Allowed Must Run Outage Hours") for which the Must Run Resources may generate [ ]* set forth in Exhibit 3.2(i). 2.2.2 Dispatchable OPC Resources. (a) With respect to Dispatchable Resources, OPC hereby offers to sell to LPM on an exclusive basis, and LPM has the exclusive right, but not the obligation, to purchase from OPC any OPC Energy from LPM's Share of Participating Member OPC Resources associated with Dispatchable Resources which is available during each Interval of the Term. OPC represents that the Dispatchable Resources (other than purchased power resources) are currently as of the Effective Date and shall, except for Allowed Dispatchable Outage Hours, remain during each Interval of the Term capable of the production and sale [ ]* set forth in Exhibit 3.2(i), and that LPM shall have the right, during each Interval during the Term to Schedule Electric Energy from each Dispatchable Resource to the extent of its availability. Exhibit 2.2.2 sets forth by Summer and Non-Summer Period designation the number of hours ("Allowed Dispatchable Outage Hours") for which the Dispatchable Resources may generate [ ]* set forth in Exhibit 3.2(i). (b) LPM shall effect the acceptance of an OPC offer made pursuant to paragraph (a) of this Section 2.2.2 by complying with the provisions of 2.2.3 and the Scheduling procedures set forth in Article 4. OPC shall sell and LPM shall purchase all such Electric Energy Properly Requested by LPM. 2.2.3 Manner of Request. LPM shall Properly Request OPC Energy from LPM's Share of Participating Member OPC Resources through (i) a recorded telephone conversation between the Parties, or (ii) such other method of communication, including electronic communication, as the Administrative Committee may determine is appropriate. Such requests shall be confirmed in the manner, if any, established by the Administrative Committee for the type of communication in question. The Parties agree not to contest or assert any defense to the validity or enforceability of telephonic requests under Laws relating to whether certain agreements are to be in writing or signed by the party to be thereby bound, or the authority of any employee of such Party to make such communication. Each Party consents to the recording of its representatives' telephone conversations without any further notice. All recordings or electronic communications may be introduced into evidence to prove oral agreements between the Parties. 2.3 Remedy for Breach of MW Representation. If at any time during the Term either OPC's representation set forth in Section 2.2.1 or Section 2.2.2(a) ceases to be correct (i.e. the OPC Resource is not capable of producing the required Mws), [ ]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -5- 2.4 Customer Choice Load. (a) Subject to paragraph (b) below, LPM shall be obligated to serve [ ]* of the requirements for Electric Energy of any Customer Choice Customer [ ]*; provided, that such obligation shall not entitle LPM to serve any portion of such requirements, and OPC or the Participating Member shall have the right to seek and accept bids from third parties for all or any portion of such requirements; and provided further, that LPM shall have the option but not the obligation to submit a bid to serve a greater percentage than that designated above of any such Customer Choice Customer's requirements on such price and other terms as may be mutually agreeable with OPC or the affected Participating Member. (b) LPM may within forty-eight (48) hours after OPC's request bid on a case by case basis to serve all of the requirements of (i) any Customer Choice Customer whose [ ]* and (ii) any Customer Choice Customer whose load is [ ]*, at such price and on such other terms as may be acceptable to LPM. To the extent OPC accepts such bid, then LPM shall be obligated to serve 100% of such Customer Choice Customer's requirements in accordance with such bid, and such requirements shall be included in LPM's Share of Participating Member Customer Choice Load. Notwithstanding anything to the contrary contained in this Agreement, OPC or a Participating Member shall have the right to seek and accept bids from third parties to serve all of the requirements of the Customer Choice Customers described in this paragraph (b). (c) The aggregate of all Customer Choice Load that LPM either is obligated to serve, or agrees to serve, as the case may be, shall be LPM's Share of Participating Member Customer Choice Load. (d) The price applicable to LPM's Share of Participating Member Customer Choice Load shall be the Customer Choice Price; provided, that if LPM offers, other than pursuant to this Agreement, to directly serve a Customer Choice Customer at a price that is less than the applicable Customer Choice Price, then LPM shall be obligated to serve 100% of the requirements of such Customer Choice Customer under this Agreement at a comparable price. 2.5 Failure to Deliver or Receive. (a) Unless excused by Force Majeure or the unexcused failure of Buyer's performance, if Seller fails to deliver, or cause to be delivered, the Contract Quantity, [ ]* (b) Unless excused by Force Majeure or the unexcused failure of Seller's performance, if Buyer fails to receive, or cause to be received, the Contract Quantity, [ ]* (c) The parties recognize that GSOC shall be responsible for maintaining the stability and reliability of OPC's generation and GTC's transmission system. OPC or its designee, GSOC, shall use commercially reasonable efforts to provide LPM with advance notice of possible transmission constraints, voltage deterioration, or similar system events or occurrences that might result in a prospective failure by, or inability of OPC to Schedule or deliver Electric Energy Properly Requested by LPM, such that LPM, to the extent practicable, shall be able to determine whether or not to modify the OPC Resources from which it desires to receive Electric Energy or the amount - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -6- thereof or to bear the risk associated with its original request, and OPC and LPM shall each use commercially reasonable efforts to discuss and agree upon the necessary redispatching. In the event OPC and LPM are unable to agree in advance, and OPC or its designee determines in good faith that in order to assure the stability and reliability of OPC's generation and GTC's transmission system, it is necessary in accordance with Prudent Utility Practice to deliver Electric Energy from an OPC Resource other than the OPC Resource associated with Electric Energy Properly Requested by LPM, then the further provisions of this paragraph 2.5(c) shall apply. The Administrative Committee shall review all relevant facts concerning the alternative delivery Scheduled and dispatched by OPC or its designee. If the Administrative Committee determines unanimously that the actions taken by both OPC and LPM were consistent with Prudent Utility Practice and their respective obligations under this Section 2.5(c), then any additional costs associated [ ]*. If the Administrative Committee does not so determine, then the Party determined unanimously by the Administrative Committee to be at fault shall bear [ ]*. If the Administrative Committee cannot in good faith reach a unanimous decision, then the matter shall be subject to arbitration under Article 14. (d) The provisions of this Section 2.5 shall not apply to the circumstances in which adjustments have been made pursuant to Section 5.4. 2.6 Stranded Costs. In the event retail wheeling is instituted in Georgia, for whatever reason, and OPC or any Participating Member, may be entitled to receive compensation associated with stranded generating or other assets, the LG&E Parties shall have no claim or entitlement to any such compensation, nor shall the LG&E Parties have any obligation or liability for the payment of any such compensation, attributable to OPC Resources. Article 3 OPC Resources 3.1 OPC Contracts. (a) OPC shall be responsible for compliance with the OPC Contracts. In connection therewith, OPC shall be permitted to make OPC Off-System Sales to comply with the OPC Off-System Sales Contracts, which Electric Energy for LPM's Share of Participating Member Off-System Sales shall be provided to OPC by LPM pursuant to Section 2.1 and at the prices set forth in Section 5.3. OPC shall have the right during the Term to enter into new contracts or other agreements to make sales, purchases or exchanges of Electric Energy, without the prior consent of LPM, including new contracts for (i) sales of capacity and Electric Energy from resources not included within OPC Resources, (ii) purchases and sales of capacity and Electric Energy to serve Customer Choice Customers as provided in Section 2.4, (iii) sales of capacity and Electric Energy under the EMC Contracts, (iv) purchases and sales of capacity and Electric Energy as required to serve OPC Load and Participating Member Load not included within LPM's Share of Participating Member Load, or to serve LPM's Share of Participating Member Load after the Term, and (v) as expressly set forth elsewhere in this Agreement and in the November 1996 Agreement; provided, that such contracts or agreements shall not adversely affect or otherwise interfere with OPC's ability to perform its obligation to sell Electric Energy to or to purchase Electric Energy from LPM hereunder. - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -7- (b) Nothing in this Agreement shall be construed to assign, impose or otherwise transfer any rights or obligations under the OPC Off-System Sales Contracts to the LG&E Parties, and OPC shall retain all of its rights and obligations, including its obligation to maintain, or cause to be maintained, generation and transmission system stability and reliability. Notwithstanding any other provision of this Agreement, OPC shall not be required to take any action inconsistent with its rights and obligations under the OPC Contracts. Notwithstanding any other provision of this Agreement, no Party shall be required to take any action inconsistent with its rights and obligations under the NERC or SERC guidelines. Nothing in this Agreement shall affect the rights or obligations of the parties to the EMC Contracts. OPC shall have the right to terminate, amend, or otherwise modify the OPC Contracts, subject to the provisions of Section 16.1. 3.2 Information on OPC Resources and System. (a) OPC acknowledges and agrees that LPM requires information concerning OPC Contracts, OPC Resources, Participating Member Load and Energy Cost in order to satisfy LPM's obligations hereunder. (b) OPC has delivered to LPM the following information: (i) a list of all OPC Resources and OPC Contracts, which list is attached as Exhibit 3.2(i); (ii) a statement of the expected availability and current transformer loss factor of each OPC Resource, including nuclear generating units, which statement is attached as Exhibit 3.2(ii); and (iii) a schedule of forecast OPC Load, which was delivered to LPM on February 7, 1996. OPC hereby agrees to update such information promptly as new information becomes available to OPC during the Term and to promptly provide such updated information to LPM. 3.3 Allocation of OPC Resources. (a) LPM's Share of OPC Resources is specified in Exhibit 3.3. LPM shall not be entitled to purchase OPC Energy in excess of the quantity of Electric Energy associated with the OPC Resource, or portion thereof (in the case of certain OPC Resources comprised of more than one generating unit) designated in such Exhibit; provided, that with respect to any OPC Resource with a minimum operating level under the applicable OPC Contracts that exceeds the amount of Electric Energy associated with such percentage, LPM shall be entitled to purchase such minimum level under the terms of this Agreement, but only if such purchase is in accordance with the Administrative Procedures and necessary to commit such OPC Resource. (b) OPC shall have the right to expand, retrofit, upgrade, or otherwise modify the OPC Resources, subject to the provisions of Section 16.1; provided, that such expansion, retrofit, upgrade, or other modification shall not adversely affect or otherwise interfere with OPC's ability to perform its obligation to sell Electric Energy to or to purchase Electric Energy from LPM hereunder. OPC shall bear the costs of such expansion, retrofit, upgrade, or other modification, and any incremental or expanded capacity and Electric Energy associated with such activity, shall not be included within OPC Resources. 3.4 RESERVED. 3.5 Dispersed Generation. Generating facilities currently owned by individual Participating Members will not be an OPC Resource, but will remain the property of each such -8- Participating Member which may use such generating facilities as it shall determine from time to time. 3.6 Load Management. Load management switching equipment and any other demand side management of individual Participating Members will not be an OPC Resource, but will remain the property of such Participating Members which may use, or direct OPC on such Participating Member's behalf to coordinate the use of such load management switching equipment or other demand side management as it shall determine from time to time. 3.7 Hartwell Fuel. LPM will provide fuel to generate the Electric Energy it purchases associated with Hartwell, in accordance with the fuel procurement provisions of that certain agreement between OPC and Hartwell Energy Limited Partnership, dated June 12, 1992. 3.8 Coal. The November 1996 Agreement sets forth procedures, prices, and terms relating to acquisition of and payment for coal for Plant Scherer and Plant Wansley. The procurement of coal for the purpose of performing this Agreement shall be governed by and subject to the procedures, terms, conditions, and prices set forth in Section 3.8 and all associated exhibits of the November 1996 Agreement, which are incorporated herein by reference. 3.9 SEPA Energy. Each of the Participating Members is presently entitled to an allocation of hydro-electric power from SEPA, the cost of which is billed directly by SEPA to each EMC. As provided in the definition of Participating Member Load, LPM's Share of Participating Member Load does not include requirements supplied by SEPA Energy Scheduled for delivery to the Participating Members pursuant to the SEPA Contracts; provided, however, that OPC shall Schedule delivery of SEPA Energy to the Participating Members as requested by LPM, to the extent permitted by SEPA under the SEPA Contracts and consistent with the CSA. 3.10 Block Power Sale Agreements. OPC has canceled Block 3 of the Georgia Power Block Power Sale Agreement, and OPC has given timely notice to Georgia Power to cancel Block 4 as of August 31, 1997 and Block 2 as of August 31, 1998. [ ]* 3.11 New Resources. OPC shall have the right during the Term to construct, purchase, lease, or otherwise acquire additional generating or purchased power resources, including entering into agreements with Qualifying Facilities, which resources shall not be included within OPC Resources; provided, that such construction, purchase, lease or other arrangement shall not adversely affect or otherwise interfere with OPC's ability to perform its obligation to sell Electric Energy to or to purchase Electric Energy from LPM hereunder. 3.12 Emission Allowances. [ ]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -9- Article 4 Transmission 4.1 Transmission and Scheduling. (a) [ ]* (b) [ ]* 4.2 Title and Risk of Loss. As between LPM and OPC, Seller shall be deemed to be in exclusive control (and responsible for any damages or injury caused thereby) of the Contract Quantity prior to the Delivery Point, and Buyer shall be deemed to be in exclusive control (and responsible for any damages or injury caused thereby) of the Contract Quantity at and from the Delivery Point. Title to and risk of loss of Electric Energy shall transfer from Seller to Buyer at and from the Delivery Point. 4.3 Scheduling. OPC and LPM agree to adopt and maintain reasonable procedures to facilitate LPM's ability on an hourly basis to (i) supply LPM's Share of Participating Member Load and (ii) purchase OPC Energy associated with LPM's Share of OPC Resources. The Parties shall also establish procedures whereby (a) OPC shall communicate to LPM on a same-time basis the availability of, and estimated Energy Cost for, each OPC Resource, as such availability and Energy Cost may change from time to time, and the projected LPM's Share of Participating Member Load; and (b) LPM shall provide all necessary Scheduling information, including the duration of proposed transactions, [ ]*. Upon communication of such information, LPM shall Properly Request the amounts of Electric Energy that LPM desires to purchase from each such OPC Resource within LPM's Share of OPC Resources. [ ]* 4.4 Delivery Points. (a) LPM shall specify one or more Delivery Points for (i) OPC Energy Scheduled and purchased by LPM from OPC and (ii) Electric Energy Scheduled and sold by LPM to OPC. [ ]* (b) [ ]* 4.5 Transformer and Transmission Loss Adjustments. (a) With respect to LPM purchases of OPC Energy from an OPC Resource that is a generating plant which interconnects directly into the ITS, [ ]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -10- (b) For purposes of supplying OPC with Electric Energy to serve LPM's Share of Participating Member Load and LPM's Share of Participating Member Customer Choice Load, [ ]* (c) For purposes of supplying OPC with Electric Energy to satisfy LPM's Share of OPC's Off-System Sales obligations, [ ]* (d) For purposes of supplying Electric Energy to satisfy LPM's sales to third parties that accept delivery on the ITS or for delivery at Points of Interconnection, [ ]* (e) For purposes of supplying Electric Energy to permit OPC to pump water to the upper reservoir at the Rocky Mountain Pumped Storage Hydroelectric Generating Facility ("Rocky Mountain"), [ ]* (f) The Parties agree and understand [ ]* 4.6 Imbalances and Regulation Deviation Errors. (a) The Parties recognize that actual LPM's Share of Participating Member Load, LPM's Share of Participating Member Customer Choice Load, and LPM's Share of Participating Member Off-System Sales may vary in any Interval even when the foregoing have been reasonably forecast by LPM and Electric Energy has been Scheduled as Properly Requested by LPM. [ ]* (b) [ ]* 4.7 Non-Territorial Contractual Delivery Obligations. For purposes of supplying Electric Energy to satisfy OPC's sales obligations to LPM of Electric Energy to be resold by LPM to third parties that accept delivery on the ITS or delivery at Points of Interconnection, [ ]* 4.8 Control Area. OPC reserves the right, at any point during the Term, to establish and operate a Control Area, or to contract with others to establish and operate a Control Area. Such Control Area would be utilized pursuant to 18 C.F.R. Part 35 to match Electric Energy input and output within the electric system, maintain scheduled interchange with other Control Areas, maintain the frequency of the Electric Energy system within reasonable limits and provide sufficient generating capacity to maintain operating services. 4.9 Other OPC or GTC Responsibilities. In addition to the above, OPC or GTC shall also be responsible for the following: (a) all communications with other owners of the ITS and for discharging all obligations for the Oglethorpe Power System under the ITSA, except for ITS related costs otherwise expressly addressed herein. - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -11- (b) OPC, or GTC, as the case may be, shall be responsible for responding to any transmission requests filed under its open access transmission tariff or pursuant to Section 211 of the Federal Power Act, or other applicable legal requirements. OPC, or GTC, as the case may be, shall represent such interest before FERC or any other regulatory agency or court. Article 5 Price 5.1 OPC's Contract Price. Subject to Section 5.4, the Contract Price for Electric Energy sold by OPC to LPM shall be the Energy Cost for OPC Energy that LPM Properly Requests. 5.2 RESERVED. 5.3 LPM's Contract Price. Subject to Section 5.4, (i) with respect to sales of Electric Energy by LPM to OPC relating to LPM's Share of Participating Member Load, the Contract Price shall be, during each calendar year of the Term, the LPM Sales Price [ ]* as set forth in Exhibit 5.3; (ii) with respect to LPM's Share of Participating Member Customer Choice Load which LPM is required to serve, the Contract Price shall be the Customer Choice Price; (iii) with respect to LPM's Share of Participating Member Customer Choice Load served at a price quoted by LPM, the Contract Price shall be the price quoted by LPM; and (iv) with respect to sales of Electric Energy by LPM to OPC relating to LPM's Share of Participating Member Off-System Sales, the Contract Price shall be as agreed to by the Parties (the "LPM Off-System Sales Price"); provided, [ ]* 5.4 Amounts Due to OPC and LPM. Each month OPC shall charge LPM an amount equal to the aggregate Energy Costs attributable to the OPC Energy that is Properly Requested by and delivered to LPM. Each month LPM shall charge OPC an amount equal to the sum of the following products: (i) the LPM's Share of Participating Member Load [ ]* purchased by and delivered to OPC during the month, multiplied by the LPM Sales Price applicable to the respective Participating Member, as set forth in Exhibit 5.3; (ii) LPM's Share of Participating Member Customer Choice Load attributable to a Customer Choice Customer and purchased by and delivered to OPC during the month, multiplied by the applicable Customer Choice Price; (iii) each OPC Off-System Sales quantity purchased by and delivered to OPC from LPM during the month, multiplied by the LPM Off-System Sales Price applicable to each such OPC Off-System Sale; provided, that the amounts so determined shall be subject to the following adjustments: 5.4.1 [ ]* (b) Exhibit 5.4.1(b) sets forth an example of the intended operation of this Section. - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -12- (c) [ ]* 5.4.2 RESERVED. 5.4.3 RESERVED. 5.4.4 RESERVED. 5.4.5 [ ]* 5.4.6 [ ]* 5.4.7 [ ]* (b) Exhibit 5.4.7(b) sets forth an example of the intended operation of this Section. (c) [ ]* 5.4.8 [ ]* (b) Exhibit 5.4.8(b) sets forth an example of the intended operation of this Section. (c) [ ]* 5.5 RESERVED. 5.6 RESERVED. Article 6 Term 6.1 Term. (a) This Agreement shall be deemed effective as of 00:00:01 CPT on January 1, 1997, and shall remain in effect until 24:00 CPT on April 30, 1997 (the "Termination Date"), subject to Sections 6.1(b) [ ]* (the "Term"). The applicable provisions of this Agreement shall continue in effect after the Termination Date in accordance with the provisions of Section 17.4. (b) Upon approval of this Agreement by the Board of Directors of Oglethorpe Power Corporation as evidenced by a properly attested corporate resolution, the Termination Date set forth in Section 6.1(a), shall be extended to 24:00 CPT on December 31, 1997, subject to Section 6.1(c), - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -13- unless earlier terminated pursuant to this Agreement. The Term shall be deemed to include any extension effective by virtue of this Section 6.1(b). (c) In the event the conditions precedent set forth in Article 11 are satisfied on or before June 1, 1997, then the Term shall be further extended until 24:00 CPT on December 31, 1999, unless earlier terminated pursuant to this Agreement, and the Term shall be deemed to include any such extension. OPC shall provide LPM with written notice promptly following the satisfaction of the conditions precedent described in Article 11, which notice shall specify the date ("Long Term Commencement Date") on which such conditions precedent were satisfied. In the event a condition precedent set forth in Article 11 has not been satisfied on or before June 1, 1997, then the extension provision in this Section 6.1(c) shall be of no further force and effect. 6.2 RESERVED. Article 7 Confidential Information 7.1 Confidentiality and Authorization to Use Information. OPC expressly authorizes and grants its consent to LPM to use Confidential Information, whether acquired before or after the Effective Date, pertaining to, without limitation, OPC, OPC Resources, OPC Load, Participating Member Load, OPC Off-System Sales and the Participating Members, for the purpose of exercising LPM's rights under this Agreement, including LPM's right to buy Electric Energy from OPC or any other person and to sell Electric Energy to OPC or any other person, whether Electric Energy is produced by or attributable to OPC Resources or other resources. Each Party agrees that it shall not disclose Confidential Information whether acquired before or after the Effective Date, to any third party other than each Party's officers, directors, employees, advisors or representatives, or each Party's Affiliates (or as to OPC, the EMCs), their officers, directors, employees, advisors or representatives who need to know and agree to maintain the confidentiality of the Confidential Information (collectively, "Representatives") during the Term and for a period of not more than three (3) years after the Termination Date. Each Party shall be responsible for any breach of this Agreement by its Representatives. 7.2 Authorized Disclosure. Notwithstanding anything contained in this Article 7, Confidential Information may be disclosed to any governmental, judicial or regulatory authority requiring such Confidential Information, provided that: (i) such Confidential Information is submitted under applicable provisions, if any, for confidential treatment by such governmental, judicial or regulatory authority; (ii) prior to such disclosure, the Party who supplied the information is given notice of the disclosure requirement so that it may take whatever action it deems appropriate, including intervention in any proceeding and the seeking of an injunction to prohibit such disclosure; and (iii) the Party subject to the governmental, judicial or regulatory authority endeavors to protect the confidentiality of any Confidential Information to the extent reasonable under the circumstances and to use its good faith efforts to prevent the further disclosure of any Confidential Information provided to any governmental judicial or regulatory authority. - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -14- 7.3 Return of Confidential Information. Upon (i) the termination of this Agreement and (ii) the request of a Party, the other Party shall return all written Confidential Information (including written confirmation of oral communications) provided by the requesting Party which was stamped "confidential" and shall not retain any copies of such written Confidential Information. In the event of such request, all documents, analyses, compilations, studies or other materials prepared by the returning Party or its Representatives that contain or reflect Confidential Information (other than computer archival and backup tapes or archival and backup files (collectively "Computer Tapes") and billing and trading records (collectively, "Other Records")) shall be destroyed and no copy thereof shall be retained (such destruction to be confirmed in writing by a duly authorized officer of the returning Party). Computer Tapes and Other Records shall be kept confidential in accordance with the terms of this Agreement. 7.4 Right to Remedies. In the event of an unauthorized disclosure to a third party, the limitations on remedies contained in Section 10.2 shall not apply, and in the event of a breach no Party will have an adequate remedy at law and accordingly shall, in addition to any other available legal or equitable remedies, be entitled to an injunction against such breach without any requirement to post a bond as a condition of such relief. 7.5 Georgia Trade Secrets Act. Except as expressly provided in Article 7 of this Agreement, including OPC's consent to the use by LPM of Confidential Information in its trading operations pursuant to this Agreement, the rights of the Parties under this Agreement are in addition to and not in lieu of their rights under Georgia law, including the Georgia Trade Secrets Act of 1990. Nothing in this Article 7 shall be construed as a waiver on the part of any Party of any privilege or objection of any kind to the disclosure or use of Confidential Information. Article 8 Billing, Payment and Records 8.1 Billing Statements. OPC shall deliver to LPM no later than on the tenth (10th) day of each month (or the first Business Day thereafter), a statement (the "Statement") setting forth for the immediately prior month the amounts of Electric Energy purchased by OPC from LPM at the applicable LPM Sales Price, the respective LPM Off-System Sales Prices, and the respective Customer Choice Prices, all as adjusted pursuant to Section 5.4, and the amounts of Electric Energy purchased by LPM from OPC at the applicable Energy Cost. To the extent that OPC has not yet received or been able to compile the applicable Energy Cost figures as of such date, OPC may set forth on such Statement its good-faith estimate of the Energy Cost of an OPC Resource, for such OPC Resource; and provided, that OPC shall compile the actual Energy Costs and "true-up" such estimates as promptly as practicable pursuant to Section 8.5. It is expressly agreed that during the Term, the Statements related to amounts due pursuant to this Agreement shall be consolidated with Statements submitted pursuant to the November 1996 Agreement. 8.2 Offset of Payment Obligations. The Parties shall discharge their obligations to pay through netting, consolidating obligations incurred under this Agreement and the November 1996 Agreement, in which case the Party, if any, owing the greater aggregate amount shall pay to the other -15- Party the difference between the amounts owed, as set forth in Section 8.3. Each Party reserves to itself all rights, setoffs, counterclaims and other remedies and defenses, consistent with Article 10, which such Party has or may be entitled to arising from or out of this Agreement. All outstanding obligations to make payments under this Agreement may be offset against each other, set-off or recouped therefrom. 8.3 Payments. The Party owing the other shall pay the amount owing under the Statement, which payment shall be due on or before the later of the following: (i) the tenth (10th) Business Day after receipt of the Statement or (ii) the twentieth (20th) day of the month in which the Statement is received (or the first Business Day thereafter). Payment shall be made by wire transfer to the payment address provided in Exhibit 17.2. If either Party, in good faith, disputes any part of any Statement, it shall provide a written explanation of the basis for the dispute and pay the portion of such Statement conceded to be correct no later than the due date as calculated in accordance with the preceding sentence. If any amount disputed is determined to be due to the other Party, it shall be paid within ten (10) days of such determination, along with interest calculated at the Interest Rate from the original due date until the date paid. Absent such a good faith dispute, overdue payments shall bear interest from, and including, the due date to, but excluding, the date of payment at a rate equal to the Interest Rate. 8.4 Audit Rights. (a) Each Party or any third party representative of a Party shall have the right, at its sole expense and during normal working hours, to examine the records of the other Party to the extent reasonably necessary to verify the accuracy of any Statement, charge or computation made pursuant to this Agreement. If requested, a Party shall provide to the other Party statements evidencing the quantities of Electric Energy delivered at the Delivery Point. With respect to records held in the custody of a third party pursuant to a confidentiality provision of an OPC Contract, if an audit is requested by a Party, the Parties shall select an independent auditor to perform the audit consistent with the rights of OPC under the contract and such confidentiality arrangements as may be required by the contract in question. Subject to any additional limitations that may be imposed under the OPC Contract in question, such examinations by an independent auditor shall not be performed more frequently than once each calendar year. The Party requesting the audit shall pay all costs, including those of the independent auditor, associated with the audit. (b) If any such examination reveals any inaccuracy in any statement, the necessary adjustments in such statement and the payments thereof will be promptly made and shall bear interest calculated at the Interest Rate from the date the overpayment or underpayment was made; provided, however, that no adjustment for any statement or payment will be made unless objection to the accuracy thereof was made prior to the lapse of two (2) years from the rendition thereof; and provided, further, that this provision of this Agreement will survive any termination of this Agreement for a period of two (2) years from the date of such termination for the purpose of such statement and payment objections. 8.5 Subsequent Payment Adjustments. The Parties understand that in certain cases monthly billings will need to be made on an estimated basis, including with respect to the calculation of Energy Cost for each of the OPC Resources. In addition, the Parties understand that after the fact adjustments to amounts owed or revenues received may be made pursuant to the CSA or other OPC -16- Contracts, which adjustments may affect the Energy Cost and associated amounts payable by LPM to OPC under this Agreement. Each Party shall cooperate in good-faith with the other Party to obtain the requisite information and perform the necessary computations so as to "true-up" or otherwise adjust any estimated or adjusted billings promptly. 8.6 Records. Each Party shall keep such records as may be needed to afford a clear history of the Scheduled purchases and sales hereunder. In maintaining such records, OPC and LPM may rely upon the logs and other meter information routinely recorded by Transmission Providers or utilities responsible for coordination of the purchases and sales. Article 9 Taxes 9.1 Seller's Obligation. Seller is liable for and shall pay, or cause to be paid, or reimburse Buyer if Buyer has paid, all Taxes applicable to the sale of Electric Energy arising prior to the Delivery Point(s). If Buyer is required to remit any such Tax, the amount shall be deducted from any sums becoming due to Seller. Seller shall indemnify, defend and hold harmless Buyer from any Claims for such Taxes. 9.2 Buyer's Obligation. Buyer is liable for and shall pay, cause to be paid, or reimburse Seller if Seller has paid, all Taxes applicable to a purchase of Electric Energy arising at and from the Delivery Point(s), including any Taxes imposed or collected by a taxing authority with jurisdiction over Buyer. Buyer shall indemnify, defend and hold harmless Seller from any Claims for such Taxes. 9.3 Exemption Certificates. Either Party, upon written request of the other, shall provide a certificate of exemption or other reasonably satisfactory evidence of exemption if either Party or a purchase or sale is exempt from Taxes, and shall use reasonable efforts to obtain and cooperate with obtaining any exemption from or reduction of any Taxes. Each Party shall use reasonable efforts to administer this Agreement and implement the provisions in accordance with the intent to minimize Taxes. 9.4 [ ]* Article 10 Indemnification and Remedies 10.1 General Indemnity. Subject to Section 10.2, Seller and Buyer shall each indemnify, defend and hold harmless the other Party from any Claims or other losses arising from (i) any act or incident occurring when title to the Contract Quantity is vested in the indemnifying Party pursuant to Section 4.2 and (ii) any Event of Default. - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -17- 10.2 Limitation on Remedies. THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE RESPONSIBLE PARTY'S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED REGARDLESS OF THE FAULT, NEGLIGENCE OR STRICT LIABILITY OF THE PARTY WHOSE LIABILITY IS RELEASED OR LIMITED THEREBY. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY HEREIN PROVIDED, THE RESPONSIBLE PARTY'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES (INCLUDING INTEREST AS PERMITTED BY APPLICABLE LAW) ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED, NO PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, MULTIPLE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR IN CONTRACT UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, INCLUDING DAMAGES PROVIDED IN SECTION 2.5 AND 4.4, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT, AND THE LIQUIDATED DAMAGES CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS. 10.3 Duty to Mitigate. Each Party agrees that it has a duty to mitigate damages and covenants that it will use commercially reasonable efforts to minimize any damages it may incur as a result of the other Party's performance or nonperformance of this Agreement. 10.4 DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH HEREIN, OPC, WITH RESPECT TO THE SALE OF ELECTRIC ENERGY TO LPM, AND LPM, WITH RESPECT TO THE SALE OF ELECTRIC ENERGY TO OPC, EXPRESSLY NEGATES ANY OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY WITH RESPECT TO CONFORMITY TO MODELS OR SAMPLES, MERCHANTABILITY, OR FITNESS FOR ANY PARTICULAR PURPOSE. 10.5 [ ]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -18- 10.6 Relation with November 1996 Agreement. The Parties agree that Proper Requests, Schedules, information regarding OPC Load, Participating Member Load, and OPC Resources, and other information required to be provided under this Agreement may be consolidated with Proper Requests, Schedules, and information required to be provided under the November 1996 Agreement. Article 11 Conditions Precedent to Extension of Term 11.1 Regulatory Authorizations. The Parties' obligations to commence delivery of Electric Energy under the long term arrangement contemplated by Section 6.1(c) of this Agreement shall be subject to receipt of any governmental consents or approvals required to perform this Agreement, including approval by the RUS without modification of this Agreement and the OPC Restructuring. 11.2 OPC Restructuring. The Parties' obligations to commence delivery of Electric Energy under the long term arrangement contemplated by Section 6.1(c) of this Agreement shall be subject to completion of the OPC Restructuring, and execution of new wholesale power contracts with OPC, as contemplated pursuant to such OPC Restructuring, by EMCs (whose total requirements in the aggregate represent at least eighty (80) percent of OPC Load). 11.3 Board Approval. The Parties' obligations to commence delivery of Electric Energy under the long-term arrangement contemplated by Section 6.1(b) and (c) of this Agreement shall be subject to the approval by the Board of Directors of Oglethorpe Power Corporation. Article 12 Representations and Warranties 12.1 Mutual Representations. On the Effective Date, January 1, 1997, the Long Term Commencement Date, and the date of entering into each purchase or sale of Electric Energy, each Party represents and warrants to the other Party: (i) it is duly organized, validly existing and in good standing under the laws of the state of its incorporation and, in the case of LPM, is doing business as a foreign corporation in the State of Georgia; (ii) it has all requisite corporate power to own, operate and lease its properties and carry on its business as now conducted; (iii) it has all regulatory authorizations, including any required authorization from the Rural Utilities Service of the United States Department of Agriculture ("RUS"), necessary for it to legally perform its obligations under this Agreement; (iv) the execution, delivery and performance of this Agreement are within its powers, have been duly authorized by all necessary action and do not violate any of the terms or conditions in its governing documents, any contract or other agreement to which it is a party or any Law applicable to it; (v) this Agreement constitutes each Party's legally valid and binding obligation enforceable against it in accordance with the terms thereof, subject to any Equitable Defenses; (vi) there are no Bankruptcy Proceedings pending or being contemplated by it or, to its knowledge, threatened against it; (vii) there are no Legal Proceedings that would be reasonably likely to materially adversely affect its ability to perform this Agreement; and (viii) it has knowledge and experience in financial matters and in the electric industry that enable it to evaluate the merits and risks of this Agreement. -19- 12.2 Additional OPC Representations. (a) OPC further represents and warrants that on the Effective Date, January 1, 1997, the Long Term Commencement Date and the date of entering into each purchase or sale of Electric Energy hereunder: (i) the EMC Contracts are and will be in full force and effect throughout the Term and will not be amended so as to adversely affect OPC's ability to perform its obligations under this Agreement; (ii) Exhibit 3.2(i) sets forth a true and complete list of each OPC Resource and each material written OPC Contract; (iii) correct and complete copies of the OPC Contracts listed on Exhibit 3.2(i) have previously been delivered to LPM by OPC; (iv) except as stated on Exhibit 3.2(i), no amendments to the OPC Contracts are proposed or pending as of the Effective Date; (v) each OPC Contract is valid, binding and in full force and effect and enforceable by or against the respective parties thereto in accordance with its terms; (vi) OPC has fulfilled, and will continue to fulfill during the Term, all of its obligations under each OPC Contract; (vii) there has not occurred any default by OPC or any event which, with the lapse of time or the giving of notice or both will become a default of OPC under any of the OPC Contracts; (viii) OPC is not in arrears in respect of the performance or satisfaction of the terms or conditions to be performed or satisfied by it under any of the OPC Contracts, and, to the best knowledge of OPC, no waiver of any of such terms or conditions has been granted thereunder by any of the parties thereto; and (ix) OPC shall maintain or cause to be maintained the OPC Resources which are generating facilities owned by OPC, in accordance with Prudent Utility Practice. (b) OPC further represents and warrants that Exhibit 3.2(ii) and the schedule of forecast load described in Section 3.2(b) reflect its best RUS-approved forecasts and estimates as of the Effective Date of the matters reflected therein and that any updates of such Exhibits required to be provided hereunder shall be its best forecasts and estimates of the matters reflected therein as of the date that the same are updated from time to time. (c) OPC further represents and warrants that the power purchase and sales agreement with Power Marketer shall contain (i) a representation and warranty at least as favorable to LPM as the representation set forth in Section 12.3(b), (ii) a covenant on the part of Power Marketer to act in good faith in the development of the Administrative Procedures, and (iii) no terms, conditions or covenants that are inconsistent with OPC's obligations hereunder or which would reasonably be expected to adversely affect LPM's ability to perform hereunder. 12.3 Additional LG&E Parties Representations. (a) LPM further represents and warrants that on the Effective Date, January 1, 1997, the Long Term Commencement Date, and the date of entering into each purchase or sale of Electric Energy hereunder (i) LPM is a power marketer authorized by the FERC to purchase and sell Electric Energy at negotiated, market-based rates pursuant to its Rate Schedule on file with and approved by the FERC; (ii) neither LPM nor any of its Affiliates or subsidiaries will, during the Term, take any action that could reasonably be anticipated to cause LPM to lose its authority as a power marketer under the Federal Power Act to make wholesale sales of power at market-based, negotiated rates; and (iii) LPM will, at all times during the Term, act in accordance with Prudent Utility Practice and will comply with all applicable regulatory requirements including SERC/NERC guidelines. (b) LPM represents and warrants that it will cooperate with the Power Marketer regarding administrative matters during the Term. -20- (c) LPI represents that neither it nor any of its affiliates or subsidiaries will, during the Term, take any action that could reasonably be anticipated to (i) cause LPM to lose its authority as a power marketer under the Federal Power Act to make wholesale sales of power at market-based, negotiated rates; or (ii) impair LPM's ability to perform its obligations under this Agreement, or LPI's ability to perform its obligations under Section 17.15. (d) LPI further represents and warrants that as of the Effective Date and January 1, 1997, it is not a "public utility" within the meaning of the Federal Power Act, as amended. 12.4 Mutual Assistance. Each Party represents and warrants that it will assist the other to the extent practicable with (i) obtaining all required Regulatory Approvals associated with this Agreement; (ii) defending transmission capacity reservations; and (iii) defending Qualifying Facility avoided cost calculations. 12.5 Good Title. Each of OPC and LPM represents and warrants that it will deliver to the other good title to Electric Energy delivered hereunder, free and clear of all liens, claims and encumbrances arising prior to transfer of title at the Delivery Point. 12.6 Power Quality. Each of OPC and LPM represents and warrants that it will deliver to the other Electric Energy at the Delivery Point that is three phase, sixty hertz, and at system nominal voltages. 12.7 Other Contracts. Neither OPC nor LPM nor any of its Affiliates or subsidiaries will, during the Term, take any action, enter into any contracts or otherwise incur obligations that could reasonably be anticipated to interfere with or adversely affect its ability to perform its obligations under this Agreement. 12.8 Continuing Representations and Warranties. Each Party covenants that it will cause these representations and warranties to be materially true and correct throughout the Term. Article 13 Defaults and Remedies 13.1 Events of Default. An "Event of Default" shall mean with respect to a Party ("Defaulting Party"): 13.1.1 The failure by the Defaulting Party to make, when due, any payment required if such failure is not remedied within five (5) Business Days after written notice of such failure is given to the Defaulting Party by the other Party ("Notifying Party"); provided, that the payment is not the subject of a good faith dispute as described in Section 8.3; or 13.1.2 Any representation or warranty made by the Defaulting Party herein shall prove to have been false or misleading in any material respect when made or deemed to be repeated; or -21- 13.1.3 The failure by the Defaulting Party to perform any obligation or covenant set forth in this Agreement (other than its obligations to make any payment or obligations which are otherwise specifically covered in this Section 13.1 as a separate Event of Default, or its obligations to deliver or receive Electric Energy, a remedy for which is provided in Section 2.5) and such failure is not excused by Force Majeure or cured within five (5) Business Days after written notice thereof to the Defaulting Party; 13.1.4 The Defaulting Party shall be subject to a Bankruptcy Proceeding; or 13.1.5 LPM's loss of FERC authorization to charge the prices for the sale of Electric Energy included in this Agreement or otherwise to perform its obligations hereunder in accordance with the terms of this Agreement. 13.2 Early Termination; Remedies. If an Event of Default occurs with respect to a Defaulting Party at any time during the Term, the other party ("Non-Defaulting Party") may, for so long as the Event of Default is continuing, (i) establish a date (which date shall be between five (5) and ten (10) Business Days after the Non-Defaulting Party delivers notice to the Defaulting Party) ("Early Termination Date") on which this Agreement shall terminate and (ii) withhold any payments due to the Defaulting Party under this Agreement; provided, however, that if the Event of Default is that the Defaulting Party becomes subject to a Bankruptcy Proceeding, then this Agreement shall automatically terminate without notice and without any other action by either Party as if an Early Termination Date had been immediately declared prior to such Event of Default. Regardless of whether an Early Termination Date is declared, if an Event of Default shall have occurred, the Non-Defaulting Party shall be entitled to exercise any remedy available at law or equity consistent with Article 10 to recover its damages, including attorneys' fees, resulting from any Event of Default. 13.3 [ ]* 13.4 Failure to Pay. Notwithstanding any other provision of this Agreement, if either Party fails to pay the other any amounts when due, the other Party shall have the right to (i) suspend performance under this Agreement until such amounts plus interest have been paid and/or (ii) exercise any remedy available at law or in equity to enforce payment of such amount plus interest; provided, however, that if the Defaulting Party, in good faith, shall dispute the amount of any such billing or part thereof and shall pay such amounts as it concedes to be correct, no suspension shall be permitted. 13.5 Effect of Regulation. In the event OPC is or becomes regulated by a federal, state or local regulatory body, and (i) such body shall disallow all or any portion of any costs incurred or yet to be incurred by OPC under any provision of this Agreement, such action shall not operate to excuse OPC from performance of any obligation nor shall such action give rise to any right of OPC - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -22- to any refund or retroactive adjustment of any amounts payable hereunder; or (ii) [ ]* then the sole and exclusive remedy for such default in performance shall be as set forth in Section 4.4(b). 13.6 Notice to LPI. OPC shall provide a copy to LPI of any notice OPC gives LPM under the provisions of this Article. Article 14 Arbitration 14.1 Applicability; Selection of Arbitrators. (a) Except as otherwise expressly provided in Sections 2.5, 4.4, 7.4 and Article 13 of this Agreement, any dispute arising out of or in connection with this Agreement, or its performance including the existence and validity of this Agreement, which cannot be resolved after discussion between the Parties as set forth herein shall be submitted to binding arbitration. (b) Prior to initiating arbitration hereunder, a Party shall provide the other Party with a written notice of the dispute, a proposed means for resolving the same, and the support for such position. Thereafter, representatives of the Parties shall meet to discuss the matter and attempt in good faith to reach a negotiated resolution of the dispute. If the Parties have not agreed upon a resolution of the dispute within ninety (90) days after the date of the original notice provided under this paragraph, or such other time period as the Parties may agree in writing to allow for discussions ("Negotiation Period"), then at any time after the end of the Negotiation Period, a Party may provide written notice to the other declaring an impasse ("Impasse Notice") and initiating binding arbitration in accordance with the further provisions of this Article 14. (c) Arbitration will be deemed to be initiated when an Impasse Notice, properly addressed and stamped, is deposited with the United States Postal Service. The Party initiating arbitration shall nominate one (1) arbitrator at the same time it initiates arbitration. The other Party shall nominate one (1) arbitrator within ten (10) calendar days of receiving the notice of arbitration. The two arbitrators shall appoint a third, neutral arbitrator. The third, neutral arbitrator shall be competent and experienced in matters involving the energy business in the United States, with at least 15 years of electric industry experience as a practicing attorney, and shall be unaffiliated and without prior financial alliances with any Party, or either of the other arbitrators. (d) If the two arbitrators are unable to agree on a third arbitrator within thirty (30) calendar days from initiation of arbitration, then a third arbitrator shall be selected by the CPR Institute for Dispute Resolution ("CPR") with due regard given to the selection criteria above and input from the Parties and other arbitrators. Parties shall undertake to request CPR to complete selection of the third arbitrator no later than sixty (60) calendar days from initiation of arbitration. Costs charged by CPR for this service shall be borne equally by OPC and the LG&E Parties. (e) In the event CPR should fail to select the third arbitrator within sixty (60) calendar days from initiation of arbitration, then any Party may petition a court of competent jurisdiction in - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -23- Georgia to select the third arbitrator. Due regard shall be given to the selection criteria above and input from the Parties and other arbitrators. (f) If prior to the conclusion of the arbitration any arbitrator becomes incapacitated or otherwise unable to serve, then a replacement arbitrator shall be appointed in the manner described above and applicable to the original arbitrator being replaced. 14.2 Discovery, Hearing. Discovery and other pre-hearing procedures shall be conducted as agreed by the parties, or if they cannot agree, as determined by a majority of the arbitrators. Within fifteen (15) days after completion of discovery, the Party submitting the Impasse Notice initiating arbitration shall submit by overnight delivery to the other Party and the arbitrators a precise statement of the dispute, means of resolving the dispute, and the factual and/or legal support therefor. Within ten (10) days after receiving such statement, the other Party shall submit by overnight mail to the first Party and the arbitrators a precise statement of the alternative means of resolving the dispute and the factual and/or legal support therefor. The Parties shall conduct a hearing in Atlanta no later than sixty (60) days following selection of the third arbitrator, or thirty (30) days after all prehearing discovery has been completed, whichever is later, at which the Parties shall present such evidence and witnesses as they may choose. Arbitration shall be conducted in accordance with the non-administered arbitration rules and procedures of the CPR, except where specifically modified by this Agreement. 14.3 Decision. The arbitrators shall consider the terms and conditions of this Agreement, and any relevant evidence and testimony, and shall render their decision within thirty (30) calendar days following conclusion of the hearing. The arbitrators' decision will be limited to selecting one of the alternatives specified in the statements of the Parties referred to in Section 14.2. The decision rendered by a majority of the arbitrators, made in writing, shall be final and binding upon the Parties. Any such decision may be filed in a court of competent jurisdiction and may be enforced by any Party as a final judgment in such court. The arbitrators shall have no authority to award special, exemplary, or consequential damages. 14.4 Expenses. The expenses of arbitration shall be borne equally by OPC and the LG&E Parties, except that each Party shall bear the compensation and expenses of its nominated arbitrator, own counsel, witnesses and employees; provided further, that any costs incurred by a Party in seeking judicial enforcement of any decision rendered in writing by the arbitrators, or a majority of the arbitrators, shall be chargeable to and borne exclusively by the Party against whom such court order is obtained. Article 15 Force Majeure 15.1 Effect of Force Majeure. (a) If either OPC or LPM is rendered unable by an event of Force Majeure to carry out, in whole or part, its obligations hereunder and such Party gives notice and full details of the event to the other Party as soon as practicable after the occurrence of the event, then during the pendency of such Force Majeure but for no longer period, the obligations of the Party affected by the event (other than the obligation to make payments then due or becoming due with -24- respect to performance prior to the event) shall be canceled to the extent required, and if applicable subject to the provisions of Section 15.1(b). The Party affected by the Force Majeure shall remedy the Force Majeure with all reasonable dispatch. (b) If due to Force Majeure, any portion of LPM's Share of OPC Resources is not available, then LPM shall not be obligated to deliver the amount of Electric Energy which is not available to LPM from LPM's Share of OPC Resources, and at OPC's option, exercisable at the time OPC gives or receives notice of the Force Majeure, either (i) [ ]* Article 16 Material Changes 16.1 [ ]* 16.2 [ ]* Article 17 Miscellaneous 17.1 Assignment. 17.1.1 General. (a) This Agreement shall be binding upon and inure to the benefit of the permitted successors and permitted assigns of the Parties, except that this Agreement may not be assigned by any Party unless prior consent to such assignment is given in writing by the other Parties and, if any Party is then an RUS borrower, the Administrator. Any assignment made without a consent required hereunder shall be void and of no force or effect as against the non-consenting party. (b) No sale, assignment, transfer or other disposition permitted by this Agreement shall affect, release or discharge any Party from its rights or obligations under this Agreement, except as may be expressly provided by this Agreement. 17.1.2 Assignment for Security. (a) Notwithstanding any other provision of this Agreement, a Party, without the other Parties' consent but, if such assigning Party is then a borrower of the RUS, only with the consent of the Administrator, may assign, transfer, mortgage or pledge its interest in this Agreement as security (an "Assignment for Security") for any obligation secured by any indenture, mortgage or similar lien on its system assets without limitation on the right of the secured party to further assign this Agreement, including the assignment to create a security interest for the benefit of the Government, acting through the Administrator, or for the benefit of any third party. - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -25- (b) After any Assignment for Security to the Administrator or other secured party (including any indenture trustee under any indenture securing the obligations of the Seller), the Administrator or other secured party, without the approval of the other Parties to this Agreement, may (i) cause this Agreement to be sold, assigned, transferred or otherwise disposed of to a third party pursuant to the terms governing such Assignment for Security, or (ii) if the Administrator or other secured party first acquires this Agreement, sell, assign, transfer or otherwise dispose of this Agreement to a third party; provided, however, that in either case the Party who made the Assignment for Security is in default of its obligations to the Administrator or other secured party that are secured by such security interest. 17.2 Notices. All notices, requests, statements or payments shall be made as specified in Exhibit 17.2. Notices required to be in writing shall be delivered by letter, facsimile or other documentary form. Notice by facsimile or hand delivery shall be deemed to have been received by the close of the Business Day on which it was transmitted or hand delivered (unless transmitted or hand delivered after close, in which case it shall be deemed received at the close of the next Business Day). Notice by overnight mail or courier shall be deemed to have been received two (2) Business Days after it was sent. A Party may change its address by providing notice of same in accordance herewith. 17.3 Applicable Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES ARISING OUT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 17.4 Survival of Obligations. Upon the expiration of the Parties' sale and purchase obligations under this Agreement, any monies, penalties or other charges due and owing Seller shall be paid, any corrections or adjustments to payments previously made shall be determined, and any refunds due Buyer made, as soon as practicable. All indemnity and confidentiality obligations and audit rights shall survive the termination of this Agreement in accordance with their respective terms. The Parties' obligations provided in this Agreement shall remain in effect for the purpose of complying with the provisions of this Section. 17.5 Entire Agreement. This Agreement, together with the attached Exhibits, constitutes the entire agreement between the Parties relating to the subject matter contemplated by this Agreement and supersedes all prior agreements, whether oral or written. 17.6 No Partnership. Nothing in this Agreement shall ever be deemed to create or constitute a partnership, joint venture or association between the Parties, or to impose a trust or partnership duty, obligation or liability on or with regard to the Parties. 17.7 Amendment. No amendment or modification to this Agreement shall be enforceable unless reduced to writing and executed by both Parties. -26- 17.8 Third Parties. The provisions of this Agreement shall not impart rights enforceable by any person or entity not a Party or not a permitted successor or assignee of a Party bound by this Agreement. 17.9 Waiver. No waiver by any Party of any one or more defaults by the other in the performance of any of the provisions of this Agreement shall be construed as a waiver of any other default or defaults, whether of a like kind or different nature. 17.10 Character of Sales by OPC. The sale by OPC to LPM of OPC Energy under this Agreement does not constitute either a sale, lease, or the dedication of ownership of any OPC Resource. 17.11 Severability. (a) Subject to the provisions of Article 16, should any provision of this Agreement for any reason be declared invalid or unenforceable by a final, non-appealable order of any court or regulatory body having jurisdiction, such decision shall not affect the validity of the remaining portions of the Agreement, and such portions shall remain in full force and effect as if this Agreement had been executed without the invalid portion. In the event any provision of this Agreement is declared invalid, the Parties shall promptly renegotiate to restore this Agreement as near as possible to its original intent and effect. (b) The obligations of LPI and LPM are severable under this Agreement, such that the invalidity or unenforceability of all or any portion of the obligations of LPM or LPI under this Agreement shall not affect the validity or enforceability of the obligations of the other. 17.12 RESERVED. 17.13 Headings. The headings used for the Articles are for convenience and reference purposes only, and shall not be construed to modify, expand, or restrict the provisions of this Agreement. 17.14 Counterparts. This Agreement may be executed in multiple counterparts to be construed as one effective as of the Effective Date. 17.15 LPI Obligations. 17.15.1 Failure of Performance of LPM. (a) In the event LPM fails, refuses, or is otherwise unable to make full and timely performance of all obligations under this Agreement, LPI unconditionally and irrevocably agrees to indemnify and hold harmless OPC from and against any cost, expense or loss associated with such breach in excess of the amounts contemplated under the Agreement. Subject to Section 10.3, OPC shall have the right to seek replacement service from any available source. Nor shall it be necessary for OPC, in order to enforce the performance of LPI under this Section, to first pursue its remedies respecting the LPM obligations under the Agreement against LPM or any other person. - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -27- (b) Alternatively, if OPC consents and LPI has previously obtained market rate authority from FERC, LPI may assume LPM's rights, duties, and obligations under this Agreement. OPC's approval of this alternative does not waive LPI's obligation under Section 17.15.1(a) to indemnify and hold harmless OPC from and against any cost, expense or loss associated with such breach by LPM in excess of the amounts contemplated under the Agreement. (c) LPI acknowledges and agrees that it has received reasonable consideration for its guarantee of LPM's performance, and the Parties acknowledge that this consideration is unrelated to the revenue or profits earned by LPM under this Agreement. 17.15.2 Further Covenants of LPI. (a) Any other provision of this Agreement notwithstanding, LPI shall have neither the obligation nor the right to engage in, control or otherwise influence any FERC jurisdictional transactions under this Agreement unless LPI shall have previously obtained market rate authority from FERC and approval from OPC. Except as provided by Section 17.15.1(c) and Section 17.15.1(b) above, LPI shall not directly derive any income from any transaction under this Agreement. (b) LPI agrees to indemnify and hold harmless OPC from and against any and all cost, expense, or loss in excess of amounts contemplated to be paid by OPC under this Agreement, and which arises from any or all regulatory consequences of LPI becoming a "public utility" within the meaning of the Federal Power Act, as amended. (c) In the event the FERC determines that LPI is a public utility responsible for delivering Electric Energy to OPC under the terms of this Agreement, then LPI agrees to take all necessary and appropriate steps to obtain all authorizations required to perform this Agreement in accordance with its terms, and shall indemnify and hold harmless OPC for the difference, if any, between the Contract Price applicable for purchases by OPC of Electric Energy under this Agreement and the rate approved by FERC. (d) LPI acknowledges that the provisions of this Section 17.15 constitute a material portion of the consideration to OPC for entering into this Agreement, and that OPC is executing this agreement in reliance on the enforceability and legality of such provisions. LPI unconditionally and irrevocably agrees not to challenge, question, or otherwise seek to undermine in any manner the enforceability or legality of this Section 17.15, and agrees to file and diligently prosecute such applications, briefs, testimony, or other pleadings as may be necessary or appropriate in connection with any Legal Proceeding to support the enforceability and legality of this Section 17.15. 17.15.3 No Discharge. The obligations of LPI under this Section 17.15 shall, to the fullest extent permitted by law, remain in full force and effect without regard to , and shall not be released, discharged or in any way affected by, (i) an amendment to the Agreement; (ii) the merger or consolidation of LPI or OPC with or into any entity, or (iii) any sale, lease or transfer of all of the assets of LPI or OPC. -28- 17.16 Administration. OPC and LPM recognize that Administrative Procedures are required to govern operations, such as those described in Section 4.3, under this Agreement that require coordination among OPC, LPM, and Power Marketer, or their designees. The Administrative Procedures developed pursuant to the November 1996 Agreement shall be applicable to this Agreement to the same extent that such procedures are applicable to transactions and matters under the November 1996 Agreement, and the Administrative Committee shall be constituted by those same Parties, shall operate, and shall have the authority and powers set forth in Section 17.16 of the November 1996 Agreement. 17.17 RESERVED. 17.18 Further Assurances. If any Party reasonably determines or is reasonably advised that any further instruments or any other things are necessary or desirable to carry out the terms of the Agreement, the other Parties shall execute and deliver all such instruments and assurances and do all things reasonably necessary and proper to carry out the terms of this Agreement. 17.19 RUS Approval. OPC shall use its best reasonable efforts to obtain RUS approval of the long term arrangement contemplated in Section 6.1(c). 17.20 Other. LPM agrees that if at any time during the Term it is asked to supply Electric Energy to any OPC member cooperative (other than indirectly as contemplated herein, including supplies to Customer Choice Customers under Section 2.4) then LPM shall either (i) decline to supply such Electric Energy or (ii) offer to supply such Electric Energy through OPC or its designee. 17.21 Novation of Interim Agreement. The Parties agree that upon the execution of this Agreement by each of the Parties, this Agreement shall act as a novation of the Interim Agreement. All transactions entered into between the Parties pursuant to the Interim Agreement shall be treated for all purposes as if such transactions had been entered into pursuant to the terms and conditions of this Agreement. -29- IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized officers and copies delivered to each Party. OGLETHORPE POWER CORPORATION By: /s/ T. D. Kilgore Attest: /s/ Patricia Nash -------------------- ----------------------- T. D. Kilgore Patricia Nash Title: Pr sident and Chief Executive Officer Title: Assistant Secretary LG&E POWER MARKETING INC. By: /s/ James W. Kasee Attest: /s/ David G. Schwartz -------------------- ----------------------- James W. Kasee David G. Schwartz Title: Vice President Title: Secretary LG&E POWER INC. By: /s/ Scott S. Noell Attest: /s/ David G. Schwartz -------------------- ----------------------- Scott S. Noell David G. Schwartz Title: Senior Vice President Title: Secretary -30- SCHEDULE A Definitions [ ]* [ ]* "Administrative Committee" means the committee described in Section 17.16. "Administrative Procedures" mean the procedures developed by LPM, OPC and Power Marketer pursuant to Section 17.16, which procedures address the Scheduling and dispatch of the OPC Resources. "Affiliate" means, with respect to any person, any other person (other than an individual) that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such person. For this purpose, "control" means the direct or indirect ownership interest of more than fifty (50) percent of the outstanding capital stock or other equity interests having ordinary voting power. [ ]* [ ]* "Assignment for Security" has the meaning specified in Section 17.1.2. "Bankruptcy Proceeding" means, with respect to a Party, that such Party (i) makes any general assignment or any general arrangement for the benefit of creditors, (ii) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy or similar law for the protection of creditors, or has such a petition involuntarily filed against it and such petition is not withdrawn or dismissed within thirty (30) days after such filing, (iii) otherwise becomes bankrupt or insolvent (however evidenced), or (iv) is unable to pay its debts as they fall due. "Business Day" means a day on which the Federal Reserve Member Banks in New York City are open for business; and a Business Day shall open at 8:00 a.m. and close at 5:00 p.m. local time for each Party's principal place of business. "Buyer" means either LPM or OPC, as the case may be, when it is the Party who is obligated to purchase and receive, or cause to be received, Electric Energy in connection with a sale hereunder. "Claims" means all claims or actions, threatened or filed and whether groundless, false or fraudulent, that directly or indirectly relate to the subject matter of an indemnity, and the resulting - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -31- losses, damages, expenses, attorneys' fees and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement. "Computer Tapes" has the meaning specified in Section 7.3. "Confidential Information" means this Agreement and any other written data or information (or an oral communication if the party requesting confidentiality for such oral communication promptly confirms such communication in writing) which is privileged, confidential or proprietary or which constitutes a trade secret under the Georgia Trade Secrets Act of 1990, except information which (i) is a matter of public knowledge at the time of its disclosure or is thereafter published in or otherwise ascertainable from any source available to the public without breach of this Agreement, (ii) constitutes information which is obtained from a third party (who or which is not an Affiliate of one of the Parties) other than by or as a result of unauthorized disclosure, or (iii) prior to the time of disclosure had been independently developed by the receiving Party or its Affiliates not utilizing improper means. "Contract Price" means the price in United States dollars (per MWh) to be paid by Buyer to Seller for the purchase of Electric Energy that is Scheduled or Properly Requested pursuant to this Agreement. "Contract Quantity" means the amount of Electric Energy that Seller agrees to sell and deliver, or cause to be delivered, to Buyer and Buyer agrees to purchase and receive, or cause to be received, from Seller pursuant to the terms of this Agreement. "Control Area" means an electric power system or combination of electric power systems to which a common automatic generation control scheme is applied. "CPR" has the meaning specified in Section 14.1(d). "CPT" means Central Prevailing Time and refers to the time in effect in the Central Time Zone of the United States, whether Central Standard Time or Central Daylight Savings Time. "CSA" means that certain Coordination Services Agreement between Georgia Power Company and Oglethorpe Power Corporation (An Electric Membership Generation and Transmission Corporation), dated as of November 12, 1990, as amended from time to time. "Customer Choice Customer" means a retail customer or prospective customer of a Participating Member which has a choice of supplier under Georgia law as defined under the Georgia Territorial Electric Services Act, whether or not such customer exercises its rights under the applicable statute on or after the Effective Date of this Agreement, but shall not include any such retail customer whose requirements are being served by a Participating Member, under an existing agreement or rate schedule as of the Effective Date until after expiration of the applicable agreement or rate schedule. -32- "Customer Choice Load" means the Electric Energy requirements of Customer Choice Customers. "Customer Choice Price" means the price at which LPM will serve LPM's Share of Participating Member Customer Choice Load, as set forth in Exhibit 5.3 in the case of Customer Choice Customers described in Section 2.4(a), and as set forth in the applicable bid accepted by OPC in the case of Customer Choice Customers described in Section 2.4(b). In the case of the Customer Choice Customers described in Section 2.4(a), the applicable price set forth in Exhibit 5.3 shall be the price stated for the Participating Member listed in such Exhibit in whose service territory, as depicted in Exhibit 18, the Customer Choice Customer is located. If a Customer Choice Customer described in Section 2.4(a) is not located in the service territory of a Participating Member listed on Exhibit 5.3, including a Customer Choice Customer within another supplier's service territory that is physically within the boundaries of an EMC's service territory, the applicable Customer Choice Customer Price shall be such price as LPM may bid and such Customer Choice Customer shall accept. "Defaulting Party" has the meaning specified Section 13.1. [ ]* "Dispatchable Resources" means the OPC Resources that are so designated in Exhibit 3.2(i). [ ]* "Effective Date" has the meaning specified in Section 6.1. "Electric Energy" means energy in the form of electricity expressed in megawatt-hours (MWh) (or in kilowatt-hours when energy is measured at the points of delivery to the EMCs). "EMC" means an electric membership corporation as defined in Section 46-3-171(3) of the Georgia Electric Membership Corporation Act. "EMC Contract" means one of those certain Wholesale Power Contracts between OPC and an EMC, which contract is dated on or after December 1, 1988, as restated and/or amended from time to time, pursuant to which OPC sells and such EMC purchases certain Electric Energy required to meet the energy requirements of its customers for the operation of its system. "EMC Metering Point" means that certain point at which deliveries of Electric Energy to each EMC, respectively, are measured and received pursuant to the EMC Contracts. "Energy Cost" with respect to the OPC Energy under both this Agreement and the November 1996 Agreement [ ]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -33- "Equitable Defenses" means bankruptcy, insolvency, reorganization and other laws affecting creditors' rights generally, and with regard to equitable remedies, the discretion of the court before which proceedings to obtain the same may be pending. "Event of Default" has the meaning specified in Section 13.1. "FERC" means the Federal Energy Regulatory Commission or any successor agency which enforces the Federal Power Act, as amended from time to time. "FOB the Plant" means FOB railcar or FOB truck at Plant Wansley or Plant Scherer, as applicable, at LPM's expense for unloading by OPC at OPC's expense. "Force Majeure" means an event which is not within the reasonable control of the Party (or, in the case of third party obligations or facilities, the third party) claiming suspension (the "Claiming Party"), and which by the exercise of due diligence the Claiming Party is unable to overcome in a commercially reasonable manner or obtain or cause to be obtained a commercially reasonable substitute performance therefor. Force Majeure includes, but is not restricted to: [ ]* [ ]* "GPC" means Georgia Power Company. "GSOC" means Georgia System Operations Corporation, a non-profit corporation organized under the laws of the State of Georgia, or any successor thereto. "GTC" means Georgia Transmission Corporation, an electric membership corporation organized and existing under Title 46 of the Official Code of Georgia Annotated, or any successor thereto. "Hartwell" means the simple cycle gas turbine Units 1 and 2, as described in the power purchase agreement between OPC and Hartwell Energy Limited Partnership, which is listed on Exhibit 3.2(i). "Impasse Notice" has the meaning specified in Section 14.1(b). "Integrated Transmission System" or "ITS" means the Transmission Facilities as defined in the Revised and Restated Integrated Transmission System Agreement between Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) and Georgia Power Company, dated as of November 12, 1990, as amended from time to time. "Interest Rate" means the Prime Rate plus two percent, or the maximum lawful rate permitted by applicable Law, whichever is less. - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -34- "Interruptible Load" means any load that can be interrupted in a power control center. "Interval" means an hour, or such other period of time as the Administrative Committee may determine is appropriate in accordance with the provisions of Section 17.16. "ITS Loss Factor" means the Participating Member transmission loss factor determined from time to time pursuant to the ITSA applicable to deliveries of Electric Energy from any point on the ITS to any Participating Member Metering Point, [ ]* "ITSA" means the Revised and Restated Integrated Transmission System Agreement between Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) and Georgia Power Company, dated as of November 12, 1980, as amended from time to time. "Law" means any law, rule, regulation, order, writ, judgment, decree or other legal or regulatory determination by a court, regulatory agency or governmental authority of competent jurisdiction. "Legal Proceeding" means any suit, proceeding, judgment, ruling or order by or before any court or any governmental authority. "Level B-1" means the high side of the step-up transformer of a generating plant that is an OPC Resource, or other input to the transmission system (other than Points of Interconnection), either of which interconnects directly into the ITS. Exhibit 1.43 illustrates Level B-1. "LG&E Parties" means LPM and LPI. "LPI" means LG&E Power Inc., or any successor thereto. "Long Term Commencement Date" has the meaning specified in Section 6.1(c). "LPM" means LG&E Power Marketing Inc., or any successor thereto. "LPM Off-System Sales Price" has the meaning specified in Section 5.3. "LPM Sales Price" means, [ ]* the price for Electric Energy set forth for the applicable period in Exhibit 5.3. "LPM's Share of Participating Member Customer Choice Load" means the applicable percentage of Customer Choice Load served by the Participating Member with Electric Energy - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -35- acquired by OPC at the Contract Price established in Section 5.3(ii) or 5.3(iii), as determined in accordance with the provisions of Section 2.4. "LPM's Share of Participating Member Load" means the percentage reflected in Exhibit 1.62 of each Participating Member. "LPM's Share of Participating Member Off-System Sales" means 5.822% of OPC's Off-System Sales under the OPC Off-System Sales Contract listed in Exhibit 2.1, and the applicable percentage to which LPM expressly commits in writing for OPC Off-System Sales under other OPC Off-System Sales Contracts by specific reference to this Agreement. "LPM's Share of OPC Resources" means the percentage of each OPC Resource, or portion thereof, shown on Exhibit 3.3. "Must Run Resources" means the OPC Resources that are so designated in Exhibit 3.2(i). "MWh" means megawatt-hour. "Negotiation Period" has the meaning specified in Section 14.1(b). "NERC" means the North American Electric Reliability Council. "Non-Defaulting Party" has the meaning specified in Section 13.2. "Non-Summer Period" has the meaning specified in Section 5.4.7. "Non-Territorial Contractual Delivery Obligations" means an obligation, based on a quantity of capacity, energy, or both, which an ITS participant is contractually committed to deliver or make available from or through the ITS to a nonterritorial entity, as further defined in the ITSA. "Notifying Party" has the meaning specified in Section 13.1.1. [ ]* "OASIS" means Open Access Same-Time Information System, the information system and standards of conduct contained in Part 37 of the FERC's regulations (18 C.F.R. Part 37), as amended from time to time. "OPC Contracts" means, as of a particular date, all EMC Contracts, the CSA, other contracts, operating procedures and understandings (whether written or oral, and if oral, written statements of the terms thereof) in effect on such date affecting OPC's rights and obligations with respect to OPC Resources and to the ITS. - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -36- "OPC Energy" means all of the available Electric Energy which OPC owns, purchases or otherwise has a right to take from OPC Resources. "OPC Load" has the meaning set forth in the November 1996 Agreement. "OPC Off-System Sales" means transactions undertaken by OPC or any Participating Member pursuant to the OPC Off-System Sales Contracts. "OPC Off-System Sales Contracts" means the contract listed on Exhibit 2.1 and, subject to the consent of LPM as to those contracts for which LPM will supply Electric Energy under this Agreement, contracts entered into after the Effective Date, between OPC or a Participating Member and third parties whose facilities are not directly inter-connected to the facilities of either GTC or a Participating Member, pursuant to which OPC or a Participating Member sells Electric Energy to such third parties. "OPC Resources" means the capacity entitlement or other rights with respect to generating facilities from which, or power purchase contracts, or other contracts or agreements, under which OPC is required or has the right to take, purchase or otherwise acquire Electric Energy during the Term and which, are listed in Exhibit 3.2(i). "OPC Restructuring" means the transaction by which OPC shall restructure to divide its business and assets into three specialized companies and, among other things, place its transmission assets into GTC. "Other Records" has the meaning specified in Section 7.3. "Participating Member" means Coweta-Fayette EMC and Sawnee EMC as listed in Exhibit1.62. "Participating Member Load" means, as of a particular Interval, the entire Electric Energy requirements (including the requirements of any retail customer with a choice of supplier under applicable Law, which customer is being served by a Participating Member as of the Effective Date) of the Participating Member listed in Exhibit 1.62, measured at each Participating Member Metering Point, after reducing such requirements to reflect the Participating Members' aggregate allocation of SEPA Energy Scheduled for delivery to the Participating Members and after reducing such requirements to reflect the Participating Member's allocated share of total Electric Energy purchased by OPC under contracts with Qualifying Facilities entered into after the Effective Date; provided, that Participating Member Load shall not include requirements for sales for resale of Electric Energy (i) by OPC other than sales for resale to a Participating Member; or (ii) by a Participating Member, other than to load physically located within the service territory assigned to such Participating Member as of the Effective Date, as reflected in Exhibit 18. "Party" means OPC, LPM, or LPI, as applicable, including permitted assignees of each pursuant to this Agreement. -37- "Plant Hatch" means the Edwin I. Hatch Nuclear Plant, consisting of two nuclear generating facilities (and associated common facilities) having a current name plate capacity of 810 MW for Unit 1 and 820 MW for Unit 2. "Plant Scherer" means the Robert W. Scherer Plant, consisting of two coal generating facilities (and associated common facilities) having a current total name plate capacity (including interests of all owners) of 818 MW for Unit 1 and 818 MW for Unit 2. "Plant Vogtle" means the Alvin W. Vogtle Nuclear Plant, consisting of two nuclear generating facilities (and associated common facilities) having a current total name plate capacity (including interests of all owners) of 1160 MW for Unit 1 and 1160 MW for Unit 2. "Plant Wansley" means the Hal B. Wansley Plant, consisting of two coal generating facilities (and associated common facilities) having a current total name plate capacity (including interests of all owners) of 865 MW for Unit 1 and 865 MW for Unit 2. [ ]* "Power Marketer" means a third party who is authorized by the FERC to sell Electric Energy at market-based, negotiated rates, and with whom OPC contracts on a long-term basis for the purchase of Electric Energy required to supply the portion of OPC Load not supplied under this Agreement or the November 1996 Agreement. "Prime Rate" means for any date, the per annum rate of interest announced from time to time by Citibank, N.A., as its "prime" rate for commercial loans, effective for such date as established from time to time by such bank. "Properly Requested" or "Properly Requests" means that LPM has notified or notifies OPC of specified amounts of OPC Energy that LPM desires to purchase from specific OPC Resources at specified times during the Term in accordance with Section 4.3; provided, that any such request must be consistent with the terms of this Agreement, the OPC Contracts, and the Administrative Procedures; and provided, further, that all Electric Energy attributable to LPM's Share of OPC Resources that are Must Run Resources (which LPM is obligated to purchase pursuant to Section 2.2.1) shall be deemed to be Properly Requested for purposes of this Agreement. "Prudent Utility Practice" means any of the practices, methods and acts engaged in or approved by a significant portion of the electric industry during the relevant time period, or any of the practices, methods and acts that, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at lowest reasonable cost consistent with good business practices, reliability, safety, and expedition. Prudent Utility Practice is not intended to be limited to the optimum practice, method or act, to the - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -38- exclusion of all others, but rather to include a spectrum of possible practices, methods, or acts generally acceptable in the region in light of the circumstances. "Qualifying Facility" means a facility as defined in Section 210 of the Public Utilities Regulatory Policy Act of 1978, as amended, and applicable FERC regulations promulgated thereunder. "Regulatory Approvals" means all current and future valid and applicable orders, approvals, consents, authorizations, permits or certificates issued by any courts or regulatory bodies (state or federal) having jurisdiction over a Party, this Agreement, or the performance hereof. [ ]* "Representatives" has the meaning specified in Section 7.1. "Rocky Mountain" means the Rocky Mountain Pumped Storage Hydroelectric Generating Facility. "RUS" has the meaning specified in Section 12.l(iii). "Sales Price" has the meaning specified in Section 2.5(b). "Scheduling," "Scheduled" or "Schedule" means or relates to the acts of Seller, Buyer and their designated representatives, including each Party's Transmission Providers, if applicable, of notifying, requesting and confirming to each other the quantity of Electric Energy to be delivered in each Interval on any given day or days at a specified Delivery Point. "Seller" means either LPM or OPC, as the case may be, when it is the Party who is obligated to sell and deliver, or cause to be delivered, Electric Energy. "SEPA" means the Southeastern Power Administration, a federal agency of the United States Government, or any successor. "SEPA Contracts" means those certain power purchase and sale agreements between each Participating Member and SEPA pursuant to which each Participating Member purchases Electric Energy from SEPA. "SEPA Energy" means the aggregate amount of Electric Energy Scheduled for delivery to the Participating Members pursuant to the SEPA Contracts. "SERC" means the Southeastern Electric Reliability Council or any successor. "Statement" has the meaning specified in Section 8.1. - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -39- [ ]* "Taxes" means any or all ad valorem, property, occupation, severance, generation, first use, conservation, Btu or energy, transmission, utility, gross receipts, privilege, sales, use, consumption, excise, lease, transaction, and other or new Taxes, governmental charges, licenses, fees, permits and assessments, or increases therein, other than taxes based on net income or net worth. "Term" has the meaning specified in Section 6.1. [ ]* [ ]* [ ]* "Transmission Provider" means the entity or entities transmitting Electric Energy on behalf of Seller or Buyer to or from the Delivery Point(s) in connection with a particular purchase or sale. - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to the omitted information. -40- EXHIBIT 1.25(iii) Energy Costs for Certain OPC Resources OPC Resource Costs Included in Energy Cost Big Rivers [ ]* GPC [ ]* Block 1 Block 2 Block 4 Block 5 Block 6 Florida Power Corp. [ ]* Entergy Power Inc. [ ]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 1.25(iv) Energy Costs Paid by LPM for Certain Qualifying Facilities[ ]* Year Energy Charges ($/MWh) 1997 [ ]* 1998 [ ]* 1999 [ ]* [ ]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 1.43 Level B-1 Diagram EXHIBIT 1.62 Participating Members EMC Percent of Requirements COWETA-FAYETTE EMC 50% SAWNEE EMC 50% EXHIBIT 2.1 Off-System Sales Contracts Sales Agreement with Alabama Electric Cooperation ("AEC"), dated March 31, 1994. EXHIBIT 2.2.1 [ ]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 2.2.2 [ ]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 3.2(i) OPC Resources1 Type of Resource OPC Resources that are Dispatch- Minimum Maximum able (OPC Resource) (OPC Resource) Resources (MW) (MW) Generating Units Rocky Mountain 1 110.0 212.0 Rocky Mountain 2 110.0 212.0 Rocky Mountain 3 110.0 212.0 Scherer1(2) 195.0 496.2 Scherer1(2) 195.0 498.0 Tallassee N/A 2.0 Wansley 1(3) 121.0 253.8 Wansley 2(3) 122.0 253.8 16.2 (summer) Wansley CT N/A 19.8 (winter) Minimum Minimum (OPC Resource) (OPC Resource) (MW) (MW) Purchased Power GPC Block 1(4) 100 215 GPC Block 2(4) 100 215 GPC Block 4(4) 100 215 GPC Block 5(4) 0 107 - ------------------------------------ (1) The figures contained in this Exhibit shall not serve to limit the actual output available from any OPC Resource. (2) Scherer minimum could be 330 MW if Georgia Power is not taking electric energy from its ownership share of the generating facility. (3) Wansley minimum could be 430 if other co-owners are not taking electric energy from their ownership share of the generating facility. (4) 100% availability - minimum applies when energy is being scheduled under the particular block. EXHIBIT 3.2(i) (continued) GPC Block 6(4) 0 108 Big Rivers 25 100 Entergy 25 100 74 (summer) 148 (summer) Hartwell 1(5) 91 (winter) 182 (winter) 74 (summer) 148 (summer) Hartwell 2(5) 91 (winter) 182 (winter) Florida Power(6) 0 50 (1997) 275 (1998) OPC Resources that are Minimum Maximum Must Run (OPC Resource) (OPC Resource) Resources (MW) (MW) Generating Units Hatch 1 N/A 234.9 Hatch 2 N/A 242.1 Vogtle 1 N/A 348.6 Vogtle 2 N/A 348.6 Purchased Power QF N/A 15.6 - ------------------------------------ (5) Unit minimums are governed by Section 7.2.1 of PPA: "Unit to be dispatched at a level no less than 50% of the maximum operating levels." See Schedule K of the Hartwell PPA for minimum and maximum capacities at certain temperatures. If unit is on AGC, unit minimum is 100 MW and maximum is 150 MW. Hartwell unit operation constraihned to no more than 2500 hours per unit annually. (6) Available only during 1997 and 1998 in the months of June through September. EXHIBIT 3.2(i) (continued) OPC Resources and OPC Contracts OPC Resource Operations Governed By Georgia Power Blocks Block Power Sale Agreement between Georgia Power Company and OPC, dated as of November 12, 1990. Letters dated as of December 30, 1992 and December 8, 1993, extending term of Block Power Sale Agreement. Letter dated as of August 30, 1994, electing to reduce capacity OPC is obligated to purchase under Block Power Sale Agreement. Vogtle, Units 1 & 2 Alvin W. Vogtle Nuclear Units Numbers One and Two Purchase and Ownership Participation Agreement among Georgia Power Company, OPC, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated as of August 27, 1976; Amendment, dated as of January 18, 1977; Amendment Number Two, dated as of February 24, 1977. Alvin W. Vogtle Nuclear Units One and Two Operating Agreement among Georgia Power Company, OPC, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated as of August 27, 1976. Hatch, Units 1 & 2 Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement between Georgia Power Company and OPC, dated as of January 6, 1975. Hatch Operating Agreement between Georgia Power Company and OPC, dated as of January 6, 1975. Scherer, Units 1 & 2 Plant Robert W. Scherer Units Numbers One and Two Purchase and Ownership Participation Agreement among Georgia Power Company, OPC, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated as of May 15, 1980; Amendment, dated as of December 30, 1985; Amendment Number Two, dated as of July 1, 1986; Amendment Number Three, dated as of August 1, 1988; Amendment Number Four, dated as of December 31, 1990. Plant Robert W. Scherer Units Numbers One and Two Operating Agreement among Georgia Power Company, OPC, Municipal Electric Authority of Georgia and City of Dalton, Georgia, dated as of May 15, 1980; Amendment, dated as of December 30, 1985; Amendment Number Two, dated as of December 31, 1990. Plant Scherer Managing Board Agreement among Georgia Power Company, OPC, Municipal Electric Authority of Georgia and City of Dalton, Georgia, EXHIBIT 3.2(i) (continued) dated as of December 31, 1990. Letter of Intent re: Use of Eastern and Western Coal at Scherer, dated as of January 16, 1992; Letter Agreement re: Capital Modifications and Expenditures for the use of Western Coal at Plant Scherer, dated as of July 7, 1992 (partially executed). Letter Agreement re: Additional Amendments to the Scherer and Wansley Agreements, dated as of December 31, 1990. Wansley, Units 1, 2, & CT Plant Hal B. Wansley Purchase and Ownership Participation Agreement between Georgia Power Company and OPC, dated as of March 26, 1976; Plant Hal Wansley Operating Agreement between Georgia Power Company and OPC, dated as of March 26, 1976. Plant Hal Wansley Combustion Turbine Agreement between Georgia Power Company and OPC, dated as of August 2, 1982; Amendment dated as of October 20, 1982. Tallassee, Units 1 & 2 No Operative Documents. Big Rivers Purchase Long Term Firm Power Purchase Agreement between Big Rivers Electric Corporation and OPC, dated as of December 17, 1990. Letter dated March 12, 1992. Long Term Firm Power Purchase Agreement, dated as of July 19, 1989, by and between OPC and Big Rivers Electric Corporation. Entergy Purchase Unit Capacity and Entergy Purchase Agreement between OPC and Entergy Power, Incorporated, dated as of October 11, 1990, Amendment dated September 29, 1992. Hartwell Energy Limited Partnership Purchase Power Purchase Agreement between OPC and Hartwell Energy Limited Partnership, dated as of June 12, 1992. Agreement for Purchase of 230KVS Switchyard and ITS Interconnection Facilities Agreement, dated as of August 31, 1992. EXHIBIT 3.2(i) (continued) Rocky Mountain Pumped Storage Resource Rocky Mountain Pumped Storage Hydroelectric Project Ownership Participation Agreement, dated as of November 18, 1988, by and between OPC and Georgia Power Company. Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement by and between OPC and Georgia Power Company, dated as of November 18, 1988. Pumped Storage Hydroelectric Project Option Agreement, dated as of November 18, 1988. Reciprocity Letter Agreement, dated as of November 18, 1988. Letters Relating to Rocky Mountain (Title Defects Letter; Floyd County Prepayment Letter; Letter Re: Other Commitments; Letter Re: Cost of Construction). QF Agreements Interconnection Policy of OPC and Members for Cogeneration and Small Power Producers, dated as of January, 1994. Agreement for Purchase of Power from Georgia Waste Systems, Inc., dated January 1993. Agreement for Purchase of Power from Southeast Paper Manufacturing Co., dated as of February 29, 1988; Amendment, dated as of November 11, 1991. Agreement for Purchase of Power from Spartan Mills, dated as of April 6, 1992. Agreement for Purchase of Power from Buckeye Cellulose Corporation, executed August 6, 1983. Amendment dated September 21, 1993; Second Amendment dated February 11, 1985; Third Amendment dated December 10, 1991; and Fourth Amendment dated September 1, 1996. EXHIBIT 3.2(i) (continued) Other Agreements Integrated Transmission System Agreement Revised and Restated Integrated Transmission System Agreement between OPC and Georgia Power Company, dated as of November 12, 1990. ITSA, Power Sale and Coordination Umbrella Agreement between OPC and Georgia Power Company, dated as of November 12, 1990. Coordination Services Coordination Services Agreement between Georgia Power Company and OPC, dated as of November 12, 1990. Transmission O&M Transmission Facilities Operation and Maintenance Contract between Georgia Power Company and OPC, dated as of June 9, 1986. ITS Transfer Capability Purchase of TVA ITS Interface capability from Municipal Electric Authority of Georgia to OPC dated December 17, 1990. Purchase of TVA ITS Interface capability from GPC to OPC dated November 12, 1990. Sale of FLA ITS Interface capability to GPC and from OPC dated May 30, 1995. SEPA SEPA Contract No. 89-00-1501-912 between SEPA and OPC dated May 28, 1991 and amended in Supplemental Agreement No. 1 dated November 26, 1991, Supplemental Agreement No. 2 dated May 23, 1994, Supplemental Agreement No. 3 dated January 30, 1995. SEPA Contract No. 89-00-1501-916 between SEPA and OPC dated December 29, 1993 and amended in Supplemental Agreement No. 1 dated June 17, 1994, Supplemental Agreement No. 2 dated July 28, 1995, Supplemental Agreement No. 3 dated November 24, 1995. Operating Procedures Rocky Mountain Pumped Storage Hydroelectric Plant Coordination Procedures Agreement between Oglethorpe Power Corporation and Georgia Power Company effective June 1, 1995. Plant Scherer Units #1 and #2 Dispatch Procedures Rev. 6. Hartwell Energy Facility Operation and Maintenance Procedure for Unit Dispatch effective June 6, 1994. Operating Procedures for use between System Control Center and Rocky Mountain Plant effective November 18, 1994. EXHIBIT 3.2(ii) [ ]* OPC Resource Total Forced Loss Factor and Scheduled Outage Rate Hatch 1(7) [ ]* [ ]* Hatch 2(7) [ ]* [ ]* Rocky Mountain o Unit 1 [ ]* [ ]* o Unit 2 [ ]* [ ]* o Unit 3 [ ]* [ ]* Scherer 1 [ ]* [ ]* Scherer 2 [ ]* [ ]* Tallassee 1 & 2 [ ]* [ ]* Vogtle 1(7) [ ]* [ ]* Vogtle 2(7) [ ]* [ ]* Wansley 1 [ ]* [ ]* Wansley 2 [ ]* [ ]* Wansley CT [ ]* [ ]* ---------------- -------------------- - ------------------------------------ (7) Nuclear planned outages exclude ramp down period prior to full expected planned outages above. - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 3.3 LPM's Share of OPC Resources Resource Percentage Share Plant Hatch Unit 1 5.822% of unit Unit 2 5.822% of unit Plant Vogtle Unit 1 5.822% of unit Unit 2 5.822% of unit Plant Scherer Unit 1 5.822% of unit Unit 2 5.822% of unit Plant Wansley Unit 1 5.822% of unit Unit 2 5.822% of unit CT 5.822% of unit Rocky Mountain Unit 1 5.822% of unit Unit 2 5.822% of unit Unit 3 5.822% of unit Tallassee 5.822% of total plant Hartwell-Units 1 and 2 5.822% of total plant Big Rivers Contract 5.822% of contract entitlement Entergy 5.822% of contract entitlement GPC Block 1 5.822% of contract entitlement GPC Block 2 5.822% of contract entitlement GPC Block 4 5.822% of contract entitlement GPC Block 5 5.822% of contract entitlement GPC Block 6 5.822% of contract entitlement Florida Power Corp. 5.822% of contract entitlement Southwire Company (QF) 5.822% of contract entitlement Herschel Webster (QF) 5.822% of contract entitlement Georgia Waste Systems, Inc. (QF) 5.822% of contract entitlement Southeast Paper Manufacturing Co. (QF) 5.822% of contract entitlement Spartan Mills (QF) 5.822% of contract entitlement - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 4.1(b) [ ]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 5.3 [ ]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 5.4.1(a) [4 pages of omitted text]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 5.4.1(b) [1 page of omitted text]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 5.4.5 [1 page of omitted text]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 5.4.6 [1 page of omitted text]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 5.4.7(a) [4 pages of omitted text]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 5.4.7(b) [1 page of omitted text]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 5.4.8(a) [3 pages of omitted text]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 5.4.8(b) [1 page of omitted text]* - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EXHIBIT 17.2 Notices and Payment LG&E Power Marketing, Inc.: NOTICES AND CORRESPONDENCE PAYMENTS LG&E Power Marketing Inc. PNC Bank, KY 12500 Fair Lake Circle, Suite 350 for LG&E Power Marketing, Inc. Fairfax, VA 22033-3804 [ ]* Attn: President [ ]* FAX # (703) 968-7145 Confirmation: LG&E Power Marketing Inc. Credit and Collections Attn: Accounts Payable FAX # (502) 627-4177 [ ]* INVOICES LG&E Power Marketing, Inc. 220 West Main Street Louisville, KY 40202 Attn: Trading Accounts Payable, 7th Floor FAX # (502) 627-4177 - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. Oglethorpe Power Corporation: NOTICES AND CORRESPONDENCE PAYMENTS 2100 East Exchange Place SunTrust Bank Atlanta P.O. Box 1349 for Oglethorpe Power Corporation Master Tucker, Georgia 30085-1349 Account Attn: Manager, System Control [ ]* FAX# (404) 270-7663 [ ]* Confirmation: Oglethorpe Power Corporation Samantha Cofield Phone: (770) 270-7191 Fax: (770) 270-7872 - ------------------------------------ * Indicates information that has been filed separately with the Secretary of the Commission as an attachment to a request for confidentiality with respect to omitted information. EX-10.32-1 18 EXHIBIT 10.32.1 EXHIBIT 10.32.1 ================================================================================ PARTICIPATION AGREEMENT (P1) Dated as of December 30, 1996 among OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), ROCKY MOUNTAIN LEASING CORPORATION, FLEET NATIONAL BANK, not in its individual capacity, except as expressly provided herein, but solely as Owner Trustee, SUNTRUST BANK, ATLANTA, not in its individual capacity, except as expressly provided herein, but solely as Co-Trustee, PHILIP MORRIS CAPITAL CORPORATION and UTRECHT-AMERICA FINANCE CO. ROCKY MOUNTAIN PUMPED STORAGE HYDROELECTRIC PROJECT ================================================================================ TABLE OF CONTENTS
Page ---- SECTION 1. DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT................................................................. 2 SECTION 2. PARTICIPATION; CLOSING DATE; TRANSACTION COSTS............................ 2 Section 2.1. Agreements to Participate................................ 2 Section 2.2. Closing Date; Procedure for Participation................ 4 Section 2.3. Transaction Costs........................................ 5 SECTION 3. REPRESENTATIONS AND WARRANTIES............................................ 6 Section 3.1. Representations and Warranties of the Co-Trustee and the Georgia Trust Company................................ 6 Section 3.2. Representations and Warranties of the Owner Trustee and the Non-Georgia Trust Company........................ 8 Section 3.3. Representations and Warranties of the Owner Participant.............................................. 10 Section 3.4. Representations and Warranties of Oglethorpe............. 11 Section 3.5. Representations and Warranties of RMLC................... 18 Section 3.6. Representations and Warranties of the Lender............. 20 SECTION 4. CLOSING CONDITIONS........................................................ 20 Section 4.1. Operative Documents...................................... 20 Section 4.2. Equity Investment; Loan.................................. 20 Section 4.3. Equity Collateral........................................ 21 Section 4.4. Payment Undertaking...................................... 21 Section 4.5. Certified Copies......................................... 21 Section 4.6. Corporate Documents...................................... 21 Section 4.7. No Defaults.............................................. 21 Section 4.8. No Threatened Proceedings................................ 21 Section 4.9. Consents................................................. 22 Section 4.10. Governmental Actions..................................... 22 Section 4.11. Insurance................................................ 22 Section 4.12. Engineering Report....................................... 22 Section 4.13. Survey................................................... 22 Section 4.14. Appraisal................................................ 22 Section 4.15. Investment Banking Opinion............................... 22 Section 4.16. Opinion with Respect to Certain Tax Aspects.............. 23 Section 4.17. Opinion of Counsel....................................... 23 Section 4.18. Recordings and Filings................................... 23 Section 4.19. Actions of Governmental Entity........................... 23 Section 4.20. Taxes.................................................... 24 Section 4.21. No Changes in Applicable Law............................. 24 Section 4.22. No Right to Burdensome Buyout............................ 24 Section 4.23. No Change in Tax Law..................................... 24
i Section 4.24. Registered Agent for RMLC and Oglethorpe................. 24 SECTION 5. COVENANTS OF THE OWNER PARTICIPANT........................................ 24 Section 5.1. Restrictions on Transfer of Beneficial Interest.......... 24 Section 5.2. Owner Participant's Liens................................ 26 Section 5.3. Amendments or Revocation of Trust Agreement.............. 26 Section 5.4. Bankruptcy Filings....................................... 26 Section 5.5. Instructions............................................. 27 SECTION 6. COVENANTS OF THE GEORGIA TRUST COMPANY AND THE CO-TRUSTEE................................................................ 27 Section 6.1. Compliance with the Trust Agreement...................... 27 Section 6.2. Facility Lessor's Liens.................................. 27 Section 6.3. Amendments to Loan Agreement, the Deed to Secure Debt and Loan Certificate................................ 27 Section 6.4. Transfer of the Facility Lessor's Rocky Mountain Interest................................................. 27 Section 6.5. Bankruptcy Filings....................................... 27 Section 6.6. Limitation on Indebtedness and Actions................... 28 Section 6.7. Change of Location....................................... 28 Section 6.8. Releases Pursuant to Section 4.2 of the Ground Lease.................................................... 28 Section 6.9. Transfers of Interest in Payment Undertaking Agreement................................................ 28 SECTION 7. COVENANTS OF THE NON-GEORGIA TRUST COMPANY AND THE OWNER TRUSTEE......................................................... 28 Section 7.1. Compliance with the Trust Agreement...................... 28 Section 7.2. Facility Lessor's Liens.................................. 29 Section 7.3. Amendments to Loan Agreement, the Deed to Secure Debt and Loan Certificate................................ 29 Section 7.4. Transfer of the Facility Lessor's Rocky Mountain Interest................................................. 29 Section 7.5. Bankruptcy Filings....................................... 29 Section 7.6. Limitation on Indebtedness and Actions................... 30 Section 7.7. Change of Location....................................... 30 Section 7.8. Transfers of Interest in Payment Undertaking Agreement................................................ 30 SECTION 8. COVENANTS OF OGLETHORPE................................................... 30 Section 8.1. Maintenance of Corporate Existence....................... 30 Section 8.2. Merger, Consolidation, Sale of Assets.................... 30 Section 8.3. Notice of Change in Address or Name...................... 31
ii Section 8.4. Delivery of Financial Statements; No Default Certificate; Notice of Negotiations...................... 31 Section 8.5. Qualifying Head Lease Surety Bond. ...................... 32 Section 8.6. Qualifying Sublease Surety Bond.......................... 33 Section 8.7. Qualifying Letter of Credit.............................. 34 Section 8.8. Qualifying Additional Security........................... 34 Section 8.9. Public Utility Regulation................................ 35 Section 8.10. Further Assurances....................................... 36 Section 8.11. Transfer of Stock of RMLC................................ 36 Section 8.12. Bankruptcy Filings....................................... 36 Section 8.13. Dividends by RMLC........................................ 36 Section 8.14. Separateness Principles.................................. 36 Section 8.15. FERC License............................................. 37 Section 8.16. Restriction on Undivided Interest Transfers.............. 37 Section 8.17. Offset of Ground Lease Rent.............................. 37 Section 8.18. Amendment of Oglethorpe Mortgage......................... 37 Section 8.19. Notices Under Georgia Power Consent...................... 38 Section 8.20. Tax Exempt Status........................................ 38 SECTION 9. COVENANTS OF RMLC......................................................... 38 Section 9.1. Maintenance of Corporate Existence....................... 38 Section 9.2. Merger, Consolidation, Sale of Assets. .................. 38 Section 9.3. No Participation in Any Other Business; No Incurrence of Additional Debt....................................... 38 Section 9.4. Notice of Change in Address or Name...................... 38 Section 9.5. Delivery of No Default Certificate....................... 39 Section 9.6. Qualifying Equity Funding Agreement...................... 39 Section 9.7. Public Utility Regulation................................ 39 Section 9.8. Payment of Dividends..................................... 39 Section 9.9. Operation of RMLC; Annual Certificate.................... 40 Section 9.10. No stock................................................. 41 Section 9.11. Amendments to Operative Documents........................ 41 Section 9.12. Releases Pursuant to Section 4.2 of the Ground Lease.................................................... 41 Section 9.13. Further Assurances....................................... 41 Section 9.14. Liens.................................................... 42 Section 9.19. Tax Exempt Status........................................ 43 SECTION 10. COVENANTS OF THE LENDER................................................... 43 Section 10.1. Transfer of Lender's Interest............................ 43 Section 10.2. No Offset................................................ 43
iii SECTION 11. OGLETHORPE'S INDEMNIFICATIONS............................................. 44 Section 11.1. General Indemnity........................................ 44 Section 11.2. General Tax Indemnity.................................... 50 SECTION 12. RMLC's INDEMNIFICATIONS................................................... 61 Section 12.1. RMLC General Indemnity................................... 61 Section 12.2 RMLC General Tax Indemnity............................... 65 SECTION 13. RMLC'S RIGHT OF QUIET ENJOYMENT........................................... 66 SECTION 14. OGLETHORPE'S RIGHT OF QUIET ENJOYMENT..................................... 66 SECTION 15. LOAN PREPAYMENTS AND REFINANCINGS......................................... 67 Section 15.1. Optional Refinancing of the Loan Certificate............. 67 Section 15.2. Financing and Refinancing Costs.......................... 68 SECTION 16. SPECIAL EQUITY REMEDIES................................................... 68 Section 16.1. Special Equity Facility Lease Remedy..................... 68 Section 16.2. Special Equity Head Lease Remedy......................... 69 SECTION 17. AGREEMENTS CONCERNING PAYMENT UNDERTAKING AGREEMENT AND EQUITY FUNDING AGREEMENT.................................... 71 Section 17.1. Notices to the Payment Undertaking Issuer................ 71 Section 17.2. Payments to RMLC by the Payment Undertaking Issuer Under Certain Circumstances.............................. 72 Section 17.3. Acceptable Substitute Credit Protection.................. 72 Section 17.4. Equity Funding Agreement................................. 73 SECTION 18. MISCELLANEOUS............................................................. 74 Section 18.1. Consents................................................. 74 Section 18.2. Successor Co-Trustee..................................... 74 Section 18.3. Bankruptcy of Trust Estate............................... 74 Section 18.4. Amendments and Waivers................................... 74 Section 18.5. Notices.................................................. 75 Section 18.6. Survival................................................. 77 Section 18.7. Successors and Assigns................................... 77 Section 18.8. Business Day............................................. 77 Section 18.9. Governing Law............................................ 77 Section 18.10. Severability............................................. 77 Section 18.11. Counterparts............................................. 77 Section 18.12. Headings and Table of Contents........................... 78 Section 18.13. Limitation of Liability.................................. 78 Section 18.14. Consent to Jurisdiction; Waiver of Trial by Jury......... 79
iv Section 18.15. Further Assurances....................................... 79 Section 18.16. Effectiveness............................................ 80 Section 18.17. Compliance with FERC License............................. 80 Section 18.18. Expiration of FERC License Term.......................... 80
v Attachments to Participation Agreement: Appendix A - Definitions Schedule 1 - Owner Participant Transaction Expenses Schedule 2 - Recordings and Filings Schedule 3 - RMLC Portion of Equity Termination Values, Oglethorpe Portion of Equity Termination Values and Equity Exposure Amounts Schedule 4 - Non-consolidation Opinion Schedule 5 - Title Report Exhibit A - Form of Trust Agreement Exhibit B - Form of Head Lease Exhibit C - Form of Ground Lease Exhibit D - Form of Rocky Mountain Agreements Assignment Exhibit E - Form of Facility Lease Exhibit F - Form of Ground Sublease Exhibit G - Form of Rocky Mountain Agreements Re-assignment Exhibit H - Form of Facility Sublease Exhibit I - Form of Ground Sub-sublease Exhibit J - Form of Rocky Mountain Agreements Second Re-assignment Exhibit K1 - Form of Loan Agreement Exhibit K2 - Form of Deed to Secure Debt Exhibit L - Form of Payment Undertaking Agreement Exhibit M - Form of Payment Undertaking Pledge Agreement Exhibit N - Form of Equity Funding Agreement Exhibit O - Form of Equity Funding Pledge Agreement Exhibit P - Form of Facility Sublease Assignment Agreement Exhibit Q - Form of Head Lease Surety Bond Exhibit R - Form of Sublease Surety Bond Exhibit S - Form of Subordinated Mortgage Exhibit T - Form of Assumption Agreement Exhibit U - Form of Guaranty Exhibit V - Form of Operating Agency Agreement Exhibit W - IRS Ruling vi PARTICIPATION AGREEMENT (P1) This PARTICIPATION AGREEMENT (P1), dated as of December 30, 1996 (this "Participation Agreement" or this "Agreement"), among (i) OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized under the laws of the State of Georgia (herein, together with its successors and permitted assigns, called "Oglethorpe"), (ii) ROCKY MOUNTAIN LEASING CORPORATION, a corporation organized under the laws of the State of Delaware (herein, together with its successors and permitted assigns, called "RMLC"), (iii) PHILIP MORRIS CAPITAL CORPORATION, a corporation organized under the laws of the State of Delaware, as Owner Participant (herein, in such capacity, together with its successors and permitted assigns, called the "Owner Participant"), (iv) FLEET NATIONAL BANK, a national banking association organized and existing under the laws of the United States, not in its individual capacity, except as specifically provided herein, but solely as a trustee under the Trust Agreement (herein in its capacity as a trustee under the Trust Agreement, together with its successors and permitted assigns, called the "Owner Trustee" and herein in its individual capacity, together with its successors and permitted assigns, called the "Non-Georgia Trust Company"), (v) SUNTRUST BANK, ATLANTA, a state banking corporation organized and existing under the laws of the State of Georgia, not in its individual capacity, except as specifically provided herein, but solely as trustee under the Trust Agreement (herein in its capacity as a trustee under the Trust Agreement, together with its successors and permitted assigns, called the "Co-Trustee" and herein in its individual capacity, together with its successors and permitted assigns, called the "Georgia Trust Company"), and (vi) UTRECHT-AMERICA FINANCE CO., a corporation organized under the laws of the State of Delaware, as the Lender (herein together with its successors and permitted assigns, the "Lender"). WITNESSETH: WHEREAS, concurrently with the execution and delivery of this Participation Agreement, the Owner Participant has entered into the Trust Agreement, pursuant to which the Owner Participant authorizes the Co-Trustee to, among other things and subject to the terms and conditions thereof and hereof, lease the Undivided Interest and the Ground Interest from Oglethorpe pursuant to the Head Lease and the Ground Lease, respectively, and concurrently therewith sublease the Undivided Interest and the Ground Interest to RMLC under the Facility Lease and the Ground Sublease, respectively; WHEREAS, RMLC desires to lease the Undivided Interest and the Ground Interest from the Co-Trustee pursuant to the Facility Lease and the Ground Sublease, respectively, and to sublease the Undivided Interest and the Ground Interest to Oglethorpe pursuant to the Facility Sublease and the Ground Sub-sublease, respectively; WHEREAS, Oglethorpe desires to lease the Undivided Interest and the Ground Interest to the Co-Trustee pursuant to the Head Lease and the Ground Lease, respectively, and to sublease the Undivided Interest and the Ground Interest from the RMLC pursuant to the Facility Sublease and the Ground Sub-sublease, respectively; WHEREAS, the Lender has agreed to finance a portion of the rent payable on the Closing Date under the Head Lease by the Trustees; and WHEREAS, the parties hereto desire to consummate the other transactions contemplated hereby. NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT The capitalized terms used in this Participation Agreement (including the foregoing recitals) and not otherwise defined herein shall have the respective meanings specified in Appendix A hereto. The general provisions of Appendix A shall apply to terms used in this Participation Agreement and specifically defined herein. SECTION 2. PARTICIPATION; CLOSING DATE; TRANSACTION COSTS Section 2.1. Agreements to Participate. Subject to the terms and conditions of this Agreement, and in reliance on the agreements, representations and warranties made herein, the parties agree to participate in the transactions described in this Section 2.1 on the Closing Date as follows: (1) the Owner Participant agrees to make an Equity Investment in an amount equal to (a) the Owner Participant's Commitment and (b) an amount sufficient to pay the Transaction Costs which the Owner Trustee is responsible to pay pursuant to Section 2.3(a) hereof; (2) Oglethorpe agrees to lease the Undivided Interest and the Ground Interest to the Co-Trustee on the terms and conditions set forth in the Head Lease and the Ground Lease, the Co-Trustee, upon the written direction of the Owner Trustee, agrees to lease the Undivided Interest and the Ground Interest from Oglethorpe, and each agrees to execute and deliver the Head Lease, the Ground Lease and the Rocky Mountain Agreements Assignment; 2 (3) the Co-Trustee, upon the written direction of the Owner Trustee, agrees to lease the Undivided Interest and the Ground Interest to RMLC on the terms and conditions set forth in the Facility Lease and the Ground Sublease, RMLC agrees to lease the Undivided Interest and the Ground Interest from the Co-Trustee and each agrees to execute and deliver the Facility Lease, the Ground Sublease and the Rocky Mountain Agreements Re-assignment; (4) RMLC agrees to lease the Undivided Interest and the Ground Interest to Oglethorpe on the terms and conditions set forth in the Facility Sublease and the Ground Sub-sublease, Oglethorpe agrees to sublease the Undivided Interest and the Ground Interest from the RMLC and each agrees to execute and deliver the Facility Sublease, the Ground Sub-sublease and the Rocky Mountain Agreements Second Re-assignment; (5) the Lender agrees to make a non-recourse secured loan to the Trustees to fund a portion of the rent payable under the Head Lease on the Closing Date in an amount equal to the Loan Commitment; (6) the Trustees agree to grant the Lender a first priority lien and security interest in, among other things, the Co-Trustee's leasehold interests under the Head Lease and the Ground Lease, their interests in the Facility Lease, the Ground Sublease, the Subordinated Mortgage and the Co-Trustee's interest in the Facility Sublease and the Ground Sub-sublease under the Facility Sublease Assignment (other than Excepted Payments and Excepted Rights), and the Owner Trustee's interest in the Payment Undertaking Agreement and the Payment Undertaking Pledge Agreement, execute and deliver the Loan Agreement and the Deed to Secure Debt and issue the Loan Certificate to the Lender in an aggregate principal amount equal to the Loan Commitment; (7) Oglethorpe agrees to acquire the capital stock of RMLC and to make a capital contribution to RMLC in an amount of $740 million. (8) the Owner Trustee agrees to use the funds received from the Owner Participant and the Lender pursuant to clauses (1)(a) and (5), respectively, of this Section 2.1 on the Closing Date to pay rent due under the Head Lease; (9) Oglethorpe agrees to furnish (a) a Qualifying Head Lease Surety Bond to the Co-Trustee and the Owner Participant to support its obligations under the Head Lease and Section 16.2 of this Participation Agreement and (b) a Qualifying Sublease Surety Bond to RMLC to support its obligations under the Facility Sublease; (10) RMLC agrees to furnish (a) a Qualifying Equity Funding Agreement to the Co-Trustee to support its obligations under the Facility Lease and Sections 16.1 and 16.2 of this Participation Agreement and (b) the Payment Undertaking Agreement to the Owner Trustee to support its obligations under the Facility Lease; 3 (11) the Owner Participant and Oglethorpe agree to enter into the Tax Indemnity Agreement; (12) the Owner Participant agrees to pay all Transaction Costs payable by it pursuant to Section 2.3 hereof; and (13) the parties shall enter into the other Operative Documents in form and substance satisfactory to each of them. Section 2.2. Closing Date; Procedure for Participation. (a) Closing Date. The closing of the transactions contemplated hereby (the "Closing") shall take place after 5:00 p.m., New York City time, on the Scheduled Closing Date or such other date as the parties hereto shall mutually agree (the "Closing Date"), at the offices of Orrick, Herrington & Sutcliffe LLP, 666 Fifth Avenue, New York, New York 10103. (b) Procedures for Funding. Unless the Closing Date shall have been postponed pursuant to Section 2.2(c), subject to the terms and conditions of this Participation Agreement, the Owner Participant and the Lender shall make the amount of their Commitments available not later than 10:00 a.m., New York City time, on the Scheduled Closing Date, by transferring or delivering such amount, in funds immediately available on such Closing Date to the Non-Georgia Trust Company. (c) Postponement of the Closing. The Scheduled Closing Date may be postponed from time to time for any reason if Oglethorpe gives the Owner Participant, the Trustees, RMLC and the Lender a telex, telegraphic, facsimile or telephonic (confirmed in writing) notice of such postponement and notice of the date to which the Closing has been postponed, such notice of postponement to be received by each party no later than 10:00 a.m., New York City time, one day prior to the original Scheduled Closing Date. If, prior to receipt of a postponement notice under this Section 2.2(c), any Participant shall have provided funds in accordance with Section 2.2(b), such funds shall be returned to such Participant, as soon as reasonably practicable but in no event later than the Business Day following the Scheduled Closing Date, unless such Participant shall have otherwise directed. All funds made available pursuant to Section 2.2(b) will be held by the Non-Georgia Trust Company in trust for the Participant who provided such funds and shall not be part of the Collateral or the Trust Estate, shall be invested by the Non-Georgia Trust Company in accordance with clause (d) below and such funds shall remain the sole property of such Participant unless and until released by such Participant and made available to the Owner Trustee and applied to pay the Head Lease Rent or Transaction Costs or returned to the applicable Participant, as provided in this Agreement. (d) Investment of Funds. If on the Scheduled Closing Date a Participant has made its Commitment available to the Non-Georgia Trust Company in accordance with Section 2.2(b), the 4 Closing does not occur on such date and the Non-Georgia Trust Company is unable to return such funds to the Participants who made them available, the Non-Georgia Trust Company shall, subject to Section 2.2(c) above, use reasonable efforts to invest such funds from time to time at the written direction of Oglethorpe, and at Oglethorpe's sole expense and risk in Permitted Investments until such funds can be returned to the Participants. If on the Scheduled Closing Date a Participant has made its Commitment available to the Non-Georgia Trust Company in accordance with Section 2.2(b), the Closing does not occur on such date and the Non-Georgia Trust Company has not returned such funds to any Participant who made them available on or before 2:00 p.m., New York City time, on such date, then Oglethorpe shall reimburse such Participant for loss of the use of such funds at the Applicable Rate for each day, from and including the day that such funds were made available to the Non-Georgia Trust Company by such Participant to but excluding the earlier of (i) the day that such funds have been returned to such Participant pursuant to Section 2.2(c) (funds received by any Participant after 2:00 p.m. of any day shall be deemed to be returned on the next succeeding Business Day) and (ii) the Closing Date. Subject to payment for the account of the relevant Participant of any reimbursement for loss of use of funds due to it at the Applicable Rate, any net gain realized on the investment of such funds (including interest) shall be paid to Oglethorpe by the Non-Georgia Trust Company on the earlier of (i) the date such funds are returned to the Participants pursuant to Section 2.2(c) and (ii) the Closing Date. The Non-Georgia Trust Company shall not be liable for any interest on or loss resulting from such investments and, if such funds are made available to the Owner Trustee and utilized to pay Head Lease Rent or Transaction Costs on the Closing Date, Oglethorpe shall reimburse the Non-Georgia Trust Company for any net loss realized on the investment of such funds. If such funds are not so utilized, Oglethorpe shall reimburse the Participants on the Closing Date for any net loss realized on the investments of such funds. In order to obtain funds for payment of the Head Lease Rent or Transaction Costs or to return funds made available to the Owner Trustee by any Participant, the Non-Georgia Trust Company is authorized to sell any investments or obligations purchased as aforesaid. (e) Expiration of Commitments. The obligation of the Owner Participant to make its Equity Investment and the obligation of the Lender to make the Loan shall expire at 11:59 p.m., New York City time, on March 31, 1997. If the Closing Date has not occurred on or before March 31, 1997, the parties hereto shall have no obligation to consummate the transactions contemplated under this Agreement. Section 2.3. Transaction Costs. (a) If the transactions contemplated by this Participation Agreement are consummated, the Owner Participant will promptly pay all Transaction Costs (or reimburse Oglethorpe for Transaction Costs previously paid) identified on or prior to the Closing Date and payable to the Persons identified on Schedule 1 hereto up to a total amount of $7,521,570.06 (the "Owner Participant Transaction Expenses"). If the Transaction Costs exceed such amount, Owner Participant will specify in writing to Oglethorpe, which Transaction Costs it elects to include 5 within the Owner Participant Transaction Expenses, and Oglethorpe and RMLC will be jointly liable for all other Transaction Costs, whenever such expenses are identified. (b) Following the Closing Date, RMLC will be responsible for, and will pay as Supplemental Rent, the annual administration fees, if any, and expenses of the Co-Trustee and the Owner Trustee under the Trust Agreement. SECTION 3. REPRESENTATIONS AND WARRANTIES Section 3.1. Representations and Warranties of the Co-Trustee and the Georgia Trust Company. The Georgia Trust Company and the Co-Trustee hereby severally, represent and warrant that, as of the Closing Date: (a) the Georgia Trust Company is a state banking corporation duly organized, validly existing and in good standing under the laws of the State of Georgia, has the corporate power and authority, as Co-Trustee and/or in its individual capacity to the extent expressly provided herein or in the Trust Agreement, to conduct its business as presently conducted, to own or hold under lease its properties and to enter into and perform its obligations under the Trust Agreement and, upon the express direction of the Owner Trustee, this Agreement and each of the other Operative Documents to which it is a party; (b) (i) the Trust Agreement Supplement has been duly authorized, executed and delivered by the Georgia Trust Company, and (ii) assuming the due authorization, execution and delivery of the Trust Agreement by the Non-Georgia Trust Company and the Owner Participant, the Trust Agreement, constitutes a legal, valid and binding obligation of the Georgia Trust Company, enforceable against it in its individual capacity or as Co-Trustee, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity; (c) (i) this Agreement has been duly authorized, executed and delivered by the Co-Trustee, and (ii) assuming the due authorization, execution and delivery of this Agreement by each party hereto other than the Co-Trustee and the Georgia Trust Company, this Agreement constitutes a legal, valid and binding obligation of the Georgia Trust Company and the Co-Trustee, enforceable against the Georgia Trust Company individually or as Co-Trustee, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity; (d) (i) each of the other Operative Documents to which the Co-Trustee is a party has been duly authorized, executed and delivered by the Co-Trustee, and (ii) assuming the due authorization, execution and delivery of each of the other Operative Documents by each party 6 thereto other than the Co-Trustee, each of the other Operative Documents to which the Co-Trustee is a party constitutes a legal, valid and binding obligation of the Co-Trustee, enforceable against the Co-Trustee in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity; (e) upon the execution and delivery of the Loan Certificate by the Trustees in accordance with the Loan Agreement and payment therefor in accordance with the terms of this Agreement, the Loan Certificate will constitute the legal, valid and binding obligations of the Co-Trustee, enforceable against the Co-Trustee in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity; (f) the execution and delivery by the Georgia Trust Company, in its individual capacity or as Co-Trustee, as the case may be, of the Trust Agreement Supplement, this Agreement and the other Operative Documents to which it is a party, the consummation by the Georgia Trust Company, in its individual capacity or as Co-Trustee, as the case may be, of the transactions contemplated hereby and thereby, and the compliance by the Georgia Trust Company, in its individual capacity or as Co-Trustee, as the case may be, with the terms and provisions hereof and thereof, do not and will not contravene any Applicable Law of the United States of America governing its banking or trust powers or the State of Georgia governing the Georgia Trust Company or the banking or trust powers of the Georgia Trust Company, or the Trust Agreement, or its organizational documents or by-laws, or contravene the provisions of, or constitute a default by the Georgia Trust Company under, or result in the creation of any Facility Lessor's Lien attributable to it upon the Trust Estate or any indenture, mortgage or other material contract, agreement or instrument to which the Georgia Trust Company is a party or by which the Georgia Trust Company or its property is bound; provided, however, that no representation is made with respect to the right, power or authority of the Georgia Trust Company or the Co-Trustee to act as operator of the Facility following an Event of Default; (g) no authorization or approval or other action by, and no notice to or filing or registration with, any Georgia Governmental Entity or federal Governmental Entity governing its banking or trust powers is required for the due execution, delivery or performance by the Georgia Trust Company or the Co-Trustee, as the case may be, of the Trust Agreement, this Agreement or the other Operative Documents to which the Co-Trustee is a party, other than any such authorization or approval or other action or notice or filing as has been duly obtained, taken or given; (h) there is no pending or, to the knowledge of the Georgia Trust Company threatened, action, suit, investigation or proceeding against the Georgia Trust Company either in its individual capacity or as Co-Trustee, before any Governmental Entity which, if determined adversely to it, would materially adversely affect the ability of the Georgia Trust Company, in its individual capacity or as Co-Trustee, as the case may be, to perform its obligations under the Trust Agreement, this Agreement or the other Operative Documents to which it is a party or would 7 materially adversely affect the Facility, the Rocky Mountain Site or any interest therein or part thereof or the Lien of the Lender on the Collateral; and (i) the Facility Lessor's right, title and interest in and to the Trust Estate is free of any Facility Lessor's Liens attributable to the Georgia Trust Company; (j) the chief executive office and principal place of business of the Georgia Trust Company where the Co-Trustee will keep its corporate records concerning the Facility, the Rocky Mountain Site and the Operative Documents is located at Atlanta, Georgia; and (k) immediately prior to the Closing, the Co-Trustee is not an "electric utility" or a "public utility" or a "public utility holding company" any Applicable Law. Section 3.2. Representations and Warranties of the Owner Trustee and the Non-Georgia Trust Company. The Non-Georgia Trust Company and the Owner Trustee hereby severally represent and warrant that, as of the Closing Date: (a) the Non-Georgia Trust Company is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America, has the corporate power and authority, as Owner Trustee and/or in its individual capacity to the extent expressly provided herein or in the Trust Agreement, to conduct its business as presently conducted, to own or hold under lease its properties and to enter into and perform its obligations under the Trust Agreement, this Agreement and each of the other Operative Documents to which it is a party; (b) (i) the Trust Agreement has been duly authorized, executed and delivered by the Non-Georgia Trust Company, and (ii) assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant, the Trust Agreement constitutes a legal, valid and binding obligation of the Non-Georgia Trust Company, enforceable against it in its individual capacity or as Owner Trustee, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity; (c) (i) this Agreement has been duly authorized, executed and delivered by the Owner Trustee, and (ii) assuming the due authorization, execution and delivery of this Agreement by each party hereto other than the Owner Trustee and the Non-Georgia Trust Company, this Agreement constitutes a legal, valid and binding obligation of the Non-Georgia Trust Company and the Owner Trustee, enforceable against the Non-Georgia Trust Company or as Owner Trustee, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity; 8 (d) (i) each of the other Operative Documents to which the Owner Trustee is a party has been duly authorized, executed and delivered by the Owner Trustee, and (ii) assuming the due authorization, execution and delivery of each of the other Operative Documents by each party thereto other than the Owner Trustee, each of the other Operative Documents to which the Owner Trustee is a party constitutes a legal, valid and binding obligation of the Owner Trustee, enforceable against the Owner Trustee in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity; (e) upon the execution and delivery of the Loan Certificate by the Owner Trustee in accordance with the Loan Agreement and payment therefor in accordance with the terms of this Agreement, the Loan Certificate will constitute the legal, valid and binding obligation of the Owner Trustee, enforceable against the Owner Trustee in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity; (f) the execution and delivery by the Non-Georgia Trust Company, in its individual capacity or as Owner Trustee, as the case may be, of the Trust Agreement, this Agreement and the other Operative Documents to which it is a party, the consummation by the Non-Georgia Trust Company, in its individual capacity or as Owner Trustee, as the case may be, of the transactions contemplated hereby and thereby, and the compliance by the Non-Georgia Trust Company, in its individual capacity or as Owner Trustee, as the case may be, with the terms and provisions hereof and thereof, do not and will not contravene any Applicable Law of the United States of America governing its banking or trust powers or the State of Connecticut governing the Non-Georgia Trust Company or the banking or trust powers of the Non-Georgia Trust Company, or the Trust Agreement, or its organizational documents or by-laws, or contravene the provisions of, or constitute a default by the Non-Georgia Trust Company under, or result in the creation of any Facility Lessor's Lien attributable to it upon the Trust Estate or any indenture, mortgage or other material contract, agreement or instrument to which the Non-Georgia Trust Company is a party or by which the Non-Georgia Trust Company or its property is bound; provided, however, that no representation is made with respect to the right, power or authority of the Non-Georgia Trust Company or the Owner Trustee to act as operator of the Facility following an Event of Default; (g) no authorization or approval or other action by, and no notice to or filing or registration with, any Connecticut Governmental Entity or federal Governmental Entity governing its banking or trust powers is required for the due execution, delivery or performance by the Non-Georgia Trust Company or the Owner Trustee, as the case may be, of the Trust Agreement, this Agreement or the other Operative Documents to which the Owner Trustee is a party, other than any such authorization or approval or other action or notice or filing as has been duly obtained, taken or given; 9 (h) there is no pending or, to the knowledge of the Non-Georgia Trust Company threatened, action, suit, investigation or proceeding against the Non-Georgia Trust Company either in its individual capacity or as Owner Trustee, before any Governmental Entity which, if determined adversely to it, would materially adversely affect the ability of the Non-Georgia Trust Company, in its individual capacity or as Owner Trustee, as the case may be, to perform its obligations under the Trust Agreement, this Agreement or the other Operative Documents to which it is a party or would materially adversely affect the Facility, the Rocky Mountain Site or any interest therein or part thereof or the security interest of the Lender in the Collateral; (i) the Facility Lessor's right, title and interest in and to the Trust Estate is free of any Facility Lessor's Liens attributable to the Non-Georgia Trust Company; (j) the chief executive office and principal place of business of the Non-Georgia Trust Company where the Owner Trustee will keep its corporate records concerning the Facility, the Rocky Mountain Site and the Operative Documents is located at Hartford, Connecticut; and (k) immediately prior to the Closing, the Owner Trustee is not an "electric utility" or a "public utility" or a "public utility holding company" under any Applicable Law. Section 3.3. Representations and Warranties of the Owner Participant. The Owner Participant represents and warrants that, as of the Closing Date: (a) the Owner Participant is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to conduct its business as presently conducted, to own or hold under lease its properties and enter into and perform its obligations under this Agreement, the Trust Agreement and the Tax Indemnity Agreement; (b) this Agreement, the Trust Agreement and the Tax Indemnity Agreement have been duly authorized, executed and delivered by the Owner Participant and assuming the due authorization, execution and delivery by each other party thereto, constitute the legal, valid and binding obligations of the Owner Participant, enforceable against the Owner Participant in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity; (c) the execution and delivery by the Owner Participant of this Agreement, the Trust Agreement and the Tax Indemnity Agreement, the consummation by the Owner Participant of the transactions contemplated hereby and thereby, and compliance by the Owner Participant with the terms and provisions hereof and thereof, do not conflict with any Applicable Law binding on the Owner Participant, or its articles of incorporation or by-laws, or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than any Lien created under any Operative Document) upon the Trust Estate under any indenture, mortgage or other material 10 contract, agreement or instrument to which the Owner Participant is a party or by which the Owner Participant or its property is bound it being understood that no representation or warranty is being made as to any Applicable Laws relating to the Facility or the Rocky Mountain Site; (d) no authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Entity is required for the due execution, delivery or performance by the Owner Participant of this Agreement, the Trust Agreement or the Tax Indemnity Agreement, other than any authorization or approval or other action or notice or filing as has been duly obtained, taken or given and other than the filing of the Form U-7D with the Securities and Exchange Commission within 30 days after the Closing Date (it being understood that no representation or warranty is being made as to any Applicable Laws relating to the Facility or the Rocky Mountain Site); (e) there is no pending or, to the knowledge of the Owner Participant, threatened action, suit, investigation or proceeding against the Owner Participant before any Governmental Entity which, if determined adversely to it, would materially adversely affect the Owner Participant's ability to perform its obligations under this Agreement, the Trust Agreement or the Tax Indemnity Agreement or would materially adversely affect the Facility, the Rocky Mountain Site or any interest therein or part thereof or the Lien of the Lender in the Collateral and the Property; (f) the Trust Estate is free of any Owner Participant's Liens; (g) no part of the funds to be used by the Owner Participant to make its investment pursuant to this Agreement, directly or indirectly, constitutes or is deemed to constitute assets (within the meaning of ERISA and any applicable rules, regulations and court decisions thereunder) of any Plan; (h) the Owner Participant is purchasing the Beneficial Interest to be acquired by it for its own account with no present intention of distributing such Beneficial Interest or any part thereof in any manner which would require registration under the Securities Act, but without prejudice, however, to the right of the Owner Participant at all times to sell or otherwise dispose of all or any part of such Beneficial Interest under a registration statement under the Securities Act or under an exemption from such registration available under such Act; (i) no Event of Loss of the type referred to in clause (iv) of the definition of Event of Loss has occurred or is continuing; (j) neither the Owner Participant nor anyone authorized by it has directly or indirectly offered or sold any interest in the Beneficial Interest or the Loan or any part thereof, or in any similar security or lease, or in any security or lease the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest or the Loan or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act; and 11 (k) immediately prior to the Closing, the Owner Participant is not an "electric utility" or a "public utility" or a "public utility holding company" under the Federal Power Act or the Holding Company Act. Section 3.4. Representations and Warranties of Oglethorpe. Oglethorpe represents and warrants that, as of the Closing Date: (a) Oglethorpe is an electric membership corporation duly organized, validly existing, and in good standing under the laws of the State of Georgia, is duly licensed or qualified and in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on its financial condition, business or operations or its ability to enter into and perform its obligations under this Agreement or any of the other Operative Documents to which it is a party, and has the corporate power and authority to carry on its business as now conducted, to own or hold under lease its property and to enter into and perform its obligations under this Agreement and each of the other Operative Documents to which it is a party; (b) this Agreement and each of the other Operative Documents to which it is a party and each certificate or letter agreement required to be delivered thereunder have been duly authorized, executed and delivered by all necessary corporate action by Oglethorpe and, assuming the due authorization, execution and delivery by each other party thereto, constitute the legal, valid and binding obligations of Oglethorpe, enforceable against Oglethorpe in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity; (c) the execution, delivery and performance by Oglethorpe of this Agreement and each of the other Operative Documents to which it is a party and each certificate or letter agreement required to be delivered thereunder, the consummation by Oglethorpe of the transactions contemplated hereby and thereby, and compliance by Oglethorpe with the terms and provisions hereof and thereof, do not and will not (i) contravene any Applicable Law binding on Oglethorpe or its property, or its certificate of incorporation or by-laws, or (ii) constitute a default by Oglethorpe under, or result in the creation of any Lien upon the property of Oglethorpe (other than pursuant to any Operative Document) under any indenture, mortgage or other material contract, agreement or instrument to which Oglethorpe is a party or by which Oglethorpe or any of its property is bound and the execution, delivery and performance of this Agreement and the other Operative Documents do not require any approval by members of Oglethorpe or other approval or consent of, or notice to, any trustee or holders of any indebtedness or obligations of Oglethorpe or any lessor under any lease to Oglethorpe or any other Person, except for the approval of the RUS set forth in the RUS Consent and the approval of Georgia Power set forth in the Georgia Power Consent; (d) no authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Entity or under any Applicable Law is required (A) for the 12 due execution, delivery or performance by Oglethorpe of this Agreement and the other Operative Documents to which it is a party or (B) assuming that neither the Owner Participant, the Co-Trustee, the Owner Trustee or any Affiliate of any of them is an "electric utility" or a "public utility" or a "public utility holding company" under any Applicable Law immediately prior to the Closing, with respect to the participation by the Co-Trustee, the Owner Trustee or the Owner Participant in the transactions contemplated by this Agreement and the other Operative Documents, other than (i) the FERC Order which has been obtained, (ii) the filing by the Owner Participant and Co-Trustee of a Form U-7D with the Securities and Exchange Commission under Rule 7(d) of the Holding Company Act, (iii) as may be required under the Securities Act in connection with any refinancing of the Loan Certificate with the proceeds of a public offering of debt securities, (iv) as may be required under Applicable Law providing for the supervision or regulation of the Owner Participant, the Owner Trustee or the Co-Trustee as a result of investing, lending or other commercial activity in which the Owner Participant, the Owner Trustee or the Co-Trustee is or may be engaged other than the transactions contemplated hereby or by any of the other Operative Documents, (v) the SEC No-action Letter which has been obtained, (vi) as may be required under existing Applicable Laws to be obtained, given, accomplished or renewed at any time after the Closing Date or from time to time after the Closing Date in connection with the maintenance or operation of the Facility and which are routine in nature or which cannot be obtained, or are not normally applied for, prior to the time they are required, and which Oglethorpe has no reason to believe will not be timely obtained, (vii) the consent of RUS to the Overall Transaction pursuant to the RUS Consent which has been obtained or (viii) as may be required under any Applicable Law enacted or adopted after the date hereof; (e) there is no pending or, to the knowledge of Oglethorpe threatened, action, suit, investigation or proceeding against Oglethorpe before any Governmental Entity which (a) questions the validity of any Transaction Document or the ability of Oglethorpe to perform its obligations under each Transaction Document to which Oglethorpe is a party or (b), if determined adversely to it, would materially adversely affect Oglethorpe's financial condition, business or operations or its ability to perform its obligations under this Agreement, under the other Transaction Documents to which it is a party or would materially adversely affect the Facility, the Rocky Mountain Site or any interest of any Transaction Party therein or part thereof or the Lien of the Lender in the Collateral or the Property; (f) the insurance (including all related endorsements) required by Section 11 of the Facility Sublease is in full force and effect and all premiums thereon are current; (g) the chief executive office and principal place of business of Oglethorpe and the office where Oglethorpe keeps its corporate records concerning the Facility, the Rocky Mountain Site and the Operative Documents is located at Tucker, Georgia; (h) no Head Lessor Event of Default, Head Lessor Default, Event of Default, Default, Sublease Default, Sublease Event of Default, Event of Loss (other than an Event of Loss referred to in clause (iv) of the definition of Event of Loss) or event that with the passage of time or giving 13 of notice or both would constitute an Event of Loss (other than an Event of Loss referred to in clause (iv) of the definition of Event of Loss) has occurred and is continuing; (i) Oglethorpe is not an "investment company" or an "affiliated person" of an "investment company" within the meaning of the Investment Company Act of 1940; (j) neither Oglethorpe nor anyone authorized by it has directly or indirectly offered or sold any interest in the Beneficial Interest or the Loan or any part thereof, or in any similar security or lease, or in any security or lease the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Beneficial Interest or the Loan or any part thereof or solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act. (k) Oglethorpe is not in default, and no condition exists that with notice or lapse of time or both would constitute a default, under any mortgage, indenture or other material contract, agreement or instrument to which Oglethorpe is a party or by which Oglethorpe or its property is bound in any such case where any such default, individually or in the aggregate, could reasonably be expected to have a material adverse effect on (i) its financial condition, business or operations, (ii) its ability to enter into and perform its obligations under this Agreement or any other Operative Document, (iii) the Facility, the Rocky Mountain Site or any interest of any Transaction Party therein or any part thereof or (iv) the Lien of the Lender on the Collateral or the Property; (l) the Facility is surrounded by the Rocky Mountain Site; (m) Oglethorpe has (i) good and valid title, as a tenant-in-common with Georgia Power to the Facility free and clear of all Liens other than the Liens described in the Title Report, and (ii) good and marketable title as a tenant-in-common with Georgia Power in the Rocky Mountain Site free of all Liens other than the Liens described in the Title Report, and such Liens do not materially adversely affect the value or use of the Facility and the Rocky Mountain Site for the purposes permitted under the Operative Documents; (n) the Head Lease creates a valid leasehold interest in favor of the Co-Trustee in the Undivided Interest under the laws of the State of Georgia subject only to the Liens described in the Title Report (attached hereto as Schedule 5); the Facility Lease creates a valid leasehold interest in favor of RMLC in the Undivided Interest under the laws of the State of Georgia; and the Facility Sublease creates a valid leasehold interest in favor of Oglethorpe in the Undivided Interest under the laws of the State of Georgia; (o) assuming that the Loan Agreement and the Deed to Secure Debt have been duly authorized, executed and delivered by each of the parties thereto, the Loan Agreement and the Deed to Secure Debt create a valid Lien in favor of the Lender in the Collateral and such Lien is a perfected first priority Lien subject only to the Lien of the Oglethorpe Mortgage and the Liens 14 set forth in the Title Report. No filing, recording, registration or notice with any federal or state Governmental Entity is necessary to establish or, except for such filings and recordings as have been made pursuant to Section 4.18, to perfect, or give record notice of, the Lien in favor of the Lender in the Collateral or the Property to the extent such Lien may be perfected by filings or recordings, prior to all Liens other than those set forth in the Title Report; (p) Oglethorpe's audited financial statements for the fiscal year ended December 31, 1995, including the footnotes thereto, present fairly the consolidated financial position, results of operations and cash flow for Oglethorpe as of and for the periods stated and have been prepared in conformity with GAAP on a consistent basis; and since December 31, 1995, except as set forth in Oglethorpe's reports on Form 10-K for calendar year 1995 and on Form 10-Q for the first three quarters of calendar year 1996, there has been no material adverse change in the business, operations or financial condition of Oglethorpe and no event has occurred or is currently contemplated or been threatened that is likely in Oglethorpe's good faith judgment to result in a decrease in the ratings on the Oglethorpe Mortgage Bonds below a S&P rating of "A" or a Moody's rating of "A3"; (q) the use by the Trustees of the proceeds of the Loan Certificate and the Equity Investment will not violate or result in a violation of Section 7 of the Exchange Act, or any regulations issued pursuant thereto, including, without limitation, Regulations G, T, U and X of the regulations of the Federal Reserve System; (r) Oglethorpe is an "electric utility company," but is not a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding company" within the meaning of the Holding Company Act and is not a registered or unregistered "holding company" within the meaning of the Holding Company Act; (s) the Rocky Mountain Agreements constitute valid and binding obligations of Oglethorpe enforceable in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by principles of equity. No pending or, to Oglethorpe's Actual Knowledge, threatened, material litigation exists with respect to such Agreements nor is Oglethorpe in default under any of the Rocky Mountain Agreements in a manner which could have a material adverse effect on the Overall Transaction or on the interests of the Owner Participant or the Co-Trustee in the Facility or the Rocky Mountain Site; (t) the Facility and the Rocky Mountain Site are, under existing Environmental Laws, free from a level of contamination that could lead to administrative response action or other action by any Governmental Entity in respect of the Facility or the Rocky Mountain Site; (u) except as to these matters set forth in the Oglethorpe Power Corporation Officer's Certificate, dated December 30, 1996, Re: Response of Oglethorpe Power Corporation to the Environmental Review Report for the Rocky Mountain Pumped Storage Facility, Oglethorpe has 15 not given, and there does not exist to Oglethorpe's Actual Knowledge, a state of facts that would require it to give any Governmental Entity, nor has it received from any Governmental Entity, any written notice, letter, citation, order, warning, complaint, inquiry, claim or demand that: (i) there has been a release, or there is a threat of release, of Hazardous Substances in, on, under or from the Facility or the Rocky Mountain Site; (ii) Oglethorpe may be or is liable, in whole or in part, for the costs of cleaning up, remedying or responding to a release of any Hazardous Substance pertaining to the Facility or the Rocky Mountain Site or (iii) either the Facility or the Rocky Mountain Site is subject to a Lien in favor of any Governmental Entity in response to a release of Hazardous Substances; (v) except as to these matters set forth in the Oglethorpe Power Corporation Officer's Certificate, dated December 30, 1996, Re: Response of Oglethorpe Power Corporation to the Environmental Review Report for the Rocky Mountain Pumped Storage Facility, Oglethorpe has taken all required or necessary response action, including any removal, remedial or other response action, in respect of any release, emission, discharge or disposal, or threat of release, discharge, disposal or emission of any Hazardous Substance, in, on, under or from the Facility or the Rocky Mountain Site, so as to be in material compliance with all Environmental Laws; (w) except as to these matters set forth in the Oglethorpe Power Corporation Officer's Certificate, dated December 30, 1996, Re: Response of Oglethorpe Power Corporation to the Environmental Review Report for the Rocky Mountain Pumped Storage Facility, no action by any Governmental Entity is necessary for the operation on the Closing Date of the Facility by Oglethorpe, other than such actions that have been obtained by Oglethorpe; (x) there are no contracts or agreements providing for unit sales of the energy produced by the Facility that have a term which extends beyond the scheduled Expiration Date; (y) to Oglethorpe's Actual Knowledge, there is not present an event or condition physically affecting the Facility or the Rocky Mountain Site that would materially adversely affect the current or residual value, utility or remaining useful life of the Facility; (z) based upon Oglethorpe's reasonable expectations, and subject to Applicable Law, the rights and interests made available to the Trustees pursuant to the Operative Documents, to the extent such rights and interests are to be made available to the Trustees or their permitted transferees, together with the rights to be made available under the other Operative Documents, permit on a commercially practicable basis during the period following the expiration or termination of the Facility Sublease Term, (i) the location, occupation, interconnection, maintenance and repair of the Facility, (ii) the use, operation and possession of the Facility, (iii) the construction, use, operation, possession, maintenance, replacement, renewal and repair of all Modifications to the Facility, (iv) appropriate ingress to and egress from the Facility and the Rocky Mountain Site for any reasonable purpose in connection with the exercise of rights under the Operative Documents and such Person's interest in the Undivided Interest and (v) the procurement of transmission services from the Rocky Mountain Site to enable such Person to 16 deliver the portion of the net electrical output of the Facility to the extent of the Undivided Interest in a commercially efficient manner and on commercially reasonable terms. (aa) Oglethorpe has filed all federal, state and local income tax returns which are required to be filed by it and has paid (prior to their delinquency dates) any Taxes which have become due pursuant to such returns or pursuant to any assessment received by it (other than Taxes and assessments the payment of which is being contested in good faith by Oglethorpe, with adequate reserves, in the aggregate, for the payment of which having been set aside on the books of Oglethorpe), and Oglethorpe has no Actual Knowledge of any actual or proposed deficiency or additional assessment in connection therewith which, either in any case or in the aggregate, would materially adversely affect Oglethorpe's financial condition, business or operations; and any charges, accruals and reserves on the books of Oglethorpe with respect to federal, state and local taxes for all open years, and for the current fiscal year, make adequate provision of any unpaid tax liabilities for such periods; (bb) the qualification of the Lender, the Trustees or the Owner Participant to do business under the laws of the State of Georgia or any political subdivision thereof is not required solely as a consequence of the execution and delivery of the Operative Documents, the making of the Equity Investment or the Loan or, prior to expiration or termination of the Facility Lease, the performance by the Trustees or the Owner Participant of this Agreement or any other Operative Document to which it is a party or, prior to the exercise of dispossessing remedies by the Lender under the Facility Lease, the performance by the Lender of this Agreement or any other Operative Document to which it is a party; (cc) the report on Form 10-K for calendar year 1995 and the reports on Form 10-Q for the first three quarters of calendar year 1996, at the time of their issuance, did not contain any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; other than as set forth in Oglethorpe's reports on Form 10-K for calendar year 1995 and on Form 10-Q for the first three quarters of calendar year 1996, there is no fact or condition, to the Actual Knowledge of any Responsible Officer of Oglethorpe, that has not been disclosed in writing to the Owner Participant and Lender that could materially and adversely affect the ability of Oglethorpe to perform its obligations under this Participation Agreement or the other Operative Documents to which it is a party or could materially adversely affect the Facility or the Lien of the Lender in the Collateral or the Property; (dd) the Facility Sublease Assignment Agreement creates a valid security interest or lien in favor of the Co-Trustee in RMLC's interest in the Facility Sublease and the Qualifying Sublease Surety Bond; (ee) assuming the filings and recordings have been made pursuant to Section 4.18, the Equity Funding Pledge Agreement and the Payment Undertaking Pledge Agreement create valid, 17 perfected security interests in favor of the Trustees in RMLC's interest, if any, in the Equity Funding Agreement and the Payment Undertaking Agreement, respectively; (ff) Oglethorpe owns all of the outstanding stock of RMLC, all of which has been fully paid and is nonassessable, and RMLC is in compliance with all of the provisions of its Certificate of Incorporation and By-laws and has not engaged in any activities or incurred any liability other than under the Operative Documents to which it is a party; (gg) in accordance with Section 18.13 hereof, Oglethorpe has validly submitted to the jurisdiction of the Supreme Court of the State of New York, New York County and the United States District Court for the Southern District of New York; (hh) Oglethorpe is in compliance with all material provisions of the FERC License and Applicable Law which could have a material adverse effect on the value, utility or remaining useful life of the Facility or the Rocky Mountain Site or the Owner Participant's or the Lender's or the Trustees' interests under the Operative Documents; (ii) assuming the correctness of the representations of the other parties hereto, the transaction contemplated hereunder and by the other Operative Documents will not constitute a "prohibited transaction" under ERISA; (jj) neither RMLC nor Oglethorpe is a tax-exempt cooperative within the meaning of Section 501(c) (12) of the Code or a tax-exempt entity within the meaning of Section 168(h) (2) of the Code and the related regulations thereunder. Neither RMLC nor Oglethorpe was at any time during the 5 year period ending on the Closing Date a tax-exempt entity described in Section 168(h) (2) of the Code and the related regulations thereunder. The IRS ruling dated September 19, 1983 attached as Exhibit W is an accurate and complete copy of the ruling obtained by Oglethorpe from the IRS confirming the taxable status of Oglethorpe for U.S. federal tax purposes and such ruling has not been revoked, modified or supplemented in any manner; (kk) Oglethorpe and RMLC are conducting their businesses in accordance with the assumptions set forth in the Non-consolidation Opinion and the other bankruptcy opinions of Orrick, Herrington & Sutcliffe LLP rendered on the Closing Date; (ll) the exercise of remedies under the Oglethorpe Mortgage, including a foreclosure having the effect of terminating the Co-Trustee's real estate interest in the Undivided Interest, the Rocky Mountain Site and the Rocky Mountain Agreements, will not adversely affect, or limit in any way, the claims of the Co-Trustee and RMLC for money damages provided for in the Head Lease, the Facility Lease, the Facility Sublease or any other Operative Document; (mm) assuming operation of Oglethorpe and RMLC in accordance with Sections 8.14 and 9.9 and the operating strictures set forth in the Non-consolidation Opinion, if the circumstances 18 described in Sections 16(n) and (o) of the Facility Sublease should occur, RMLC will not be consolidated into any resulting bankruptcy proceeding involving Oglethorpe; (nn) any "gain" realized by Oglethorpe as a result of the prepayment of rent under the Head Lease will not adversely affect RMLC's or Oglethorpe's obligations to pay Facility Lease Rent or Facility Sublease Rent under the Facility Lease or the Facility Sublease, respectively; (oo) the Lender is not required to become a "co-licensee" on the FERC License and will not become a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding company" within the meaning of the Holding Company Act and will not become a registered or unregistered "holding company" within the meaning of the Holding Company Act, solely as a consequence of the execution and delivery of the Operative Documents, the making of the Loan and the performance by the Lender of this Agreement or any other Operative Document to which it is a party, prior to the exercise of dispossessing remedies by the Lender under the Facility Lease; and (pp) the representation and warranties of RMLC set forth in Section 3.5 are true and correct. Section 3.5. Representations and Warranties of RMLC. RMLC hereby represents and warrants that, as of the Closing Date: (a) RMLC is a duly organized and validly existing corporation in good standing under the laws of the State of Delaware, and has the power and authority to enter into and perform its obligations under this Agreement and each of the other Operative Documents to which it is a party and to own or hold under lease its property; (b) this Agreement and each of the other Operative Documents to which RMLC is a party and each certificate or letter agreement required to be delivered thereunder have been duly authorized, executed and delivered by RMLC, and assuming the due authorization, execution and delivery of this Agreement and each of the other Operative Documents by each party hereto and thereto other than RMLC, this Agreement and each of the other Operative Documents to which RMLC is a party constitute legal, valid and binding obligations of RMLC, enforceable against RMLC in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity; (c) the execution and delivery by RMLC of this Agreement and each of the other Operative Documents to which it is a party and each certificate or letter agreement required to be delivered thereunder, the consummation by RMLC of the transactions contemplated hereby and thereby, and the compliance by RMLC with the terms and provisions hereof and thereof, do not and will not contravene any Applicable Law of the United States of America or the State of Delaware or RMLC's certificate of incorporation or bylaws, or contravene the provisions of, or 19 constitute a default by RMLC under any indenture, mortgage or other material contract, agreement or instrument to which the RMLC is a party or by which RMLC or its property is bound, or result in the creation of any Lien (other than pursuant to the Operative Documents) upon the Trust Estate; provided, however, that no representation is made with respect to the right, power or authority of RMLC to act as operator of the Facility; (d) no authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Entity is required for the due execution, delivery or performance by RMLC of this Agreement or the other Operative Documents to which it is a party, other than any such authorization or approval or other action or notice or filing as has been duly obtained, taken or given; (e) there is no pending or, to the knowledge of the RMLC, threatened action, suit, investigation or proceeding against RMLC, before any Governmental Entity which, if determined adversely to it, would materially adversely affect the ability of RMLC to perform its obligations under this Agreement or the other Operative Documents to which it is a party or would materially adversely affect the Facility, the Rocky Mountain Site or any interest therein or part thereof or the security interest of the Lender in the Collateral; (f) the chief executive office of RMLC, and the place where the records concerning the Undivided Interest, and all the interest of the RMLC in, to and under all documents relating to the Trust Estate, is located at Atlanta, Georgia; (g) RMLC is in compliance with all of the provisions of its Certificate of Incorporation and By-laws and has not engaged in any activities or incurred any liability other than the Operative Documents to which it is a party; (h) no Default or Event of Default has occurred and is continuing; (i) RMLC is conducting its business in accordance with the assumptions set forth in the Non-consolidation Opinion and the other bankruptcy opinions of Orrick Herrington to be rendered on the Closing Date; and (j) assuming operation of RMLC in accordance with Sections 8.14 and 9.9 and the operating strictures set forth in the Non-consolidation Opinion, if the circumstances described in Sections 16(n) and (o) of the Facility Sublease should occur, RMLC will not be consolidated into any resulting bankruptcy proceeding involving Oglethorpe. Section 3.6. Representations and Warranties of the Lender. The Lender represents and warrants that, as of the Closing Date: (a) no part of the funds to be used by the Lender to make the Loan and acquire the Loan Certificate pursuant to this Agreement or the Loan Agreement constitutes or is deemed 20 to constitute assets (within the meaning of ERISA and any applicable rules or regulations thereunder) of any Plan; (b) the Lender is making the Loan and acquiring the Loan Certificate for investment and not with a view towards any resale or distribution thereof, and neither it nor anyone authorized by it to act on its behalf has directly or indirectly offered the Loan Certificate or any interest in the Trust Estate, the Collateral or any similar security for sale to, or solicited any offer to acquire any of the same from, anyone, it being understood that the Lender makes no representations as to actions taken by the Owner Participant, either Trustee, RMLC or Oglethorpe or anyone acting on behalf of such Persons; and (c) the Lender is actively engaged in the business of making commercial loans and the Loan is being made by the Lender for its own account in the ordinary course of its financing business and not for or on behalf of any other Person and the Lender will treat the Loan as a loan. All arrangements, agreements or understandings by contract or by law with respect to the Loan Certificate or the Lender's rights and obligations under the Loan Agreement between or among the Lender and any party to any Operative Document are set forth in the Operative Documents. SECTION 4. CLOSING CONDITIONS The obligations of the Owner Participant, RMLC, the Co-Trustee, the Owner Trustee, the Lender and Oglethorpe to consummate the transactions contemplated hereby on the Closing Date shall be subject to the following conditions, except that the obligations of any Person shall not be subject to such Person's own performance or compliance. Section 4.1. Operative Documents. On or before the Closing Date, each of the Operative Documents to be delivered at the Closing shall have been duly authorized, executed and delivered by the parties thereto in substantially the form attached as an Exhibit hereto, shall each be in full force and effect, and executed counterparts of each shall have been delivered to each of the parties hereto. Section 4.2. Equity Investment; Loan. The Owner Participant shall have made the Equity Investment and the Lender shall have made its Loan available to the Trustees at the place and in the manner contemplated by Section 2. Section 4.3. Equity Collateral. (a) RMLC shall have purchased the AIG Equity Funding Agreement from AIG and delivered it to the Owner Trustee and AIG shall have delivered such certificates and opinions as the Owner Participant shall reasonably request. (b) Oglethorpe shall have obtained a Qualifying Sublease Surety Bond meeting the applicable requirements of Section 8.5 and a Qualifying Head Lease Surety Bond meeting the 21 requirements of Section 8.6, from AMBAC, AMBAC shall have delivered such certificates and opinions as the Owner Participant shall reasonably request, and the Head Lease Surety Bond shall have been delivered to the Owner Participant and the Sublease Surety Bond shall have been delivered to the Co-Trustee as assignee of RMLC. Section 4.4. Payment Undertaking. The Payment Undertaking Issuer shall have received the Undertaking Fee under the Payment Undertaking Agreement and pledged its right, title and interest, if any, under the Payment Undertaking Agreement to the Owner Trustee pursuant to the Payment Undertaking Pledge Agreement. Section 4.5. Certified Copies. The Owner Participant, the Co-Trustee, the Owner Trustee and the Lender shall have received copies certified by the Secretary of Oglethorpe of the Rocky Mountain Agreements, the RUS Loan Contract and the Oglethorpe Mortgage, the Proposed Indenture, and all amendments and supplements to each thereof. Section 4.6. Corporate Documents. Each of the parties hereto shall have received certified copies of the by-laws and organizational documents of each of the other parties hereto (other than from the Lender) and resolutions of the Board of Directors of each such other corporate party duly authorizing the transaction and such documents and such evidence as each party may reasonably request in order to establish the authority of each such other party to consummate the transactions contemplated by this Agreement, the taking of all corporate and other proceedings in connection therewith and compliance with the conditions herein or therein set forth and the incumbency of all officers signing any of the Operative Documents. Each of the foregoing documents shall be reasonably satisfactory to the recipient. Section 4.7. No Defaults. No Event of Default, Sublease Event of Default, Event of Loss or event that with the passage of time or giving of notice or both would constitute an Event of Default, a Sublease Event of Default or an Event of Loss shall have occurred and be continuing; and no event of default or event that with the passage of time or giving of notice or both would constitute an event of default under the Oglethorpe Mortgage shall have occurred and be continuing. Section 4.8. No Threatened Proceedings. No action, suit, investigation or proceeding shall have been instituted nor shall governmental action be threatened before any Governmental Entity, nor shall any order, judgment or decree have been issued or proposed to be issued by any Governmental Entity at the time of the Closing Date, to set aside, restrain, enjoin or prevent the consummation of the Operative Documents or any of the transactions contemplated by any of the Operative Documents. Section 4.9. Consents. The Intercreditor Agreement, the Partial Release of Security Interest and the Georgia Power Consent shall have been duly obtained and shall be in full force and effect and in the form and substance satisfactory to the Owner Participant, the Co-Trustee, Oglethorpe, RMLC, the Owner Trustee and the Lender; and the Owner Participant, the 22 Co-Trustee, Oglethorpe, RMLC, the Owner Trustee and the Lender shall have received a copy of such approval or consent certified by the applicable Transaction Party. Section 4.10. Governmental Actions. All actions, if any, required to have been taken by any Governmental Entity on or prior to the Closing Date in connection with the transactions contemplated by any Operative Documents on the Closing Date (including, without limitation, the Georgia Commission Order, the RUS Consent, the FERC Order and the SEC No-action Letter) shall have been taken and all orders, permits, waivers, exemptions, authorizations and approvals of and registrations with such Governmental Entities required to be in effect on the Closing Date in connection with the transactions contemplated by the Operative Documents on the Closing Date shall have been issued; and all such orders, permits, waivers, exemptions, authorizations and approvals shall be in full force and effect on the Closing Date; and the Owner Participant, the Owner Trustee, the Co-Trustee, Oglethorpe, RMLC and the Lender shall have received a copy of any such order, permit, waiver, exemption, authorization or approval. Section 4.11. Insurance. Insurance (including all related endorsements) complying with the requirements of Section 11 of the Facility Lease and Section 11 of the Facility Sublease shall be in full force and effect and all premiums thereon shall be current. The Owner Participant, the Owner Trustee, the Co-Trustee, the Lender and the RMLC shall have received a certificate or certificates dated the Closing Date of AEGIS Insurance Service Ltd., Arkwright Mutual Insurance Company and Aon Risk Services or an independent insurance broker or carrier reasonably satisfactory to such Persons stating that such insurance is in full force and effect. Section 4.12. Engineering Report. Each such Person shall have received, on or before the Closing Date, a final copy of the Engineering Report prepared by the Engineer and the Environmental Report prepared by Dames & Moore, each reasonably acceptable in form and substance to the Owner Participant and, in the case of the Environmental Report, the Lender. Section 4.13. Survey. The Owner Participant, the Owner Trustee, the Co-Trustee and the Lender shall have received a survey of the Rocky Mountain Site in form reasonably satisfactory to each of them. Section 4.14. Appraisal. The Owner Participant shall have received the Appraisal prepared by the Appraiser, reasonably satisfactory in form and substance to the Owner Participant; and the Lender and Oglethorpe shall each have received a letter in form and substance reasonably satisfactory to the Lender and Oglethorpe, respectively, from the Appraiser as to the fair market value of the Facility Lessor's Rocky Mountain Interest on the Closing Date and such other matters as either may reasonably request prior to closing. Section 4.15. Investment Banking Opinion. The Owner Participant shall have received a satisfactory opinion of Smith Barney Inc. or another investment banking firm reasonably acceptable to the Owner Participant as to (a) the market rate nature of the interest rate on the Loan Certificates and the Reset Interest Rate for the Loan Certificates, (b) the commercial feasibility 23 of refinancing the Loan on the Expiration Date, (c) the commercial reasonableness and market rate on the Payment Undertaking Agreement, (d) the commercial feasibility of Facility Lessee substituting other collateral for the Payment Undertaking Agreement in accordance with the terms of the Operative Documents and (e) such other matters as the Owner Participant shall reasonably request. Section 4.16. Opinion with Respect to Certain Tax Aspects. The Owner Participant shall have received the opinion, dated the Closing Date, of Hunton & Williams addressed to the Owner Participant, in form and substance satisfactory to the Owner Participant, containing such counsel's favorable opinion with respect to the federal income tax aspects of the transactions contemplated hereby. Section 4.17. Opinion of Counsel. Oglethorpe, RMLC, the Co-Trustee, the Owner Trustee, the Owner Participant, the Lender, AMBAC and the RUS shall each have received an opinion, dated the Closing Date, of (i) Orrick, Herrington & Sutcliffe LLP, New York counsel to Oglethorpe and RMLC, (ii) Sutherland, Asbill & Brennan, L.L.P., Georgia counsel to Oglethorpe and RMLC, (iii) in-house legal counsel to the Owner Participant, (iv) Hunton & Williams, New York counsel to the Owner Participant, (v) Hunton & Williams, Georgia counsel to the Owner Participant and the Lender, (vi) Davis Polk & Wardwell, New York counsel to the Bank and the Lender, (vii) Guillermo G. Bilbao, General Counsel for the Bank and the Lender, (viii) DeBrauw, Blackstone & Westbroek, Dutch counsel to the Bank, (ix) O'Melveny & Myers, counsel to AIG and American International Group, (x) in-house legal counsel to AMBAC, (xi) King & Spalding, counsel to the Co-Trustee and (xii) Shipman & Goodwin LLP, counsel to the Owner Trustee addressed to and in form and substance reasonably acceptable to such Person. Each such Person expressly consents to the rendering by its counsel of the opinion referred to in this Section 4.17 and acknowledges that such opinion shall be deemed to be rendered at the request and upon the instructions of such Person, each of whom has consulted with and has been advised by its counsel as to the consequences of such request, instructions and consent. Section 4.18. Recordings and Filings. All filings and recordings listed on Schedule 2 hereto shall have been duly made and all filing, recordation, transfer and other fees payable in connection therewith shall have been paid; and the filing of all precautionary financing statements under the Uniform Commercial Code of Georgia and any other mortgages, security agreements or other documents as may be reasonably requested by counsel to the Owner Participant, or the Lender to perfect the right, title and interest of the Facility Lessor in the Facility Lessor's Rocky Mountain Interest or any part thereof or interest therein, to perfect the right, title and interest of the Facility Sublessor in the Facility Sublessor's Rocky Mountain Interest or any part thereof or interest therein and the Lien of the Lender in the Collateral, shall have been made. 24 Section 4.19. Actions of Governmental Entity. No action or proceeding shall be pending nor shall any action be threatened before any court or Governmental Entity, nor shall any order, judgment or decree have been issued by any court or Governmental Entity at the time of the Closing Date, to set aside, restrain, enjoin or prevent the completion and consummation of the Operative Documents or any of the transactions contemplated by any of the Operative Documents. Section 4.20. Taxes. All Taxes, if any, due and payable by Oglethorpe or RMLC on or before the Closing Date in connection with the execution, delivery, recording and filing of this Agreement or any other Operative Document, or any document or instrument contemplated thereby shall have been duly paid in full. Section 4.21. No Changes in Applicable Law. No change shall have occurred in Applicable Law or the interpretation thereof by any competent court or other Governmental Entity that would make it illegal for Oglethorpe, RMLC, the Trustees, the Owner Participant or the Lender to participate in any of the transactions contemplated by the Operative Documents. Section 4.22. No Right to Burdensome Buyout. No event or condition described in paragraph (a), (b) or (c) of Section 13.1 of the Facility Lease shall have occurred and be continuing. Section 4.23. No Change in Tax Law. No change or proposed change in federal, state or local tax law shall have occurred on or prior to the Closing Date which could adversely affect the Owner Participant in relation to the transactions contemplated by the Operative Documents. Section 4.24. Registered Agent for RMLC and Oglethorpe. CT Corporation System shall have been appointed by RMLC and Oglethorpe as registered agent for service of process in the State of New York as provided in the Operative Documents and CT Corporation System shall have accepted such appointment. SECTION 5. COVENANTS OF THE OWNER PARTICIPANT Section 5.1. Restrictions on Transfer of Beneficial Interest. (a) The Owner Participant covenants and agrees that, except as otherwise permitted by Section 16, it shall not during the Facility Lease Term assign, convey or transfer any of its right, title or interest in the Beneficial Interest without the prior written consent, so long as no Event of Default has occurred and is continuing, of RMLC and, so long as no Sublease Event of Default has occurred and is continuing, of Oglethorpe and, so long as the Loan is outstanding, of the Lender and, so long as any OPC Secured Obligations (as defined in the Intercreditor Agreement) are outstanding and secured by the Oglethorpe Mortgage, of the RUS; provided, however, that the Owner Participant may not assign, convey or transfer its Beneficial Interest so as to cause there to exist more than two "Owner Participants" in respect of the Undivided Interest; and provided, further, that the Owner Participant may assign, convey or transfer all or a portion of its interest in the Beneficial 25 Interest without such consent to a Person (the "Transferee") which shall assume the duties and obligations of the Owner Participant under the Operative Documents with respect to the interest being transferred pursuant to an Assumption Agreement substantially in the form of Exhibit T hereto, which Transferee shall be either (i) an Affiliate of the Owner Participant which is a "United States person" within the meaning of Section 7701(a)(30) of the Code and which does not otherwise qualify under clause (ii) below, provided that all of the payment and performance obligations of the Transferee with respect to the interest being transferred under the Operative Documents shall be guaranteed by Owner Participant pursuant to a guaranty substantially in the form of Exhibit U hereto or (ii) a Person which meets, or the payment and performance obligations of which with respect to the interest being transferred under the Operative Documents are guaranteed (pursuant to a guaranty substantially in the form of Exhibit U hereto) by the Owner Participant (or such other guarantor, the "Guarantor") which meets, the following criteria: (A) the net worth of the Transferee or Guarantor and each general partner thereof, if any, is at least equal to $75 million calculated in accordance with GAAP; (B) each of the Transferee and any Guarantor is a financial institution, corporation or a partnership all of whose partners are corporations; (C) the Transferee is a "United States person" within the meaning of Section 7701(a)(30) of the Code; (D) unless waived by Oglethorpe, such Transferee is not a direct competitor of Oglethorpe or its members. For purposes of the preceding sentence a "direct competitor of Oglethorpe or its members" shall mean an entity which, or an Affiliate of which, at the time of such transfer is significantly involved as a seller of capacity and energy at wholesale or retail within the service territory of Oglethorpe's members. If a Bankruptcy Default, Payment Default or Event of Default shall have occurred and be continuing, the restrictions in this Section 5.1 shall not apply for the benefit of RMLC. If a Sublease Bankruptcy Default, Sublease Payment Default or Sublease Event of Default shall have occurred and be continuing the restrictions in this Section 5.1 shall not apply for the benefit of Oglethorpe. The Owner Participant covenants and agrees to comply with the provisions of Section 5.3 of the Georgia Power Consent. The parties hereby acknowledge the right of AMBAC to purchase the Beneficial Interest in accordance with the provisions of the AMBAC Assignment Agreement. Notwithstanding such acknowledgment, AMBAC must meet the requirements of a permitted Transferee under this Section 5.1 to exercise such rights. (b) The Owner Participant shall give Oglethorpe, RMLC and the Lender 30 days prior written notice of such transfer, or 10 days in the case of a transfer to an Affiliate of the Owner Participant, specifying the name and address of any proposed Transferee and such additional information as shall be necessary to determine whether the proposed transfer satisfies the requirements of this Section 5.1. If requested by the Owner Participant, Oglethorpe, RMLC and the Lender will acknowledge qualifying transfers. All reasonable fees, expenses and charges of the Lender, RMLC and Oglethorpe (including reasonable attorneys' fees and expenses in connection with any such transfer (or proposed transfer), including any of the foregoing relating to any amendments to the Operative Documents required in connection therewith, shall be paid by the Owner Participant, without any right of indemnification from RMLC, Oglethorpe or any other Person; provided, however, that the Owner Participant shall have no obligation to pay such fees, expenses or charges as a result of any transfer while a Sublease Event of Default is 26 continuing, in which case Oglethorpe shall be obligated to pay such costs and provided, further, that the Owner Participant shall have no obligation to pay such fees, expenses or charges as a result of any transfer while an Event of Default is continuing, in which case RMLC shall be obligated to pay such costs. RMLC shall pay all such fees, expenses or charges of Oglethorpe as a result of any transfer if an Event of Default is continuing and no Sublease Event of Default is continuing and the Owner Participant shall have no obligation in respect thereof. (c) Upon any such transfer in compliance with this Section 5.1, (i) such Transferee shall be deemed the "Owner Participant" for all purposes, and shall enjoy the rights and privileges and perform the obligations of the Owner Participant hereunder and under the Assumption Agreement, the Guaranty and each other Operative Document to which such Owner Participant is a party, and each reference in this Agreement, the Assumption Agreement, the Guaranty and each other Operative Document to the "Owner Participant" shall thereafter be deemed to include such Transferee for all purposes and (ii) the transferor Owner Participant and the Guarantor, if any, of such transferor Owner Participant's obligations shall be released from all obligations hereunder and under each other Operative Document to which such transferor or Guarantor is a party or by which such transferor Owner Participant or Guarantor is bound to the extent such obligations are expressly assumed by a Transferee; provided, however, that in no event shall any such transfer waive or release the transferor or its Guarantor from any liability existing immediately prior to or occurring simultaneously with such transfer. Section 5.2. Owner Participant's Liens. The Owner Participant covenants that it will not directly or indirectly create, incur, assume or suffer to exist any Owner Participant's Lien and the Owner Participant shall promptly notify RMLC, Oglethorpe and the Lender of the imposition of any such Lien of which the Owner Participant has Actual Knowledge and shall promptly, at its own expense, take such action as may be necessary to duly discharge such Owner Participant's Lien. Section 5.3. Amendments or Revocation of Trust Agreement. The Owner Participant covenants that it will not (i) amend, supplement, or otherwise modify Section 9.01, Section 10.01 or Section 12.02 of the Trust Agreement (except as required by the Operative Documents or Applicable Law) without the prior written consent of RMLC so long as no Event of Default has occurred and is continuing, or Oglethorpe so long as no Sublease Event of Default has occurred and is continuing, or the Lender so long as the Loan is outstanding, in any manner that would have a material adverse effect upon the rights of Oglethorpe, RMLC or the Lender or (ii) revoke, or otherwise waive compliance with or terminate the Trust Agreement without the prior written consent of RMLC so long as no Event of Default has occurred and is continuing, or Oglethorpe so long as no Sublease Event of Default has occurred and is continuing, or the Lender so long as the Loan is outstanding, and so long as OPC Secured Obligations (as defined in the Intercreditor Agreement) are outstanding and secured by the Oglethorpe Mortgage, the RUS. Section 5.4. Bankruptcy Filings. The Owner Participant agrees that it will not file a petition, or join in the filing of a petition, seeking reorganization, arrangement, adjustment or 27 composition of, or in respect of, RMLC or the Owner Trust under the Bankruptcy Code, or any other applicable Federal or state law or the law of the District of Columbia. Section 5.5. Instructions. The Owner Participant agrees that it will not instruct the Co-Trustee or the Owner Trustee to take any action prohibited by this Agreement or any other Operative Document. SECTION 6. COVENANTS OF THE GEORGIA TRUST COMPANY AND THE CO-TRUSTEE Section 6.1. Compliance with the Trust Agreement. The Georgia Trust Company and the Co-Trustee each hereby severally covenants and agrees that it will comply with all of the terms of the Trust Agreement applicable to it. Section 6.2. Facility Lessor's Liens. The Georgia Trust Company covenants that neither it nor the Co-Trustee will directly or indirectly create, incur, assume or suffer to exist any Facility Lessor's Lien attributable to it and will promptly notify RMLC, Oglethorpe, the Owner Participant and the Lender of the imposition of any such Lien of which it has Actual Knowledge and shall promptly, at its own expense, take such action as may be necessary to duly discharge such Facility Lessor's Lien attributable to it; provided, however, that the Georgia Trust Company and the Co-Trustee may, in good faith and by appropriate proceedings diligently conducted, contest the validity or application of any such Lien in any reasonable manner (a) which does not involve any danger of (i) foreclosure, sale, forfeiture or loss of, or imposition of a Lien on, any part of the Facility, the Rocky Mountain Site or Trust Estate or the impairment of the Facility, the Rocky Mountain Site or the Trust Estate in any material respect or (ii) any criminal liability being incurred or any material adverse effect on the Facility Lessor, the Owner Participant, Oglethorpe, RMLC or the Lender (in each case in the reasonable opinion of such Person), or (iii) the loss of the perfected security interest of the Lender in the Collateral and (b) so long as the existence of any such Lien on the Facility, the Rocky Mountain Site or the Assigned Rocky Mountain Interests is permitted by the Oglethorpe Mortgage. Section 6.3. Amendments to Loan Agreement, the Deed to Secure Debt and Loan Certificate. The Co-Trustee and the Georgia Trust Company each covenants that it will not unless such action is directed in writing by the Owner Trustee or the Owner Participant, (i) through its own action terminate any Operative Document to which it is a party, or (ii) amend, supplement, waive or modify (or consent to any such amendment, supplement, waiver or modification) of any Operative Document to which it is a party. Section 6.4. Transfer of the Facility Lessor's Rocky Mountain Interest. Other than as contemplated by the Operative Documents, and except as directed in writing by the Owner Trustee or the Owner Participant, the Co-Trustee covenants that it will not assign, pledge, convey or 28 transfer any of its then existing right, title or interest in and to the Facility Lessor's Rocky Mountain Interest, the Trust Estate or the other Operative Documents. Section 6.5. Bankruptcy Filings. The Georgia Trust Company agrees that neither it nor the Co-Trustee will file a petition, or join in the filing of a petition, seeking reorganization, arrangement, adjustment or composition of, or in respect of, RMLC under the Bankruptcy Code, or any other applicable Federal or state law or the law of the District of Columbia. Section 6.6. Limitation on Indebtedness and Actions. The Co-Trustee covenants that it will not incur any indebtedness nor enter into any business or activity except as required or expressly permitted or contemplated by any Operative Document. Section 6.7. Change of Location. The Co-Trustee agrees to give the Owner Participant, RMLC, Oglethorpe and the Lender 30 days' written notice of any relocation of the Co-Trustee's chief executive office or the place where documents and records relating to the Co-Trustee or the Trust Estate are kept from the location set forth in Section 3.1(j) and of any change in its name. Section 6.8. Releases Pursuant to Section 4.2 of the Ground Lease. Without limiting or conditioning in any manner the Ground Lessor's Release Rights, the Co-Trustee, as Ground Lessee, hereby expressly agrees from time to time to execute and deliver to Oglethorpe, as Ground Lessor, in sufficient form to permit recordation in the real property records of the Clerk of Superior Court of Floyd County, Georgia, within thirty (30) days after the effectiveness of written notice from the Owner Trustee requesting the same and the delivery of an Officer's Certificate as contemplated by Section 4.2 of the Ground Lease, a quitclaim deed releasing from the effect of the Ground Lease any Released Property described in such Officer's Certificate together with any other documentation Oglethorpe reasonably deems necessary to effectuate any sale, grant, release, lease or conveyance provided for in Section 4.2 of the Ground Lease. Section 6.9. Transfers of Interest in Payment Undertaking Agreement. The Co-Trustee may not transfer, assign, pledge, repledge or otherwise dispose of, or grant any option, participation or interest in, with respect to or measured by, or any proceeds with respect to the rights of the Co-Trustee as a beneficiary under the Payment Undertaking Agreement to any Person other than the Lender pursuant to the Loan Agreement or to any transferee of all or an undivided interest (and only to the extent of such undivided interest) in all of Co-Trustee's right, title and interest in the Operative Documents, except as directed in writing by the Owner Trustee or the Owner Participant. SECTION 7. COVENANTS OF THE NON-GEORGIA TRUST COMPANY AND THE OWNER TRUSTEE Section 7.1. Compliance with the Trust Agreement. The Non-Georgia Trust Company and the Owner Trustee each hereby severally covenants and agrees that it will: 29 (a) comply with all of the terms of the Trust Agreement applicable to it; and (b) Subject to the Trust Agreement, not amend, supplement, or otherwise modify Section 9.01, Section 10.01 or Section 12.02 of the Trust Agreement (except as required by the Operative Documents or Applicable Law) in any manner that would have an effect upon the rights of Oglethorpe or RMLC without the prior written consent of RMLC so long as no Event of Default has occurred and is continuing, or Oglethorpe so long as no Sublease Event of Default or Head Lessor Event of Default has occurred and is continuing. Section 7.2. Facility Lessor's Liens. The Non-Georgia Trust Company covenants that neither it nor the Owner Trustee will directly or indirectly create, incur, assume or suffer to exist any Facility Lessor's Lien attributable to it and will promptly notify RMLC, Oglethorpe, the Owner Participant and the Lender of the imposition of any such Lien of which it has Actual Knowledge and shall promptly, at its own expense, take such action as may be necessary to duly discharge such Facility Lessor's Lien attributable to it; provided, however, that the Non-Georgia Trust Company and the Owner Trustee may, in good faith and by appropriate proceedings diligently conducted, contest the validity or application of any such Lien in any reasonable manner (a) which does not involve any danger of (i) foreclosure, sale, forfeiture or loss of, or imposition of another Lien on, any part of the Facility, the Rocky Mountain Site or the Trust Estate or the impairment of the Facility, the Rocky Mountain Site or the Trust Estate in any material respect or (ii) any criminal liability being incurred or any material adverse effect on the Facility Lessor, the Owner Participant, Oglethorpe, RMLC or the Lender (in each case in the reasonable opinion of such Person), or (iii) the loss of the perfected security interest of the Lender in the Collateral and (b) so long as the existence of any such Lien on the Facility, the Rocky Mountain Site or the Assigned Rocky Mountain Interests is permitted by the Oglethorpe Mortgage. Section 7.3. Amendments to Loan Agreement, the Deed to Secure Debt and Loan Certificate. Subject to the Trust Agreement, the Owner Trustee and the Non-Georgia Trust Company each covenants that it will not unless such action is expressly contemplated by the Operative Documents (i) through its own action terminate the Loan Agreement, the Deed to Secure Debt or the Loan Certificate, (ii) amend, supplement, waive or modify (or consent to any such amendment, supplement, waiver or modification) the Loan Agreement, the Deed to Secure Debt or the Loan Certificate in any manner that would have an adverse effect upon the rights of Oglethorpe or RMLC or (iii) take any action to prepay or refund the Loan Certificate or amend any of the payment terms of the Loan Certificate without, in each case, the prior written consent of RMLC so long as no Event of Default shall have occurred and be continuing or Oglethorpe so long as no Head Lessor Event of Default or Sublease Event of Default shall have occurred and be continuing. Section 7.4. Transfer of the Facility Lessor's Rocky Mountain Interest. Other than as contemplated by the Operative Documents, the Owner Trustee covenants that it will not assign, pledge, convey or transfer any of its then existing right, title or interest in and to the Facility Lessor's Rocky Mountain Interest, the Trust Estate or the other Operative Documents. Nothing 30 in this Section 7.4 shall limit the ability of the Owner Trustee to appoint a successor Owner Trustee pursuant to Section 9.06 of the Trust Agreement. Section 7.5. Bankruptcy Filings. The Non-Georgia Trust Company agrees that neither it nor the Owner Trustee will file a petition, or join in the filing of a petition seeking reorganization, arrangement, adjustment or composition of, or in respect of, RMLC under the Bankruptcy Code, or any other applicable Federal or state law or the law of the District of Columbia. Section 7.6. Limitation on Indebtedness and Actions. The Owner Trustee covenants that it will not incur any indebtedness nor enter into any business or activity except as required or expressly permitted or contemplated by any Operative Document. Section 7.7. Change of Location. The Owner Trustee shall use its best efforts to give the Owner Participant, RMLC, Oglethorpe and the Lender 30 days' written notice of any relocation of the Owner Trustee's chief executive office or the place where documents and records relating to the Owner Trustee or the Trust Estate are kept from the location set forth in Section 3.1(j) and of any change in its name, but in any event the Owner Trustee shall give such notice within 30 days after such relocation or name change. Section 7.8. Transfers of Interest in Payment Undertaking Agreement. The Owner Trustee may not transfer, assign, pledge, repledge or otherwise dispose of, or grant any option, participation or interest in, with respect to or measured by, or any proceeds with respect to, the rights of the Owner Trustee as a beneficiary under the Payment Undertaking Agreement to any Person other than the Lender pursuant to the Loan Agreement or to any transferee of all or an undivided interest (and only to the extent of such undivided interest) in all of Owner Trustee's right, title and interest in the Operative Documents. SECTION 8. COVENANTS OF OGLETHORPE Section 8.1. Maintenance of Corporate Existence. Except as permitted by Section 8.2, Oglethorpe will at all times maintain its existence as an electric membership corporation in good standing under the laws of the State of Georgia, and Oglethorpe will remain qualified to do business in any state in which the conduct of its business or the ownership or leasing of assets used in its business requires such qualification and where the failure to be so qualified would have a material adverse effect on the operations, business, properties, assets or condition of Oglethorpe and its subsidiaries taken as a whole. 31 Section 8.2. Merger, Consolidation, Sale of Assets. Oglethorpe covenants and agrees as follows: (a) Oglethorpe will not consolidate with or merge into any other Person, or sell, transfer or otherwise dispose of, all or substantially all of its assets to any Person or Persons in one or a series of transactions, unless immediately after giving effect to such transaction: (i) no Head Lessor Event of Default, Sublease Payment Default, Sublease Bankruptcy Default or Sublease Event of Default shall have occurred and be continuing; (ii) the entity resulting from such consolidation, surviving in such merger or succeeding to such assets, if other than Oglethorpe, shall be organized under the laws of the United States, any state thereof or the District of Columbia; (iii) such resulting, surviving or succeeding entity, if other than Oglethorpe, shall execute and deliver to the Co-Trustee, the Owner Trustee, RMLC, the Owner Participant and the Lender at least 30 days prior to such proposal a valid and enforceable assumption agreement in form and substance reasonably satisfactory to each of such parties, by such entity of all of Oglethorpe's obligations under this Participation Agreement and each other Transaction Document to which Oglethorpe is then a party, together with an opinion of counsel acceptable to the Owner Participant, the Trustees, RMLC and the Lender to the effect that the proposed merger, consolidation or sale complies with this Section 8.2 and that the assumption agreement is valid, binding and enforceable in accordance with its terms; (iv) no event of default under the Oglethorpe Mortgage, the RUS Loan Contract or the Rocky Mountain Agreements shall have occurred and be continuing; and (v) unless the Oglethorpe Mortgage Bonds which are then rated shall be rated at least "investment grade" by Moody's and S&P, both immediately prior to and subsequent to such consolidation, merger or sale, the net worth of the surviving entity, calculated in accordance with GAAP, shall not be less than the net worth of Oglethorpe immediately prior to such consolidation, merger or sale. (b) Upon the consummation of such transaction described in Section 8.2(a), the surviving entity, if other than Oglethorpe, shall succeed to, and be substituted for, and may exercise every right and power and shall perform every obligation of, Oglethorpe under this Participation Agreement and each other Transaction Document to which Oglethorpe was a party immediately prior to such transaction, with the same effect as if such entity had been named herein and therein. Nothing contained herein shall permit any sublease, assignment or other arrangement for the use, operation or possession of the Undivided Interest except in compliance with the applicable provisions of the Facility Sublease. Oglethorpe will pay the reasonable costs and expenses of the 32 Owner Participant, the Trustees, RMLC and the Lender in connection with any transaction contemplated by this Section 8.2. Section 8.3. Notice of Change in Address or Name. Oglethorpe will provide the Co-Trustee, the Owner Trustee, the Owner Participant, RMLC and the Lender with 30 days' prior written notice of any change in its chief executive office, its principal place of business, its name or the place where Oglethorpe maintains its business records. Section 8.4. Delivery of Financial Statements; No Default Certificate; Notice of Negotiations. (a) Oglethorpe will deliver to the Owner Participant, RMLC, the Co-Trustee, the Owner Trustee, and, so long as the Loan is outstanding, the Lender, as soon as practicable after the end of each fiscal year but in no event later than 145 days after the end of such year, its annual report on Form 10-K filed by Oglethorpe with the SEC or if not so filed, such other annual report, including an audited balance sheet of Oglethorpe as at the end of such fiscal year and the related statements of revenue and expenses, patronage capital, and cash flows for the year then ended, together with the report with respect thereto of Coopers & Lybrand L.L.P. or other independent public accountants of nationally reorganized standing all in reasonable detail and prepared in accordance with GAAP on a consistent basis, and an Officer's Certificate of Oglethorpe stating that (i) the signer has made, or caused to be made under its supervision, a review of this Agreement and the other Operative Documents; (ii) such review has not disclosed the existence during such fiscal year (and the signer does not have knowledge of the existence as of the date of such certificate) of any condition or event constituting a Head Lessor Default or Head Lessor Event of Default, a Sublease Default, a Sublease Event of Default or an Event of Loss or, if any such condition or event existed or exists, specifying the nature thereof, the period of existence thereof and what action Oglethorpe has taken or proposes to take with respect thereto, and (iii) Oglethorpe has fully observed the operating strictures set forth in the Non-consolidation Opinion. (b) Oglethorpe will deliver to the Owner Participant, RMLC, the Owner Trustee, the Co-Trustee and, so long as the Loan is outstanding, the Lender, (i) as soon as reasonably practicable after the end of each fiscal quarter but in no event later than 45 days after the end of such quarter, a copy of the Form 10-Q filed by Oglethorpe with the Securities and Exchange Commission or if not so filed, such other quarterly audited or unaudited report as Oglethorpe shall distribute to the holders of the Oglethorpe Mortgage Bonds. (c) In addition to the Officer's Certificate referred to in Section 8.4(a) above, upon any Responsible Officer of Oglethorpe having Actual Knowledge of a condition or circumstance that constitutes a Head Lessor Default, Head Lessor Event of Default, a Sublease Default or Sublease Event of Default, Oglethorpe shall report such condition or circumstance to the Owner Participant and RMLC, promptly but in no event later than 10 Business Days after such Actual Knowledge. (d) Oglethorpe will provide the Owner Participant, the Lender and RMLC with prompt notice of the commencement or request by RUS (or any other Person holding a claim 33 secured by the Lien of the Oglethorpe Mortgage) to commence any negotiations or discussions, or of any request or demand that Oglethorpe take any action in furtherance of, any settlement or "work-out". (e) When requested by the Owner Participant, the Lender or RMLC, Oglethorpe will promptly provide any such requesting entity with such financial or operating information as it shall reasonably request and which are routinely made available to creditors of Oglethorpe other than the RUS. Section 8.5. Qualifying Head Lease Surety Bond. At all times during the Facility Sublease Term, Oglethorpe shall, subject to the second sentence of this Section 8.5, maintain a Qualifying Head Lease Surety Bond. If (a) any Qualifying Head Lease Surety Bond (or any Qualifying Letter of Credit maintained pursuant to this Section 8.5) shall cease to be a Qualifying Head Lease Surety Bond (or a Qualifying Letter of Credit) or (b) Oglethorpe shall make a good faith determination that a significant possibility exists that the existing Qualifying Head Lease Surety Bond (or Qualifying Letter of Credit) will cease to be a Qualifying Sublease Surety Bond (or Qualifying Letter of Credit) or (c) with respect to the Qualifying Head Lease Surety Bond issued by AMBAC on the Closing Date, the Qualifying Surety Bond Provider shall be released from its obligations under the Qualifying Head Lease Surety Bond pursuant to Section 2 of the AMBAC Assignment Agreement, Oglethorpe shall, within 60 days of the earliest of (i) having Actual Knowledge of such fact (ii) reaching such good faith determination, (iii) receiving notice from the Owner Participant of such fact or (iv) such release, provide (w) a replacement Qualifying Head Lease Surety Bond, (x) a Qualifying Letter of Credit supporting Oglethorpe's obligations under Section 16 of the Head Lease and the Special Equity Head Lease Remedy having a maximum drawing amount from time to time equal to the Equity Exposure Amount, (y) other credit enhancement acceptable to the Owner Participant in its sole discretion or (z) a combination of the credit enhancements set forth in clause (w), (x) and (y); provided that Oglethorpe delivers a favorable opinion of counsel (such counsel and the form and substance of such opinion to be reasonably satisfactory to the Owner Participant) covering the matters and to the same effect as set forth in the opinion of counsel to AMBAC rendered in connection with the Qualifying Head Lease Surety Bond issued by AMBAC on the Closing Date in respect of the replacement Qualifying Head Lease Surety Bond or Qualifying Letter of Credit. Section 8.6. Qualifying Sublease Surety Bond. At all times during the Facility Sublease Term Oglethorpe shall, subject to the second sentence of this Section 8.6, maintain a Qualifying Sublease Surety Bond. If (a) any Qualifying Sublease Surety Bond (or any Qualifying Letter of Credit maintained pursuant to this Section 8.6) shall cease to be a Qualifying Sublease Surety Bond (or a Qualifying Letter of Credit) or (b) Oglethorpe shall make, a good faith determination that a significant possibility exists that the existing Qualifying Sublease Surety Bond (or Qualifying Letter of Credit) will cease to be a Qualifying Sublease Surety Bond (or Qualifying Letter of Credit) or (c) with respect to the Qualifying Sublease Surety Bond issued by AMBAC on the Closing Date, the Qualifying Surety Bond Provider shall be released from its obligations under the Qualifying Sublease Surety Bond pursuant to Section 2 of the AMBAC Assignment 34 Agreement, Oglethorpe shall, within 60 days of the earliest of (i) having Actual Knowledge of such fact, (ii) reaching such good faith determination, (iii) receiving notice from the Owner Participant or RMLC of such fact or (iv) such release, provide (w) a replacement Qualifying Sublease Surety Bond, (x) a Qualifying Letter of Credit supporting Oglethorpe's obligations under the Facility Sublease and the Special Equity Facility Lease Remedy having a maximum drawing amount from time to time equal to the Equity Exposure Amount, (y) other credit enhancement acceptable to the Owner Participant and RMLC in their sole discretion or (z) a combination of the credit enhancements set forth in clause (w), (x) or (y); provided that (a) Oglethorpe delivers a favorable opinion of counsel (such counsel and the form and substance of such opinion to be reasonably satisfactory to RMLC and the Owner Participant) covering the matters, and to the same effect, as set forth in the opinion of counsel to AMBAC in connection with the Qualifying Sublease Surety Bond issued by AMBAC on the Closing Date in respect of the replacement Qualifying Sublease Surety Bond or Qualifying Letter of Credit and (b) RMLC delivers a favorable opinion of such counsel (such counsel and the form and substance of such opinion to be reasonably satisfactory to the Owner Participant) regarding the existence of a valid and perfected first priority security interest in favor of the Facility Lessor and the Owner Participant in such Qualifying Sublease Surety Bond and the proceeds thereof or in such Qualifying Letter of Credit and the proceeds thereof, as the case may be, to secure the Facility Lessee's obligations under the Facility Lease and the Special Equity Facility Lease Remedy, respectively. Section 8.7. Qualifying Letter of Credit. Oglethorpe shall be permitted, from time to time, to replace any Qualifying Head Lease Surety Bond, Qualifying Sublease Surety Bond or Qualifying Letter of Credit issued when required by Section 8.5 or 8.6 or this Section 8.7 with a replacement Qualifying Letter of Credit meeting the criteria of Section 8.5 or Section 8.6, as the case may be satisfying the terms of the second sentence of this Section 8.7, provided that, if such Qualifying Letter of Credit shall be maintained pursuant to Section 8.6, a valid and perfected first priority security interest in favor of the Facility Lessor and the Owner Participant in such Qualifying Sublease Surety Bond and the proceeds thereof or the proceeds of such Qualifying Letter of Credit, shall be provided by RMLC; provided, further, that (x) Oglethorpe delivers a favorable opinion of counsel (such counsel and the form and substance of such opinion to be reasonably satisfactory to RMLC and the Owner Participant) regarding the validity and enforceability of such replacement Qualifying Letter of Credit and such other customary matters as the Owner Participant may reasonably request and (y) RMLC delivers a favorable opinion of counsel (such counsel and the form and substance of such opinion to be reasonably satisfactory to the Owner Participant) regarding the existence of such valid and perfected security interest in favor of the Facility Lessor and the Owner Participant. If a Qualifying Letter of Credit issued pursuant to Section 8.5 or 8.6 or this Section 8.7 shall have an expiry date prior to the Expiration Date, Oglethorpe shall extend such Qualifying Letter of Credit no less than 60 days prior to its expiry date or replace such Qualifying Letter of Credit no less than 60 days prior to such expiry date with a (i) replacement Qualifying Letter of Credit having a maximum drawing amount from time to time equal to the maximum drawing amounts under the Qualifying Letter of Credit being replaced, (ii) a Qualifying Head Lease Surety Bond or a Qualifying Sublease Surety Bond, meeting the requirements of Sections 8.5 and 8.6 hereof as the case may be, having a maximum 35 amount from time to time payable equal to the maximum drawing amount under the Qualifying Letter of Credit being replaced, (iii) other credit enhancement acceptable to the Owner Participant and RMLC in their sole discretion or (iv) a combination of (i), (ii) and (iii). Section 8.8. Qualifying Additional Security. By May 30th and November 30th of each year during the Facility Sublease Term, Oglethorpe will provide the Owner Participant and RMLC with a certificate of a Responsible Officer setting forth (a) a computation in accordance with GAAP as of a date no more than 60 days prior to May 30 or November 30, as the case may be, of Oglethorpe's then current assets minus its current liabilities, defined as the difference between (1) cash, marketable securities (including cash or marketable securities then held by consolidated subsidiaries of Oglethorpe to the extent they exceed the sum of claims against such consolidated subsidiaries not fully economically defeased), accounts receivable that are due and payable within 30 days of such computation and not overdue and lines of credit then available to pay current liabilities and (2) current liabilities due and payable or to be due and payable within 30 days of the date of such computation (the "Liquidity Amount"), (b) whether the Oglethorpe Mortgage Bonds are then rated at least mid-"B" investment grade ("BBB" by S&P, "Baa2" by Moody's and "BBB" by Fitch's) by at least two of such rating services and (c) whether its senior long-term unsecured indebtedness, if any and if rated, is then rated at least investment grade ("BBB-" by S&P, "Baa3" by Moody's, "BBB-" by Fitch's) by at least two of such rating services. If (x) as of such a date of computation set forth in any such certificate, the Liquidity Amount shall not equal or exceed $50,000,000 or (y) at any time the Oglethorpe Mortgage Bonds shall not be rated at least the above-described mid-"B" investment grade by at least two of such three rating services or (z) at any time the senior long-term unsecured indebtedness, if any and if rated, of Oglethorpe shall not be rated at least such above-described investment grade by at least two of such three rating services, Oglethorpe shall, within 60 days of the receipt of a request from the Owner Participant (with respect to Oglethorpe's obligations under the Head Lease) or RMLC (with respect to Oglethorpe's obligations under the Facility Sublease), provide additional security ("Qualifying Additional Security") for its obligations under the Head Lease and the Facility Sublease in accordance with this Section 8.8. Qualifying Additional Security shall consist of surety bonds issued by a Qualifying Surety Bond Provider or a Qualifying Letter of Credit in favor of the Co-Trustee and the Owner Participant (in the case of Qualifying Additional Security securing Oglethorpe's obligations under the Head Lease and the Special Equity Head Lease Remedy) and in favor of RMLC or the Owner Participant (in the case of Qualifying Additional Security securing Oglethorpe's obligations under the Facility Sublease), in each case payable or drawable in an amount equal to $50,000,000. Oglethorpe's obligation in this Section 8.8 may be satisfied by increasing the maximum amounts payable under the existing Qualifying Head Lease Surety Bond and Qualifying Sublease Surety Bond by $50,000,000 each. All Qualifying Additional Security shall be in form and substance, and accompanied by documentation and opinions, reasonably satisfactory to RMLC and the Owner Participant. Items of Qualifying Additional Security issued in favor of RMLC will be collaterally assigned to the Facility Lessor and the Owner Participant to the extent such Qualifying Additional Security secures obligations under the Facility Sublease. Oglethorpe shall replace any item of Qualifying Additional Security which shall cease to be "qualifying" in accordance with the above criteria required by this Section 36 8.8 with a "qualifying" item of Qualifying Additional Security within 60 days after the earlier of (1) having Actual Knowledge of such fact, (2) reaching a good faith determination that a significant possibility exists that the existing Qualifying Additional Security will cease to be a Qualifying Additional Security and (3) receiving notice from RMLC or the Owner Participant of such fact. Oglethorpe shall be obligated in keeping the Qualifying Additional Security in effect so long as (A) the certificates provided by Oglethorpe by each May 30 and November 30 demonstrate that the Liquidity Amount shall not equal or exceed $50,000,000 or (B) the Oglethorpe Mortgage Bonds shall not be rated at least mid-"B" investment grade by at least two of the three identified rating services as described above in clause (b) of this Section 8.8 or (C) Oglethorpe's senior long-term unsecured indebtedness, if any and if rated, shall not be rated at least such investment grade by two of the three identified ratings services as described above in clause (c) of this Section 8.8. Section 8.9. Public Utility Regulation. Oglethorpe agrees to cooperate with RMLC, the Owner Participant and the Trustees and to take reasonable measures to alleviate the source or consequence of any regulation constituting an Event of Loss described in paragraph (iv) of the definition thereof, at the cost and expense of RMLC. Section 8.10. Further Assurances. Oglethorpe, at its own cost, expense and liability, will cause to be promptly and duly taken, executed, acknowledged and delivered all such further acts, documents and assurances as may be necessary in order to carry out the intent and purposes of this Participation Agreement and the other Operative Documents, and the transactions contemplated hereby and thereby. Oglethorpe, at its own cost, expense and liability, will cause such financing statements and fixture filings (and continuation statements with respect thereto) as may be necessary and such other documents as the Owner Participant, RMLC, the Co-Trustee, the Owner Trustee or the Lender shall reasonably request to be recorded or filed at such places and times in such manner, and will take all such other actions or cause such actions to be taken, as may be necessary in order to establish, preserve, protect and perfect the right, title and interest of the (a) Facility Lessor in and to (i) the Undivided Interest under the Head Lease, the Ground Interest under the Ground Lease or any part of either thereof or interest therein and (ii) the Qualifying Head Lease Surety Bond or Qualifying Additional Security to the extent securing Oglethorpe's obligations under the Head Lease and Section 16 of the Participation Agreement and (b) RMLC in and to the Qualifying Sublease Surety Bond, Oglethorpe will record the Facility Lease and the Facility Sublease within 30 days after the Closing Date. Oglethorpe shall promptly from time to time furnish to the Owner Participant, the Co-Trustee, the Owner Trustee or the Lender such information with respect to the Facility, the Rocky Mountain Site or the transactions contemplated by the Operative Documents to which Oglethorpe is a party as may be required to enable the Owner Participant, the Co-Trustee or the Owner Trustee or the Lender, as the case may be, to timely file with any Governmental Entity any reports and obtain any licenses or permits required to be filed or obtained by the Owner Trustee or the Co-Trustee under any Operative Document or the Owner Participant as the owner of the Beneficial Interest or the Lender . 37 Section 8.11. Transfer of Stock of RMLC. Oglethorpe will not sell, transfer, assign or grant a Lien with respect to, or otherwise alienate or transfer any interest in, the stock of RMLC, or any part thereof, without the prior written consent of the Owner Participant and the Lender. Oglethorpe will not initiate or consent to any amendment to the certificate of incorporation or bylaws of RMLC without the prior written consent of the Owner Participant and the Lender. Section 8.12. Bankruptcy Filings. Oglethorpe agrees that it will not take any corporate steps, or file a petition, or join in the filing of a petition, seeking reorganization, arrangement, adjustment, liquidation or composition, or any other similar action, of, or in respect of, RMLC under the Bankruptcy Code, or any other applicable Federal or state law or the law of the District of Columbia. Section 8.13. Dividends by RMLC. Oglethorpe shall not cause RMLC to declare and pay any dividends, or make any other payment with respect to RMLC's capital stock, during the existence of any Default or Event of Default. Section 8.14. Separateness Principles. Oglethorpe will at all times observe the operating strictures set forth in, the Non-consolidation Opinion and the other bankruptcy opinions of Orrick, Herrington & Sutcliffe LLP rendered on the Closing Date. Oglethorpe will cause an independent third party, such as CT Corporation System, to manage RMLC pursuant to a management contract among Oglethorpe, the Trustees and such third party in compliance with the foregoing requirements of this Section and Section 9.9, hereof, the Non-Consolidation Opinion and the other bankruptcy opinions of Orrick, Herrington & Sutcliffe LLP rendered on the Closing Date. Section 8.15. FERC License. Oglethorpe will fully perform all its obligations or duties required under the FERC License during the Facility Sublease Term if failure to perform such obligations could have an adverse effect on the value, utility or useful life of the Facility or an adverse effect on the interests of the Transaction Parties in the Facility or the Rocky Mountain Site. Oglethorpe will perform on a timely basis, at its sole cost and expense, any obligations imposed on the Owner Trustee or the Co-Trustee as co-licensees under the FERC License, including any obligation to maintain any amortization reserve required under Article 45 of the FERC License to be maintained by either the Owner Trustee or the Co-Trustee. In the event any such amortization reserve, or any amortization reserve required to be maintained by Oglethorpe or RMLC, is used to reduce the "net investment" of the Owner Trustee or the Co-Trustee in the Undivided Interest or the "net investment" of Oglethorpe in the Rocky Mountain Site upon a government take over of the Facility or the award of a FERC License with respect to the Facility to a new license at the end of the term of the FERC License, Oglethorpe will pay the amount of such reductions to the Owner Participant upon written demand by the Owner Participant. Oglethorpe will also use its best efforts to cause a renewal of the FERC License for a period of not less than 17 years to inter alia Oglethorpe and the Co-Trustee upon expiration of the FERC License. 38 Section 8.16. Restriction on Undivided Interest Transfers. Oglethorpe will not assign, sell or otherwise transfer the Undivided Interest to any Person without the prior written consent of the Lender and the Owner Participant, including but not limited to taking action that would result in any conveyance, transfer, sale or auction referred to in Section 4 of the Intercreditor Agreement. The foregoing covenant shall not restrict Oglethorpe's ability to create a Permitted Lien on the Undivided Interest. Section 8.17. Offset of Ground Lease Rent. In the event the Facility Lessor is entitled by the terms of the Facility Lease to exercise remedies as a result of an Event of Default thereunder and any amounts remain unpaid to the Ground Lessee under the Facility Lease or any other Operative Document as a result of such Event of Default, payment of any amounts owed to the Ground Lessor by the Ground Lessee under the Ground Lease may, in the sole discretion of the Ground Lessee, be suspended until such time as all amounts of Sublease Rent due and owing under the Operative Documents to the Ground Lessee shall have been paid in full. Section 8.18. Amendment of Oglethorpe Mortgage. The Oglethorpe Mortgage will not be supplemented, modified, amended or otherwise altered in any manner that would, and no substitute or replacement mortgage, deed to secure debt, deed of trust, trust indenture or other security instrument executed and delivered in substitution for the then current instrument constituting the Oglethorpe Mortgage will, materially adversely affect Oglethorpe's or RMLC's ability to perform its obligations under any Transaction Document. No mortgage, deed to secure debt, deed of trust, trust indenture or other security instrument which constitutes the Oglethorpe Mortgage shall create a Lien on the property which is the subject of the Partial Release of Security Interest. Section 8.19. Notices Under Georgia Power Consent. Oglethorpe will promptly provide to the Trustees and the Lender a copy of all notices received by it or given by it under the Georgia Power Consent. Section 8.20. Tax Exempt Status. Neither Oglethorpe nor any Affiliate (other than RMLC) of Oglethorpe (i) has taken, will take or will cause to be taken, and Oglethorpe will not cause RMLC to take or cause to be taken, any action that would result in the ruling described in Section 3.4(jj) being revoked or otherwise modified or supplemented in a manner that would adversely affect the Owner Participant or (ii) otherwise has taken, will take or will cause to be taken any action that would cause RMLC or Oglethorpe to become a tax-exempt entity within the meaning of Section 168(h)(2) of the Code during the term of the Facility Lease or the Facility Sublease. If RMLC or Oglethorpe's status as a tax-exempt entity would adversely affect the Owner Participant. Oglethorpe shall notify the Owner Participant promptly of any information, facts or circumstances in respect of, or that could result in, any revocation, modification or supplement of or to such ruling. At the request of the Owner Participant, Oglethorpe will take or cause to be taken any action that the Owner Participant reasonably believes is necessary or appropriate to preserve the status of both Oglethorpe and RMLC as taxable entities if such action 39 is (i) of a purely ministerial nature or (ii) otherwise has no adverse affect on the business or operations of Oglethorpe or RMLC. SECTION 9. COVENANTS OF RMLC Section 9.1. Maintenance of Corporate Existence. RMLC will at all times maintain its existence as a corporation in good standing under the laws of the State of Delaware. Section 9.2. Merger, Consolidation, Sale of Assets. RMLC will not consolidate with or merge with or into, any other Person, or sell, transfer or, except, subject to Section 9.8 hereof, for the making of dividends to its shareholder in accordance with RMLC's normal dividend policy, otherwise dispose of, any of its assets to any Person. Section 9.3. No Participation in Any Other Business; No Incurrence of Additional Debt. RMLC covenants that it will not engage in any other business or activity other than that contemplated by the Operative Documents. RMLC will not incur any additional indebtedness, nor become obligated with respect to any agreements or obligations whatever, except those contemplated by the Operative Documents and except obligations in respect of RMLC's ordinary and necessary operating expenses incurred in the ordinary course of the business of RMLC consistent with the Operative Documents. Section 9.4. Notice of Change in Address or Name. RMLC will provide the Co-Trustee, the Owner Trustee, the Owner Participant, Oglethorpe and the Lender with 30 days' prior written notice of any change in its chief executive office, its principal place of business, its name or the place where RMLC maintains its business records. Section 9.5. Delivery of No Default Certificate. RMLC will deliver to the Owner Participant, Oglethorpe, the Co-Trustee, the Owner Trustee, and, so long as the Loan is outstanding, the Lender, as soon as practicable after the end of the fiscal year but in no event later than 145 days after the end of each fiscal year, an Officer's Certificate of RMLC stating that (1) the signer has made, or caused to be made under its supervision, a review of this Agreement and the other Operative Documents to which RMLC is then a party, (2) such review has not disclosed the existence during such fiscal year (and the signer does not have knowledge of the existence as of the date of such certificate) of any condition or event constituting a Default, an Event of Default or an Event of Loss or, if any such condition or event existed or exists, specifying the nature thereof, the period of existence thereof and what action RMLC has taken or proposes to take with respect thereto and (3) RMLC has fully observed the operating strictures set forth in the Non-consolidation Opinion. Section 9.6. Qualifying Equity Funding Agreement. On the Closing Date, RMLC has caused the AIG Equity Funding Agreement to be issued by AIG. The Owner Participant acknowledges that on the Closing Date, the AIG Equity Funding Agreement is a Qualifying 40 Equity Funding Agreement. Subject to the fourth sentence of this Section 9.6, at all times during the Facility Lease Term, RMLC shall maintain for the benefit of the Facility Lessor and the Owner Participant a Qualifying Equity Funding Agreement and will grant a first priority security interest in favor of the Facility Lessor and the Owner Participant with respect to the interest, if any, of RMLC in such Qualifying Equity Funding Agreement. If (a) any Qualifying Equity Funding Agreement maintained pursuant to this Section 9.6 shall cease to be a Qualifying Equity Funding Agreement or (b) RMLC shall make a good faith determination that a significant possibility exists that the existing Qualifying Equity Funding Agreement will cease to be a Qualifying Equity Funding Agreement, RMLC shall, within 60 days of the earliest of (i) having Actual Knowledge of such fact, (ii) reaching such a good faith determination or (iii) receiving notice from the Owner Participant of such fact, provide a replacement Qualifying Equity Funding Agreement and a first priority security interest with respect to the interest, if any, of RMLC in such Qualifying Equity Funding Agreement; provided that RMLC delivers a favorable opinion of counsel (such counsel and the form and substance of such opinion to be reasonably satisfactory to the Owner Participant) covering the matters, and to the same effect, as set forth in the opinion of counsel to AIG in connection with the issuance of the AIG Equity Funding Agreement on the Closing Date of such replacement Qualifying Equity Funding Agreement and the validity and perfection of the first priority security interest in favor of the Facility Lessor and the Owner Participant. Section 9.7. Public Utility Regulation. RMLC agrees to cooperate with the Owner Participant, Oglethorpe, the Owner Trustee and the Co-Trustee and to take reasonable measures to alleviate the source or consequence of any regulation constituting an Event of Loss described in paragraph (iv) of the definition thereof, at RMLC's cost and expense. Section 9.8. Payment of Dividends. RMLC will not declare or pay any dividends or make any other distributions in respect of its common stock at such time as a Default or Event of Default shall have occurred and be continuing or RMLC is insolvent. Section 9.9. Operation of RMLC; Annual Certificate. RMLC will conduct its operations in accordance with the following provisions: (a) RMLC will not commingle its assets or business functions with the assets or business functions of Oglethorpe, any other Oglethorpe Affiliate or any other Person. RMLC will maintain bank accounts and funds separately from those of Oglethorpe or any other Affiliate of Oglethorpe and such accounts and funds will be maintained in the name and under the tax identification number of RMLC; (b) The financial records and accounts of RMLC will be prepared and maintained in accordance with GAAP and are audited annually by independent accountants; (c) RMLC will conduct its business solely in its own name and all written and oral communications, including, without limitation, letters, invoices, purchase orders and 41 contracts, of RMLC will be made solely in the name of RMLC, and RMLC will have its own tax identification number, telephone number, stationery, and business forms, separate from those of Oglethorpe or any other Affiliate of Oglethorpe; (d) RMLC will have its own physically separate office, which will not be used by Oglethorpe or any Affiliate of Oglethorpe, for which RMLC will pay a fair rent which office will be prominently identified on both the office itself and any building directory as the office of RMLC, and RMLC will have a mailing address that is not shared with Oglethorpe or any other Affiliate of Oglethorpe; (e) RMLC will pay its own expenses and liabilities from its own funds, and neither Oglethorpe nor any other Affiliate of Oglethorpe will pay, or be liable for, the expenses or liabilities of RMLC (although organizational expenses of RMLC may be paid by Oglethorpe), except that nothing herein shall prevent Oglethorpe from making future additional capital contributions to RMLC; (f) RMLC will not be liable for the payment of, nor will it pay, any liability of Oglethorpe or any other Affiliate of Oglethorpe; (g) RMLC will maintain an arm's-length relationship with Oglethorpe and each other Affiliate of Oglethorpe, and no transaction between RMLC and Oglethorpe or any other Affiliate of Oglethorpe will be on terms more favorable than in a similar transaction involving an unrelated third party; assets will not be transferred between RMLC and Oglethorpe or any other Affiliate of Oglethorpe without reasonably equivalent value or with the intent to hinder, delay or defraud the creditors of the transferor; (h) RMLC will at all times maintain its corporate separateness from Oglethorpe and fully observe the corporate separateness strictures set forth in the Non-consolidation Opinion and the other bankruptcy opinions of Orrick, Herrington & Sutcliffe LLP that were rendered on the Closing Date; (i) RMLC will conduct all of its business and affairs in strict accordance with its Certificate of Incorporation and Bylaws and will not amend, supplement or otherwise modify such Certificate or Bylaws without the prior written consent of the Owner Participant and the Lender. At time of delivery of the certificate required by Section 9.5, RMLC will provide the Owner Participant and the Lender with a certificate of counsel to the effect that RMLC's operations during the preceding year have been in compliance with the procedures set forth in this Section 9.9. If such certificate is provided by outside counsel it shall state the nature of the investigation conducted by such counsel and may be based solely upon such investigation. Such investigation shall, however, at a minimum include conversations with Responsible Officers of RMLC and an investigation of the books and records of RMLC for the preceding year. 42 Section 9.10. No stock. RMLC will not own or hold any stock or shares in any other corporation. Section 9.11. Amendments to Operative Documents. RMLC will not, without the prior written consent of the Lender, consent to or engage in any termination, supplement, waiver or modification of any Operative Documents that affect the Lender, the Loan or the Lender's security interest in the Collateral. Section 9.12. Releases Pursuant to Section 4.2 of the Ground Lease. Without limiting or conditioning in any manner the Ground Lessor's Release Rights, RMLC, as Ground Sublessee hereby expressly agrees from time to time to execute and deliver to Oglethorpe, as Ground Lessor, in sufficient form to permit recordation in the real property records of the Clerk of Superior Court of Floyd County, Georgia, within thirty (30) days after the effectiveness of notice from Oglethorpe, as Ground Lessor, requesting the same and the delivery of an Officer's Certificate contemplated by Section 4.2 of the Ground Lease, a quitclaim deed releasing from the effect of the Ground Lease any Release Property described in such Officer's Certificate together with any other documentation Oglethorpe reasonably deems necessary to effectuate any sale, grant, release, lease or conveyance provided for in Section 4.2 of the Ground Lease. Section 9.13. Further Assurances. RMLC, at its own cost, expense and liability, will cause to be promptly and duly taken, executed, acknowledged and delivered all such further acts, documents and assurances as may be necessary in order to carry out the intent and purposes of this Participation Agreement and the other Operative Documents, and the transactions contemplated hereby and thereby. RMLC, at its own cost, expense and liability, will cause such financing statements and fixture filings (and continuation statements with respect thereto) as may be necessary and such other documents as the Owner Participant, Oglethorpe, the Co-Trustee, the Owner Trustee or the Lender shall reasonably request to be recorded or filed at such places and times in such manner, and will take all such other actions or cause such actions to be taken, as may be necessary in order to establish, preserve, protect and perfect the right, title and interest of the Facility Lessor in and to (i) the Undivided Interest under the Head Lease, the Ground Interest under the Ground Lease or any part thereof or interest therein, (ii) the Qualifying Equity Funding Agreement and the Payment Undertaking Agreement, and (iii) the Qualifying Sublease Surety Bond under the Facility Sublease Assignment. RMLC shall, at its sole cost and expense, execute, deliver and record such documents and instruments and shall take such other actions as the Lender shall reasonably request or as shall be required by Applicable Law from time to time in order to establish, protect and perfect the rights and remedies intended to be created by the Loan Agreement and the Deed to Secure Debt and to maintain the first priority security interest of the Loan Agreement and the Deed to Secure Debt in the Collateral and the Property. RMLC shall promptly from time to time furnish to the Owner Participant, the Co-Trustee, the Owner Trustee, Oglethorpe or the Lender such information with respect to the Facility, the Rocky Mountain Site or the transactions contemplated by the Operative Documents to which RMLC is a party as may be required to enable the Owner Participant, the Co-Trustee, the Owner Trustee, Oglethorpe or the Lender, as the case may be, to timely file with any Governmental Entity any 43 reports and obtain any licenses or permits required to be filed or obtained by the Owner Trustee, Oglethorpe or the Co-Trustee under any Operative Document or the Owner Participant as the owner of the Beneficial Interest or the Lender. Section 9.14. Liens. Except as expressly provided in the Operative Documents, RMLC will not create, assume, permit or suffer to exist any Lien on or over any part of its properties or revenues, whether now owned or hereafter acquired. Section 9.15. Facility Sublease Assignment Agreement. Upon the occurrence and continuation of any Payment Default, Bankruptcy Default or Event of Default the Facility Sublessee will make all payments of Facility Sublease Basic Rent and Sublease Termination Value to the Facility Lessor in accordance with the Facility Sublease Assignment Agreement to be held as security for RMLC's obligations under the Facility Lease and the other Operative Documents. Furthermore, RMLC will not make a demand for payment under the Qualifying Facility Sublease Surety Bond without the prior consent of the Co-Trustee, so long as the Sublease Assignment Agreement is in effect. Section 9.16. Delivery of Financial Statements. RMLC will deliver to the Owner Participant, Oglethorpe, the Co-Trustee, the Owner Trustee, and, so long as the Loan is outstanding, the Lender, as soon as practicable after the end of each fiscal year but in no event later than 145 days after the end of such year, its annual audited financial statements including an audited balance sheet of RMLC as at the end of such fiscal year and the related statements of revenue and expenses, patronage capital, and cash flows for the year then ended, together with the report with respect thereto of Coopers & Lybrand L.L.P. or other independent public accountants of nationally recognized standing all in reasonable detail and prepared in accordance with GAAP on a consistent basis. Section 9.17. Request Pursuant to Section 8.8 of the Participation Agreement. When requested by the Owner Participant, RMLC will request Qualifying Additional Security for Oglethorpe's obligations under the Facility Sublease pursuant to Section 8.8 of this Participation Agreement. Section 9.18. Instructions from Co-Trustee and Owner Participant. RMLC shall take no action under the Facility Sublease or any of the collateral pledged for Oglethorpe's obligations thereunder, without the written consent of the Co-Trustee or the Owner Participant. RMLC shall exercise all rights and remedies that it may have under the Facility Sublease and the collateral for Oglethorpe's obligations thereunder as instructed by the Co-Trustee and in accordance with the Assignment of Facility Sublease. Section 9.19. Tax Exempt Status. RMLC (i) has not taken, will not take and will not cause to be taken, any action that would result in the ruling described in Section 3.4(jj) being revoked or otherwise modified or supplemented in a manner that would adversely affect the Owner Participant or (ii) otherwise has not taken, will not take and will not cause to be taken any 44 action that would cause RMLC or Oglethorpe to become a tax-exempt entity within the meaning of Section 168(h)(2) of the Code during the term of the Facility Lease or the Facility Sublease. If RMLC's status as a tax-exempt entity would adversely affect the Owner Participant, RMLC shall notify the Owner Participant promptly of any information, facts or circumstances in respect of, or that could result in, any revocation, modification or supplement of or to such ruling. At the request of the Owner Participant, RMLC will take or cause to be taken any action that the Owner Participant reasonably believes is necessary or appropriate to preserve the status of both Oglethorpe and RMLC as taxable entities if such action is (i) of a purely ministerial nature or (ii) otherwise has no adverse affect on the business or operations of Oglethorpe or RMLC. SECTION 10. COVENANTS OF THE LENDER Section 10.1. Transfer of Lender's Interest. The Lender hereby covenants and agrees that it will not transfer any Loan Certificate in violation of Applicable Law or to the Payment Undertaking Issuer. By its acquisition of any Loan Certificate, each transferee of such Loan Certificate shall be deemed to have made to the other parties to the Participation Agreement the same representations and warranties set forth in Section 3.6 hereof that the transferor made, such representations and warranties of the transferee to be effective as of the date of transfer. Section 10.2. No Offset. The Lender agrees that it will not have, and does hereby waive, any and all rights the Lender may have, under Applicable Law, its general operating conditions, or otherwise, to offset or otherwise satisfy any obligations that the Lender may have or have the right to assert to the Facility Sublessee, the Facility Lessee or the Facility Lessor against any claims the Lender may have pursuant to the Loan Certificates, the Loan Agreement or the Deed to Secure Debt, except that this waiver shall not in any way or in any respect result in any diminution of the rights of the Lender with respect to the assignment of the Facility Lessor's rights under the Facility Lease pursuant to the Loan Agreement and the Deed to Secure Debt. SECTION 11. OGLETHORPE'S INDEMNIFICATIONS Section 11.1. General Indemnity (a) Claims Indemnified. Subject to the exclusions stated in paragraph (b) below, Oglethorpe agrees to indemnify, protect, defend and hold harmless, and does hereby indemnify the Co-Trustee, the Georgia Trust Company in its individual capacity, the Owner Trustee, the Non-Georgia Trust Company in its individual capacity, the Trust Estate, RMLC, the Owner Participant, the Lender and the Payment Undertaking Issuer and their respective Affiliates, successors, assigns, agents, directors, officers or employees (each an "Indemnitee") against any and all Claims (including Claims under Environmental Laws) of whatsoever kind and nature (whether or not any of the transactions contemplated by the Operative Documents are 45 consummated) imposed on, incurred or suffered by or asserted against any Indemnitee in any way relating to or resulting from or arising out of or attributable to: (i) the construction, financing, refinancing, acquisition, operation, warranty, ownership, possession, maintenance, repair, lease, condition, alteration, modification, restoration, refurbishing, return, purchase, sale or other disposition, insuring, sublease, or other use or non-use of the Facility, the Undivided Interest, the Ground Interest or Component or any portion of any thereof or any interest therein; (ii) the conduct of the business or affairs of Oglethorpe and the Facility and the Rocky Mountain Site; (iii) the manufacture, design, purchase, acceptance, rejection, delivery or condition of, or improvement to, the Facility, the Undivided Interest, the Rocky Mountain Site, the Ground Interest, or any Component, or any portion of any thereof or any interest therein; (iv) the Ground Lease, the Head Lease, the Facility Sublease, the Ground Sub-sublease, the Rocky Mountain Agreements, the Oglethorpe Mortgage, or any other Transaction Document, the execution or delivery thereof or the performance, enforcement, attempted enforcement or amendment of any terms thereof, or the transactions contemplated thereby or resulting therefrom; (v) the offer, issuance, sale, acquisition or delivery of the Loan Certificate or any refinancing thereof pursuant to Section 15 hereof or the provision of Acceptable Substitute Credit Protection; (vi) the reasonable costs and expenses of the Transaction Parties in connection with amendments or supplements to the Transaction Documents or in connection with defaults under such Transaction Documents other than defaults in consequence of the acts or omissions of RMLC; (vii) the imposition of any Lien other than a Facility Lessor's Lien or an Owner Participant's Lien; (viii) any violation by, or liability relating to, Oglethorpe of, or under, any Applicable Law, whether now or hereafter in effect (including those relating to the environment), or any action of any Governmental Entity or other Person taken with respect to the Facility or the Rocky Mountain Site, the Transaction Documents or the interests of the Trustees or the Owner Participant under the Transaction Documents or the presence, use, storage, transportation, treatment or manufacture of any Hazardous Substance in, at, under or from the Facility or the Rocky Mountain Site; 46 (ix) the non-performance or breach by Oglethorpe of any obligation contained in this Agreement or any other Transaction Document or the falsity or inaccuracy of any representation, warranty or obligation of Oglethorpe contained in this Agreement or any other Transaction Document; (x) the continuing fees (if any) and expenses of the Co-Trustee and the Owner Trustee (including the reasonable compensation and expenses of its counsel, accountants and other professional persons) arising out of the Co-Trustee's or the Owner Trustee's discharge of its duties under or in connection with the Transaction Documents (other than the Facility Lease, the Ground Sublease, the Rocky Mountain Agreements Re-assignment, the Payment Undertaking Pledge Agreement and the Equity Funding Pledge Agreement); (xi) for the benefit of any Lender only, a breach of Section 5.1 or 6.4 hereof resulting from the transfer of the Beneficial Interest or the Trust Estate to a Person that is not a "United States person" within the meaning of section 7701(a)(30) of the Code; (xii) for the benefit of any Lender only, a breach by the Owner Participant of its representation in paragraph (g) of Section 3.3; (xiii) any action by Georgia Power or any other Person as tenant-in-common in the Facility and the Rocky Mountain Site or the Facility Operator or otherwise in connection with any transactions contemplated by the Transaction Documents and the Rocky Mountain Agreements; (xiv) the establishment or maintenance of the Qualifying Surety Bonds, any Qualifying Letter of Credit replacing a Qualifying Surety Bond or the Additional Qualifying Security or any substitution or replacement therefor; and (xv) the FERC License (or any renewals thereof) including any obligations imposed by FERC in connection with the Facility or the Rocky Mountain Site. (xvi) in case such Indemnitee is a Trustee or the Lender, all costs and expenses incurred with respect to the Loan Agreement and the Collateral and the Property all amounts payable under the Loan Agreement except principal and interest payable under the Loan Certificate. (b) Claims Excluded. The following are excluded from Oglethorpe's agreement to indemnify any Indemnitee under this Section 11.1: (i) any Claim to the extent attributable to acts, omissions or events occurring after the earlier of (and not based on circumstances or conditions occurring before) the latest of (x) the return of the Facility Lessor's Rocky Mountain Interest in full compliance of Section 5 of the Facility Lease, if applicable, and (y) the expiration or earlier 47 termination of the Facility Sublease in compliance with the terms thereof under circumstances not requiring the return of the Facility Sublessor's Rocky Mountain Interest, unless, and to the extent such Claim is attributable to actions, omissions or events occurring in connection with a Sublease Event of Default; (ii) without limiting Oglethorpe's obligations under paragraph (d) below, any Claim (other than an indemnity payable to the Lender under Section 11.1(a)(xii) hereof) that is a Tax, or is a cost of contesting a Tax imposed on, or asserted against, the Indemnitee or an Affiliate, whether or not Oglethorpe is required to indemnify therefor under Section 11.2 hereof or the Tax Indemnity Agreement; (iii) with respect to any Indemnitee, any Claim attributable to the gross negligence or willful misconduct of such Indemnitee unless attributable to (a) any breach by Oglethorpe or its Affiliates of any covenant, representation or warranty contained in any Transaction Document or (b) any breach by any other Transaction Party or its Affiliates of any covenant, representation or warranty made by it in any Transaction Document; (iv) as to any Indemnitee, any Claim attributable to the noncompliance of such Indemnitee, with any of the terms of, or any misrepresentation or breach of warranty by such Indemnitee contained in any Operative Document made by such Indemnitee or any breach by such Indemnitee or any Party Related thereto of any covenant contained in any Operative Document made by such Indemnitee unless attributable to (a) any breach by Oglethorpe or its Affiliates of any covenant, representation or warranty contained in any Transaction Document or (b) any breach by any other Transaction Party or its Affiliates of any covenant, representation or warranty made by it in any Transaction Document; (v) as to any Indemnitee, any Claim attributable to the offer, sale, assignment, transfer or other disposition (voluntary or involuntary) by or on behalf of such Indemnitee of its interest (whether direct or beneficial) in any Operative Document or in the Facility Lessor's Rocky Mountain Interest or the Trust Estate, other than a transfer by such Indemnitee (A) required by the terms of an Operative Document or (B) any transfer during the continuance of a Sublease Payment Default, Sublease Bankruptcy Default or Sublease Event of Default; (vi) with respect to the Trustees and the Trust Companies, any Claim constituting or arising from a Facility Lessor's Lien; (vii) with respect to the Owner Participant, any claim constituting or arising from an Owner Participant's Lien; (viii) any Claim relating to the payment of any amount which constitutes Transaction Costs which the Owner Participant is obligated to pay pursuant to 48 Section 2.3(a) hereof or any other amount to the extent such Indemnitee has expressly agreed in any Operative Document to pay such amount without express right of reimbursement; (ix) in the case of the Trustees and the Owner Participant, any failure on the part of either Trustee to distribute in accordance with the Trust Agreement any amounts received and distributable by it thereunder; (x) any Claim relating to the validity or binding nature with respect to RMLC of any document or agreement, the enforceability against RMLC of any document or agreement, the creation, perfection, or priority of any security interest purportedly granted by RMLC, or the legality of any act or omission of RMLC, unless such claim relates to a breach of a representation or warranty contained in Section 3.4 hereof. (xi) any Claim for any amount for which all of the following are true: (A) RMLC would be liable at law or equity (including contractual liabilities) without regard to the indemnity in Section 12.1 hereof, (B) Oglethorpe would not be liable without the indemnity provided in this Section 11.1 and (C) such Claim did not result from the acts or omissions of Oglethorpe; and (xii) any Claim that constitutes principal and/or interest on the Loan Certificate, including without limitation any Claim that constitutes a payment of interest resulting in connection with a substitution of the Payment Undertaking Agreement; provided that the terms "omission," "gross negligence" and "willful misconduct," when applied with respect to the Lender or any Affiliate, shall not include any liability imputed as a matter of law to such Indemnitee solely by reason of such entity's interest in the Facility or the Rocky Mountain Site or such Indemnitee's failure to act in respect of matters which are or were the obligation of Oglethorpe or another party under this Agreement. (c) Insured Claims. Subject to the provisions of paragraph (e) of this Section 11.1, in the case of any Claim indemnified by Oglethorpe hereunder which is covered by a policy of insurance maintained by Oglethorpe, each Indemnitee agrees, unless it and each other Indemnitee shall waive its rights to indemnification in a manner reasonably acceptable to Oglethorpe and unless a Sublease Event of Default has occurred and is continuing, to cooperate, at the sole cost and expense of Oglethorpe, with insurers in exercise of their rights to investigate, defend or compromise such Claim. (d) After-Tax Basis. Oglethorpe agrees that any payment or indemnity pursuant to this Section 11.1 in respect of any Claim shall be made to the Indemnitee of such payment or indemnity on an After-Tax Basis. 49 (e) Claims Procedure. Each Indemnitee shall promptly after such Indemnitee shall have Actual Knowledge thereof notify Oglethorpe of any Claim as to which indemnification is sought; provided, that the failure so to notify Oglethorpe shall not reduce or affect Oglethorpe's liability which it may have to such Indemnitee under this Section 11.1; and no payment hereunder by Oglethorpe to an Indemnitee shall be deemed to constitute a waiver or release of any right or remedy that Oglethorpe may have against any such Indemnitee for actual damages resulting directly from the failure or delay of such Indemnitee to give Oglethorpe such notice. Any amount payable to any Indemnitee pursuant to this Section 11.1 shall be paid within thirty (30) days after receipt of such written demand therefor from such Indemnitee, accompanied by a certificate of such Indemnitee stating in reasonable detail the basis for the indemnification thereby sought and (if such Indemnitee is not a party hereto) an agreement to be bound by the terms hereof as if such Indemnitee were such a party. The foregoing shall not, however, constitute an obligation to disclose confidential information of any kind. Promptly after Oglethorpe receives notification of such Claim accompanied by a written statement describing in reasonable detail the Claims which are the subject of and basis for such indemnity and the computation of the amount so payable, Oglethorpe shall notify such Indemnitee whether it intends to pay, object to, compromise or defend any matter involving the asserted liability of such Indemnitee. Oglethorpe shall have the right to investigate and so long as no Sublease Event of Default shall have occurred and be continuing, Oglethorpe shall have the right in its sole discretion, to defend or compromise any Claim for which indemnification is sought under this Section 11.1 which Oglethorpe acknowledges is subject to indemnification hereunder; provided that no such defense or compromise shall involve any danger of (i) foreclosure, sale, forfeiture or loss of, or imposition of a Lien on any part of the Ground Interest, the Undivided Interest, the Trust Estate or the other Collateral or the impairment of the Facility in any material respect or (ii) any criminal liability being incurred or any material adverse effect on such Indemnitee, provided further, that no Claim shall be compromised by Oglethorpe on a basis that admits any criminal violation or gross negligence or willful misconduct on the part of such Indemnitee without the express written consent of such Indemnitee; and provided, further, that to the extent that other Claims unrelated to the transactions contemplated by the Transaction Documents are part of the same proceeding involving such Claim, Oglethorpe may assume responsibility for the contest or compromise of such Claim only if the same may be and is severed from such other Claims (and each Indemnitee agrees to use reasonable efforts to obtain such a severance). If Oglethorpe elects, subject to the foregoing, to compromise or defend any such asserted liability, it may do so at its own expense and by counsel selected by it. Upon Oglethorpe's election to compromise or defend such asserted liability and prompt notification to such Indemnitee of its intent to do so, such Indemnitee shall cooperate at Oglethorpe's expense with all reasonable requests of Oglethorpe in connection therewith and will provide Oglethorpe with all information not within the control of Oglethorpe as is reasonably available to such Indemnitee which Oglethorpe may reasonably request; provided, however, that such Indemnitee shall not, unless otherwise required by Applicable Law, be obligated to disclose to Oglethorpe or any other Person, or permit Oglethorpe or any other Person to examine (i) any income tax returns of the Owner Participant or Lender or (ii) any confidential information or pricing information not generally accessible by the public possessed by the Owner Participant, the Lender (and, in the event that any such information is made available, Oglethorpe shall treat such information as 50 confidential and shall take all actions reasonably requested by such Indemnitee for purposes of obtaining a stipulation from all parties to the related proceeding providing for the confidential treatment of such information from all such parties). Where Oglethorpe, or the insurers under a policy of insurance maintained by Oglethorpe, undertake the defense of such Indemnitee with respect to a Claim (with counsel reasonably satisfactory to such Indemnitee and without reservation of rights against such Indemnitee), no additional legal fees or expenses of such Indemnitee in connection with the defense of such Claim (with counsel reasonably satisfactory to such Indemnitee and without reservation of rights) shall be indemnified hereunder unless such fees or expenses were incurred at the request of Oglethorpe or such insurers. Notwithstanding the foregoing, an Indemnitee may participate at its own expense in any judicial proceeding controlled by Oglethorpe pursuant to the preceding provisions; provided, however, that such party's participation does not constitute a waiver of the indemnification provided in this Section; provided, further, that if and to the extent that (i) such Indemnitee is advised by counsel that an actual or potential conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel or (ii) there is a risk that such Indemnitee may be indicted or otherwise charged in a criminal complaint and such Indemnitee informs Oglethorpe that such Indemnitee desires to be represented by separate counsel, such Indemnitee shall have the right to control its own defense of such Claim and the reasonable fees and expenses of such separate counsel shall be borne by Oglethorpe. So long as no Sublease Default or Sublease Event of Default shall have occurred and be continuing, no Indemnitee shall enter into any settlement or other compromise with respect to any Claim without the prior written consent of Oglethorpe unless the Indemnitee waives its rights to indemnification hereunder. Nothing contained in this Section shall be deemed to require an Indemnitee to contest any Claim or to assume responsibility for or control of any judicial proceeding with respect thereto. (f) Subrogation. To the extent that a Claim indemnified by Oglethorpe under this Section 11.1 is in fact paid in full by Oglethorpe or an insurer under an insurance policy maintained by Oglethorpe, Oglethorpe (so long as no Sublease Event of Default shall have occurred and be continuing) or such insurer shall be subrogated to the rights and remedies of the Indemnitee on whose behalf such Claim was paid to the extent of such payment (other than rights of such Indemnitee under insurance policies maintained at its own expense) with respect to the transaction or event giving rise to such Claim. Should an Indemnitee receive any refund, in whole or in part, with respect to any Claim paid by Oglethorpe hereunder, so long as no Sublease Event of Default has occurred and is continuing, it shall promptly pay over to Oglethorpe the lesser of (i) the amount refunded reduced by the amount of any Tax incurred by reason of the receipt or accrual of such refund and increased by the amount of any Tax (but not in excess of the amount of such reduction) saved as a result of such payment or (ii) the amount Oglethorpe or any of its insurers has paid in respect of such Claim. 51 Section 11.2. General Tax Indemnity (a) Indemnity. Except as provided in paragraph (b), Oglethorpe agrees to indemnify on an After-Tax Basis each of the Co-Trustee, the Georgia Trust Company in its individual capacity, the Owner Trustee, the Non-Georgia Trust Company in its individual capacity, the Trust Estate, the Owner Participant, the Lender and RMLC, their respective successors and assigns, and the Affiliates of each of the foregoing (other than Oglethorpe) (each a "Tax Indemnitee") for and to hold each Tax Indemnitee harmless from and defend against all Taxes that are imposed upon or with respect to or borne by or asserted against any Tax Indemnitee, the Undivided Interest, the Facility, the Rocky Mountain Site or any portion or Component thereof or any interest therein, or upon any Operative Document or interest therein, or otherwise arising out of, in connection with or relating to, any of the following: (i) the construction, financing, refinancing, rental, mortgage, nonuse, acquisition, operation, warranty, ownership, possession, maintenance, repair, lease, condition, alteration, modification, restoration, refurbishing, return, purchase sale or other disposition, insuring, sublease, or other use of the Undivided Interest, the Facility, the Rocky Mountain Site or any portion or Component thereof, or any interest therein; (ii) the conduct of the business or affairs of Oglethorpe; (iii) the manufacture, design, purchase, acceptance, rejection, delivery, redelivery, nondelivery or condition of, or improvement to, the Undivided Interest or the Facility, or any portion or Component thereof, or any interest therein; (iv) the Ground Lease, the Head Lease, the Facility Sublease, the Ground Sub-sublease, the Rocky Mountain Agreements (including any claim arising out of any consent by, or right of first refusal of, Georgia Power), the Oglethorpe Mortgage or any other Transaction Document, the execution or delivery thereof, or the performance, enforcement, attempted enforcement or amendment of any terms thereof or the transactions contemplated thereby; (v) the payment or receipt of Basic Rent, Sublease Basic Rent, Supplemental Rent or Sublease Supplemental Rent or any other payment, receipt or earning under the Facility Lease or the Facility Sublease or arising from the Facility or any portion thereof or interest therein, the Undivided Interest, the Rocky Mountain Site or any portion thereof or interest therein, or, in each case, the acquisition or disposition thereof, or any other payment or right to receive payment pursuant to the Operative Documents, or the property, income or other proceeds with respect to any property, income or other proceeds held in the Trust Estate; 52 (vi) the issuance, acquisition, modification, refinancing, reoptimization, holding or sale of the Loan Certificate or the payment of any amount on or with respect thereto; or (vii) any payment with or from or as the proceeds of any Acceptable Substitute Credit Protection. Notwithstanding anything contained herein to the contrary and without regard to the exclusions set forth in clause 11.2(b), Oglethorpe will indemnify the Co-Trustee, the Owner Trustee, the Georgia Trust Company, the Non-Georgia Trust Company, the Trust Estate and the Owner Participant (and any Affiliate of the foregoing) for any obligation with respect to withholding Taxes imposed on the Co-Trustee, the Owner Trustee, the Georgia Trust Company, the Non-Georgia Trust Company, the Trust Estate or the Owner Participant (or any Affiliate of the foregoing) with respect to the Loan Certificates (or any debt issued to refinance or refund the Loan Certificates) as a result of a claim by the Internal Revenue Service or other taxing authority asserted against the Co-Trustee, the Owner Trustee, the Georgia Trust Company, the Non-Georgia Trust Company, the Trust Estate or the Owner Participant (or any Affiliate of the foregoing) with respect to any such withholding Tax, provided that Oglethorpe shall be subrogated to the rights (including a right to reimbursement from the Lender to the extent that a payment under the Loan Agreement or with respect to the Loan Certificates has been made without deduction for a withholding Tax that is not the responsibility of the Co-Trustee under the Loan Agreement or of Oglethorpe to the Lender hereunder) and defenses of any such Person that it has indemnified or held harmless in respect of such withholding Taxes. (b) Excluded Taxes. The indemnity provided for in paragraph (a) above shall not extend to any of the following Taxes (the "Excluded Taxes"): (i) Taxes (other than any sales, use, license, stamp, value added, rental, property, transfer Taxes or Taxes imposed under Section 4975 of the Code or under Part 5 of subtitle B of Title I of ERISA or Taxes in the nature thereof) imposed on, based on or measured by (I) net income (including any capital gain, minimum taxes or taxes on items of tax preference), or (II) gross income, net or gross receipts, capital or net worth, imposed by (y) the U.S. federal government or (other than with respect to the Lender or the Bank) the State of Georgia or (z) any other jurisdiction in which the Tax Indemnitee is subject to such Taxes by reason of transactions or activities unrelated to the transactions contemplated by the Transaction Documents or by reason of the presence of any office or other property of such Tax Indemnitee in such jurisdiction (except to the extent such Taxes are imposed as a result of (1) the location, operation or use of any portion or Component of the Facility in such jurisdiction, (2) the location, presence, activities or place of business of Facility Lessee, Oglethorpe or any other Facility Sublessee Person in such jurisdiction or (3) the making of any payments from such jurisdiction by or on behalf of a Facility Sublessee Person); 53 (ii) Accumulated earnings, withholding, personal holding company, excess profits, succession or estate, franchise, conduct of business, and other similar Taxes (other than any sales, use, license, stamp, value added, rental, property, transfer Taxes or Taxes imposed under Section 4975 of the Code or under Part 5 of subtitle B of Title I of ERISA or Taxes in the nature thereof) imposed by (y) the U.S. federal government or (other than with respect to the Lender or the Bank) the State of Georgia or (z) any other jurisdiction in which the Tax Indemnitee is subject to such Taxes by reason of transactions or activities unrelated to the transactions contemplated by the Transaction Documents or by reason of the presence of any office or other property of such Tax Indemnitee in such jurisdiction (except to the extent such Taxes are imposed as a result of (1) the location, operation or use of any portion or Component of the Facility in such jurisdiction, (2) the location, presence, activities or place of business of Facility Lessee, Oglethorpe or any other Facility Sublessee Person in such jurisdiction or (3) the making of any payments from such jurisdiction by or on behalf of a Facility Sublessee Person); (iii) Taxes attributable to any period after the expiration of the Facility Sublease Term or earlier termination of the Facility Sublease and any required return of the Undivided Interest to the Co-Trustee, unless and to the extent such Taxes are attributable to actions, omissions or events occurring in connection with the exercise of remedies pursuant to section 17 of the Facility Lease or section 17 of the Facility Sublease following the occurrence and continuance of an Event of Default under the Facility Lease or a Sublease Event of Default, respectively, provided that the exception set forth in this clause (iii) shall not apply to Taxes to the extent (A) such Taxes are related to or arise from payments made under the Operative Documents after, or events, acts or omissions occurring or matters arising prior to or simultaneously with, the time set forth above or (B) as long as Oglethorpe or an Affiliate is the Head Lessor under the Head Lease, such Taxes as are caused by, or imposed in connection with, an action by Oglethorpe (or such Affiliate) as Head Lessor that is prohibited or not permitted under the terms of the Head Lease; (iv) Taxes imposed on a Tax Indemnitee that result from the breach by such Tax Indemnitee or any Affiliate thereof of any of its representations, warranties or covenants in any of the Operative Documents or the gross negligence or willful misconduct of such Tax Indemnitee or any Affiliate; (v) Taxes imposed on the Owner Participant, the Co-Trustee, the Owner Trustee or the Trust Estate arising out of, or caused by, any voluntary assignment, sale, transfer or other disposition or an involuntary transfer or disposition resulting from a bankruptcy or similar proceeding for relief of debtors in which such Tax Indemnitee is a debtor or a foreclosure by a creditor of such Tax Indemnitee (i) by the Owner Participant of its Beneficial Interest or a portion thereof or any interest in any Operative Document, (ii) by the Co-Trustee of the Facility Lessor's Undivided Interest or any portion or Component thereof or interest therein, any Operative Document, or any interest in or 54 arising under any of the foregoing or (iii) of any interest in the Owner Participant, other than a disposition (w) in connection with an Event of Loss, (x) during the continuance of an Event of Default under the Facility Lease or a Sublease Event of Default, (y) resulting from the exercise of rights or performance of obligations by Oglethorpe or any other Facility Sublessor Person under the Transaction Documents (including, without limitation, any repair, replacement, Modification or substitution of or to the Facility or any Component thereof, the exercise of Facility Lessee's rights under Section 13 or 14 of the Facility Lease, Oglethorpe's rights under Section 13 or 14 of the Facility Sublease, the exercise of the Purchase Option under the Facility Lease or the Sublease Purchase Option, the Return of the Undivided Interest) or from the action of the Facility Sublessee or (z) in connection with the transactions contemplated to occur on the Closing Date (other than the transfer by the Trust Companies of the Beneficial Interest to the Owner Participant); (vi) Taxes, imposed on the Owner Participant, the Co-Trustee, the Owner Trustee or the Trust Estate arising in connection with Facility Lessor's Liens or Owner Participant's Liens; (vii) Otherwise indemnifiable Taxes imposed against a transferee or assignee of any Tax Indemnitee to the extent of the excess of such otherwise indemnifiable Taxes over the amount of such Taxes that would have been imposed on the original Tax Indemnitee had such transfer or assignment not occurred (provided that this exclusion shall not apply to the calculation of After-Tax Basis for any payment required to be made on an After-Tax Basis or to transfers in connection with an Event of Default under the Facility Lease or a Sublease Event of Default); (viii) Taxes that are included (and paid) as a part of the Transaction Costs; (ix) Taxes imposed on the Co-Trustee, the Owner Trustee, the Lender or the Bank with respect to any fees or other compensation received by the Co-Trustee, the Owner Trustee, Lender, or the Bank respectively, in its capacity as such, other than with respect to Taxes on the Lender or the Bank imposed by the State of Georgia (unless the State of Georgia is a jurisdiction described in clause (z) of Section 11.2(b)(i) hereof with respect to the Lender or the Bank and such Taxes); (x) Taxes that would not have been imposed but for the failure of a Tax Indemnitee to comply with certification, information, documentation, reporting or other similar requirements concerning the nationality, residence, identity, connection with the jurisdiction imposing such Taxes or other similar matters; provided that the foregoing exclusion shall only apply if (i) such Tax Indemnitee shall have been given timely written notice of such requirement by Oglethorpe, (ii) such Tax Indemnitee shall have determined that compliance with such requirement will not have, or create any material risk of having, any adverse consequence to such Tax Indemnitee or any Affiliate thereof that is not indemnified against by Oglethorpe to the reasonable satisfaction of the Tax Indemnitee and 55 (iii) the non-compliance does not result from a failure of Oglethorpe to satisfy its obligations under clause 11.2(h) hereof; (xi) Taxes imposed on a Tax Indemnitee that would not have been imposed but for the failure of the Tax Indemnitee to comply with the contest provisions of paragraph (g) below, but only if the contest of such Taxes was effectively precluded as a result of such failure; (xii) Taxes imposed on the Lender (or its Affiliates) that would not have been imposed but for activities or assets of the Lender (or its Affiliates), or the presence in the taxing jurisdiction of the Lender (or its Affiliates), in each case unrelated to the transactions contemplated by the Transaction Documents; (xiii) Taxes imposed on any Tax Indemnitee that would not have been imposed but for an amendment, modification, supplement, consent or waiver to any Operative Document to which Oglethorpe is not a party executed by such Tax Indemnitee (or, in the case of the Owner Participant, by either Owner Trustee if acting at the express direction of the Owner Participant) that was not joined in, consented to or requested by Oglethorpe unless such amendment, modification, supplement, consent or waiver was required by law or the Operative Documents or is made while an Event of Default under the Facility Lease or a Sublease Event of Default is continuing; (xiv) Taxes imposed on the Owner Participant to the extent resulting from the Owner Participant being organized under the laws of a jurisdiction other than the United States or any state thereof; (xv) in the case of the Lender, Taxes based on or measured by the value of the interest of the Lender in the Loan Certificate (other than Taxes imposed by the State of Georgia); (xvi) in the case of the Lender, any transfer of its interest in a Loan Certificate (other than during the continuance of an Event of Default under the Facility Lease or an Event of Default under the Sublease); (xvii) Taxes to the extent all of the following are true: (A) RMLC is liable at law or equity (including contractual liabilities) without regard to the indemnity in Section 11.2 hereof, (B) Oglethorpe would not be liable without the indemnity provided in this Section 11.2 and (C) such Taxes did not result from the acts or omissions of Oglethorpe; (xviii) Taxes imposed under Section 4975 of the Code or under Part of subtitle B of Title I of ERISA (other than such Taxes imposed on the Tax Indemnitee that result from the status of, or acts by Oglethorpe or any other Facility Sublessee Person); and 56 (xix) Taxes that are enacted or adopted by their express terms in substitution for or in lieu of any Taxes otherwise excluded hereunder. Notwithstanding the foregoing, the exclusions set forth in clauses (i) and (ii) above shall not apply to the Trustees or the Trust Companies to the extent that the Taxes described in such clauses arise or are imposed solely as a result of their execution and delivery of, and performance of their obligations under, the Operative Documents. The Owner Participant and the Trustees will, at Oglethorpe's expense, use reasonable efforts to comply with reasonable requests by Oglethorpe to do or to refrain from doing any act if such compliance is, in the good faith opinion of the Owner Participant, of a purely ministerial nature or otherwise has no unindemnified adverse impact on the Owner Participant or either Owner Trustee or any Affiliate of any thereof or on the business or operations of any of the foregoing. A Tax Indemnitee shall also include the employees, officers, directors and agents of any Tax Indemnitee to the extent of any secondary liability for indemnifiable Taxes. (c) Payment. Each payment required to be made by Oglethorpe to a Tax Indemnitee pursuant to this Section 11.2 shall be paid either (I) when due directly to the applicable taxing authority by Oglethorpe if it is permitted to do so, or (II) in immediately available funds to such Tax Indemnitee by the later of (A) 30 days following Oglethorpe's receipt of the Tax Indemnitee's written demand for the payment (which demand shall be accompanied by a statement of the Tax Indemnitee describing in reasonable detail the Taxes for which the Tax Indemnitee is demanding indemnity and the computation of such Taxes), (B) subject to paragraph (g) below, in the case of amounts which are being contested pursuant to such paragraph (g), at the time and in accordance with a final determination of such contest (including all appeals permitted hereby and by law; provided that no Tax Indemnitee shall be required to pursue any appeal to the United States Supreme Court), or (C) in the case of any indemnity demand for which Oglethorpe has requested review and determination pursuant to paragraph (d) below, the completion of such review and determination; provided, however, in no event later than the date which is five Business Days prior to the date on which such Taxes are required to be paid to the applicable taxing authority. Any amount payable to Oglethorpe pursuant to paragraph (e) or (f) below shall be paid promptly after the Tax Indemnitee realizes a Tax Benefit (determined using the same assumptions set forth in the second sentence under the definition of After-Tax Basis) giving rise to a payment under paragraph (e) or receives a refund or credit giving rise to a payment under paragraph (f), as the case may be, and shall be accompanied by a statement of the Tax Indemnitee computing in reasonable detail the amount of such payment. Upon the final determination of any contest pursuant to paragraph (g) below in respect of any Taxes for which Oglethorpe has made a Tax Advance, the amount of Oglethorpe's obligation under paragraph (a) above shall be determined as if such Tax Advance had not been made. Any obligation of Oglethorpe under this Section 11.2 and the Tax Indemnitee's obligation to repay the Tax Advance will be satisfied first by set off against each other, and any difference owing by either party will be paid within 10 days of such final determination, but not prior to the date determined in accordance with the first sentence of this paragraph (c). 57 (d) Independent Examination. Within 15 days after Oglethorpe receives any computation from the Tax Indemnitee, Oglethorpe may request in writing that an independent public accounting firm selected by the Tax Indemnitee and reasonably acceptable to Oglethorpe review and determine on a confidential basis the amount of any indemnity payment by Oglethorpe to the Tax Indemnitee pursuant to this Section 11.2 or any payment by a Tax Indemnitee to Oglethorpe pursuant to paragraph (e) or (f) below. The Tax Indemnitee shall cooperate with such accounting firm and supply it with all information reasonably necessary for the accounting firm to conduct such review and determination (but not tax returns and books) provided that such accounting firm shall agree in writing in a manner satisfactory to the Tax Indemnitee to maintain the confidentiality of such information. The parties hereto agree that the independent public accounting firm's sole responsibility shall be to verify the computation of any payment pursuant to this Section 11.2 and that matters of interpretation of this Participation Agreement or any other Operative Document are not within the scope of the independent accountant's responsibility. The fees and disbursements of such accounting firm will be paid by Oglethorpe, provided that such fees and disbursements will be paid by the Tax Indemnitee if the verification results in an adjustment in Oglethorpe's favor of five percent or more of the indemnity payment or payments computed by the Tax Indemnitee. (e) Tax Benefit. If, as the result of any Taxes paid or indemnified against by Oglethorpe under this Section 11.2, the aggregate Taxes paid by the Tax Indemnitee for any taxable year and not subject to indemnification pursuant to this Section 11.2 are less (whether by reason of a deduction, credit, allocation or apportionment of income or otherwise) than the amount of such Taxes that otherwise would have been payable by such Tax Indemnitee (a "Tax Benefit"), then to the extent such Tax Benefit was not taken into account in determining the amount of indemnification payable by Oglethorpe under paragraph (a) above and provided no Bankruptcy Default, Payment Default or Event of Default under the Facility Lease or a Sublease Bankruptcy Default, Sublease Payment Default or Sublease Event of Default shall be continuing, such Tax Indemnitee shall pay to Oglethorpe the lesser of (A) (y) the amount of such Tax Benefit, plus (z) an amount equal to any United States federal, state or local income tax benefit resulting from the payment under clause (y) above (determined using the same assumptions as set forth in the second sentence under the definition of After-Tax Basis) and (B) the amount of the indemnity paid pursuant to this Section 11.2 giving rise to such Tax Benefit. If it is subsequently determined that the Tax Indemnitee was not entitled to such Tax Benefit, the portion of such Tax Benefit that is repaid or recaptured will be treated as Taxes for which Oglethorpe must indemnify the Tax Indemnitee pursuant to this Section 11.2 without regard to paragraph (b) hereof. (f) Refund. If a Tax Indemnitee obtains a refund or credit of all or part of any Taxes paid, reimbursed or advanced by Oglethorpe pursuant to this Section 11.2, the Tax Indemnitee promptly shall pay to Oglethorpe the amount of such refund or credit plus or minus any net Tax benefit or detriment realized by such Tax Indemnitee as a result of any Taxes incurred by such Tax Indemnitee by reason of the receipt or accrual of such refund or credit as well as any Tax benefits or credits by reason of such payment to Oglethorpe (determined using the same assumptions as set forth in the second sentence under the definition of After-Tax Basis), provided that (A) if at 58 the time such payment is due to Oglethorpe a Bankruptcy Default, Payment Default or Event of Default under the Facility Lease or a Sublease Bankruptcy Default, Sublease Payment Default or Sublease Event of Default shall have occurred and be continuing, such amount shall not be payable until such Bankruptcy Default, Payment Default or Event of Default under the Facility Lease or Sublease Bankruptcy Default, Sublease Payment Default, or Sublease Event of Default has been cured, and (B) the amount payable to Oglethorpe pursuant to this sentence (net of any amount in respect of any tax benefit realized by reason of the payment hereunder) shall not exceed the amount of the indemnity payment in respect of such refunded or credited Taxes that was made by Oglethorpe (net of any amount that was necessary to make such payment on an After-Tax Basis). If it is subsequently determined that the Tax Indemnitee was not entitled to such refund or credit, the portion of such refund or credit that is repaid or recaptured will be treated as Taxes for which Oglethorpe must indemnify the Tax Indemnitee pursuant to this Section 11.2 without regard to paragraph (b) hereof. If, in connection with a refund or credit of all or part of any Taxes paid, reimbursed or advanced by Oglethorpe pursuant to this Section 11.2, a Tax Indemnitee receives an amount representing interest on such refund or credit, the Tax Indemnitee promptly shall pay to Oglethorpe the amount of such interest that shall be fairly attributable to such Taxes paid, reimbursed or advanced by Oglethorpe prior to the receipt of such refund or credit net of Taxes payable in respect of such receipt. (g) Contest. (1) Notice of Contest. If a written claim for payment is made by any taxing authority against a Tax Indemnitee for any Taxes with respect to which Oglethorpe may be liable for indemnity hereunder (a "Tax Claim"), such Tax Indemnitee shall give Oglethorpe written notice of such Tax Claim as soon as practicable after its receipt, and shall furnish Oglethorpe with copies of such Tax Claim and all other writings received from the taxing authority to the extent relating to such claim, provided that failure so to notify Oglethorpe shall not relieve Oglethorpe of any obligation to indemnify the Tax Indemnitee hereunder except as provided in clause (xi) of Section 11.2(b). The Tax Indemnitee shall not pay such Tax Claim until at least 30 days after providing Oglethorpe with such written notice, unless required to do so by law or regulation. (2) Control of Contest. Subject to Subsection (g)(3) below, Oglethorpe (i) will be entitled to contest, and control the contest of, any Tax Claim if such Tax Claim may be and is brought in the name of Oglethorpe, or may be and is segregated procedurally from tax claims for which Oglethorpe is not obligated to indemnify the Tax Indemnitee and the Tax Indemnitee in good faith determines that there is no material risk of it or an Affiliate being adversely affected by such contest or the conduct thereof and (ii) shall contest any Tax claim if the Tax Indemnitee requests that Oglethorpe control such contest, provided that in the case of any such contest pursuant to (i) or (ii) Oglethorpe shall use its best efforts to contest such Tax Claim in its own name and if it is contesting the Tax Claim in the Tax Indemnitee's name, it shall consult with such Tax Indemnitee with respect to all decisions involving the contest of such Tax Claim and provided further that the Tax 59 Indemnitee shall be entitled to reassert control of any contest if it determines in good faith that Oglethorpe's continued control of the contest will adversely affect it. In the case of a Tax Claim that Oglethorpe is not entitled to contest, or that Oglethorpe and the Tax Indemnitee otherwise agree that the Tax Indemnitee shall contest subject to subsection (g)(3) below: (i) the Tax Indemnitee will contest and control such Tax Claim in good faith, (ii) at Oglethorpe's written request, if payment is made to the applicable taxing authority, the Tax Indemnitee shall use reasonable efforts to obtain a refund thereof in appropriate administrative or judicial proceedings, (iii) the Tax Indemnitee shall consult with and keep reasonably informed Oglethorpe and its designated counsel with respect to such Tax Claim and shall consider and consult in good faith with Oglethorpe concerning any request by Oglethorpe to (a) resist payment of Taxes demanded by the taxing authority in connection with such Tax Claim if practical and (b) not pay such Taxes except under protest if protest is necessary and proper, (iv) the Tax Indemnitee will not, without Oglethorpe's prior written consent (not unreasonably to be withheld), forego any administrative appeal, proceeding, hearing or conference if doing so would preclude as a matter of law initiating or contesting further such Tax Claim, and (v) the Tax Indemnitee shall not otherwise settle, compromise or abandon such contest without Oglethorpe's prior written consent except as provided in paragraph (g)(4) below. (3) Conditions of Contest. Notwithstanding the foregoing, no contest with respect to a Tax Claim will be required or permitted pursuant to this Section 11.2, and Oglethorpe shall be required to pay the applicable Taxes without contest, unless: (i) within 30 days after notice by the Tax Indemnitee to Oglethorpe of such Tax Claim, Oglethorpe shall request in writing that such Tax Claim be contested, provided that if a shorter period is required for taking action with respect to such Tax Claim and the Tax Indemnitee notifies Oglethorpe of such requirement, Oglethorpe shall use reasonable best efforts to request such contest within such shorter period, (ii) no Bankruptcy Default or Payment Default under the Facility Lease or Sublease Bankruptcy Default, Sublease Payment Default or Sublease Event of Default has occurred and is continuing, 60 (iii) there is no risk of sale, forfeiture or loss of, or the creation of a Lien on the Facility Lessor's Rocky Mountain Interest or any Component thereof as a result of such Tax Claim, provided that this clause (iii) shall not apply if Oglethorpe posts security satisfactory to the Tax Indemnitee in its sole discretion, or the Tax is paid in either manner specified in clause (v) below, (iv) there is no risk of imposition of any criminal penalties, (v) if such contest involves payment of such Tax, Oglethorpe will either advance to the Tax Indemnitee on an interest-free basis (without reduction for any Tax savings that the Tax Indemnitee may realize as a result of the payment of such Tax) and with no after tax cost to such Tax Indemnitee or the Owner Participant (a "Tax Advance") or pay such Tax Indemnitee the amount payable by Oglethorpe pursuant to Section 11.2(a) above with respect to such Tax, (vi) Oglethorpe agrees to pay (and pays on demand) and with no after tax cost to such Tax Indemnitee or the Owner Participant all reasonable costs and expenses incurred by the Tax Indemnitee in connection with the contest of such claim (including, without limitation, reasonable fees and disbursements of counsel), (vii) the Tax Indemnitee has been provided at Oglethorpe's sole expense with an opinion, reasonably acceptable to such Tax Indemnitee, of independent tax counsel of recognized standing selected by Oglethorpe and reasonably acceptable to the Tax Indemnitee to the effect that there is a reasonable basis within the meaning of ABA Formal Opinion No. 85-352 for contesting such Tax Claim or in the case of an appeal from an adverse lower court decision, that it is more likely than not that the lower court's opinion would be reversed or substantially modified, (viii) the amount of Taxes in controversy, taking into account the amount of all similar and logically related Taxes with respect to the transactions contemplated by Operative Documents that could be raised in any other year (including any future year) not barred by the statute of limitations, exceeds $50,000, (ix) Oglethorpe shall acknowledge in writing its liability to indemnify the Tax Indemnitee hereunder in respect of such claim if the contest is not successful, provided that such acknowledgment of liability will not be binding if the contest is resolved by the final decision of a court of competent jurisdiction on a clearly articulated basis which establishes that Oglethorpe would not be responsible to indemnify the Tax Indemnity under subsection 11.2(a) hereof in the absence of such acknowledgement, and 61 (x) in the case of a judicial appeal, no appeal to the U.S. Supreme Court shall be required or permitted. (4) Waiver of Indemnification. Notwithstanding anything to the contrary contained in this Section 11.2, the Tax Indemnitee at any time may elect to decline to take any action or any further action with respect to a Tax Claim and may in its sole discretion settle or compromise any contest with respect to such Tax Claim without Oglethorpe's consent if the Tax Indemnitee: (i) waives its right to any indemnity payment by Oglethorpe pursuant to this Section 11.2 in respect of such Tax Claim, and (ii) promptly repays to Oglethorpe any Tax Advance and any amount paid to such Tax Indemnitee under Section 11.2(a) above in respect of such Taxes, but not any costs or expenses with respect to any such contest. Except as provided in the preceding sentence, any such waiver shall be without prejudice to the rights of the Tax Indemnitee with respect to any other Tax claim. (h) Reports. (1) If any report, statement or return is required to be filed by a Tax Indemnitee with respect to any Tax that is subject to indemnification under this Section 11.2, Oglethorpe will (1) notify the Tax Indemnitee in writing of such requirement not later than 30 days prior to the date such report, statement or return is required to be filed (determined without regard to extensions) and (2) either (y) if permitted by applicable law, prepare such report, statement or return for filing by Oglethorpe in such manner as will show the ownership of the Facility by the Co-Trustee for United States federal, state and local income tax purposes (if applicable), send a copy of such report, statement or return to the Tax Indemnitee and timely file such report, statement or return with the appropriate taxing authority, or (z) if so directed by the Tax Indemnitee or in any event if practicable and if the return to be filed reflects only information in respect of the transactions contemplated by the Operative Documents, prepare and furnish to such Tax Indemnitee not later than 30 days prior to the date such report, statement or return is required to be filed (determined without regard to extensions) a proposed form of such report, statement or return for filing by the Tax Indemnitee. If no report, statement or return is required to be filed with respect to a Tax subject to indemnification under this Section 11.2, Oglethorpe will notify the Tax Indemnitee of such Tax in writing not later than 30 days prior to the due date for payment of such Tax. (2) Subject to paragraph (c) above, not later than the date which is five Business Days prior to the date any Tax described in the preceding clause (1) is required to be paid by the Tax Indemnitee, Oglethorpe will either (y) if permitted by applicable law, pay such 62 Tax directly to the appropriate taxing authority or (z) pay the Tax Indemnitee the amount of such Tax in immediately available funds. (3) Each of the Tax Indemnitee or Oglethorpe, as the case may be, will timely provide the other, at Oglethorpe's expense, with all information in its possession that the other party may reasonably require and request to satisfy its obligations under this paragraph (h). Oglethorpe (i) shall hold each Tax Indemnitee harmless on an After-Tax Basis from and against all liabilities arising out of any insufficiency or inaccuracy of any report, statement or return if such insufficiency or inaccuracy results from the insufficiency or inaccuracy of any information required to be supplied by Oglethorpe pursuant to this paragraph (h) in preparing and filing such report, statement or return and (ii) shall indemnify each Tax Indemnitee for all liabilities, costs and expenses (including the attorneys', accountants' and other professional fees for tax related filings or reviews) of such Tax Indemnitee with respect to all returns, reports or statements to which this Section 11.2(h) applies. (i) Non-Parties. If a Tax Indemnitee is not a party to this Agreement, Oglethorpe may require such Tax Indemnitee to agree in writing, in a form reasonably acceptable to Oglethorpe, to the terms of this Section 11 prior to making any payment to such Tax Indemnitee under this Section. SECTION 12. RMLC's INDEMNIFICATIONS Section 12.1. RMLC General Indemnity (a) Claims Indemnified. Subject to the exclusions stated in paragraph (b) below, RMLC agrees to indemnify, protect, defend and hold harmless, and does hereby indemnify the Co-Trustee, the Georgia Trust Company in its individual capacity, the Owner Trustee, the Non-Georgia Trust Company in its individual capacity, the Trust Estate, Oglethorpe, the Owner Participant and the Lender and their respective Affiliates (other than, in the case of Oglethorpe, RMLC), successors, assigns, agents, directors, officers or employees (each an "RMLC Indemnitee") against any and all Claims (including claims under Environmental Laws) imposed on, incurred or suffered by or asserted against any RMLC Indemnitee in any way relating to or resulting from or arising out of or attributable to: (i) the conduct of the business or affairs of RMLC and the Facility and the Rocky Mountain Site; (ii) the reasonable costs and expenses of the Transaction Parties in connection with amendments or supplements to the Transaction Documents or in connection with 63 defaults under such Transaction Documents other than defaults in consequence of the acts or omissions of Oglethorpe; (iii) the imposition of any Lien attributable to the acts or omissions of RMLC other than a Facility Lessee's Lien or an Owner Participant's Lien; (iv) any violation by, or liability relating to, RMLC of, or under, any Applicable Law, whether now or hereafter in effect (including those relating to the environment), or any action of any Governmental Entity or other Person taken with respect to the Facility or the Rocky Mountain Site or the interests of Trustees under Transactions Documents; (v) the non-performance or breach by RMLC of any obligation contained in this Agreement or any other Transaction Document or the falsity or breach of any representation or warranty of RMLC contained in this Agreement or any other Transaction Document; (vi) the continuing fees (if any) and expenses of the Co-Trustee and the Owner Trustee (including the reasonable compensation and expenses of its counsel, accountants and other professional persons) arising out of the Co-Trustee's or the Owner Trustee's discharge of its duties under or in connection with the Facility Lease, the Ground Sublease, the Rocky Mountain Agreements Re-assignment, the Payment Undertaking Pledge Agreement and the Equity Funding Pledge Agreement; and (vii) the establishment or maintenance of the Qualifying Equity Funding Agreement or any Qualifying Letter of Credit in replacement for a Qualifying Equity Funding Agreement. (b) Claims Excluded. The following are excluded from RMLC's agreement to indemnify any Indemnitee under this Section 12.1: (i) any Claim to the extent attributable to acts, omissions or events occurring after the earlier of (and not based on circumstances or conditions occurring before) (a) the return of the Facility Lessor's Rocky Mountain Interest in full compliance of Section 5 of the Facility Lease, if applicable, or (b) the expiration or earlier termination of the Facility Lease in compliance with the terms thereof under circumstances not requiring the return of the Facility Lessor's Rocky Mountain Interest pursuant to Section 5 of the Facility Lease, unless, and to the extent such Claim is attributable to actions, omissions or events occurring in connection with an Event of Default; (ii) without limiting RMLC's obligations under paragraph (d) below, any Claim that is a Tax, or is a cost of contesting a Tax imposed on, or asserted against, the RMLC 64 Indemnitee or an Affiliate (other than, in the case of Oglethorpe, RMLC), whether or not RMLC is required to indemnify therefor under Section 12.2 hereof; (iii) with respect to any RMLC Indemnitee, any Claim attributable to the gross negligence or wilful misconduct of such RMLC Indemnitee unless attributable to (a) any breach by RMLC of any covenant, representation or warranty contained in any Transaction Document or (b) any breach by any other Transaction Party or its Affiliates (other than, in the case of Oglethorpe, RMLC) of any covenant, representation or warranty made by it in any Transaction Document; (iv) as to any RMLC Indemnitee, any Claim attributable to the noncompliance of such RMLC Indemnitee or any Party Related (other than, in the case of Oglethorpe, RMLC) thereto, with any of the terms of, or any misrepresentation or breach of warranty by such RMLC Indemnitee or any Party Related (other than, in the case of Oglethorpe, RMLC) thereto contained in any Operative Document made by such RMLC Indemnitee or any breach by such RMLC Indemnitee or any Party Related (other than, in the case of Oglethorpe, RMLC) thereto of any covenant contained in any Transaction Document by which such RMLC Indemnitee is bound unless attributable to (a) any breach by RMLC of any covenant, representation or warranty contained in any Transaction Document or (b) any breach by any other Transaction Party or its Affiliates (other than, in the case of Oglethorpe, RMLC) of any covenant, representation or warranty made by it in any Transaction Document; (v) as to any RMLC Indemnitee or Party Related (other than, in the case of Oglethorpe, RMLC) thereto, any Claim attributable to the offer, sale, assignment, transfer or other disposition (voluntary or involuntary) by or on behalf of such RMLC Indemnitee of its interest (whether direct or beneficial) in any Operative Document or in the Facility Lessor's Rocky Mountain Interest or the Trust Estate, other than a transfer by such RMLC Indemnitee (A) required by the terms of an Operative Document or (B) any transfer during the continuance of a Payment Default, Bankruptcy Default or Event of Default; (vi) with respect to the Trustees or the Trust Companies, any Claim constituting or arising from a Facility Lessor's Lien; (vii) with respect to the Owner Participant, any claim constituting or arising from an Owner Participant's Lien; (viii) any Claim relating to the payment of any amount which constitutes Transaction Costs which the Co-Trustee or the Owner Participant is obligated to pay pursuant to Section 2.4(a) hereof or any other amount to the extent such RMLC Indemnitee or any Party Related (other than, in the case of Oglethorpe, RMLC) thereto has expressly agreed in any Operative Document to pay such amount without express right of reimbursement; 65 (ix) in the case of the Trustees and the Owner Participant, any failure on the part of either Trustee to distribute in accordance with the Trust Agreement any amounts received and distributable by it thereunder; and (x) any Claim that constitutes principal and/or interest on the Loan Certificate, including without limitation any Claim that constitutes a payment of interest resulting in connection with a substitution of the Payment Undertaking Agreement; provided that the terms "omission," "gross negligence" and "willful misconduct," when applied with respect to the Lender or any Affiliate thereto, shall not include any liability imputed as a matter of law to such Indemnitee solely by reason of such entity's interest in the Facility or the Rocky Mountain Site or such Indemnitee's failure to act in respect of matters which are or were the obligation of Oglethorpe or another party under this Agreement. (c) Insured Claims. Subject to the provisions of paragraph (e) of this Section 12.1, in the case of any Claim indemnified by RMLC hereunder which is covered by a policy of insurance maintained by RMLC each RMLC Indemnitee agrees, unless it and each other RMLC Indemnitee shall waive its rights to indemnification (for itself and each Party Related thereto) in a manner reasonably acceptable to RMLC and unless an Event of Default has occurred and is continuing, to cooperate, at the sole cost and expense of RMLC, with insurers in exercise of their rights, and to investigate, defend or compromise such Claim. (d) After-Tax Basis. RMLC agrees that any payment or indemnity pursuant to this Section 12.1 in respect of any Claim shall be made to the RMLC Indemnitee on an After-Tax Basis. (e) Claims Procedure. Each RMLC Indemnitee shall promptly after such RMLC Indemnitee shall have Actual Knowledge thereof notify RMLC of any Claim as to which indemnification is sought; provided, that the failure so to notify RMLC shall not reduce or affect RMLC's liability which it may have to such RMLC Indemnitee under this Section 12.1; and no payment hereunder by RMLC to an Indemnitee or Party Related thereto shall be deemed to constitute a waiver or release of any right or remedy that RMLC may have against any such RMLC Indemnitee or any Party Related thereto for actual damages resulting directly from the failure or delay of such RMLC Indemnitee or any Party Related (other than in the case of Oglethorpe, RMLC) thereto to give RMLC such notice. Any amount payable to any RMLC Indemnitee pursuant to this Section 12.1 shall be paid within thirty (30) days after receipt of such written demand therefor from such RMLC Indemnitee, accompanied by a certificate of such RMLC Indemnitee stating in reasonable detail the basis for the indemnification thereby sought and (if such RMLC Indemnitee is not a party hereto) an agreement to be bound by the terms hereof as if such RMLC Indemnitee were such a party. The foregoing shall not, however, constitute an obligation to disclose confidential information of any kind. Promptly after RMLC receives notification of such Claim accompanied by a written statement describing in reasonable detail the Claims which are the subject of and basis for such indemnity and the computation of the amount 66 so payable, RMLC shall notify such RMLC Indemnitee whether it intends to pay, object to, compromise or defend any matter involving the asserted liability of such RMLC Indemnitee. RMLC shall have the right to investigate and so long as no Event of Default shall have occurred and be continuing, RMLC shall have the right in its sole discretion, to defend or compromise any Claim for which indemnification is sought under this Section 12.1 which RMLC acknowledges is subject to indemnification hereunder; provided that no such defense or compromise shall involve any danger of (i) foreclosure, sale, forfeiture or loss of, or imposition of a Lien on any part of the Ground Interest, the Undivided Interest, the Trust Estate the other Collateral or the impairment of the Facility in any material respect or (ii) any criminal liability being incurred or any gross negligence or willful misconduct on such RMLC Indemnitee, provided further, that no Claim shall be compromised by RMLC on a basis that admits any criminal violation or material allegation of wrongdoing or misconduct on the part of such RMLC Indemnitee, without the express written consent of such RMLC Indemnitee; and provided, further, that to the extent that other Claims unrelated to the transactions contemplated by the Transaction Documents are part of the same proceeding involving such Claim, RMLC may assume responsibility for the contest or compromise of such Claim only if the same may be and is severed from such other Claims (and each RMLC Indemnitee agrees to use reasonable efforts to obtain such a severance). If RMLC elects, subject to the foregoing, to compromise or defend any such asserted liability, it may do so at its own expense and by counsel selected by it. Upon RMLC's election to compromise or defend such asserted liability and prompt notification to such RMLC Indemnitee of its intent to do so, such RMLC Indemnitee shall cooperate at RMLC's expense with all reasonable requests of RMLC in connection therewith and will provide RMLC with all information not within the control of RMLC as is reasonably available to such RMLC Indemnitee which RMLC may reasonably request; provided, however, that such RMLC Indemnitee shall not, unless otherwise required by Applicable Law, be obligated to disclose to RMLC or any other Person, or permit RMLC or any other Person to examine (i) any income tax returns of the Owner Participant or Lender or (ii) any confidential information or pricing information not generally accessible by the public that are possessed by the Owner Participant, the Lender (and, in the event that any such information is made available, RMLC shall treat such information as confidential and shall take all actions reasonably requested by such RMLC Indemnitee for purposes of obtaining a stipulation from all parties to the related proceeding providing for the confidential treatment of such information from all such parties). Where RMLC, or the insurers under a policy of insurance maintained by RMLC, undertake the defense of such RMLC Indemnitee with respect to a Claim (with counsel reasonably satisfactory to such Indemnitee and without reservation of rights against such Indemnitee), no additional legal fees or expenses of such RMLC Indemnitee in connection with the defense of such Claim shall be indemnified hereunder unless such fees or expenses were incurred at the request of RMLC or such insurers. Notwithstanding the foregoing, a RMLC Indemnitee may participate at its own expense in any judicial proceeding controlled by RMLC pursuant to the preceding provisions; provided, however, that such party's participation does not in the reasonable opinion of independent counsel constitute a waiver of the indemnification provided in this Section; provided, further, that (i) such RMLC Indemnitee is advised by counsel that an actual or potential conflict of interest exists where it is advisable for such RMLC Indemnitee to be represented by separate counsel or (ii) there is a risk that such RMLC Indemnitee 67 may be indicted or otherwise charged in a criminal complaint and such RMLC Indemnitee informs RMLC that such RMLC Indemnitee desires to be represented by separate counsel, such RMLC Indemnitee shall have the right to control its own defense of such Claim and the reasonable fees and expenses of such separate counsel shall be borne by RMLC. So long as no Default or Event of Default shall have occurred and be continuing, no RMLC Indemnitee shall enter into any settlement or other compromise with respect to any Claim without the prior written consent of RMLC unless the RMLC Indemnitee waives its rights to indemnification hereunder. Nothing contained in this Section shall be deemed to require an Indemnitee to content any Claim or to assume responsibility for or control of any judicial proceeding with respect thereto. (f) Subrogation. To the extent that a Claim indemnified by RMLC under this Section 12.1 is in fact paid in full by RMLC or an insurer under an insurance policy maintained by RMLC, RMLC (so long as no Event of Default shall have occurred and be continuing) or such insurer shall be subrogated to the rights and remedies of the RMLC Indemnitee on whose behalf such Claim was paid to the extent of such payment (other than rights of such RMLC Indemnitee under insurance policies maintained at its own expense) with respect to the transaction or event giving rise to such Claim. Should an RMLC Indemnitee receive any refund, in whole or in part, with respect to any Claim paid by RMLC hereunder, so long as no Event of Default has occurred and is continuing it shall promptly pay over to RMLC the lesser of (i) the amount refunded reduced by the amount of any Tax incurred by reason of the receipt or accrual of such refund and increased by the amount of any Tax saved as a result of such payment or (ii) the amount RMLC or any of its insurers has paid in respect of such Claim. Section 12.2 RMLC General Tax Indemnity (a) Indemnity. Except as provided in paragraph (b), RMLC agrees to indemnify, on an After-Tax Basis, each of the Georgia Owner, the Georgia Trust Company in its individual capacity, the Owner Trustee, the Non-Georgia Trust Company in its individual capacity, the Trust Estate, the Owner Participant, the Lender, the Payment Undertaking Issuer and Oglethorpe, their respective successors and assigns, and the Affiliates of each of the foregoing (other than, in the case of Oglethorpe, RMLC) (each a "RMLC Tax Indemnitee") for, and to hold each RMLC Tax Indemnitee harmless from and against, all Taxes . (b) Excluded Taxes. The indemnity provided for in paragraph (a) above shall not extend to any Excluded Taxes (other than Excluded Taxes defined in clause (xvii) of 11.2(b)). (c) Other Provisions. The provisions of paragraphs (c) through (i) of Section 11.2 shall apply to the indemnity provided by this Section 12.2 on the same basis as if RMLC was "Oglethorpe," each RMLC Indemnitee was a "Tax Indemnitee", for the purpose of such paragraphs and references to defaults or events of default under the Head Lease or the Facility Sublease shall be deemed to be references to the corresponding default or event of default under the Facility Lease. 68 SECTION 13. RMLC'S RIGHT OF QUIET ENJOYMENT Every party to this Agreement acknowledges notice of, and consents in all respects to, the terms of the Facility Lease, the Ground Sublease and the Rocky Mountain Agreements Re-assignment, and expressly, severally and as to its own actions only, agrees that, so long as no Event of Default has occurred and is continuing, it shall not take or cause to be taken any action contrary to RMLC's rights under the Facility Lease, the Ground Sublease or the Rocky Mountain Agreements Re-assignment, including the right to possession, use and quiet enjoyment of the Undivided Interest, the Ground Interest and the Assigned Rocky Mountain Agreements by RMLC as provided therein. SECTION 14. OGLETHORPE'S RIGHT OF QUIET ENJOYMENT Each party to this Agreement acknowledges notice of, and consents in all respects to, the terms of the Facility Sublease, the Ground Sub-sublease and the Rocky Mountain Agreements Second Re-assignment and expressly, severally and as to its own actions only, agrees that, so long as no Sublease Event of Default has occurred and is continuing, it shall not take or cause to be taken any action contrary to Oglethorpe's rights under the Facility Sublease, the Ground Sub-sublease or the Rocky Mountain Agreements Second Re-assignment, including the right to possession, use and quiet enjoyment of the Undivided Interest, the Ground Interest and the Assigned Rocky Mountain Interests by Oglethorpe as provided therein. SECTION 15. LOAN PREPAYMENTS AND REFINANCINGS Section 15.1. Optional Refinancing of the Loan Certificate. If the senior unsecured debt obligations (or long-term deposits) of the Payment Undertaking Issuer shall not be rated at least "AA" by S&P and "Aa2" by Moody's, then at the request of RMLC, the Owner Participant, the Owner Trustee, the Co-Trustee and the Lender agree to cooperate with RMLC to refinance the Loan Certificate in whole but not in part, through the issuance of an Additional Loan Certificate. The obligation of the Owner Participant, the Owner Trustee and the Co-Trustee to effect such a refinancing shall be subject to the satisfaction of all conditions to the issuance of an Additional Loan Certificate under Section 2.10 of the Loan Agreement and to the satisfaction of the following additional conditions: (i) no Payment Default, Bankruptcy Default or Event of Default under the Facility Lease shall have occurred and be continuing; (ii) the principal amount and amortization of such Additional Loan Certificate shall be equal to the outstanding principal amount and amortization of the Loan Certificate on the date such Loan Certificate is refinanced (the "Loan Refinancing Date") (after taking 69 into account any scheduled amortization of principal, if any, occurring on such Loan Refinancing Date); (iii) each Additional Loan Certificate shall be prepayable and payable without premium or penalty of any kind (including Breakage Costs or Make-Whole Amount) and shall have a final maturity date no later than the Loan Maturity Date; (iv) appropriate adjustments pursuant to Section 3.4 of the Facility Lease shall be made to Basic Rent and the applicable Termination Values in order to preserve the Owner Participant's Net Economic Return and reflect the interest rate on the Additional Loan Certificate; (v) RMLC shall pay (y) if the Loan Refinancing Date is a Rent Payment Date, the Basic Rent due on such date, or (z) if the Loan Refinancing Date is not a Rent Payment Date, accrued and unpaid interest on the Loan Certificate being refinanced for the period from the immediately preceding Payment Date to the Loan Refinancing Date; (vi) such refinancing shall not, in and of itself, result in a violation of Applicable Law not attributable to a default in, or a breach of, the obligations of any such Person hereunder or under the other Operative Documents; (vii) any authorization or approval or other action by, or notice to or filing with, any Governmental Entity required for such issuance of an Additional Loan Certificate shall have been duly obtained, taken or given and the Owner Participant, the Co-Trustee, and the Owner Trustee shall have received one or more opinions of counsel for RMLC (such opinions and such counsel to be reasonably acceptable to the Owner Participant, the Co-Trustee and the Owner Trustee) to such effect; (viii) the representations and warranties set forth in Section 3.6 of this Agreement shall be true and correct in all material respects on and as of the Loan Refinancing Date with the same force and effect with respect to the new Lender as of such Loan Refinancing Date and the Owner Participant, the Co-Trustee and the Owner Trustee shall have received an Officer's Certificate from the new Lender to such effect; (ix) all documentation in connection with such refinancing shall be reasonably satisfactory to the Co-Trustee, the Owner Trustee and the Owner Participant and shall have terms and conditions no less favorable from the perspective of the Owner Participant and the Trustees as the documentation existing with respect to the initial Loan Certificate; (x) the Owner Participant shall at the expense of RMLC have obtained a favorable tax opinion from the Owner Participant's Tax Counsel to the effect that the exercise of such refinancing right (as opposed to the existence of such right) will not result in any adverse tax consequence to the Owner Participant; and 70 (xi) the Owner Participant shall have consented to such refinancing, which consent the Owner Participant may withhold in the Owner Participant's sole, good faith discretion; except that the Owner Participant shall have no such consent right if and to the extent Hunton & Williams, or other such counsel selected by the Owner Participant and reasonably acceptable to RMLC have delivered an opinion to the Owner Participant that, as a result of a change in or clarification of Regulations issued under section 467 of the Code (which change or clarification occurs after the Closing Date and before such refinancing), the absence of such consent right shall not adversely affect the eligibility of the Facility Lease or the Facility Sublease for initial and continued compliance with section 1.467-3(c)(2)(i) of the Regulations. Section 15.2. Financing and Refinancing Costs. RMLC hereby agrees to pay, on an After-Tax Basis, all reasonable costs and expenses of the Transaction Parties, including the reasonable fees and expenses of counsel to the Owner Participant, the Co-Trustee, the Owner Trustee, the Lender and any Person making a loan evidenced by an Additional Loan Certificate, in each case to the extent incurred in connection with any financing or refinancing pursuant to this Section 15 whether or not the financing or refinancing is consummated. SECTION 16. SPECIAL EQUITY REMEDIES. Section 16.1. Special Equity Facility Lease Remedy. Notwithstanding the limitations set forth in Section 5.1, upon the occurrence and during the continuance of an Event of Default, the Owner Participant may, upon not less than five Business Days' written notice to RMLC, Oglethorpe and the Lender, require RMLC (or its designee as provided below) to purchase all of the Owner Participant's Beneficial Interest (the "Special Equity Facility Lease Remedy") on the Termination Date specified in such notice occurring not less than five Business Days after such notice by the Owner Participant at a price equal to the Equity Portion of Termination Value determined as of such Termination Date plus, if such Termination Date is a Rent Payment Date, the Basic Rent due on such date (to the extent payable in arrears) reduced by the sum of any amounts received by the Owner Participant in respect of the Equity Portion of Termination Value as a result of the exercise of any remedies under Section 17 of the Facility Lease (including under the Qualifying Equity Funding Agreement and from the proceeds of the Qualifying Sublease Surety Bond and Facility Sublease Assignment). On the Termination Date identified in the notice of the Owner Participant, RMLC shall pay to the Owner Participant the purchase price for the Beneficial Interest determined as of such date and reduced as provided in the immediately preceding sentence, plus all amounts of Supplemental Rent to the extent payable to the Owner Participant or the Trustees (including, without limitation, all costs and expenses of the Owner Participant and Trustees and all sales, use, value added and other Taxes covered by Section 12.2 of the Participation Agreement associated with the exercise of the Special Equity Facility Lease Remedy pursuant to this Section 16.1, to the extent such amounts have not otherwise been reimbursed pursuant to Section 12.2) due and payable on such Termination Date. Concurrently with the payment of all sums required to be paid pursuant to this Section 16.1 (or on such later 71 date of transfer of the Beneficial Interest in accordance with clause (ii) below) (i) RMLC shall cease to have any liability to the Owner Participant with respect to the Operative Documents, except for obligations (including, without limitation, Sections 12.1 and 12.2 hereof) surviving pursuant to the express terms of any Operative Document as of such date and (ii) the Owner Participant will transfer (by an appropriate instrument of transfer), to the extent it is then not legally enjoined from doing so, all of its right, title and interest in the Beneficial Interest to RMLC; provided, however, that if the Liens of the Loan Agreement and the Deed to Secure Debt have not been terminated or discharged, such transfer shall not be made to RMLC or its then successor, if any, as Facility Lessee, but shall be made to RMLC's designee (other than Oglethorpe or its then successor, if any, as Facility Sublessee) promptly upon RMLC's designation of such designee and such designee will agree not to transfer the Beneficial Interest to RMLC (or its then successor, if any, as Facility Lessee) or Oglethorpe (or its then successor, if any, as Facility Sublessee) until such Lien is terminated or discharged. Any failure of RMLC to identify such a designee shall not effect RMLC's obligation to make the payments under this Section 16.1 on the date specified. At the time of any transfer under this Section 16.1 the Owner Participant shall represent and warrant as to the absence of Liens attributable to the Owner Participant on the Beneficial Interest. It is understood and agreed among the parties hereto that the transaction contemplated by this Section 16.1 shall not effect a merger of RMLC's interest in the Undivided Interest and the Ground Interest with the Facility Lessor's Rocky Mountain Interest. Section 16.2. Special Equity Head Lease Remedy. Notwithstanding the limitations set forth in Section 5.1 herein, upon the occurrence and during the continuance of a Head Lessor Event of Default, the Owner Participant may, upon not less than five Business Days' written notice to RMLC, Oglethorpe and the Lender, require RMLC and Oglethorpe (or their designee as provided below) in the proportions set forth below to purchase all of the Owner Participant's Beneficial Interest (the "Special Equity Head Lease Remedy") on the Termination Date specified in such notice occurring not less than five Business Days after such notice by the Owner Participant on the terms and conditions set forth in this Section 16.2. On the Termination Date identified in the notice of the Owner Participant, RMLC shall pay to the Owner Participant the RMLC Portion of Equity Termination Value plus, if such Termination Date is a Rent Payment Date, the Basic Rent due on such date (to the extent payable in arrears) reduced by all amounts, if any, received in respect of the Equity Portion of Termination Value under the Qualifying Equity Funding Agreement determined as of such Termination Date, and plus all amounts of Supplemental Rent due and owing on the date of such purchase to the extent payable to the Owner Participant or the Trustees (including, without limitation, all costs and expenses of the Owner Participant or the Trustees and all sales, use, value added and other Taxes covered by Section 12.2 of the Participation Agreement associated with the exercise of the Special Equity Head Lease Remedy pursuant to this Section 16.2, to the extent such amounts have not otherwise been reimbursed pursuant to Section 11 or 12) due and payable on such date. Concurrently with the payment of all sums required to be paid by RMLC pursuant to this Section 16.2 (or on such later date of transfer of RMLC Portion of the Beneficial Interest in accordance with clause (ii) below) (i) RMLC shall cease to have any liability to the Owner Participant with respect to the Operative Documents, except for obligations (including, without limitation, Sections 12.1 and 12.2 hereof) 72 surviving pursuant to the express terms of any Operative Document as of such date and (ii) the Owner Participant will transfer (by an appropriate instrument of transfer) to the extent it is then not legally enjoined from doing so, all of its right, title and interest in the RMLC Portion of the Beneficial Interest to RMLC; provided, however, that if the Liens of the Loan Agreement and the Deed to Secure Debt have not been terminated or discharged, such transfer shall not be made to RMLC or its then successor, if any, as Facility Lessee, but shall be made to RMLC's designee (other than Oglethorpe or its then successor, if any, as Facility Sublessee) promptly upon RMLC's designation of such designee and such designee will agree not to transfer the RMLC Portion of the Beneficial Interest to RMLC (or its then successor, if any, as Facility Lessee) or Oglethorpe (or its then successor, if any, as Facility Sublessee) until such Lien is terminated or discharged. Any failure of RMLC to identify such a designee shall not effect RMLC's obligation to make the payments under this Section 16.2 on the dates specified. On the Termination Date identified in the notice of the Owner Participant referred to in the first sentence of this Section 16.2, Oglethorpe shall pay to the Owner Participant the Oglethorpe Portion of Equity Termination Value reduced by all amounts, if any, received under the Qualifying Head Lease Surety Bond determined as of such Termination Date, plus all amounts of Sublease Supplemental Rent to the extent payable to the Owner Participant or the Trustees (including, without limitation, all costs and expenses of the Owner Participant or the Trustees and all sales, use, value added and other Taxes covered by Section 11 of the Participation Agreement associated with the exercise of the Special Equity Head Lease Remedy pursuant to this Section 16.2, to the extent such amounts have not otherwise been reimbursed pursuant to Section 11 or 12) due and payable on such date. Concurrently with the payment of all sums required to be paid by Oglethorpe pursuant to this Section 16.2 (or on such later date of transfer of the Oglethorpe Portion of the Beneficial Interest in accordance with clause (y) below) (y) Oglethorpe shall cease to have any liability to the Owner Participant with respect to the Operative Documents, except for obligations (including, without limitation, Sections 11.1 and 11.2 hereof and the Tax Indemnity Agreement) surviving pursuant to the express terms of any Operative Document as of such date and (z) the Owner Participant will transfer (by an appropriate instrument of transfer) to the extent it is then not legally enjoined from doing so, all of its right, title and interest in the Oglethorpe Portion of the Beneficial Interest to Oglethorpe; provided, however, that if the Liens of the Loan Agreement and the Deed to Secure Debt have not been terminated or discharged, such transfer shall not be made to Oglethorpe or its then successor, if any, as Facility Sublessee, but shall be made to Oglethorpe's designee promptly upon Oglethorpe's designation of such designee (which shall not be RMLC or its then successor, if any, as Facility Lessee) and such designee will agree not to transfer the Oglethorpe Portion of the Beneficial Interest to Oglethorpe or its then successor as Facility Sublessee until such Lien is terminated or discharged. Any failure of Oglethorpe to identify such a designee shall not effect Oglethorpe's obligation to make the payments under this Section 16.2 on the dates specified. At the time of any transfer to RMLC or Oglethorpe under this Section 16.2 the Owner Participant shall represent and warrant as to the absence of Liens attributable to the Owner Participant on the Beneficial Interest. It is understood and agreed among the parties hereto that the transaction contemplated by this Section 16.2 shall not effect a merger of Oglethorpe's ownership interest in the Facility and the Rocky Mountain Site with the Facility Lessor's Rocky Mountain Interest or 73 of RMLC's interest in the Undivided Interest and the Ground Interest with the Facility Lessor's Rocky Mountain Interest. SECTION 17. AGREEMENTS CONCERNING PAYMENT UNDERTAKING AGREEMENT AND EQUITY FUNDING AGREEMENT Section 17.1. Notices to the Payment Undertaking Issuer. (a) Release Event. As promptly as practicable after the Loan Certificates have been refinanced, purchased or prepaid in accordance with the Operative Documents (other than in connection with an event which causes payment of the Full Termination Amount under the Payment Undertaking Agreement and other than any voluntary transfer of the Loan Certificates) or RMLC has provided Acceptable Substitute Credit Protection to replace the Payment Undertaking Agreement, (i) the Owner Trustee or the Lender will deliver a written notice to the Payment Undertaking Issuer to the effect that the applicable event has occurred, (ii) if the Owner Trustee gives such notice, it will simultaneously request a written acknowledgement from the Lender that the Payment Undertaking Agreement is no longer subject to the Lien of the Loan Agreement and the Payment Undertaking Pledge Agreement and (iii) the Lender will deliver to the Payment Undertaking Issuer, as promptly as practicable after receiving such a request from the Owner Trustee or giving such notice, a written acknowledgement that the Payment Undertaking Agreement is no longer subject to the Lien of the Loan Agreement and the Payment Undertaking Pledge Agreement. The Lender hereby agrees that it shall not give any notices pursuant to the Payment Undertaking Agreement if an event that requires payment of the Full Termination Amount has not occurred. The Owner Trustee hereby agrees that it shall not give any notices which would cause the Full Termination Amount to become payable if an event which requires the payment of Full Termination Amount has not occurred. (b) Payment Undertaking Termination. After a Release Event, the Owner Trustee will, upon receipt of a written request from RMLC, give notice of termination of the Payment Undertaking Agreement to the Payment Undertaking Issuer pursuant to clause (b) of Section 4.01 of the Payment Undertaking Agreement and the Owner Trustee hereby agrees that it shall not give any such notice of termination unless so instructed by the Facility Lessee. Section 17.2. Payments to RMLC by the Payment Undertaking Issuer Under Certain Circumstances. (a) If, on any Scheduled Payment Date or the Full Termination Date prior to the occurrence of a Release Event, the Lender has received payment in full of the principal of and accrued interest on the Loan Certificate due on such day prior to receipt of any payment then due under the Payment Undertaking Agreement, then the Owner Trustee shall, but only with the prior written consent of the Lender as assignee of the Owner Trustee's rights under the Payment Undertaking Agreement, (i) pay to RMLC the amount received by the Owner Trustee from the Payment Undertaking Issuer on such day or (ii) on the instructions of RMLC, instruct the Payment Undertaking Issuer to pay such amount then due under the Payment Undertaking Agreement directly to RMLC. The Lender agrees to give such consent if no Event of Default or Bankruptcy 74 Default has occurred and is then continuing but otherwise shall only give such consent in its sole discretion. (b) After a Release Event occurs, the Owner Trustee shall, (i) pay to RMLC the amount received by the Owner Trustee from the Payment Undertaking Issuer from time to time or (ii) on the instruction of RMLC, instruct the Payment Undertaking Issuer to pay amounts due from time to time under the Payment Undertaking directly to RMLC. (c) Notwithstanding the foregoing, if, prior to a Release Event, an Event of Default or Bankruptcy Default has occurred and is continuing (and the Lender has not consented to the payment or instruction described in paragraph (a) of this Section), the Owner Trustee shall not make such payment to RMLC pursuant to this Section or give such instruction to the Bank pursuant to this Section, but shall hold the amount so received from the Payment Undertaking Issuer as security for RMLC's obligations under the Operative Documents as provided in Section 23 of the Facility Lease until applied toward the satisfaction of such obligations and, to the extent not so applied, paid over to RMLC when all such obligations have been fully satisfied. Section 17.3. Acceptable Substitute Credit Protection. RMLC may replace the Payment Undertaking Agreement with Acceptable Substitute Credit Protection at any time; provided, however, that in connection with any such replacement of the Payment Undertaking Agreement the Lender that holds the Loan Certificate immediately prior to such replacement shall not be entitled to reset the Loan Rate pursuant to Section 2.12 of the Loan Agreement or otherwise receive any payment that would be the economic equivalent of an increase in the Loan Rate without the Owner Participant's consent, which consent may be withheld in the Owner Participant's good faith discretion; provided further that if such Lender in its sole discretion is unwilling to continue holding the Loan Certificate in the absence of an increase in the Loan Rate and the Owner Participant has not consented to such adjustment or payment, RMLC will be required to arrange for a third party lender (which may not be RMLC, Oglethorpe or any Affiliate or Tax Affiliate of either RMLC or Oglethorpe) to purchase the Loan Certificate from such Lender, and such Lender agrees to sell the Loan Certificate (without recourse or warranty, other than as to such Lender's title to and right to sell such Loan Certificate), for a purchase price in cash at least equal to the outstanding principal amount and accrued interest thereon. The parties hereto agree to execute such documents as are necessary to create and effect, to the reasonable satisfaction of RMLC and the Lender that will hold the Loan Certificate after the replacement, a first priority perfected security interest in such Acceptable Substitute Credit Protection in favor of the Lender and to release the Payment Undertaking Agreement from the Liens of the Loan Agreement upon receipt of the Acceptable Substitute Credit Protection (and such first priority perfected security interest). RMLC shall deliver to the parties hereto all such documents at least 10 Business Days prior to the anticipated execution thereof. Such documents shall be in form and substance reasonably satisfactory to such parties. No replacement undertaken by RMLC in accordance with this Section 17.3 shall be effective, and the Payment Undertaking Agreement or Acceptable Substitute Credit Protection provided hereunder in substitution therefor (and the rights and obligations of the issuer thereunder) shall not terminate, prior to the execution and delivery 75 of such documents by the parties thereto. RMLC shall be responsible for, and shall pay or cause to be paid, promptly and in any event within 30 days after the provision of Acceptable Substitute Credit Protection (but without duplication of any other amount payable pursuant to any other Operative Documents), all costs, fees and expenses (including reasonable fees, expenses and disbursements of counsel but excluding any payment that would be the economic equivalent of an increase in the Loan Rate) incurred by the Owner Participant, the Payment Undertaking Issuer, the Lender that holds the Loan Certificate immediately prior to such replacement and the Trustee in connection with RMLC's provision of Acceptable Substitute Credit Protection (whether or not consummated). In addition, if RMLC provides Acceptable Substitute Credit Protection in accordance herewith, then RMLC shall pay to the Lender (a) if the original Lender has elected to retain its interest in the Loan Certificate in connection with such replacement and the Loan Certificate shall at any time thereafter be prepaid or purchased by the Trustees or the Owner Participant or its designee pursuant to the terms of the Operative Documents, in each case prior to the Expiration Date, an amount equal to any Make-Whole Amount or Breakage Costs pursuant to Section 2.12 of the Loan Agreement in connection with such prepayment or purchase and (b) amounts from time to time equal to any Increased Costs pursuant to Section 2.13 of the Loan Agreement. With respect to claims by the Lender under clause (b) of the preceding sentence, the Lender shall provide to RMLC a copy of any notice given by the Lender pursuant to such Section 2.13. Section 17.4. Equity Funding Agreement (a) The Owner Trustee and the Owner Participant hereby agree that they shall not provide nor instruct the Co-Trustee to provide any Payment Certificate (as defined in and pursuant to Section 3.2 of the Equity Funding Agreement) if an event that requires payment of Termination Amount has not occurred. (b) If on any date a payment under Section 3.1 or 3.2 of the Equity Funding Agreement is to be made, the Co-Trustee and Owner Participant have received (prior to receipt of any payment then due under the Equity Funding Agreement) payment in full of all amounts stated to be due under the Facility Lease on such date, then the Co-Trustee upon instruction from the Owner Trustee or the Owner Participant or the Owner Participant shall (i) pay to RMLC the amount received by the Co-Trustee or the Owner Participant from AIG on such date or (ii) on the instructions of RMLC, instruct AIG to pay such amount then due under the Equity Funding Agreement directly to RMLC. (c) Notwithstanding the foregoing, if an Event of Default or Bankruptcy Default has occurred and is continuing the Owner Trustee and the Owner Participant shall instruct the Co-Trustee not to make such payment to RMLC pursuant to paragraph (b) above or give such instruction to AIG pursuant to paragraph (b) above but shall hold the amounts so received from AIG as security for RMLC's obligations under the Operative Documents as provided in Section 23 of the Facility Lease until applied toward the satisfaction of such obligations and, to the extent not so applied paid over to AIG when all such obligations have been fully satisfied. 76 SECTION 18. MISCELLANEOUS Section 18.1. Consents. The Owner Participant covenants and agrees that it shall not unreasonably withhold its consent to any consent requested of the Facility Lessor under the terms of the Operative Documents that by its terms is not to be unreasonably withheld by the Facility Lessor. Section 18.2. Successor Co-Trustee. The parties hereto agree that the transfer or assignment pursuant to the terms of the Trust Agreement by the Co-Trustee to a successor co-trustee, pursuant to the trust created thereunder, will not violate the terms of any Operative Document. Section 18.3. Bankruptcy of Trust Estate. If (i) all or any part of the Trust Estate becomes the property of a debtor subject to the reorganization provisions of Title 11 of the United States Code, as amended from time to time, (ii) pursuant to such reorganization provisions the Owner Participant is required, by reason of the Owner Participant being held to have recourse liability to the debtor or the trustee of the debtor directly or indirectly, to make payment on account of any amount payable as principal or interest on the Loan Certificate, and (iii) the Lender actually receives any Excess Amount, as defined below, which reflects any payment by the Owner Participant on account of clause (ii) above, the Lender shall promptly refund to the Owner Participant such Excess Amount. For purposes of this Section 18.2, "Excess Amount" means the amount by which such payment exceeds the amount which would have been received by the Lender if the Owner Participant had not become subject to the recourse liability referred to in clause (ii) above. Nothing contained in this Section 18.2 shall prevent the Lender from enforcing any personal recourse obligations (and retaining the proceeds thereof) of the Owner Participant as contemplated by this Participation Agreement (other than referred to in clause (ii)). Section 18.4. Amendments and Waivers. No term, covenant, agreement or condition of this Agreement may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto. Section 18.5. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to each party hereto at its address set forth below or, in the case of any such party hereto, at such 77 other address as such party may from time to time designate by written notice to the other parties hereto: If to Oglethorpe: Oglethorpe Power Corporation 2100 East Exchange Place Tucker, Georgia 30085-1349 Facsimile No.: (770) 270-7920 Telephone No.: (770) 270-7325 Attention: Vice President - Finance If to RMLC: Rocky Mountain Leasing Corporation c/o Corporation Trust Center 1209 Orange Street, Room 123 Wilmington, Delaware 19801 Facsimile No.: (302) 658-5459 Telephone No.: (302) 777-0250 with copies to: Sutherland, Asbill & Brennan 999 Peachtree Street, N.E. Atlanta, Georgia 30309-3996 Facsimile No.: (404) 853-8806 Telephone No.: (404) 853-3000 Attention: Managing Attorney and to the Lender at the address set forth below. If to the Georgia Trust Company or the Co-Trustee: SunTrust Bank, Atlanta P.O. Box 4625 Mail Code 008 Atlanta, Georgia 30302 78 Facsimile No.: (404) 332-3966 Telephone No.: (404) 588-7813 Attention: Corporate Trust Department with copies to the Owner Participant, the Owner Trustee and the Lender at their respective addresses set forth below. If to the Non-Georgia Trust Company or the Owner Trustee: Fleet National Bank 777 Main Street Hartford, CT 06115 Facsimile No.: (860) 986-7920 Telephone No.: (860) 986-4540 Attention: Corporate Trust Administration with copies to the Owner Participant and the Lender at their respective addresses set forth below. If to the Owner Participant: Philip Morris Capital Corporation 800 Westchester Avenue Rye Brook, NY 10573-1301 Facsimile No.: (914) 335-1297 Telephone No.: (914) 335-5000 Attention: Vice President, Leasing with a copy to Director, Portfolio Administration with a copy to the Lender at the address set forth below. 79 If to the Lender: Utrecht-America Finance Co., c/o Rabobank Nederland, New York Branch 245 Park Avenue New York, New York 10167-0062 Facsimile No.: (212) 916-7880 Telephone No.: (212) 916-7864 Attention: General Counsel's Office Section 18.6. Survival. All warranties, representations, indemnities and covenants made by any party hereto, herein or in any certificate or other instrument delivered by any such party or on the behalf of any such party under this Agreement shall be considered to have been relied upon by each other party hereto and shall survive the consummation of the transactions contemplated hereby and in the other Operative Documents regardless of any investigation made by any such party or on behalf of any such party. Section 18.7. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and assigns as permitted by and in accordance with the terms hereof, including each successive holder of the Beneficial Interest permitted under Section 5.1. Except as expressly provided herein or in the other Operative Documents, no party hereto may assign its interests herein without the consent of the other parties hereto. Section 18.8. Business Day. Notwithstanding anything herein or in any other Operative Document to the contrary, if the date on which any payment is to be made pursuant to this Agreement or any other Operative Document is not a Business Day, the payment otherwise payable on such date shall be payable on the next succeeding Business Day with the same force and effect as if made on such scheduled date and (provided such payment is made on such succeeding Business Day) no interest shall accrue on the amount of such payment from and after such scheduled date to the time of such payment on such next succeeding Business Day. Section 18.9. Governing Law This Agreement has been delivered in the State of New York and shall be in all respects governed by and construed in accordance with the laws of the State of New York including all matters of construction, validity and performance. Section 18.10. Severability. If any provision hereof shall be invalid, illegal or unenforceable under Applicable Law, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. 80 Section 18.11. Counterparts. This Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one Agreement. Section 18.12. Headings and Table of Contents. The headings of the sections of this Agreement and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. Section 18.13. Limitation of Liability. (a) None of the Georgia Trust Company, the Co-Trustee, the Owner Trustee, the Non-Georgia Trust Company or the Owner Participant shall have any obligation or duty to Oglethorpe or to others with respect to the transactions contemplated hereby, except those obligations or duties expressly set forth in this Agreement and the other Operative Documents, and neither the Co-Trustee, the Georgia Trust Company, the Owner Trustee, the Non-Georgia Trust Company, nor the Owner Participant shall be liable for performance by any other party hereto of such other party's obligations or duties hereunder. Without limitation of the generality of the foregoing, under no circumstances whatsoever shall the Owner Participant be liable to Oglethorpe for any action or inaction on the part of the Co-Trustee or the Owner Trustee in connection with the transactions contemplated herein, whether or not such action or inaction is caused by willful misconduct or gross negligence of the Co-Trustee, unless such action or inaction is at the direction of the Owner Participant. In addition, each of the parties hereto acknowledges and agrees that the Co-Trustee has been appointed by the Owner Participant and Owner Trustee for the limited purpose of exercising those trust powers in the State of Georgia which may not be exercised by the Owner Trustee under applicable law, and that, except as otherwise required by applicable law, the Co-Trustee shall not be obligated to take any action hereunder unless expressly directed in writing by the Owner Trustee or the Owner Participant in accordance with the terms of the Trust Agreement. (b) Each Trust Company is entering into the Operative Documents to which it is a party solely as trustee under the Trust Agreement and not in its individual capacity, except as expressly provided herein or therein, and in no case whatsoever shall either Trust Company be personally liable for, or for any loss in respect of, any of the statements, representations, warranties, agreements or obligations of Facility Lessor hereunder or under any other Operative Document, as to all of which the other parties hereto agree to look solely to the Trust Estate; provided, however, that each Trust Company shall be liable hereunder for its own gross negligence or willful misconduct or for a breach of its representations, warranties and covenants made in its individual capacity in Section 3 hereof. (c) Owner Participant will give Sublessee at least 15 days' prior notice of any proposed amendment or supplement to the Trust Agreement (other than an amendment solely effecting a transfer of Owner Participant's interest in the Trust Estate) and deliver true, complete and fully executed copies to each of them of any amendment or supplement to the Trust Agreement. No 81 amendment or supplement to the Trust Agreement that could materially adversely affect the interests of the Lender shall become effective without the written consent of the Lender and, except if an Event of Default has occurred and is continuing, no amendment or supplement to the Trust Agreement that could materially adversely affect the interests of RMLC shall become effective without the written consent of RMLC. Owner Participant agrees, notwithstanding anything to the contrary contained in the Trust Agreement (i) solely for the benefit of the Lender that it will not revoke or otherwise terminate the Trust Agreement so long as the Loan and Security Agreement is in effect without the prior written consent of the Lender, and (ii) solely for the benefit of RMLC that, unless an Event of Default has occurred and is continuing, it will not revoke or otherwise terminate the Trust Agreement during the Basic Term without the prior written consent of RMLC, except that, notwithstanding clause (i) or (ii) above or any other provision of the Operative Documents to the contrary, Owner Participant shall have the right to terminate the Trust Agreement without the consent of any other party to the Operative Documents, at any time, so long as any such other party and its rights and interests under the Operative Documents and the validity and perfection of its security interests in the Trust Estate and the Mortgage shall not be adversely affected by such termination and if in connection therewith Owner Participant shall simultaneously create a new trust upon substantially the same terms and conditions as the Trust Agreement so terminated and shall cause the Trust Estate to be vested in Facility Lessor under the new trust upon the same terms and conditions so applied to such terminated Trust Agreement. Owner Participant further agrees not to remove either institution acting as Facility Lessor, and not to replace institution acting as Facility Lessor in the event that such institution resigns as Facility Lessor, unless Owner Participant shall have obtained the prior consent of RMLC (except if an Event of Default is continuing or if necessary to avoid the occurrence of a Special Termination Event) and the Lender prior to such removal or replacement, which consent shall not be unreasonably withheld. Section 18.14. Consent to Jurisdiction; Waiver of Trial by Jury. (a) Each of the parties hereto (i) hereby irrevocably submits to the nonexclusive jurisdiction of the Supreme Court of the State of New York, New York County (without prejudice to the right of any party to remove to the United States District Court for the Southern District of New York) and to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York for the purposes of any suit, action or other proceeding arising out of this Agreement, the other Operative Documents, or the subject matter hereof or thereof or any of the transactions contemplated hereby or thereby brought by any of the parties hereto or their successors or assigns; (ii) hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court, or in such federal court; and (iii) to the extent permitted by Applicable Law, hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding any claim that it is not personally subject to the jurisdiction of the above-named courts, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement, the other Operative Documents, or the subject matter hereof or thereof may not be enforced in or by such court. 82 (b) To the extent permitted by applicable law, each of the parties hereto hereby irrevocably waives the right to demand a trial by jury, in any such suit, action or other proceeding arising out of this Agreement, the other Operative Documents, or the subject matter hereof or thereof or any of the transactions contemplated hereby or thereby brought by any of the parties hereto or their successors or assigns. Section 18.15. Further Assurances. Each party hereto will promptly and duly execute and deliver such further documents to make such further assurances for and take such further action reasonably requested by any party to whom such first party is obligated, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Participation Agreement and the other Operative Documents. Section 18.16. Effectiveness. The Participation Agreement has been dated as of the date first above written for convenience only. This Participation Agreement shall be effective on the date of execution and delivery by each of the parties hereto. Section 18.17. Compliance with FERC License. Notwithstanding any provision contained in this Participation Agreement or in any Operative Document, any co-licensee of the FERC License has the right to perform any and all acts required by an order of the FERC or its successor affecting the Facility or the Rocky Mountain Site without the prior approval of any party to the Operative Documents. Section 18.18. Expiration of FERC License Term. Pursuant to the FERC Order, each of the parties hereto hereby agrees that to the extent property or facility rights pertaining to the Facility are held under trust at the expiration of the term of the FERC License, such interests will be immediately available for acquisition by the Federal government or a new licensee pursuant to Sections 14 and 15 of the Federal Power Act, 16 U.S.C. Sections 807 and 808. 83 IN WITNESS WHEREOF, the parties hereto have caused this Participation Agreement to be executed and delivered by their respective officers thereunto duly authorized as of the day and year first above written. OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) By: /s/ T. D. Kilgore -------------------------------------------------- Name: T. D. Kilgore Title: President and Chief Executive Officer Date: December 30, 1996 (CORPORATE SEAL) Attest: /s/ Gary M. Bullock ---------------------------------------------- Name: Gary M. Bullock Title: Secretary-Treasurer Date: December 30, 1996 ROCKY MOUNTAIN LEASING CORPORATION By: /s/ Eugen Heckl -------------------------------------------------- Name: Eugen Heckl Title: Vice-President Date: December 30, 1996 FLEET NATIONAL BANK, not in its individual capacity, except to the extent provided herein, but solely as Owner Trustee under the Trust Agreement By: /s/ Frank McDonald -------------------------------------------------- Name: Frank McDonald Title: Vice President Date: December 30, 1996 84 SUNTRUST BANK, ATLANTA, in its individual capacity, to the extent provided herein, and as Co-Trustee under the Trust Agreement By: /s/ Bryan Echols -------------------------------------------------- Name: Bryan Echols Title: Vice President Date: December 30, 1996 By: /s/ Sandra Thompson -------------------------------------------------- Name: Sandra Thompson Title: Vice President Date: December 30, 1996 PHILIP MORRIS CAPITAL CORPORATION By: /s/ Steven B. Seagrift -------------------------------------------------- Name: Steven B. Seagrift Title: Vice President Date: December 30, 1996 UTRECHT-AMERICA FINANCE CO. By: /s/ J. W. den Baas -------------------------------------------------- Name: J. W. den Baas Title: Vice President Date: December 30, 1996 By: /s/ David I. Dietz -------------------------------------------------- Name: David I. Dietz Title: Assistant Treasurer Date: December 30, 1996 85 SCHEDULE TO EXHIBIT 10.32.1 PARTICIPATION AGREEMENT (P1) The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant --------- ---- ----------------- P1 December 30, 1996 Philip Morris Capital Corporation P2 January 3, 1997 Philip Morris Capital Corporation F3 December 30, 1996 First Chicago Leasing Corporation F4 December 30, 1996 First Chicago Leasing Corporation N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation Certain Exhibits and Schedules to the Participation Agreement (P1) are filed as separate exhibits to this Form 10-K. The other Exhibits and Schedules to the Participation Agreement (P1) are not filed herewith; however, the registrant hereby agrees that such Schedules and Exhibits will be provided to the Commission upon request. 86 APPENDIX A to Participation Agreement Definitions GENERAL PROVISIONS In this Appendix A and each Operative Document (as hereinafter defined), unless otherwise provided herein or therein: (a) the terms set forth in this Appendix A or in any such Operative Document shall have the meanings herein provided for and any term used in an Operative Document and not defined therein or in this Appendix A but in another Operative Document shall have the meaning herein or therein provided for in such other Operative Document; (b) any term defined in this Appendix A by reference to another document, instrument or agreement shall continue to have the meaning ascribed thereto whether or not such other document, instrument or agreement remains in effect; (c) words importing the singular include the plural and vice versa; (d) words importing a gender include any gender; (e) a reference to a part, clause, section, paragraph, article, party, annex, appendix, exhibit, schedule or other attachment to or in respect of an Operative Document is a reference to a part, clause, section, paragraph, or article of, or a party, annex, appendix, exhibit, schedule or other attachment to, such Operative Document unless, in any such case, otherwise expressly provided in any such Operative Document; A-1 (f) a reference to any statute, regulation, proclamation, ordinance or law includes all statutes, regulations, proclamations, ordinances or laws varying, consolidating or replacing the same from time to time, and a reference to a statute includes all regulations, policies, protocols, codes, proclamations and ordinances issued or otherwise applicable under that statute unless, in any such case, otherwise expressly provided in any such statute or in such Operative Document; (g) a definition of or reference to any document, instrument or agreement includes an amendment or supplement to, or restatement, replacement, modification or novation of, any such document, instrument or agreement unless otherwise specified in such definition or in the context in which such reference is used; (h) a reference to a particular section, paragraph or other part of a particular statute shall be deemed to be a reference to any other section, paragraph or other part substituted therefor from time to time; (i) if a capitalized term describes, or shall be defined by reference to, a document, instrument or agreement that has not as of any particular date been executed and delivered and such document, instrument or agreement is attached as an exhibit to the Participation Agreement (as hereinafter defined), such reference shall be deemed to be to such form and, following such execution and delivery and subject to paragraph (g) above, to the document, instrument or agreement as so executed and delivered; (j) a reference to any Person (as hereinafter defined) includes such Person's successors and permitted assigns; (k) any reference to "days" shall mean calendar days unless "Business Days" (as hereinafter defined) are expressly specified; A-2 (l) if the date as of which any right, option or election is exercisable, or the date upon which any amount is due and payable, is stated to be on a date or day that is not a Business Day, such right, option or election may be exercised, and such amount shall be deemed due and payable, on the next succeeding Business Day with the same effect as if the same was exercised or made on such date or day (without, in the case of any such payment, the payment or accrual of any interest or other late payment or charge, provided such payment is made on such next succeeding Business Day); (m) a reference to the satisfaction, release and/or discharge of the Loan Agreement and the Deed to Secure Debt (as hereinafter defined) or the encumbrance thereof (or words of similar import) shall, whether or not so expressly stated, be deemed to be a reference to the satisfaction, release and discharge in full and cancellation of the Loan Agreement and the Deed to Secure Debt in accordance with the express provisions thereof; (n) words such as "hereunder", "hereto", "hereof" and "herein" and other words of similar import shall, unless the context requires otherwise, refer to the whole of the applicable document and not to any particular article, section, subsection, paragraph or clause thereof; and (o) a reference to "including" means including without limiting the generality of any description preceding such term, and for purposes hereof and of each Operative Document the rule of ejusdem generis shall not be applicable to limit a general statement, followed by or referable to an enumeration of specific matters, to matters similar to those specifically mentioned. A-3 DEFINED TERMS "Acceptable Substitute Credit Protection" means any U.S. dollar denominated (x) instruments or securities with term, interest rate and amount being at least equal to the amounts payable under the Payment Undertaking Agreement and issued by and carrying the full faith and credit or equivalent support of the government of the United States of America, The Netherlands, the United Kingdom, the Federal Republic of Germany or Japan or the World Bank, the Asian Development Bank, International Finance Corporation or such other institutions as are reasonably acceptable to the Owner Participant and, if the Lien of the Loan Agreement is in effect, the Lender, so long as at the time of substituting the Acceptable Substitute Credit Protection for the Payment Undertaking Agreement (i) there has not been a material adverse change in the financial condition of the issuer or of the Person providing the full faith and credit or equivalent support (the "Support Entity") of such Acceptable Substitute Credit Protection since the Closing Date (including, without limitation any downgrading or proposed downgrading of the credit rating of such issuer or of such Support Entity being placed under review); (ii) the nature and amount of such Acceptable Substitute Credit Protection is acceptable to the appropriate credit, investment and other approval committees or officers of, the Owner Participant and RMLC and, prior to the Release Date, the Lender, with respect to limitations on total credit exposure to such Acceptable Substitute Credit Protection issuer or Support Entity, or, if applicable, limitations on total credit exposure to the country in which such Support Entity is the government; (iii) there is no then generally applicable lending or other internal policy of, the Owner Participant and RMLC and, prior to the Release Date, the Lender, that would be inconsistent with its continued participation in this transaction with the Acceptable Substitute Credit Protection; (iv) it is not illegal for the parties to enter into such arrangements with such Acceptable Substitute Credit Protection; (v) there is no material litigation, dispute or arbitration proceeding between the Owner Participant, RMLC or, prior to the Release Date, the Lender and the issuer or Support Entity of such Acceptable Substitute Credit Protection which litigation is threatened, pending or in progress, and (vi) such Acceptable Substitute Credit Protection shall remain in full force and effect at all times until the Expiration Date and shall at all times have a marked to market value equal to at least 120% of the A-4 outstanding principal amount of the Loan Certificate and provide for the payment of an amount equal to the Basic Rent, Termination Value or Purchase Option Price in excess of the Equity Portion of Basic Rent, the Equity Portion of Termination Value and the Equity Portion of the Purchase Option Price, respectively (as Basic Rent and Termination Value may be adjusted from time to time pursuant to Section 3.4 of the Facility Lease), (taking into account a requirement that such Acceptable Substitute Credit Protection be marked to market at least once annually, and at such other time as the Lender may reasonably request) or (y) one or more letters of credit, a debt payment undertaking agreement substantially similar to the Payment Undertaking Agreement or guaranteed investment contract issued by a bank or other financial institution the long term senior debt obligations (or long-term deposits) of which are rated at least Aa2 by Moody's or AA by S&P and, in the case of any letter of credit, in a stated amount equal to the principal of and interest expected to accrue over the next 12 months on the Loan Certificate, so long as at the time of substituting the Acceptable Substitute Credit Protection for the Payment Undertaking Agreement the conditions set forth in clauses (ii) through (vi) above shall have been met (provided that a letter of credit may have an earlier expiry date so long as suitable arrangements are agreed to respecting substitution of new letters of credit or cash therefor before such expiry date). Such Acceptable Substitute Credit Protection shall be accompanied by such certificates, opinions and other documents as the Lender and the Owner Participant may reasonably request to evidence the enforceability of such Acceptable Substitute Credit Protection. A-5 "Accreted Par Value" as of any date of early termination of a Qualifying Equity Funding Agreement, shall mean the assumed value of such Qualifying Equity Funding Agreement, discounting all future payments due thereunder to such date of early termination at the implicit interest rate in such Qualifying Equity Funding Agreement. "Actual Knowledge" shall mean, with respect to any Transaction Party, actual knowledge of, or receipt of written notice by, an officer of such a Transaction Party having responsibility for the administration of the Overall Transaction. "Additional Loan Certificates" shall mean any Loan Certificates issued pursuant to Section 2.01 of the Loan Agreement. "ADR class life" shall mean the class life of an asset determined pursuant to the class life asset depreciation system under Section 167 of the Code. "Advisors to Oglethorpe" shall mean Smith Barney Inc. and Babcock & Brown Inc. "Affiliate" of a particular Person shall mean any Person directly or indirectly controlling, controlled by or under common control with such particular Person. For purposes of this definition, "control" when used with respect to any particular Person shall mean the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "After-Tax Basis", in the context of determining the amount of a payment to be made on such basis, shall mean the payment of an amount which, after reduction by the net increase in Taxes of the recipient of such payment and its Affiliates (or any consolidated or combined group of which it is a member) which net increase shall be calculated by taking into account any reduction in such Taxes resulting from any Tax benefits realized or (except in the case of the Lender) the present value of any reduction in such Taxes resulting from any Tax benefits to be realized by the A-6 recipient and its Affiliates (or any consolidated or combined group of which it is a member) as a result of such payment, shall be equal to the amount required to be paid. In calculating the amount payable by reason of this provision, all income taxes payable and tax benefits realized or to be realized shall be determined on the assumptions that (i) the recipient shall be subject to the applicable income taxes at the highest marginal tax rates then applicable to corporate taxpayers taxed on the same basis as the recipient that are in effect in the applicable jurisdictions at the time such amount is received or properly accrued, and (ii) all tax benefits are utilized at the highest marginal rates then applicable to corporate taxpayers taxed on the same basis as the recipient that are then in effect in the applicable jurisdictions. "Agreement Collateral" shall have the meaning specified in Section 2(a) of the Payment Undertaking Pledge Agreement. "AIG" shall mean AIG Matched Funding Corp., a corporation organized and existing under the laws of the State of Delaware. "AIG Equity Funding Agreement" shall mean the Equity Funding Agreement (P1) dated the Closing Date between AIG and RMLC, in substantially the form of Exhibit N to the Participation Agreement. "AIG Guaranty" shall mean the Guarantee (P1) dated as of December 30, 1996 by American International Group for the benefit of RMLC, the Co-Trustee, the Owner Trustee and the Owner Participant. "AMBAC and "AMBAC Indemnity" shall mean AMBAC Indemnity Corporation, a Wisconsin-domiciled stock insurance corporation. "AMBAC Assignment Agreement" shall mean the Agreement for Assignment on Default dated as of December 30, 1996 among Oglethorpe, RMLC, the Owner Participant, the Co-Trustee, the Owner Trustee and AMBAC. A-7 "AMBAC Guaranty" shall mean the Guaranty Agreement (P1) dated as of December 30, 1996, between AMBAC and Oglethorpe. "American International Group" shall mean American International Group, Inc., a corporation organized and existing under the laws of the State of Delaware. "Applicable Law" shall mean, without limitation, all applicable laws, including, without limitation, all Environmental Laws, and treaties, judgments, decrees, injunctions, writs and orders of any court, arbitration board or Governmental Entity and rules, regulations, orders, ordinances, licenses and permits of any Governmental Entity. "Applicable Rate" shall mean, in the case of the Lender, the Loan Rate, and in the case of the Owner Participant, the Prime Rate plus 2% per annum. "Appraisal" shall mean the appraisal prepared by the Appraiser with respect to the Facility Lessor's Rocky Mountain Interest referred to in Section 4.14 of the Participation Agreement. "Appraisal Procedure" shall mean a procedure for determining Fair Market Rental Value of the Ground Interest whereby the parties are unable to agree upon a Fair Market Rental Value of the Ground Interest within 30 days after commencement of the Appraisal Procedure, the Fair Market Rental Value of the Ground Interest shall be determined by appraisal. The parties will consult with the intent of selecting a mutually acceptable Independent Appraiser. If a mutually acceptable Independent Appraiser is selected, the Fair Market Rental Value of the Ground Interest shall be determined by such Independent Appraiser. If the parties are unable to agree upon a single Independent Appraiser within a 15-day period, the Owner Participant will retain an Independent Appraiser. Within 15 days after the Owner Participant's selection of an Independent Appraiser, the Ground Lessor shall select an Independent Appraiser. If the Ground Lessor fails to retain an Independent Appraiser within such period, the Fair Market Rental Value of the Ground Interest shall be determined by the Independent Appraiser retained by the Owner Participant. The Independent Appraiser selected by the Ground Lessor and the Independent Appraiser selected by A-8 the Owner Participant shall select a consensus Independent Appraiser within 10 days. If the Independent Appraisers cannot agree on a consensus Independent Appraiser within 10 days, the consensus Independent Appraiser shall be selected by the American Arbitration Association. If the parties are able to agree upon a single Independent Appraiser, or the two Independent Appraisers are able to agree upon a consensus Independent Appraiser, the single Independent Appraiser or the three Independent Appraisers, as the case may be, shall within 30 days make a determination of such Fair Market Rental Value of the Ground Interest. If there shall be a panel of three Independent Appraisers, the appraisal which differs most from the other two appraisals with respect to the Ground Interest shall be excluded and the remaining two appraisals shall be averaged and such average shall constitute Fair Market Rental Value of the Ground Interest. Fees and expenses relating to all such appraisals shall be payable by the Ground Lessor. "Appraiser" shall mean Deloitte & Touche LLP Valuation Group. "Assigned Rocky Mountain Interests" shall mean Oglethorpe's rights, obligations and liabilities under the Rocky Mountain Agreements attributable to the Undivided Interest and the Ground Interest, excluding, however, (i) the rights to independent dispatch pursuant to Section 7.02 of the Rocky Mountain Operating Agreement unless subsequently granted to the Head Lessee, (ii) Oglethorpe's appointment as "agent" pursuant to Section 4.01 of the Rocky Mountain Ownership Agreement, (iii) Oglethorpe's authorities and responsibilities as "agent" under Section 4.02 of the Rocky Mountain Ownership Agreement, (iv) Oglethorpe's responsibilities as "agent" for the planning, design, licensing, acquisition, construction, completion, renewal, addition, replacement, modification and disposal of the Facility pursuant to the provisions of the Rocky Mountain Ownership Agreement, (v) Oglethorpe's appointment as "Operating Agent" pursuant to Article II of the Rocky Mountain Operating Agreement, (vi) Oglethorpe's authorities and responsibilities as "agent" under Article III of the Rocky Mountain Ownership Agreement and (vii) Oglethorpe's responsibilities as "agent" for the management, control, operation and maintenance of the Facility pursuant to the provisions of the Rocky Mountain Operating Agreement. A-9 "Assignee" shall mean (i) in the case of the Rocky Mountain Agreements Assignment, the Co-Trustee as assignee thereunder, (ii) in the case of the Rocky Mountain Agreements Re-assignment, RMLC as assignee thereunder, (iii) in the case of the Rocky Mountain Agreements Second Re-assignment, Oglethorpe as assignee thereunder and (iv) in the case of the Facility Sublease Assignment Agreement, the Co-Trustee as assignee thereunder. "Assignment Amount" shall have the meaning specified in paragraph (a) of Section 11.2 of the Head Lease. "Assignor" shall mean (i) in the case of the Rocky Mountain Agreements Assignment, Oglethorpe as assignor thereunder, (ii) in the case of the Rocky Mountain Agreements Re-assignment, the Co-Trustee as assignor thereunder, (iii) in the case of the Rocky Mountain Agreements Second Re-assignment, RMLC as assignor thereunder and (iv) in the case of the Facility Sublease Assignment Agreement, RMLC as assignor thereunder. "Auction Rate" shall mean the rate of interest determined pursuant to clause (ii) of the definition of "Reset Interest Rate". "Banker" shall mean an internationally recognized financial institution or investment banking firm selected by Owner Participant to locate a potential purchaser or purchasers of Loan Certificates as provided in Section 2.11 of the Loan Agreement. "Bankruptcy Code" shall mean the United States Bankruptcy Code of 1978, as amended from time to time, 11 U.S.C. ss.101 et seq. "Bankruptcy Default" shall mean an event that is, or in the case of Section 16(k) of the Facility Lease with the passage of time would become, an Event of Default under Section 16(j) or 16(k) of the Facility Lease. A-10 "Basic Ground Lease Term" shall have the meaning specified in Section 2.2 of the Ground Lease. "Basic Ground Sublease Term" shall have the meaning specified in Section 2.2 of the Ground Sublease. "Basic Ground Sub-sublease Term" shall have the meaning specified in Section 2.2 of the Ground Sub-sublease. "Basic Rent" shall mean all rent payable by the Facility Lessee to the Facility Lessor pursuant to Section 3.2 of the Facility Lease, as the same may be adjusted from time to time pursuant to Section 3.4 of the Facility Lease. "Basic Term" shall have the meaning specified in Section 3.1 of the Facility Lease. "Beneficial Interest" shall mean the interest of the Owner Participant in the Owner Trust. "Breakage Costs" means any loss incurred by the Lender in obtaining, liquidating, or employing deposits not exceeding 6 months in original maturity from third parties (but excluding any loss of margin for the period after any such event) for purposes of funding its loan to the Trustees; provided that the Lender shall have delivered to the Trustees and the Facility Lessee a certificate as to the amount of such loss or expense (and setting forth its calculation thereof in reasonable detail), which certificate shall be conclusive in the absence of manifest error. "Business Day" shall mean any day other than a Saturday, Sunday or other day on which commercial banking institutions are authorized or required by law, regulation or executive order to be closed in (i) Atlanta, Georgia, (ii) Hartford, Connecticut, or (iii) New York, New York. "Claim" shall mean any liability (including, without limitation, in respect of negligence (whether passive or active or other torts), strict or absolute liability in tort or otherwise, warranty, latent A-11 or other defects (regardless of whether or not discoverable), statutory liability, property damage, bodily injury or death), obligation, loss, settlement, damage, penalty, claim, action, suit, proceeding (whether civil or criminal), judgment, penalty, fine and other legal or administrative sanction, judicial or administrative proceeding, cost, expense or disbursement, including reasonable legal, investigation and expert fees, expenses and reasonable related charges, of whatsoever kind and nature. "Closing" shall have the meaning specified in Section 2.2(a) of the Participation Agreement. "Closing Date" shall mean the Scheduled Closing Date or such later date on which the Closing shall occur. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor statute. "Collateral" shall have the meaning specified in the Loan Agreement. "Commitment", with respect to the Owner Participant, shall mean the Owner Participant's Commitment and with respect to the Lender, shall mean the Loan Commitment. "Component" shall mean any appliance, part, instrument, appurtenance, accessory, furnishing, equipment or other property of whatever nature that may from time to time be incorporated in the Facility, except to the extent constituting Modifications. "Co-Owners" shall mean Oglethorpe and Georgia Power, their successors or permitted assigns, as tenants-in-common of the Facility and the Rocky Mountain Site. "Co-Trustee" shall mean SunTrust Bank, Atlanta, a state banking corporation organized under the laws of the State of Georgia, not in its individual capacity except as expressly provided in the relevant Operative Document to which it is a party, but solely as Co-Trustee under the Trust A-12 Agreement, and each other Person which may from time to time be acting as the Co-Trustee in accordance with the provisions of the Trust Agreement. "Covered Obligations" shall have the meaning set forth in the Qualifying Surety Bonds issued by AMBAC on the Closing Date. "Deed to Secure Debt" shall mean the Deed to Secure Debt (P1), dated as of December 30, 1996, between the Co-Trustee, as Grantor, and the Lender, as Secured Party, in substantially the form of Exhibit K2 to the Participation Agreement. "Default" shall mean an event that with the passage of time or giving of notice or both would constitute an Event of Default. "Demand for Payment" shall have the meaning specified in paragraph 1 of the Qualifying Surety Bonds issued by AMBAC on the Closing Date. "Dollars" or the sign "$" shall mean United States dollars or other lawful currency of the United States. "Enforcement Notice" shall have the meaning specified in Section 4.4 of the Loan Agreement. "Engineer" shall mean Black & Veatch. "Engineering Report" shall mean the report of the Engineer required by Section 4.12 of the Participation Agreement. "Environmental Consultant" shall mean Dames & Moore. "Environmental Laws" shall mean any federal, state or local laws, ordinances, rules, orders, statutes, decrees, judgments, injunctions, directives, permits, licenses, approvals, codes and A-13 regulations relating to the environment, human health, natural resources or toxic, explosive, corrosive, flammable, infectious, radioactive or Hazardous Substances, as each may from time to time be amended, supplemented or supplanted. "Equity Exposure Amount" for any Termination Date shall mean the amount set forth opposite such Termination Date on Schedule 3 to the Participation Agreement, as adjusted from time to time. "Equity Funding Collateral" shall mean "AIG Collateral" as defined in Article 1 of the AIG Equity Funding Agreement. "Equity Funding Pledge Agreement" shall mean the Equity Funding Pledge Agreement (P1), dated as of December 30, 1996, between RMLC, as pledgor, and the Trustees, as pledgees, in substantially the form of Exhibit O to the Participation Agreement. "Equity Investment" shall mean the Owner Participant's investment in the Owner Trust contemplated by Section 2.1 of the Participation Agreement. "Equity Portion of Basic Rent" shall mean for any Rent Payment Date the difference between (i) Basic Rent scheduled to be paid under the Facility Lease on such Rent Payment Date and (ii) the principal and interest scheduled to be paid on the Loan Certificate on such Rent Payment Date. "Equity Portion of Purchase Option Price" shall mean (i) the excess of the initial installment of the Purchase Option Price set forth in clause (a)(i) of the third sentence of Section 15.1 of each of the Facility Lease and, without duplication, the Facility Sublease over the scheduled (in accordance with the payment terms of the Loan Certificate) outstanding principal balance of the Loan Certificate on the Termination Date plus scheduled accrued interest thereon after giving effect to any Basic Rent due on such date and (ii) the additional amounts of the Purchase Option Price set forth in clause (b) of the third sentence of Section 15.1 of each of the Facility Lease and, without duplication, the Facility Sublease. A-14 "Equity Portion of Termination Value" in respect of any determination of Termination Value or amount determined by reference to Termination Value payable pursuant to the Operative Documents shall mean an amount equal to the excess, if any, of (i) the Termination Value set forth opposite the Termination Date corresponding to such date of determination on Schedule 2 of the Facility Lease and, without duplication, Schedule 1 of the Head Lease and Schedule 2 of the Facility Sublease and, if such date of determination is a Rent Payment Date, Basic Rent due on that date (to the extent payable in arrears) over (ii) the balance, including scheduled (in accordance with the payment terms of the Loan Certificate) accrued interest, on the Loan Certificate scheduled (in accordance with the payment terms of the Loan Certificate) to be outstanding on such date of determination. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "Event of Default" shall have the meaning specified in Section 16 of the Facility Lease. "Event of Loss" shall mean any of the following events: (i) the loss of the Facility or use thereof due to destruction or damage to the Facility that renders repair uneconomic or that renders the Facility permanently unfit for normal use or which does not satisfy the preconditions for repair of the Facility set forth below; or (ii) any damage to the Facility that results in an insurance settlement with respect to the Facility on the basis of a total loss or an agreed constructive or a compromised total loss; or (iii) the seizure, expropriation, condemnation or requisition of the use of, or title to, the Undivided Interest or the Rocky Mountain Site by any Governmental Entity that shall have resulted in (a) the loss by Oglethorpe of title to its interest in the Facility A-15 or the Rocky Mountain Site, the loss by the Co-Trustee of its interest in the Undivided Interest under the Head Lease or the Ground Interest under the Ground Lease, the loss by the Facility Lessee of its interest in the Undivided Interest or the Ground Interest under the Facility Lease or the Ground Sublease or the loss by the Facility Sublessee of its interest in the Undivided Interest or the Ground Interest under the Facility Sublease or the Ground Sub-sublease, or (b) the loss by the Facility Sublessee of possession of, but not of title to, the Undivided Interest or the Ground Interest if such loss of possession shall be for an indefinite period or, unless the Facility Lessee shall have exercised the Purchase Option, if such loss of possession shall be for a stated period which shall be continuing on a date 18 months or less prior to the end of the Basic Term, or the scheduled expiration date of the Renewal Term, as the case may be, following all efforts to contest any such loss of title to, or the use of the Undivided Interest or the Ground Interest, in each case unless the existence of an Event of Loss resulting from such seizure, expropriation, condemnation or requisition of use or title is waived by the Facility Lessor; or (iv) if elected in writing by the Owner Participant, and only in circumstances where the termination of the Head Lease or the Facility Lease shall remove the basis of the regulation described below, subjection of the Owner Participant or either Trustee to any public utility regulation of any Governmental Entity or law which in the reasonable opinion of the Owner Participant is burdensome, or the subjection of the Owner Participant's or either Trustee's interest in the Head Lease or the Facility Lease to any rate of return regulation by any Governmental Entity, in either case by reason of the participation of either Trustee or the Owner Participant in the transactions contemplated by the Operative Documents and not, in any event, as a result of (a) investments, loans or other business activities of the Owner Participant or its Affiliates in respect of equipment or facilities similar in nature to the Facility or any part thereof or in any other electrical, steam, cogeneration or other energy or utility related equipment or facilities or the general business or A-16 other activities of the Owner Participant or its Affiliates or the nature of any of the properties or assets from time to time owned, leased, operated, managed or otherwise used or made available for use by the Owner Participant or its Affiliates or (b) a failure of the Owner Participant to perform routine, administrative or ministerial actions the performance of which would not subject the Owner Participant to any adverse consequence (as determined by the Owner Participant, in its sole discretion acting in good faith); or (v) unless the Facility Lessee shall have exercised the Purchase Option, (a) loss of the FERC License for a period of six months or such longer period as is reasonably required to employ all efforts to contest such loss (provided no such contest shall subject the Owner Trustee or the Owner Participant to criminal liability and such contest does not extend the period during which the Facility is without a FERC license beyond the earlier of two years or the date which is 18 months prior to the end of the Basic Term) and so long as such loss does not interfere with the continued operation of the Facility by the Facility Sublessee, (b) notification by a Governmental Entity that it intends to take over the Facility at the expiration of the term of the FERC License if such notification has not been withdrawn on or prior to the date which is 90 days before the end of the Basic Term or (c) on the 90th day prior to the Expiration Date it is not reasonable to expect that the Co-Trustee will be able to renew the FERC License for a term of not less than 17 years on terms and conditions not materially more burdensome than the terms and conditions of the current FERC License. The date of occurrence of an Event of Loss described in clauses (i) or (ii) above shall be the date of the Facility Lessee's notice to the Facility Lessor, the Owner Participant and the Lender pursuant to Section 10.1 of the Facility Lease that it does not elect to repair the Facility pursuant to Section 10.3 of the Facility Lease but to pay Termination Value and terminate the Facility Lease pursuant to Section 10.2 thereof, or the date an Event of Loss is deemed to occur pursuant to the last sentence of Section 10.1 of the Facility Lease. The date of occurrence of an Event of A-17 Loss described in clause (iii) above shall be the date of the loss of title or leasehold interest by Oglethorpe, the Co-Trustee, the Owner Trustee, the Facility Lessee or the Facility Sublessee, or, in the case of a loss of possession or use by the Facility Sublessee but not of title, following all efforts to contest such loss, the date of loss of possession in the case of a loss of possession for an indefinite period or for a stated period which shall continue beyond the date which is 18 months prior to the end of the Basic Term, or the scheduled expiration date of the Renewal Term, as the case may be. The date of occurrence of an Event of Loss described in clause (iv) shall be the date of imposition of such regulation. The date of occurrence of an Event of Loss described in clause (v) shall be the date referred to in such clause (v). "Excepted Payments" shall mean and include (i)(A) any indemnity (whether or not constituting Supplemental Rent or Sublease Supplemental Rent and whether or not an Event of Default exists) payable to either Trust Company, either Trustee or the Owner Participant or to their respective Indemnities or RMLC Indemnities and successors and permitted assigns (other than the Lender) pursuant to Section 2.3, 11.1, 11.2, 12.1 or 12.2 of the Participation Agreement, Section 7.01 of the Trust Agreement, and any payments under the Tax Indemnity Agreement or (B) any amount payable by the Facility Lessee or the Facility Sublessee to either Trustee or the Owner Participant to reimburse any such Person for its costs and expenses in exercising its rights under the Operative Documents, (ii)(A) insurance proceeds, if any, payable to either Trustee or the Owner Participant under insurance separately maintained by either Trustee or the Owner Participant with respect to the Facility as permitted by Section 11 of the Facility Lease or (B) proceeds of personal injury or property damage liability insurance maintained under any Operative Document for the benefit of either Trustee or the Owner Participant, (iii) any amount payable to the Owner Participant as the purchase price of the Owner Participant's right and interest in the Beneficial Interest, (iv) the Equity Portion of Termination Value payable (a) by the Facility Lessee under the Facility Lease to the extent of amounts payable under the Qualifying Equity Funding Agreement or (b) by the Head Lessor and the Facility Lessee under the Head Lease and the Facility Sublease to the extent of amounts payable under the Surety Bonds and any Qualifying Additional Security, the Equity Portion of the Purchase Option Price to the extent of amounts payable under the Qualifying Equity Funding Agreement and the Equity Portion of Basic Rent to the extent of amounts payable under A-18 the Equity Funding Agreement, (v) any payments or distributions to either Trustee or the Owner Participant attributable to any Qualifying Equity Funding Agreement, Qualifying Additional Security, a Qualifying Surety Bond or any Qualifying Letter of Credit (whether any of the foregoing arrangements continue to be "qualifying" under the definitions herein or not), and such Agreements, Qualifying Additional Security, Qualifying Surety Bonds, or Letters of Credit, (vi) any amounts payable to the Owner Participant upon exercise by it of the Special Equity Facility Lease Remedy pursuant to Section 16.1 of the Participation Agreement or the Special Equity Head Lease Remedy pursuant to Section 16.2 of the Participation Agreement and (vii) any payments in respect of interest, or any payments made on an After-Tax Basis, to the extent attributable to payments referred to in clause (i) through (viii) above that constitute Excepted Payments. "Excepted Rights" shall have the meaning specified in Section 5.05 of the Loan Agreement. "Excess Amount" shall have the meaning specified in Section 18.2 of the Participation Agreement. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Excluded Property" shall mean Excepted Payments and Excepted Rights, collectively. "Excluded Taxes" shall have the meaning specified in Section 11.2(b) of the Participation Agreement. "Expiration Date" shall mean January 1, 2027. "Facility" shall mean the Rocky Mountain Pumped Storage Hydroelectric Project, consisting of among other things: A-19 (i) the three units of the Rocky Mountain Pumped Storage Hydroelectric Project, including the pump-turbines, motorgenerators, spherical valves, the associated auxiliaries and equipment and the step-up substation, and (ii) the facilities used in common by Rocky Mountain Unit No. 1, Rocky Mountain Unit No. 2 and Rocky Mountain Unit No. 3, or any combination thereof. The Facility is more particularly described on Exhibit A to the Head Lease, Exhibit A to the Facility Lease and Exhibit A to the Facility Sublease. The Facility does not include the Rocky Mountain Site. Oglethorpe owns a 74.61% undivided interest in the Facility as a tenant in common with Georgia Power, which owns a 25.39% interest in the Facility as a tenant-in-common. "Facility Lease" shall mean, collectively, the Facility Lease Agreement (P1), dated as of December 30, 1996, between the Facility Lessor and the Facility Lessee, in substantially the form of Exhibit E to the Participation Agreement and the Short Form of Facility Lease Agreement in respect thereof. "Facility Lease Term" shall mean the Basic Term and the Renewal Term, if any, under the Facility Lease. "Facility Lessee" shall mean RMLC as lessee of the Undivided Interest under the Facility Lease. "Facility Lessee's Rocky Mountain Interest" shall mean RMLC's right, title and interest in, to and under, (i) the Undivided Interest under the Facility Lease, (ii) the Ground Interest under the Ground Sublease and (iii) the Assigned Rocky Mountain Interests under the Rocky Mountain Agreements Re-assignment. "Facility Lessor" shall mean the Co-Trustee as lessor of the Undivided Interest under the Facility Lease. A-20 "Facility Lessor's Lien" shall mean any Lien on the Trust Estate or any part thereof arising as a result of (i) Taxes against or affecting a Trust Company or a Trustee, or any Affiliate thereof that is not related to, or that is in violation of, any Operative Document or the transactions contemplated thereby, (ii) Claims against or any act or omission of a Trust Company or a Trustee, or Affiliate thereof that is not related to, or that is in violation of, any Operative Document or the transactions contemplated thereby or that is in breach of any covenant or agreement of such Trust Company or a Trustee specified therein, (iii) Taxes imposed upon the Trust Company or either Trustee, or any Affiliate thereof that are not indemnified against by RMLC or Oglethorpe pursuant to any Operative Document or (iv) Claims against or affecting a Trust Company or a Trustee, or any Affiliate thereof arising out of the voluntary or involuntary transfer by such Trust Company or such Trustee of any portion of the interest of such Trust Company or such Trustee in the Facility Lessor's Rocky Mountain Interest, other than pursuant to the Operative Documents. "Facility Lessor's Percentage" shall mean 31.484962406%. "Facility Lessor's Rocky Mountain Interest" shall mean the Co-Trustee's right, title and interest in, to and under the (i) Undivided Interest under the Head Lease, (ii) the Ground Interest under the Ground Lease and (iii) the Assigned Rocky Mountain Interests under the Rocky Mountain Agreements Assignment. "Facility Operator" shall mean Oglethorpe or any successor operating agent appointed pursuant to Section 2.01 of the Rocky Mountain Operating Agreement. "Facility Sublease" shall mean, collectively, the Facility Sublease Agreement (P1), dated as of December 30, 1996, between the Facility Sublessor and the Facility Sublessee in substantially the form of Exhibit H to the Participation Agreement, and the Short Form of Facility Sublease Agreement in respect thereof. "Facility Sublease Assignment Agreement" shall mean the Deed to Secure Debt, Assignment of Surety Bond and Security Agreement (P1) dated as of December 30, 1996, between RMLC, A-21 as grantor, and the Co-Trustee, as secured party, in substantially the form of Exhibit P to the Participation Agreement. "Facility Sublease Term" shall mean the Sublease Basic Term and the Sublease Renewal Term, if any. "Facility Sublessee" shall mean Oglethorpe as lessee of the Undivided Interest under the Facility Sublease. "Facility Sublessee's Rocky Mountain Interest" shall mean Oglethorpe's right, title and interest in, to and under, (i) the Undivided Interest under the Facility Sublease, (ii) the Ground Interest under the Ground Sub-sublease and (iii) the Assigned Rocky Mountain Interests under the Rocky Mountain Agreements Second Re-assignment. "Facility Sublessor" shall mean RMLC, as lessor of the Undivided Interest under the Facility Sublease. "Facility Sublessor's Lien" shall mean any Lien on the Facility Sublessor's Rocky Mountain Interest or any part thereof arising as a result of (i) Taxes or Claims against or affecting the Facility Sublessor that are not related to, or that are in violation of, any Operative Document or the transactions contemplated thereby, (ii) Claims against or any act or omission of the Facility Sublessor that is not related to, or that is in violation of, any Transaction Document or the transactions contemplated thereby or that is in breach of any covenant or agreement of the Facility Sublessor set forth therein or (iii) Taxes against the Facility Sublessor that are not indemnified against by either Trustee, the Owner Participant, either Trust Company or Oglethorpe pursuant to the Operative Documents. "Facility Sublessor's Percentage" shall mean 31.484962406%. A-22 "Facility Sublessor's Rocky Mountain Interest" shall mean RMLC's right, title and interest in, to and under, (i) the Undivided Interest under the Facility Lease, (ii) the Ground Interest under the Ground Sublease and (iii) the Assigned Rocky Mountain Interests under the Rocky Mountain Agreements Re-assignment. "Fair Market Rental Value" of the Ground Interest shall mean the rental value that would be obtained in an arms-length transaction between an informed and willing lessee under no compulsion to lease and an informed and willing lessor under no compulsion to lease. "Fair Market Sales Value of the Facility Lessor's Rocky Mountain Interest" shall mean the cash price obtainable for the Facility Lessor's Rocky Mountain Interest in an arm's length sale between an informed and willing purchaser under no compulsion to purchase and an informed and willing seller under no compulsion to sell, without regard to the rights of Georgia Power set forth in Section 5.1 of the Georgia Power Consent, assuming that (i) the conditions contained in Sections 7 and 8 of the Facility Lease shall have been complied with in all respects and (ii) the Facility Lessor's Rocky Mountain Interest is free and clear of all Liens (other than Facility Lessor's Liens and Owner Participant's Liens) (except for purposes of Section 17 of the Facility Lease, as to which the Facility Lessor's Rocky Mountain Interest, shall be valued on an "as-is", "where-is" and "with all faults" basis and shall take into account all Liens (other than Facility Lessor's Liens or Owner Participant's Liens)). If the Fair Market Sales Value of the Facility Lessor's Rocky Mountain Interest is to be determined during the continuance of an Event of Default or in connection with the exercise of remedies by the Facility Lessor pursuant to Section 17 of the Facility Lease, such value shall be determined by an appraiser appointed solely by the Facility Lessor; provided, however, in any such case where the Facility Lessor shall be unable to obtain constructive possession sufficient to realize the economic benefit of the Facility Lessor's Rocky Mountain Interest, Fair Market Sales Value of the Facility Lessor's Rocky Mountain Interest shall be deemed equal to $0. If in any case other than in the preceding sentence the parties are unable to agree upon a Fair Market Sales Value of the Facility Lessor's Rocky Mountain Interest within 30 days after a request therefor has been made, the Fair Market Sales Value of the Facility Lessor's Rocky Mountain Interest shall be determined by appraisal. The A-23 Owner Participant and RMLC will consult with the intent of selecting a mutually acceptable Independent Appraiser. If a mutually acceptable Independent Appraiser is selected, the Fair Market Sales Value of the Facility Lessor's Rocky Mountain Interest shall be determined by such Independent Appraiser. If RMLC and the Owner Participant are unable to agree upon a single Independent Appraiser within such 15-day period, the Owner Participant will retain an Independent Appraiser. Within 15 days after the Owner Participant's selection of an Independent Appraiser, RMLC shall select an Independent Appraiser. If RMLC fails to retain an Independent Appraiser within such period, the Fair Market Sales Value of the Facility Lessor's Rocky Mountain Interest shall be determined by the Independent Appraiser retained by the Owner Participant. The Independent Appraiser selected by RMLC and the Independent Appraiser selected by the Owner Participant shall select a consensus Independent Appraiser within 10 days. If the Independent Appraisers cannot agree on a consensus Independent Appraiser within 10 days, the consensus Independent Appraiser shall be selected by the American Arbitration Association. If the parties are able to agree upon a single Independent Appraiser or the two Independent Appraisers are able to agree upon a consensus Independent Appraiser, the single Independent Appraiser or the three Independent Appraisers, as the case may be, shall within 30 days make a determination of such Fair Market Sales Value of the Facility Lessor's Rocky Mountain Interest. If there shall be a panel of three Independent Appraisers, the appraisal which differs most from the other two appraisals with respect to the Facility Lessor's Rocky Mountain Interest, shall be excluded and the remaining two appraisals shall be averaged and such average shall constitute Fair Market Sales Value of the Facility Lessor's Rocky Mountain Interest. Fees and expenses relating to all such appraisals shall be payable by RMLC. "Fair Market Sales Value of the Facility Sublessor's Rocky Mountain Interest" shall mean the cash price obtainable for the Facility Sublessor's Rocky Mountain Interest, in an arm's length sale between an informed and willing purchaser under no compulsion to purchase and an informed and willing seller under no compulsion to sell, without regard to the rights of Georgia Power set forth in Section 5.1 of the Georgia Power Consent, assuming that (i) the conditions contained in Section 7 and 8 of the Facility Sublease shall have been complied with in all respects and (ii) the Facility Sublessor's Rocky Mountain Interest is free and clear of all Liens (other than Facility A-24 Sublessor's Liens) (except for purposes of Section 17 of the Facility Sublease, as to which the Facility Sublessor's Rocky Mountain Interest, shall be valued on an "as-is", "where-is" and "with all faults" basis and shall take into account all Liens (other than Facility Sublessor's Liens)). If the Fair Market Sales Value of the Facility Sublessor's Rocky Mountain Interest is to be determined during the continuance of a Sublease Event of Default or in connection with the exercise of remedies by the Facility Sublessor pursuant to Section 17 of the Facility Sublease, such value shall be determined by an appraiser appointed solely by the Facility Sublessor; provided, however, in any such case where the Facility Sublessor shall be unable to obtain constructive possession sufficient to realize the economic benefit of the Facility Sublessor's Rocky Mountain Interest, Fair Market Sales Value of the Facility Sublessor's Rocky Mountain Interest shall be deemed equal to $0. If, in any case other than in the preceding sentence, the parties are unable to agree upon a Fair Market Sales Value of the Facility Sublessor's Rocky Mountain Interest within 30 days after a request therefor has been made, the Fair Market Sales Value of the Facility Sublessor's Rocky Mountain Interest shall be determined by appraisal. RMLC and Oglethorpe will consult with the intent of selecting a mutually acceptable an Independent Appraiser. If a mutually acceptable Independent Appraiser is selected, the Fair Market Sales Value of the Facility Sublessor's Rocky Mountain Interest shall be determined by such Independent Appraiser. If Oglethorpe and RMLC are unable to agree upon a single Independent Appraiser within such 15- day period, RMLC will retain an Independent Appraiser. Within 15 days after RMLC's selection of an Independent Appraiser, Oglethorpe shall select an Independent Appraiser. If Oglethorpe fails to retain an Independent Appraiser within such period, the Fair Market Sales Value of the Facility Sublessor's Rocky Mountain Interest shall be determined by the Independent Appraiser retained by RMLC. The Independent Appraiser selected by Oglethorpe and the Independent Appraiser selected by RMLC shall select a consensus Independent Appraiser within 10 days. If the Independent Appraisers cannot agree on a consensus Independent Appraiser within 10 days, the consensus Independent Appraiser shall be selected by the American Arbitration Association. If the parties are able to agree upon a single Independent Appraiser, the single Independent Appraiser or the three Independent Appraisers, as the case may be, shall within 30 days make a determination of such Fair Market Sales Value of the Facility Sublessor's Rocky Mountain Interest. If there shall be a panel of three Independent Appraisers, the appraisal which differs A-25 most from the other two appraisals with respect to the Facility Sublessor's Rocky Mountain Interest, shall be excluded and the remaining two appraisals shall be averaged and such average shall constitute Fair Market Sales Value of the Facility Sublessor's Rocky Mountain Interest. Fees and expenses relating to all appraisals shall be payable by Oglethorpe. "Federal Power Act" shall mean the Federal Power Act, as amended. "FERC" shall mean the Federal Energy Regulatory Commission of the United States or any successor agency thereto. "FERC License" shall mean the license issued by Order, dated January 21, 1977, to Georgia Power by FERC for the Rocky Mountain Project No. 2725; as amended by Order issued January 28, 1988 to add Oglethorpe as a co-licensee; as further modified by Order issued November 2, 1988, to reflect the inclusion of Piedmont-Forrest Corporation as an interim transferee and transfer of the Project License; and as further amended by the FERC Order. "FERC Order" shall mean the order issued by the FERC on December 24, 1996, in Project No. 2725-047, approving the partial transfer of the FERC License to include the Co-Trustee, the Owner Trustee and RMLC as co-licensees. "FERC Waiver Order" shall mean the Order issued by the FERC on December 27, 1996 in Docket No. EL 97-13-0000, disclaiming jurisdiction under Section 201(b) of the Federal Power Act over the Owner Trustees, Owner Participant and the Lender. "Final Lender Payment Date" means the date on which the principal of and interest on the Loan Certificate is paid in full, all amounts payable to the Lender under all other Operative Documents have been paid in full and the Liens of the Loan Agreement and the Deed to Secure Debt have terminated in accordance with their terms. "Fitch" shall mean Fitch Investors Service, L.P., and any successor thereto. A-26 "Form U-7D" shall mean the certificate to be filed pursuant to Rule 7(d) of the Holding Company Act for the purpose of exempting the Owner Participant and the Trustees from registration under the Holding Company Act. "Full Termination Amount" shall have the meaning specified in Section 1.01 of the Payment Undertaking Agreement. "Full Termination Date" shall have the meaning specified in Section 1.01 of the Payment Undertaking Agreement. "GAAP" shall mean generally accepted accounting principles. "Georgia Commission Order" shall mean that order issued on December 11, 1996 by the Georgia Public Service Commission in Docket No. 6819-U. "Georgia Power" shall mean Georgia Power Company, a corporation organized under the laws of the State of Georgia and any successor thereto. "Georgia Power Consent" shall mean the Consent No. 1 dated as of December 30, 1996, among Georgia Power, Oglethorpe, the Co-Trustee, the Owner Trustee and RMLC. "Georgia Trust Company" shall mean SunTrust Bank, Atlanta, in its individual capacity. "Governmental Entity" shall mean and include any national government, any political subdivision of a national government or of any state, country or local jurisdiction therein or any board, commission, department, division, organ, instrumentality, court or agency of any thereof. "Grantor" shall mean the Co-Trustee, as grantor under the Deed to Secure Debt, together with its successors and permitted assigns. A-27 "Ground Interest" shall mean an undivided interest equal to the Facility Lessor's Percentage in the Rocky Mountain Site, including the right as tenant-in-common with Georgia Power and the Other Facility Lessors and sublessees of undivided interests in the Rocky Mountain Site under the Other Rocky Mountain Lease Transactions to nonexclusive possession of the Rocky Mountain Site, subject to the terms and conditions of the Rocky Mountain Agreements. "Ground Lease" shall mean the Ground Lease Agreement (P1), dated as of December 30, 1996, between the Ground Lessor and the Ground Lessee, in substantially the form of Exhibit C to the Participation Agreement. "Ground Lease Basic Term" shall have the meaning specified in Section 2.2 of the Ground Lease. "Ground Lease Renewal Term" shall have the meaning specified in Section 2.3 of the Ground Lease. "Ground Lease Term" shall mean the Basic Ground Lease Term and any Renewal Ground Lease Term or Terms elected by the Ground Lessee pursuant to Section 2.3 of the Ground Lease. "Ground Lessee" shall mean the Co-Trustee as lessee of the Ground Interest under the Ground Lease. "Ground Lessor" shall mean Oglethorpe as lessor of the Ground Interest under the Ground Lease. "Ground Lessor's Release Rights" shall have the meaning specified in Section 4.2 of the Ground Lease. "Ground Sublease" shall mean the Ground Sublease Agreement (P1), dated as of December 30, 1996, between the Ground Sublessor and the Ground Sublessee, in substantially the form of Exhibit F to the Participation Agreement. A-28 "Ground Sublease Term" shall mean the Basic Ground Sublease Term and the Renewal Ground Sublease Term or Terms, if any. "Ground Sublessee" shall mean RMLC as sublessee of the Ground Interest under the Ground Sublease. "Ground Sublessor" shall mean the Co-Trustee as sublessor of the Ground Interest under the Ground Sublease. "Ground Sub-sublease" shall mean the Ground Sub-sublease Agreement (P1), dated as of December 30, 1996, between the Ground Sub-sublessee and the Ground Sub-sublessor, in substantially the form of Exhibit I to the Participation Agreement. "Ground Sub-sublease Term" shall mean the Basic Ground Sub-sublease Term and the Renewal Ground Sub-sublease Term or Terms, if any. "Ground Sub-sublessee" shall mean Oglethorpe, as sub-sublessee of the Ground Interest under the Ground Sub-sublease. "Ground Sub-sublessor" shall mean RMLC, as sub-sublessor of the Ground Interest under the Ground Sub-sublease. "Guarantor" shall mean any Person which shall guaranty the obligations of a Transferee under the Operative Documents in accordance with Section 5.1 of the Participation Agreement. "Guaranty" shall mean any guaranty of the obligations of a Transferee executed pursuant to Section 5.1 of, and in substantially the form of Exhibit U to the Participation Agreement. "Hazardous Substance" shall mean any substance that is toxic, explosive, corrosive, flammable, infectious or radioactive, or defined as a "hazardous substance," "hazardous waste," "toxic A-29 substance," "pollutant," "contaminant" or the like under any Environmental Law, including petroleum, asbestos, petroleum derivatives, crude oil or any fraction thereof. "Head Lease" shall mean the Rocky Mountain Head Lease Agreement (P1), dated as of December 30, 1996, between the Head Lessee and the Head Lessor, in substantially the form of Exhibit B to the Participation Agreement. "Head Lease Basic Term" shall have the meaning specified in Section 3.1 of the Head Lease. "Head Lease Renewal Term" shall have the meaning specified in Section 3.2 of the Head Lease. "Head Lease Rent" shall have the meaning specified in Section 3.3 of the Head Lease. "Head Lease Term" shall have the meaning specified in Section 3.2 of the Head Lease. "Head Lessee" shall mean the Co-Trustee as lessee of the Undivided Interest under the Head Lease. "Head Lessor" shall mean Oglethorpe as lessor of the Undivided Interest under the Head Lease. "Head Lessor Default" shall mean an event that with the passage of time or giving of notice or both would constitute a Head Lessor Event of Default. "Head Lessor Event of Default" shall have the meaning specified in Section 11.1 of the Head Lease. "Holding Company Act" shall mean the Public Utility Holding Company Act of 1935, as amended. "Increased Costs" shall have the meaning specified in the Loan Agreement. A-30 "Indemnitee" shall have the meaning specified in Section 11.1(a) of the Participation Agreement. "Independent Appraiser" shall mean a Person independent of the Owner Participant and Oglethorpe having experience in the business of evaluating facilities similar to the Facility. "Independent Engineer" shall mean an independent engineer selected by the Owner Participant and, so long as no Event of Default shall have occurred and be continuing, reasonably acceptable to RMLC. "Intercreditor Agreement" shall mean the OPC Intercreditor and Security Agreement No. 1, dated as of December 30, 1996, among the RUS, Oglethorpe, the Trustees, the Lender and AMBAC. "Intermediary" shall have the meaning specified in Section 3.4(c) of the Facility Lease. "IRS" shall mean the Internal Revenue Service of the United States Department of Treasury or any successor agency. "Lender" shall mean Utrecht-America or any subsequent holder of the Loan Certificate. "Lender's Account" shall mean the account (No. 802-6002-533) maintained by the Lender with Cooperatieve Centrale Raiffeisen - Boerenleenbank B.A., New York Branch or such other account of the Lender in New York, New York, as the Lender may from time to time specify in a notice to the other parties to the Participation Agreement. "Lien" shall mean any mortgage, security deed, security title, pledge, lien, charge, encumbrance, lease, security interest or title retention arrangement. "Liquidity Amount" shall have the meaning specified in Section 8.8 of the Participation Agreement. A-31 "Loan" shall mean the loan evidenced by the Loan Certificate. "Loan Agreement" shall mean the Loan and Security Agreement (P1) dated as of December 30, 1996, among the Owner Trustee, the Co-Trustee and the Lender. "Loan Bankruptcy Default" shall mean an event that is, or with the passage of time would become, a Loan Event of Default under Section 4.01(e) or (f) of the Loan Agreement. "Loan Certificate" shall mean the Loan Certificate, dated the Closing Date, in substantially the form of Exhibit A to the Loan Agreement, in an initial principal amount equal to the Loan Commitment, issued by the Trustees to the Lender pursuant to Section 2.01 of the Loan Agreement. "Loan Certificate Register" shall have the meaning specified in Section 2.07 of the Loan Agreement. "Loan Commitment" shall mean $268,000,000.00. "Loan Default" shall mean any event or occurrence which, with the passage of time or the giving of notice or both, would become a Loan Event of Default. "Loan Event of Default" shall have the meaning specified in Section 4.2 of the Loan Agreement. "Loan Extension" shall mean that on the last day of the Basic Term either (a) the Lender shall agree to retain the Loan Certificates in accordance with Section 2.11(c) of the Loan Agreement or (b) a third party lender (x) shall purchase the Loan Certificates in accordance with Section 2.11(e) of the Loan Agreement or (y) shall make a replacement loan pursuant to a loan agreement in substantially the form of the Loan Agreement, mutatis mutandis, with such changes thereto as shall be mutually agreeable to the parties. A-32 "Loan Maturity Date" shall mean July 1, 2039. "Loan Payment Default" shall mean failure of the Facility Lessor to make any payment in respect of the principal of, or interest on, the Loan Certificate when the same shall have become due without regard to any grace period or notice requirement. "Loan Rate" shall mean (a) for the period from and including the Closing Date to but not including the Reset Date 8% per annum, and (b) for the period from and including the Reset Date until the Loan Certificate is paid in full, the Reset Interest Rate. "Loan Refinancing Date" shall have the meaning specified in Section 15.1 of the Participation Agreement. "Modification" shall mean an addition, betterment or enlargement of the Facility. Modifications shall include any Required Modifications or Optional Modifications, but do not include Components. "Moody's" shall mean Moody's Investors Service, Inc. and any successor thereto. "Net Economic Return" shall mean the Owner Participant's anticipated (i) net after-tax yield (computed using the multiple investment sinking fund method) and (ii) periodic after-tax cash flow, based upon the same assumptions used by the Owner Participant in making the original computations implicit in the schedule of Basic Rent attached as Schedule 1 to the Facility Lease. "Non-consolidation Opinion" shall mean the opinion of Orrick, Herrington & Sutcliffe, dated the Closing Date and attached to the Participation Agreement as Schedule 4. "Non-Georgia Trust Company" shall mean Fleet National Bank in its individual capacity. A-33 "Obsolescence Termination Date" shall have the meaning specified in Section 14.1 of the Facility Lease and Section 14.1 of the Facility Sublease. "Officer's Certificate" shall mean with respect to any Person, a certificate signed by the Chairman of the Board, the President, or a Vice President of such Person or any person authorized by or pursuant to the organizational documents, the by-laws or any resolution of the Board of Directors or Executive Committee of such Person (whether general or specific) to execute, deliver and take actions on behalf of such Person in respect of any of the Operative Documents. "Oglethorpe" shall mean Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation), an electric membership corporation organized under the laws of the State of Georgia, together with its successors. "Oglethorpe Mortgage" shall mean (i) the Consolidated Mortgage and Security Agreement, dated as of September 1, 1994, made by Oglethorpe, as mortgagor, and the United States of America, acting through the Administrator of the Rural Electrification Administration, now known as the Rural Utilities Service, CoBank, ACB, formerly known as the National Bank for Cooperatives, Credit Suisse, acting by and through its New York Branch, and SunTrust Bank, Atlanta, formerly known as Trust Company Bank, in its separate capacity as Trustee for certain pollution control bonds issued on behalf of Oglethorpe, as mortgagees as the same may from time to time be supplemented, modified, amended, renewed, extended or consolidated, as modified by and subject to the Intercreditor Agreement and the Partial Release of Security Interest, or (ii) any one or more other mortgages, deeds to secure debt, deeds of trust, trust indentures or other security instruments from time to time entered into by Oglethorpe as a substitute or replacement for such instruments, including, without limitation, the Proposed Indenture, which secures equally and ratably the payment of principal of and interest on the obligations thereunder and creates a lien or other encumbrance on substantially all of the real and tangible personal property of Oglethorpe (other than the property subject to the Partial Release of Security Interest) then owned and which was immediately prior thereto subject to the Lien of the then existing Oglethorpe Mortgage in favor of such mortgagees and/or additional and/or substitute mortgagees or secured parties . A-34 "Oglethorpe Mortgage Bonds" shall mean the bonds issued by Oglethorpe under the Oglethorpe Mortgage, or by development authorities with respect to which Oglethorpe is an obligor and which are secured directly or indirectly under the Oglethorpe Mortgage. "Oglethorpe Portion of the Beneficial Interest" for any Termination Date, shall mean a fraction of the Beneficial Interest equal to the quotient obtained by dividing the Oglethorpe Portion of Equity Termination Value for such Termination Date by the Equity Portion of Termination Value for such Termination Date. "Oglethorpe Portion of Equity Termination Value" for any Termination Date shall mean the "Oglethorpe Portion of Equity Termination Value" set forth on Schedule 3 to the Participation Agreement for such date. "Operating Agency Agreement" shall mean the Operating and Support Agreement (P1) dated as of December 30, 1996, among the Owner Trustee, the owner trustees on behalf of other investors owning long-term leasehold interests in undivided interests in the Facility, RMLC and Oglethorpe, in substantially the form of Exhibit V to the Participation Agreement. "Operative Documents" shall mean the Participation Agreement, the Head Lease, the Facility Lease, the Facility Sublease, the Rocky Mountain Agreements Assignment, the Rocky Mountain Agreements Re-assignment, the Rocky Mountain Agreements Second Re-assignment, the Ground Lease, the Ground Sublease, the Ground Sub-sublease, the Facility Sublease Assignment Agreement, the Deed to Secure Debt, the Loan Agreement, the Loan Certificate, the Trust Agreement, the Tax Indemnity Agreement, the Operating Agency Agreement, the Transmission Service Agreement, the Payment Undertaking Agreement, the Payment Undertaking Pledge Agreement, the Qualifying Surety Bonds (without regard to whether any such instrument continues to be qualified within the meaning of the defined term herein), the Qualifying Equity Funding Agreement (without regard to whether any such instrument continues to be qualified within the meaning of the defined term herein), the AIG Guaranty, the Partial Release of Security Interest, the Equity Funding Pledge Agreement, the Georgia Power Consent, the AMBAC Assignment A-35 Agreement, the Intercreditor Agreement, the Subordinated Deed to Secure Debt and Security Agreement and other documents, agreements and certificates (including any certificates delivered on the Closing Date relied on for purposes of rendering any opinion) in connection with the transactions contemplated under the documents defined in this definition of "Operative Documents". "Optional Modification" shall have the meaning specified in Section 8.2 of the Facility Lease or Section 8.2 of the Facility Sublease, as the case may be. "Other Facility Lease" shall mean each other facility lease in substantially the same form as the Facility Lease of an undivided interest in the Facility from an Other Facility Lessor to RMLC, as lessee in connection with an Other Rocky Mountain Lease Transaction. "Other Facility Lessor" shall mean other trustees on behalf of equity investors acquiring long term leasehold interests in the Facility and the Rocky Mountain Site, and subleasing such interests to RMLC, in connection with an Other Rocky Mountain Lease Transaction. "Other Facility Sublease" shall mean each other facility sublease, in substantially the same form as the Facility Sublease, of an undivided interest in the Facility from RMLC, as sublessor, to Oglethorpe, as sublessee, in connection with an Other Rocky Mountain Lease Transaction. "Other Rocky Mountain Lease Transactions" shall mean other transactions involving the lease of undivided interests in the Facility, the Rocky Mountain Site, and an assignment of a portion of Oglethorpe's interest in the Rocky Mountain Agreements, to trustees on behalf of equity investors, and the simultaneous sublease and re-assignment of such interests and rights to RMLC, and, in turn, the further sublease and reassignment of such interests and rights to Oglethorpe, all on substantially the same terms and conditions as under the Overall Transaction. "Overall Transaction" shall mean the transactions contemplated by the Operative Documents. A-36 "Overdue Rate" shall mean 2% per annum over the rate of interest publicly announced from time to time by Citibank, N.A. at its New York office as its prime lending rate for domestic commercial loans, such rate to change as and when such prime lending rate changes. For purpose of this definition, "prime lending rate" shall mean that rate announced by Citibank, N.A. from time to time as its prime rate as that rate may change from time to time with changes to occur on the date Citibank's prime rate changes. Citibank, N.A.'s prime rate is one of several interest rate bases used by Citibank, N.A. Citibank, N.A. lends at rates both above and below its prime rate, and RMLC and Oglethorpe each acknowledges and agrees that the prime rate is not represented or not intended to be the lowest or most favorable rate of interest offered by Citibank, N.A. "Owner Participant" shall mean Philip Morris Capital Corporation, a Delaware corporation. "Owner Participant's Commitment" shall mean $67,000,000.00 (which shall not include Owner Participant Transaction Expenses). "Owner Participant's Lien" shall mean any Lien on the Trust Estate or any part thereof arising as a result of (i) Taxes against or affecting the Owner Participant not related to, or that are in violation of, any Operative Document or the transactions contemplated thereby, (ii) Claims against or any act or omission of the Owner Participant that is not related to, or that is in violation of, any Transaction Document or the transactions contemplated thereby or that is in breach of any covenant or agreement of the Owner Participant set forth therein, (iii) Taxes against the Owner Participant that are not indemnified against by RMLC or Oglethorpe pursuant to the Operative Documents or (iv) Claims against or affecting the Owner Participant arising out of the voluntary or involuntary transfer by the Owner Participant (except as contemplated or permitted by the Operative Documents) of any portion of the interest of the Owner Participant in the Beneficial Interest. "Owner Participant Transaction Expenses" shall have the meaning set forth in Section 2.3 of the Participation Agreement. A-37 "Owner Trust" shall mean the grantor trust created by the Trust Agreement. "Owner Trustee" shall mean Fleet National Bank, a national banking association, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement, and each other Person which may from time to time be acting as Owner Trustee in accordance with the provisions of the Trust Agreement. "Partial Release of Security Interest" shall mean the Partial Release of Security Interest (P1) dated as of December 30, 1996 by the United States of America acting through the RUS acting through the Administrator of the Rural Utility Service, Cobank, ACB, Credit Suisse and the Co-Trustee. "Participants" shall mean the Owner Participant and the Lender. "Participation Agreement" shall mean the Participation Agreement (P1), dated as of December 30, 1996, among Oglethorpe, RMLC, the Georgia Trust Company in its individual capacity and as Co-Trustee, the Non-Georgia Trust Company, in its individual capacity and as the Owner Trustee, the Owner Participant and the Lender. "Payment Default" shall mean the failure to pay any Basic Rent or Supplemental Rent when due without regard to any grace period or notice requirement. "Payment Undertaking Agreement" shall mean the Payment Undertaking Agreement (P1), dated as of December 30, 1996, between the Facility Lessee and the Payment Undertaking Issuer, in substantially the form of Exhibit L to the Participation Agreement. "Payment Undertaking Documents" shall mean the Payment Undertaking Agreement and the Payment Undertaking Pledge Agreement. A-38 "Payment Undertaking Issuer" shall mean Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., New York Branch. "Payment Undertaking Payment Date" shall have the meaning specified in Section 1 of the Payment Undertaking Agreement. "Payment Undertaking Pledge Agreement" shall mean the Payment Undertaking Pledge Agreement (P1), dated as of December 30, 1996, between the Payment Undertaking Pledgee and the Payment Undertaking Pledgor, in substantially the form of Exhibit M to the Participation Agreement. "Payment Undertaking Pledgees" shall mean the Owner Trustee and the Co-Trustee, as pledgees under the Payment Undertaking Pledge Agreement. "Payment Undertaking Pledgor" shall mean RMLC, as pledgor under the Payment Undertaking Pledge Agreement. "Permitted Encumbrances" shall mean all Liens now or hereafter existing and permitted to exist on the Facility or the Rocky Mountain Site under the Oglethorpe Mortgage as in effect on the Closing Date or in the form of the Proposed Indenture. "Permitted Investments" shall mean investments in (a) overnight loans to or other customary overnight investments in commercial banks of the type referred to in paragraph (d) below, (b) obligations of the United States, (c) open market commercial paper of any corporation (other than Oglethorpe) incorporated under the laws of the United States or any State thereof which is rated not less than "prime-1" or its equivalent by Moody's and "A-1" or its equivalent by S&P maturing within one year after such investment, (d) certificates of deposit and issued by commercial banks organized under the laws of the United States or any State thereof or a domestic branch of a foreign bank (i) having a combined capital and surplus in excess of $500,000,000 and (ii) which are rated "AA" (or "Aa") or better by S&P and/or Moody's; provided that no more than A-39 $20,000,000 may be invested in such deposits at any one such bank and (e) a money market fund registered under the Investment Company Act of 1940, as amended, the portfolio of which is limited to U.S. government obligations and U.S. agency obligations. "Permitted Liens" shall mean (i) the interests of Oglethorpe, RMLC, the Owner Participant, the Trustees and the Lender under any of the Operative Documents; (ii) the Lien of the Oglethorpe Mortgage; (iii) all Permitted Encumbrances; (iv) the interest of Georgia Power or its successors and assigns pursuant to the Rocky Mountain Agreements; (v) the interest of Georgia Power as tenant in common with Oglethorpe in the Facility and the Rocky Mountain Site; (vi) all Facility Lessor's Liens and Owner Participant's Liens; (vii) the Liens of the Deed to Secure Debt and the Loan Agreement; (viii) the reversionary interests of Oglethorpe in the Rocky Mountain Site, (ix) the Lien of the Subordinated Deed to Secure Debt and Security Agreement, (x) the interests of the Other Facility Lessors in the Facility, the Rocky Mountain Site and the Rocky Mountain Agreements and the lenders thereto in the Other Rocky Mountain Lease Transactions, (xi) the interest of the Georgia Department of Natural Resources under the Resource Management Agreement and (xii) those Liens identified in the Title Report. "Permitted Post-Term Encumbrances" shall mean the Liens described in paragraphs A, B, G, H, I, J, N, O, P, Q, R, S, T, and U of the definition of "Permitted Exceptions" in Section 1.1 of the Proposed Indenture. "Permitted Sublease Liens" shall mean (i) the interests of RMLC, Oglethorpe, the Owner Participant and the Trustees under any of the Operative Documents; (ii) the Lien of the Oglethorpe Mortgage; (iii) the interest of Georgia Power or its successors and assigns pursuant to the Rocky Mountain Agreements; (iv) the interest of Georgia Power as tenant in common with Oglethorpe in the Facility and the Rocky Mountain Site; (v) all Facility Lessor's Liens and Owner Participant's Liens; (vi) the Liens of the Deed to Secure Debt and the Loan Agreement; (vii) the interests of Oglethorpe in the Rocky Mountain Site; (viii) the Lien of the Subordinated Deed to Secure Debt and Security Agreement; (ix) the interests of the Other Facility Lessors in the Facility; (x) the interest of the Georgia Department of Natural Resources under the Resource A-40 Management Agreement; (xi) Permitted Encumbrances and (xii) those Liens identified in the Title Report. "Person" shall mean any individual, corporation, cooperative, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Plan" shall mean any "employee benefit plan" (as defined in Section 3(3) of ERISA) that is subject to ERISA, any "plan" (as defined in Section 4975(e)(1) of the Code) that is subject to Section 4975 of the Code, any trust created under any such plan or any "governmental plan" (as defined in Section 3(32) of ERISA or Section 414(d) of the Code) that is organized in a jurisdiction having prohibitions on transactions with government plans similar to those contained in Section 406 of ERISA or Section 4975 of the Code. "Pledgee" shall mean the Owner Trustee, as pledgee under the Equity Funding Pledge Agreement. "Pledgor" shall mean RMLC, as pledgor under the Equity Funding Pledge Agreement. "Prime Rate" shall mean "prime lender rate" of Citibank, N.A. described in the definition of "Overdue Rate." "Property" shall have the meaning specified in the Granting Clause of the Deed to Secure Debt. "Proposed Indenture" shall mean the December 23, 1996 draft indenture from Oglethorpe to SunTrust Bank, Atlanta, as trustee, in the form certified to the Owner Participant and the Lender on the Closing Date and attached to the Participation Agreement as Exhibit W, as modified by and subject to the Intercreditor Agreement and the Partial Release of Security Interest. A-41 "Proposed RUS Loan Contract" shall mean the December 24, 1996 draft of the Amended and Consolidated Loan Contract between Oglethorpe and the RUS in the form certified to the Owner Participant and the Lender on the Closing Date. "Prudent Utility Practice" shall mean, at a particular time, any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry prior to such time, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at the lowest reasonable cost consistent with good business practices, reliability, safety and expedition. "Prudent Utility Practice" is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts having due regard for, among other things, manufacturers' warranties and the requirements of Governmental Entities of competent jurisdiction and the requirements of the Rocky Mountain Agreements. "Purchase Option" shall have the meaning specified in Section 15.1 of the Facility Lease. "Purchase Option Price" shall mean the purchase price set forth in Section 15.1 of each of the Facility Lease and the Facility Sublease. "Qualifying Additional Security" shall have the meaning specified in Section 8.8 of the Participation Agreement. "Qualifying Equity Funding Agreement" shall mean a valid and enforceable obligation in accordance with its terms of a Qualifying Equity Funding Provider in favor of the Facility Lessor and the Owner Participant, in either case the payments, under which shall be sufficient in timing and amount to pay (i) the Equity Portion of Basic Rent, (ii) the Equity Portion of the Purchase Option Price on the Expiration Date and (iii) each subsequent installment of the Purchase Option Price on the date each installment is due and payable pursuant to Section 15.1 of the Facility Lease or a Qualifying Letter of Credit issued by a Qualifying Letter of Credit Bank. Any Qualifying A-42 Equity Funding Agreement not constituting a qualifying Letter of Credit shall be in substantially the form of Exhibit N to the Participation Agreement (including, without limitation, the procedure for determining the price and limitations on fluctuations in such price paid by the Qualifying Equity Funding Agreement Provider in the event of a required payment of termination amount prior to the Expiration Date) but need not include an obligation to collateralize the Qualifying Equity Funding Provider's obligations thereunder in the event of a ratings decline and shall be substantially in the form of Exhibit N to the Participation Agreement including provisions no less favorable to the Owner Participant than in the form of Exhibit N1 to the Participation Agreement. The AIG Equity Funding Agreement and any replacement Qualifying Equity Funding Agreement will continue to constitute a Qualifying Equity Funding Agreement even if American International Group, or the Qualifying Equity Funding Agreement Provider under such replacement Qualifying Equity Funding Agreement shall cease to be a Qualifying Equity Funding Agreement Provider if such Qualifying Equity Funding Agreement shall include an obligation similar to that in the AIG Equity Funding Agreement of the obligor thereunder to secure its obligations thereunder with Equity Funding Collateral in an amount, subject to a weekly mark to market, equal to 104% of Accreted Par Value of the Qualifying Equity Funding Agreement if the claims paying ability of, or the senior uninsured debt obligations of, American International Group or any replacement Qualifying Equity Funding Provider shall not be rated at least "Aa3" by Moody's and "AA-" by S&P and American International Group or such replacement Qualifying Equity Funding Agreement Provider shall be in compliance with such provision and shall continue to meet the requirement of the definition of a "Qualifying Equity Funding Agreement Provider. On the Closing Date, the AIG Equity Funding Agreement delivered on the Closing Date shall constitute a Qualifying Equity Funding Agreement. "Qualifying Equity Funding Agreement Provider" shall mean an entity, the claims paying ability of which, or the senior unsecured debt obligations of which, at the time of issuance of any Qualifying Equity Funding Agreement are rated at least "Aa2" by Moody's and "AA" by S&P, and the claims paying ability of which, or the senior unsecured debt obligations of which thereafter is rated at least "Aa2" by Moody's or "AA" by S&P; provided, however, that if a Qualifying Equity Funding Agreement shall include the obligation of the Qualifying Equity A-43 Funding Agreement Provider referenced in the third sentence of the definition of Qualifying Equity Funding Agreement, such Person shall continue to a Qualifying Security Funding Agreement Provider if it is in compliance with such obligation and the ratings of the Rating Agencies are no lower than Baa3 by Moody's and BBB- by S&P. "Qualifying Head Lease Surety Bond" shall mean a valid and enforceable surety bond in accordance with its terms of a Qualifying Surety Bond Provider for the benefit of the Head Lessee and the Owner Participant (a) supporting Oglethorpe's obligations under Sections 5 and 13 of the Head Lease and the Special Equity Head Lease Remedy, (b) in substantially the form of Exhibit Q to the Participation Agreement including provisions no less favorable to the Owner Participant and the Head Lessee than in the form of Exhibit Q to the Participation Agreement or in such other form acceptable to the Owner Participant, (c) providing for a maximum amount payable from time to time equal to the Equity Exposure Amount and (d) providing for a reduction in the maximum amount payable from time to time equal to amounts paid to the Owner Participant or either Trustee under the Qualifying Sublease Surety Bond. On the Closing Date, the AMBAC Head Lease Surety Bond delivered on the Closing Date shall constitute a Qualifying Head Lease Surety Bond. "Qualifying Letter of Credit" shall mean a valid and enforceable irrevocable transferable letter of credit in form and substance acceptable to the Owner Participant and RMLC (i) issued by a Qualifying Letter of Credit Bank having a stated expiration date of not earlier than one year after the date of original issuance and (ii) unless the expiry date shall be on or after the Expiration Date, providing for a draw thereunder if not renewed or replaced with a Qualifying Letter of Credit or Qualifying Surety Bond prior to its expiry or within 60 days of the issuer's ceasing to be a Qualifying Letter of Credit Bank. "Qualifying Letter of Credit Bank" shall mean a bank, the senior unsecured debt obligations (or long-term deposits) of which are rated at least "Aa2" by Moody's and "AA" by S&P. A-44 "Qualifying Sublease Surety Bond" shall mean a valid and enforceable surety bond of a Qualifying Surety Bond Provider, (a) securing Oglethorpe's obligations under the Facility Sublease including Sublease Supplemental Rent, (b) in substantially the form of Exhibit R to the Participation Agreement including provisions no less favorable to RMLC than in the form of Exhibit R to the Participation Agreement or in such other form acceptable to the Owner Participant, (c) providing for a maximum amount payable from time to time equal to the Equity Exposure Amount and (d) providing for a reduction in the maximum amount payable from time to time equal to amounts paid under the Qualifying Head Lease Surety Bond. On the Closing Date, the AMBAC Sublease Surety Bond delivered on the Closing Date shall constitute a Qualifying Sublease Surety Bond. "Qualifying Surety Bonds" shall mean the Qualifying Head Lease Surety Bond and the Qualifying Sublease Surety Bond. "Qualifying Surety Bond Provider" shall mean an insurer, the claims paying ability of which at the time of issuance of a Qualifying Surety Bond is rated at least "Aa2" by Moody's and "AA" by S&P, and the claims paying ability of which thereafter is rated at least "Aa2" by Moody's or "AA" by S&P. "Quoted Rate" shall mean the rate of interest determined pursuant to clause (i) of the definition of Reset Interest Rate. "Rating Agencies" shall mean S&P and Moody's. "Reasonable Basis" for a position shall exist if tax counsel may properly advise reporting such position on a tax return in accordance with Formal Opinion 85-352 issued by the Standing Committee on Ethics and Professional Responsibility of the American Bar Association (or any successor to such opinion). A-45 "Rebuilding Closing Date" shall have the meaning specified in paragraph (f) of Section 10.3 of the Facility Lease and paragraph (f) of Section 10.3 of the Facility Sublease, as the case may be. "Release Date" shall have the meaning specified in Section 1.01 of the Payment Undertaking Agreement. "Released Property" shall have the meaning specified in Section 4.2 of the Ground Lease. "Renewal Ground Lease Term" shall have the meaning specified in Section 2.3 of the Ground Lease. "Renewal Ground Sublease Term" shall have the meaning specified in Section 2.3 of the Ground Sublease. "Renewal Ground Sub-sublease Term" shall have the meaning specified in Section 2.3 of the Ground Sub-sublease. "Renewal Term" shall have the meaning specified in Section 15.4 of the Facility Lease. "Renewal Term Option" shall have the meaning set forth in Section 15.2 of the Facility Lease. "Rent" shall mean all Basic Rent and all Supplemental Rent. "Rent Payment Date" shall mean each January 1 and July 1, commencing July 1, 1997, to and including January 1, 2027. "Rent Payment Period" shall mean in the case of the first Rent Payment Period the period commencing on the Closing Date and ending on June 30, 1997 and thereafter each six-month or shorter period (i) commencing, on each Rent Payment Date through and including July 1, 2026, and (ii) through but excluding the following January 1 or July 1, as the case may be. A-46 "Replacement Component" shall have the meaning specified in Section 7.2 of the Facility Lease or Section 7.2 of the Facility Sublease, as the case may be. "Replacement Facility Lease" shall have the meaning specified in Section 15.3 of the Facility Lease. "Replacement Facility Lease Term" shall have the meaning specified in Section 15.3 of the Facility Lease. "Replacement Facility Lessee" shall mean a replacement lessee for the Undivided Interest executing a Replacement Facility Lease in accordance with Section 15.3 of the Facility Lease which replacement lessee (i) shall have a credit rating with respect to its senior long-term unsecured indebtedness of at least BBB by S&P and Baa2 by Moody's or, if not rated by S&P or Moody's, an equivalent credit standing as determined by the Owner Participant in its reasonable discretion or (ii) has provided credit enhancement (reasonably satisfactory in form and substance to the Owner Participant) resulting in the replacement lessee's obligations under the Operative Documents being so ratable. "Replacement Lease Option" shall have the meaning specified in Section 15.2 of the Facility Lease. "Required Modification" shall have the meaning specified in Section 8.1 of the Facility Lease or Section 8.1 of the Facility Sublease, as the case may be. "Reset Date" shall mean as of 11:59 p.m. (New York City time) on the last day of the Basic Term. "Reset Interest Rate" with respect to the Loan Certificate, shall mean one of the following determined in accordance with the procedures set forth in Section 2.11 of the Loan Agreement: (i) a fixed interest rate per annum, computed on the basis of a 360 day year or twelve 30-day A-47 months with interest payable semi-annually, determined by the Lender in the Lender's reasonable good faith judgment, based on prevailing market conditions and the maturity, credit risk and other terms and conditions of a Loan Certificate and the Loan Agreement, the lending policies of the Lender at the time and any other factors which the Lender deems relevant (referred to as the "Quoted Rate"), or (ii) the lowest fixed interest rate per annum computed on the basis of a 360 day year of twelve 30-day months with interest payable semi-annually that allows the Banker, using reasonable efforts, including soliciting offers from entities proposed by the Owner Participant or the Facility Lessee, to locate one or more Persons ready, willing and able to purchase the Loan Certificate from the Lender at a price equal to the outstanding principal amount thereof plus interest accrued thereon to such date (referred to as the "Auction Rate"); provided that in the event the Facility Lessee or Facility Sublessee purchases the Loan Certificates pursuant to Section 15.5 of the Facility Lease or Section 15.3 of the Facility Sublease, the Auction Rate shall be based on the Banker's determination of the interest rate at which a third party institutional investor would acquire the Loan Certificate. "Resource Management Agreement" shall mean the Resource Management Agreement for the Rocky Mountain Pumped Storage Hydroelectric Project between Oglethorpe and the State of Georgia acting through the Department of Natural Resources. "Responsible Officer" shall mean, with respect to any Person, (i) its Chairman of the Board, its President, any Senior Vice President, the Chief Financial Officer, any Vice President, the Treasurer or any other management employee (a) that has the power to take the action in question and has been authorized, directly or indirectly, by the Board of Directors of such Person, (b) working under the direct supervision of such Chairman of the Board, President, Senior Vice President, Chief Financial Officer, Vice President or Treasurer and (c) whose responsibilities include the administration of the transactions and agreements contemplated by the Operative Documents and (ii) with respect to the Trustees, an officer in their respective corporate trust departments. "Retention Option" shall have the meaning specified in Section 15.2 of the Facility Lease. A-48 "Return Acceptance Tests" shall mean performance standards or tests meeting or exceeding the following conditions: (a) The plant cycle efficiency, defined as the gross pumping energy in MWh divided by gross generating energy in MWh (including all station service energy requirements), shall have been 1.325 minimum during the preceding 12 months of operation; (b) The plant availability, as defined by North American Electric Reliability Council, shall have been 85 percent minimum during the preceding 12 months; (c) The plant forced outage rate and factors, as defined by North American Electric Reliability Council, shall have been a maximum of 7.9 percent and 1.9 percent, respectively, during the preceding 12 months; (d) There shall be no outstanding FERC or civil/structural issues requiring correction and an independent FERC Part 12 inspection shall have been performed within the past 12 months; (e) All equipment (including the pump/turbine-motor/generator) operates at maximum capability without exceeding the design temperature or vibration limits of the equipment; (f) All scheduled and unscheduled equipment (including the pump/turbine-motor/generator) maintenance items shall have been performed; (g) Any pump/turbine runner cavitation damage shall have been repaired within the past year for all units; (h) The motor/generators shall have satisfactorily passed a hi-pot test; (i) All auxiliary systems shall not exceed the forced outage rate of 7.9 percent; and (j) The renewed FERC license for the project has been obtained from the FERC and does not include operating requirements and/or restrictions which are more onerous than the original license conditions. "Return Option" shall have the meaning specified in Section 15.1 of the Facility Lease. "RMLC" shall mean Rocky Mountain Leasing Corporation, a Delaware corporation, together with its successors and assigns. A-49 "RMLC Creditor" shall have the meaning specified in Section 2.01(b) of the Payment Undertaking Agreement. "RMLC Indemnitee" shall have the meaning specified in Section 12.1 of the Participation Agreement. "RMLC Portion of the Beneficial Interest", as of any Termination Date, shall mean a fraction of the Beneficial Interest equal to the quotient obtained by dividing the RMLC Portion of Equity Termination Value for such Termination Date by the Equity Portion of Termination Value for such Termination Date. "RMLC Portion of Equity Termination Value" shall mean the "RMLC Portion of Equity Termination Value" set forth in Schedule 3 to the Participation Agreement for such date. "RMLC Secured Obligations" shall have the meaning specified in the Granting Clause of the Facility Sublease Assignment Agreement. "RMLC Tax Indemnitee" shall have the meaning specified in Section 12.2 of the Participation Agreement. "Rocky Mountain Agreements" shall mean the Rocky Mountain Ownership Agreement and the Rocky Mountain Operating Agreement. "Rocky Mountain Agreements Assignment" shall mean the Rocky Mountain Agreements Assignment and Assumption Agreement (P1) dated as of December 30, 1996, between Oglethorpe and the Co-Trustee, in substantially the form of Exhibit D to the Participation Agreement. "Rocky Mountain Agreements Re-assignment" shall mean the Rocky Mountain Agreements Re-assignment and Assumption Agreement (P1), dated as of December 30, 1996, between the Co-Trustee and RMLC, in substantially the form of Exhibit G to the Participation Agreement. A-50 "Rocky Mountain Agreements Second Re-assignment" shall mean the Rocky Mountain Agreements Second Re-assignment and Assumption Agreement (P1), dated as of December 30, 1996, between RMLC and Oglethorpe, in substantially the form of Exhibit J to the Participation Agreement. "Rocky Mountain Operating Agreement" shall mean that certain Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement dated as of November 18, 1988, by and between Oglethorpe and Georgia Power. "Rocky Mountain Ownership Agreement" shall mean that certain Rocky Mountain Pumped Storage Hydroelectric Project Ownership Participation Agreement dated as of November 18, 1988, by and between Oglethorpe and Georgia Power. "Rocky Mountain Site" shall mean the land on which the Facility is situated, which land is described in Schedule 1 to the Ground Lease, but excluding the Facility. "RUS" shall mean the Rural Utilities Services, an agency of the United States Department of Agriculture. "RUS Loan Contract" shall mean the Amended and Consolidated Loan Contract between Oglethorpe and the United States of America, dated as of June 1, 1984, as heretofore amended and supplemented, or as the same may from time to time be supplemented, modified, amended or restated. "S&P" shall mean Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. or any successor thereto. "Scheduled Amount" shall have the meaning specified in Section 1.01 of the Payment Undertaking Agreement. A-51 "Scheduled Closing Date" shall mean December 30, 1996, and any date set for Closing in a notice of postponement pursuant to Section 2.2(c) of the Participation Agreement. "Scheduled Payment Date" shall mean a Rent Payment Date. "SEC No-action Letter" shall mean the "no-action" letter of the SEC, dated December 9, 1996, addressed to Robert J. Gloistein, Esq., (SEC File No. 132-3). "Secured Claims" shall have the meaning specified in Section 3 of the Equity Funding Pledge Agreement. "Secured Indebtedness" shall have the meaning specified in the Granting Clause of the Deed to Secure Debt. "Secured Obligations" shall have the meaning specified in the Granting Clause of the Subordinated Deed to Secure Debt and Security Agreement. "Secured Party" shall mean the Lender or any subsequent holder of the Loan Certificate, as secured party under the Deed to Secure Debt. "Securities Act" shall mean the Securities Act of 1933, as amended. "Security" shall have the same meaning as in Section 2(1) of the Securities Act. "Special Equity Facility Lease Remedy" shall have the meaning specified in Section 16.1 of the Participation Agreement. "Special Equity Head Lease Remedy" shall have the meaning specified in Section 16.2 of the Participation Agreement. A-52 "Special Facility Lease Event of Default" shall mean an Event of Default other than an Event of Default described in clause (i) of Section 16 of the Facility Lease in consequence of a Sublease Event of Default described in clause (n) or (o) of Section 16 of the Facility Sublease. "Special Head Lease Event of Default" shall mean an event described in clause (e) or (f) of Section 12.1 of the Head Lease. "Special Payments" shall mean payments by the Payment Undertaking Issuer pursuant to Section 3.2 of the Payment Undertaking Agreement. "Specified Sum" shall have the meaning set forth in Article I of the Equity Funding Agreement. "Sublease Bankruptcy Default" shall mean an event that is or in the case of Section 16(o) of the Facility Sublease with the passage of time would be, a Sublease Event of Default under Section 16(n) or 16(o) of the Facility Sublease. "Sublease Basic Rent" shall mean all amounts payable by Oglethorpe to the Lessee pursuant to Section 3.2 of the Facility Sublease, as the same may be adjusted from time to time pursuant to Section 3.4 of the Facility Sublease. "Sublease Basic Term" shall have the meaning specified in Section 3.1 of the Facility Sublease. "Sublease Collateral" shall have the meaning specified in the Granting Clause of Facility Sublease Assignment Agreement. "Sublease Default" shall mean an event that with the passage of time or giving of notice or both would constitute a Sublease Event of Default. "Sublease Event of Default" shall have the meaning specified in Section 16 of the Facility Sublease. A-53 "Sublease Payment Default" shall mean any failure to pay Sublease Basic Rent or Sublease Supplemental Rent when due without regard to any grace period or notice requirement. "Sublease Purchase Option" shall have the meaning specified in Section 15.1 of the Facility Sublease. "Sublease Renewal Term" shall have the meaning specified in Section 15.2 of the Facility Sublease. "Sublease Rent" shall mean all Sublease Basic Rent and Sublease Supplemental Rent. "Sublease Return Option" shall have the meaning specified in Section 15.1 of the Facility Sublease. "Sublease Supplemental Rent" shall mean any and all amounts, liabilities and obligations (other than Sublease Basic Rent) which the Facility Sublessee assumes or agrees to pay under the Operative Documents (other than the Head Lease, the Ground Lease and Section 16.2 of the Participation Agreement) to the Facility Sublessor or any other Person, including, but not limited to, Sublease Termination Value and if and to the extent applicable, the Sublease Purchase Option Price. "Sublease Term" shall mean the Sublease Basic Term and the Sublease Renewal Term, if any, of the Facility Sublease. "Sublease Termination Value" for any Termination Date shall mean the Sublease Termination Value set forth in Schedule 2 of the Facility Sublease for such Termination Date. "Subordinated Collateral" shall have the meaning as defined in the Granting Clause of the Subordinated Deed to Secure Debt and Security Agreement. A-54 "Subordinated Deed to Secure Debt and Security Agreement" shall mean the Subordinated Deed to Secure Debt and Security Agreement (P1), dated as of December 30, 1996 among Oglethorpe, as grantor, and AMBAC, and the Co-Trustee, as subordinated secured parties. "Subordinated Deed to Secure Debt and Security Agreement Events of Default" shall have the meaning specified in Section 3.2 of the Subordinated Deed to Secure Debt and Security Agreement. "Subordinated Secured Parties" shall mean AMBAC, the Owner Participant and the Trustees, as secured parties under the Subordinated Deed to Secure Debt and Security Agreement. "Subsidiary" of any Person shall mean any corporation, association, or other business entity of which more than 50% (by number of votes) of the voting stock at the time outstanding shall at the time be owned, directly or indirectly, by such Person or by any other corporation, association or trust which is itself a Subsidiary within the meaning of this definition, or collectively by such Person and any one or more such Subsidiaries. "Supplemental Rent" shall mean any and all amounts, liabilities and obligations (other than Basic Rent) which the Facility Lessee assumes or agrees to pay under the Operative Documents to the Facility Lessor or any other Person, including, but not limited to, Termination Value and if and to the extent applicable, the Purchase Option Price. "Tax" or "Taxes" shall mean all fees, taxes (including, without limitation, sales taxes, use taxes, transfer, mortgage, recording, intangible and similar taxes, value-added taxes, ad valorem taxes, property taxes (personal and real, tangible and intangible), income taxes, gross receipts taxes, withholding taxes and stamp taxes), levies, assessments, withholdings and other charges and impositions of any nature, plus all related interest, penalties, fines and additions to tax, now or hereafter imposed by any government or other taxing authority. A-55 "Tax Advance" shall have the meaning specified in Section 11.2(g)(3) of the Participation Agreement. "Tax Benefit" shall have the meaning specified in Section 11.2(e) of the Participation Agreement. "Tax Claim" shall have the meaning specified in Section 11.2(g)(1) of the Participation Agreement. "Tax Indemnitee" shall have the meaning specified in Section 11.2(a) of the Participation Agreement. "Tax Indemnity Agreement" shall mean the Tax Indemnity Agreement (P1), dated as of December 30, 1996, between Oglethorpe and the Owner Participant. "Term" shall mean the Basic Term and the Renewal Term, if any, of the Facility Lease. "Termination Date" shall mean each of the monthly dates during the Head Lease Term, the Facility Lease Term and the Facility Sublease Term identified as a "Termination Date" on Schedule 1 of the Head Lease, Schedule 2 of the Facility Lease, or Schedule 2 of the Facility Sublease, as the case may be. "Termination Value" for any Termination Date shall mean the Termination Value set forth on Schedule 2 of the Facility Lease, Schedule 2 to the Facility Sublease and Schedule 1 of the Head Lease, as the case may be, for such Termination Date. "Title Report" shall mean the letter of Robert N. Farrar, Esq. to the Participants dated December 27, 1996. A-56 "Transaction Costs" shall mean the following: (a) the cost of reproducing and printing the Operative Documents and all costs and fees, including but not limited to filing and recording fees and recording, transfer, mortgage, intangible and similar taxes in connection with the execution, delivery, filing and recording of the Ground Lease, the Ground Sublease, the Ground Sub-sublease, the Head Lease, the Facility Lease, the Facility Sublease, the Deed to Secure Debt and the Subordinated Deed to Secure Debt and Security Agreement and any other Operative Document and any other document required to be filed or recorded pursuant to the provisions hereof or of any other Operative Document and any Uniform Commercial Code filing fees in respect of the perfection of any security interests created by any of the Operative Documents or as otherwise reasonably required by the Owner Participant or the Lender and surveyor fees; (b) the reasonable fees and expenses of Hunton & Williams, special New York and Georgia counsel to the Owner Participant, for their services rendered in connection with the negotiation, execution and delivery of the Participation Agreement and the other Operative Documents; (c) the reasonable fees and expenses of Orrick, Herrington & Sutcliffe LLP, special counsel for Oglethorpe (up to the amount separately agreed to by Oglethorpe), for their services rendered in connection with the negotiation, execution and delivery of the Participation Agreement and the other Operative Documents; (d) the reasonable fees and expenses of Sutherland, Asbill & Brennan, L.L.P., counsel for Oglethorpe (up to the amount separately agreed to by Oglethorpe), for their services rendered in connection with the negotiation, execution and delivery of the Participation Agreement and the other Operative Documents; A-57 (e) the reasonable fees and expenses of King & Spalding, special counsel for the Co-Trustee, for their services rendered in connection with the negotiation, execution and delivery of the Participation Agreement and the other Operative Documents; (f) the reasonable fees and expenses of Troutman Sanders, counsel for Georgia Power, for their services rendered in connection with their review of the Operative Documents on behalf of Georgia Power and the negotiation, execution and delivery of the Georgia Power Consent; (g) the reasonable fees and expenses of Robert N. Farrar, Attorney at Law, for his services rendered in connection with the recording of the Facility Lease, the Ground Lease and the other applicable Operative Documents; (h) the reasonable fees and expenses of Davis Polk & Wardwell, special counsel for the Lender and the Payment Undertaking Issuer, Hunton & Williams, as special Georgia counsel to the Lender and the Payment Undertaking Issuer, and of DeBrauw Blackstone Westbroek, Dutch counsel to the Lender and the Payment Undertaking Issuer, for their services rendered in connection with the negotiation, execution and delivery of the Participation Agreement and the other Operative Documents; (i) the initial fees and expenses of the Co-Trustee and the Owner Trustee in connection with the execution and delivery of the Participation Agreement and the other Operative Documents to which either one is or will be a party; (j) the fees of the Engineer, for its services rendered in connection with delivering the Engineering Report required by Section 4.12 of the Participation Agreement; (k) the fees of the Appraiser, for its services rendered in connection with delivering the Appraisal required by Section 4.14 of the Participation Agreement; A-58 (l) the fees of the Advisors to Oglethorpe (up to the amount separately agreed to by the Advisors to Oglethorpe), for their services rendered in connection with the transactions contemplated by the Participation Agreement; (m) the reasonable fees and expenses of Shipman & Goodwin, special counsel for the Owner Trustee, for their services rendered in connection with the negotiation, execution and delivery of the Participation Agreement and the other Operative Documents; (n) a portion of the Undertaking Fee payable to the Payment Undertaking Issuer equal to $670,000.00; (o) the fee paid to AMBAC in consideration for the Surety Bonds; (p) the fees of the Environmental Consultant retained by the Owner Participant; (q) the out-of-pocket expenses of the Owner Participant (including computer time procurement) up to a maximum amount equal to the product of (a) $30,000 and (b) the fraction obtained by dividing the Facility Lessor's Percentage by the sum of (1) "Facility Lessor's Percentage" of each Other Facility Lessor and (2) the Facility Lessor's Percentage. (r) the reasonable fees and expenses of Coudert Brothers, special counsel to the RUS, for their services rendered in connection with their review of the Operative Documents on behalf of the RUS and the preparation and negotiation of the Intercreditor Agreement; (s) the reasonable fees and expenses of O'Melveny & Myers, special counsel to AIG and American International Group, for their services rendered in connection with the preparation and negotiation of the AIG Equity Funding Agreement and the review of the Operative Documents; A-59 (t) the reasonable fees and expenses of Cadwalader, Wickersham & Taft, special counsel to AMBAC, for their reasonable services rendered in connection with the preparation and negotiation of the Qualifying Surety Bonds and the review of the Operative Documents; and (u) the reasonable fees of Richards, Layton & Finger, special Delaware counsel to RMLC, for their services rendered in connection with the negotiation, execution and delivery of the Operative Documents. Notwithstanding the foregoing, Transaction Costs shall not include internal costs and expenses such as salaries and overhead of whatsoever kind or nature nor costs incurred by the parties to the Participation Agreement pursuant to arrangements with third parties for services (other than those expressly referred to above or listed on Schedule 1 to the Participation Agreement), such as computer time procurement (other than out-of-pocket expenses of the Owner Participant), financial analysis and consulting, advisory services, and costs of a similar nature. "Transaction Documents" shall mean the Operative Documents, the Rocky Mountain Agreements, the Oglethorpe Mortgage, the FERC License, the RUS Loan Contract, and any other documents, agreements, certificates or other arrangements contemplated thereby. "Transaction Party" shall mean, individually or collectively as the context shall require, all or any of the parties to the Operative Documents (including the Trust Companies). "Transferee" shall have the meaning specified in Section 5.1(a) of the Participation Agreement. "Transmission Service Agreement" shall mean the Non-Member Transmission Service Agreement (P1), dated as of December 30, 1996, entered into by and between Georgia Transmission Corporation (An Electric Membership Corporation) and the Owner Trustee. A-60 "Treasury Regulations" shall mean regulations, including temporary regulations, promulgated under the Code. "Trust Agreement" shall mean, collectively, the Trust Agreement (P1), dated as of December 30, 1996, among the Owner Participant and the Non-Georgia Trust Company and the Trust Agreement Supplement (P1), dated as of December 30, 1996 by and among the Owner Participant, the Owner Trustee and the Georgia Trust Company. "Trust Companies" shall mean the Georgia Trust Company and the Non-Georgia Trust Company. "Trustees" shall mean the Co-Trustee and the Owner Trustee. "Trust Estate" shall mean all the estate, right, title and interest of the Trustees in, to and under the Ground Interest, the Undivided Interest, the Assigned Rocky Mountain Interests and the Operative Documents, including all funds advanced to the Co-Trustee or the Owner Trustee by the Owner Participant, all installments and other payments of Basic Rent, Supplemental Rent, Termination Value under the Facility Lease, condemnation awards, purchase price, sale proceeds, insurance proceeds and all other proceeds, rights and interests of any kind for or with respect to the estate, right, title and interest of the Trustees in, to and under the Ground Interest, the Undivided Interest and the Assigned Rocky Mountain Interests and the Operative Documents (including any right title and interest of the Trustees under the Assignment of Facility Sublease) and any of the foregoing, but shall not include Excluded Property or Excepted Rights. "Undertaking Fee" shall have the meaning specified in Section 1.01 of the Payment Undertaking Agreement. "Undivided Interest" shall mean an undivided interest equal to the Facility Lessor's Percentage in the Facility, including the right as tenant in common with Georgia Power and the Other Facility A-61 Lessors and other sublessees under the Other Rocky Mountain Lease Transactions to nonexclusive possession of the Facility, subject to the terms and conditions of the Rocky Mountain Agreements. "Undivided Interest Cost" shall mean $335,000,000.00. "Uniform Commercial Code" or "UCC" shall mean the Uniform Commercial Code as in effect in the applicable jurisdiction. "United States" shall mean the United States of America. "Utrecht-America" shall mean Utrecht-America Finance Co., a corporation organized and existing under the laws of the State of Delaware and any successor thereto. A-62 EXHIBIT B to Participation Agreement (P1) Head Lease Refer to Exhibit 10.32.2 of the Form 10-K. EXHIBIT C to Participation Agreement (P1) Ground Lease Refer to Exhibit 10.32.3 of the Form 10-K. EXHIBIT D to Participation Agreement (P1) Rocky Mountain Agreements Assignment Refer to Exhibit 10.32.4 of the Form 10-K. EXHIBIT E to Participation Agreement (P1) Facility Lease Refer to Exhibit 10.32.5 of the Form 10-K. EXHIBIT F to Participation Agreement (P1) Ground Sublease Refer to Exhibit 10.32.6 of the Form 10-K. EXHIBIT G to Participation Agreement (P1) Rocky Mountain Agreements Re-assignment Refer to Exhibit 10.32.7 of the Form 10-K. EXHIBIT H to Participation Agreement (P1) Facility Sublease Refer to Exhibit 10.32.8 of the Form 10-K. EXHIBIT I to Participation Agreement (P1) Ground Sub-sublease Refer to Exhibit 10.32.9 of the Form 10-K. EXHIBIT J to Participation Agreement (P1) Rocky Mountain Agreements Second Re-assignment Refer to Exhibit 10.32.10 of the Form 10-K. EXHIBIT L to Participation Agreement (P1) Payment Undertaking Agreement Refer to Exhibit 10.32.11 of the Form 10-K. EXHIBIT M to Participation Agreement (P1) Payment Undertaking Pledge Agreement Refer to Exhibit 10.32.12 of the Form 10-K. EXHIBIT N to Participation Agreement (P1) Equity Funding Agreement Refer to Exhibit 10.32.13 of the Form 10-K. EXHIBIT O to Participation Agreement (P1) Equity Funding Pledge Agreement Refer to Exhibit 10.32.15 of the Form 10-K. EX-10.32-2 19 EXHIBIT 10.32.2 EXHIBIT 10.32.2 This instrument, when recorded, should be returned to: THE PURPOSE OF THIS INSTRUMENT IS TO MAKE Robert N. Farrar TECHNICAL CORRECTIONS TO THAT CERTAIN Attorney at Law HEAD LEASE (P1), DATED DECEMBER 30, 1996, The Carnegie Building RECORDED IN DEED BOOK ____, PAGE ____, OF 607 Broad Street, Suite 141 THE RECORDS OF THE CLERK OF SUPERIOR Rome, Georgia 30161-3059 COURT OF FLOYD COUNTY, GEORGIA. IT IS THE INTENTION OF THE PARTIES THAT THIS DOCUMENT SUPERCEDE SUCH OTHER DOCUMENT IN ITS ENTIRETY. ================================================================================ ROCKY MOUNTAIN HEAD LEASE AGREEMENT (P1) Dated as of December 30, 1996 between OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) and SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee ROCKY MOUNTAIN PUMPED STORAGE HYDROELECTRIC PROJECT ================================================================================ CERTAIN OF THE RIGHT, TITLE AND INTEREST OF SUNTRUST BANK, ATLANTA IN AND TO THIS ROCKY MOUNTAIN HEAD LEASE AGREEMENT (P1) HAVE BEEN ASSIGNED TO AND ARE SUBJECT TO A SECURITY TITLE, LIEN AND SECURITY INTEREST IN FAVOR OF UTRECHT-AMERICA FINANCE CO., AS LENDER UNDER THE LOAN AGREEMENT AND THE DEED TO SECURE DEBT EACH DATED AS OF DECEMBER 30, 1996. THIS ROCKY MOUNTAIN HEAD LEASE AGREEMENT (P1) HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE ORIGINAL COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY THE LENDER ON THE SIGNATURE PAGE THEREOF. SEE SECTION 13 FOR INFORMATION CONCERNING THE RIGHTS OF THE HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF. TABLE OF CONTENTS Page SECTION 1. DEFINITIONS...............................................1 SECTION 2. LEASE OF THE UNDIVIDED INTEREST...........................2 SECTION 3. TERM AND RENT.............................................2 Section 3.1. Basic Term...............................2 Section 3.2. Renewal Term.............................2 Section 3.3. Head Lease Rent..........................2 Section 3.4. Nonterminability.........................2 Section 3.5. Termination Option.......................3 SECTION 4. RIGHT OF QUIET ENJOYMENT..................................3 SECTION 5. RETURN OF UNDIVIDED INTEREST BY HEAD LESSEE...............3 SECTION 6. LIENS.....................................................4 Section 6.1. Head Lessee Covenant.....................4 Section 6.2. Head Lessor Covenant.....................4 SECTION 7. OPERATION AND MAINTENANCE; REPLACEMENT COMPONENTS................................................4 Section 7.1. Operation and Maintenance................4 Section 7.2. Replacement Components...................5 SECTION 8. MODIFICATIONS.............................................5 SECTION 9. TRANSFER OF UNDIVIDED INTEREST............................5 SECTION 10. INSPECTION................................................5 SECTION 11. HEAD LESSOR EVENT OF DEFAULT; REMEDIES....................6 Section 11.1. Head Lessor Event of Default................6 Section 11.2. Remedies for Head Lessor Event of Default...7 SECTION 12. WAIVER OF PARTITION.......................................9 SECTION 13. SECURITY FOR THE HEAD LESSEE'S OBLIGATION TO THE LENDER....................................................9 1 TABLE OF CONTENTS, Continued Page SECTION 14. NONMERGER................................................10 SECTION 15. APPLICATION OF PAYMENTS FROM GOVERNMENTAL ENTITY...................................................10 SECTION 16. INSURANCE................................................10 SECTION 17. MISCELLANEOUS............................................10 Section 17.1. Amendments and Waivers..................10 Section 17.2. Notices.................................10 Section 17.3. Survival................................12 Section 17.4. Successors and Assigns..................12 Section 17.5. Business Day............................13 Section 17.6. Governing Law...........................13 Section 17.7. Severability............................13 Section 17.8. Counterparts............................13 Section 17.9. Headings and Table of Contents..........13 Section 17.10. Further Assurances......................13 Section 17.11. Effectiveness of Head Lease.............13 Section 17.12. Limitation of Liability.................13 Section 17.13. Measuring Life..........................14 Appendix A Definintions.................................................A-1 EXHIBIT A Description of the Facility..................................A-1 Exhibit A-1 Descripton of Entire Rocky Mountain Property........A-1-1 Exhibit A-2 Project Boundary Drawing of the Rocky Mountain Project ..........................................A-2-1 Exhibit A-3 Powertunnel and Powerhouse General Plan and Profile of the Rocky Mountain Project Drawing NO. RM-00-CL0013 R1...................................A-3-1 Exhibit A-4 Equipment...........................................A-3-2 Schedule 1 Termination Values for Head Lease Basic Term................S1-1 ii ROCKY MOUNTAIN HEAD LEASE AGREEMENT (P1) This ROCKY MOUNTAIN HEAD LEASE AGREEMENT (P1), dated as of December 30, 1996 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof, this "Head Lease"), between OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized under the laws of the State of Georgia (together with its successors and permitted assigns, the "Head Lessor"), and SUNTRUST BANK, ATLANTA, a state banking corporation organized under the laws of the State of Georgia, not in its individual capacity but solely as Co-Trustee (together with its successors and permitted assigns, the "Head Lessee") under the Trust Agreement (P1), dated as of December 30, 1996 (as amended, supplemented or otherwise modified from time to time in accordance with provisions hereof, the "Trust Agreement"), with the Owner Trustee and the Owner Participant (as each is defined therein). WHEREAS, the Head Lessor and Georgia Power Company, a corporation organized under the laws of the State of Georgia ("Georgia Power"), own the Rocky Mountain Site as tenants in common under laws of the State of Georgia; WHEREAS, the Head Lessor and Georgia Power own the Facility (as hereinafter defined) as tenants in common under laws of the State of Georgia; WHEREAS, pursuant to the Ground Lease (as hereinafter defined) the Co-Trustee has acquired from the Head Lessor a leasehold interest in an undivided interest equal to the Facility Lessor's Percentage in the Rocky Mountain Site for a term equal to approximately 120% of the estimated useful life of the Facility, subject to extension as provided therein; and WHEREAS, pursuant to this Head Lease, the Head Lessor is leasing the Undivided Interest to the Head Lessee for a term equal to approximately 120% of the estimated useful life of the Facility, subject to extension as provided herein. NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS. Capitalized terms used in this Head Lease, including the recitals, and not otherwise defined herein shall have the respective meanings set forth in Appendix A attached hereto unless the context hereof shall otherwise require. The general provisions of Appendix A shall apply to terms used in this Head Lease and specifically defined herein. SECTION 2. LEASE OF THE UNDIVIDED INTEREST. The Head Lessor hereby leases the Undivided Interest, upon the terms and conditions set forth herein, to the Head Lessee for the term and renewal terms, if any, described below, and the Head Lessee hereby leases the Undivided Interest from the Head Lessor. The Head Lessor and the Head Lessee understand and agree that (a) this Head Lease of the Undivided Interest is subject to the limitations identified in the definition of Undivided Interest, (b) legal title to the Facility remains vested in the Head Lessor and Georgia Power as tenants-in-common, (c) this Head Lease of the Undivided Interest is subject and subordinate to the Lien of the Oglethorpe Mortgage and the encumbrances described in the Title Report, and (d) this Head Lease is subject to those encumbrances set forth in the Title Report. SECTION 3. TERM AND RENT. Section 3.1. Basic Term. The term of this Head Lease shall commence on the Closing Date and shall terminate at 11:59 p.m. (New York City time) on November 1, 2067 (the "Head Lease Basic Term"), subject to earlier termination pursuant to the express terms hereof and extension for any number of Renewal Terms (as defined below); provided, however, that notwithstanding anything to the contrary set forth herein, in no event shall the Head Lease Basic Term terminate so long as the Head Lessee's interest under this Head Lease shall be subject to the Lien of the Loan Agreement or the security title of the Deed to Secure Debt. Section 3.2. Renewal Term. At the expiration of the Head Lease Basic Term or any Head Lease Renewal Term (as hereinafter defined), the Head Lessee may extend this Head Lease for any number of additional terms of not less than 1 year each (each a "Head Lease Renewal Term" and, together with the Head Lease Basic Term, the "Head Lease Term") by giving the Head Lessor 180 days prior written notice. Section 3.3. Head Lease Rent. The Head Lessee hereby agrees to pay the Head Lessor rent in the amount of the Undivided Interest Cost on the Closing Date for the Head Lease Basic Term and all Head Lease Renewal Terms (the "Head Lease Rent"). The Head Lessor acknowledges receipt of such amount in full satisfaction of the Head Lessee's obligation to pay rent during the Head Lease Basic Term and each Head Lease Renewal Term. If the Head Lessee elects to renew the term of the Head Lease for any number of Head Lease Renewal Term or Terms pursuant to Section 3.2 hereof, the Head Lessor agrees that no additional rent shall be payable in respect of any such Head Lease Renewal Term. The parties agree that this Head Lease constitutes a sale of the Undivided Interest from the Head Lessor to the Head Lessee for U.S. federal income tax purposes and that the Head Lessee shall be treated as the owner of the Undivided Interest for U.S. federal income tax purposes. 2 Section 3.4. Nonterminability. Subject to Sections 3.1, 3.2 and 3.5 hereof, notwithstanding anything herein or otherwise to the contrary, neither the rights of the Head Lessee nor the obligations of the Head Lessor under this Head Lease shall be extinguished, diminished, lost or otherwise impaired by any circumstances of any character or for any reason whatsoever, whether or not the same involves the loss of all or any part of the leasehold estate granted by this Head Lease, including, without limitation, any of the following circumstances or reasons: (a) any damage to or loss or destruction of all or any part of the Facility for any reason whatsoever and of whatever duration, (b) the condemnation, requisition (by eminent domain or otherwise), seizure or other taking of title or use of all or any part of the Facility by any Governmental Entity or otherwise, (c) any prohibition, limitation or restriction on the use by any Person of all or any part of its property or the interference with such use by any Person, or any foreclosure or deed in lieu of foreclosure of the Oglethorpe Mortgage, or any termination of this Head Lease as a result thereof by operation of law or contract, or any eviction by paramount title or otherwise, (d) any inadequacy, incorrectness or failure of the description of the Facility or the Undivided Interest or any part thereof or any rights or property in which an interest is intended to be granted or conveyed by this Head Lease, (e) the insolvency, bankruptcy, reorganization or similar proceedings by or against the Head Lessor, the Head Lessee or any other Person, (f) the failure by the Head Lessee to comply with Section 3, 5, 6 or 7 or any other provision hereof or of any other Operative Documents or (g) any other reason whatsoever, whether similar or dissimilar to any of the foregoing. The provisions of this Section 3.4 shall survive the termination of this Head Lease for any reason whatsoever. The obligations of the Head Lessor hereunder are covenants that are independent of the existence of such leasehold and shall survive the termination thereof for any reason whatsoever. Section 3.5. Termination Option. After the expiration or earlier termination of the Facility Lease Term, subject to the provision at the end of Section 3.1, the Head Lessee may terminate this Head Lease upon thirty days prior written notice to the Head Lessor; provided, however, that the Head Lessee shall simultaneously terminate the Ground Lease pursuant to Section 2.6 thereof. SECTION 4. RIGHT OF QUIET ENJOYMENT. The Head Lessor warrants that it has full right and authority to lease the Undivided Interest to the Head Lessee pursuant to the terms of this Head Lease and covenants that, notwithstanding any provision of any other Operative Documents, during the Head Lease Term, neither the Head Lessor, any Affiliate nor any other Person claiming title superior to, or by, through or under it (other than the obligees or any trustee under the Oglethorpe Mortgage) shall interfere with or interrupt the quiet enjoyment of the use, operation and possession by the Head Lessee of the Undivided Interest pursuant to the terms hereof; provided that the Head Lessor's covenant does not relate to actions of the Lender. 3 SECTION 5. RETURN OF UNDIVIDED INTEREST BY HEAD LESSEE. Subject to Section 9, hereof, on the last day of the Head Lease Term, the Head Lessee shall return the Undivided Interest by delivering its possession of the same to the Head Lessor at the location of the Facility in Floyd County, Georgia, and shall execute, acknowledge and deliver a release, surrender or conveyance of all of its rights, title and interests in the Undivided Interest to be prepared by and at the expense of the Head Lessor in a form reasonably satisfactory to the Head Lessee, in each case without representation or warranty other than that the Undivided Interest is free and clear of any Facility Lessor's Liens attributable to it and a warranty from the Owner Participant with respect to absence of Owner Participant's Liens and the Owner Trustee with respect to the absence of Facility Lessor's Liens attributable to it, without any other liability or cost to the Head Lessee. The obligations of the Head Lessee under this Section 5 shall survive termination of this Head Lease. SECTION 6. LIENS. Section 6.1. Head Lessee Covenant. Prior to the expiration or termination of the Facility Sublease, the Head Lessee agrees that it will not, directly or indirectly, create, incur, assume or suffer to exist, any Facility Lessor's Liens on or with respect to the Undivided Interest or the Facility Lessor's Rocky Mountain Interest, and the Head Lessee shall promptly notify the Head Lessor of the imposition of any such Lien of which the Head Lessee is aware and shall promptly, at its own expense, take such action as may be necessary to fully discharge or release any such Lien. Section 6.2. Head Lessor Covenant. The Head Lessor agrees that it will not, directly or indirectly, (i) create, incur, assume or suffer to exist any Lien on or with respect to the Undivided Interest other than Permitted Liens or (ii) assign, convey or otherwise transfer its interest in the Undivided Interest, and the Head Lessor shall promptly notify the Head Lessee of the imposition of any such Lien of which the Head Lessor is aware and shall promptly, at its own expense, take such action as may be necessary to fully discharge or release any such Lien. SECTION 7. OPERATION AND MAINTENANCE; REPLACEMENT COMPONENTS. Section 7.1. Operation and Maintenance. Prior to the end of the Facility Lease Term, the Head Lessee shall comply with the provisions of Section 7 of the Facility Lease (which provisions are incorporated herein, mutatis mutandis) as if such provisions applied to the Head Lessee; provided, however, by entering into the Facility Lease with the Facility Lessee, the Head Lessee shall be deemed to be in full compliance with the first sentence of this Section 7.1 whether or not the Facility Lessee complies or continues to comply with the terms of the Facility Lease. On and after the end of the Facility Lease Term, the Head Lessee, at its own expense, will maintain, repair and service, or cause to be maintained, repaired and serviced, the Undivided 4 Interest in accordance with Prudent Utility Practice for similar hydroelectric power plants; provided, however, that so long as the Operating Agency Agreement shall be in effect, the Head Lessee shall be deemed to have complied with the second sentence of this Section 7.1. Notwithstanding any provision contained in this Head Lease or in any other Operative Document, the Head Lessee has the right to perform any and all acts required by an order of the FERC or its successor affecting the Facility or the Rocky Mountain Site without the prior approval of the Head Lessor. Section 7.2. Replacement Components. An undivided interest equal to the Facility Lessor's Percentage in all Replacement Components incorporated in the Facility during the Head Lease Term in accordance with the Facility Lease, the Facility Sublease or the Rocky Mountain Operating Agreement shall automatically become subject to this Head Lease without any action by any Person whatsoever and shall be deemed to be a part of the Facility and the Undivided Interest for all purposes of this Head Lease. SECTION 8. MODIFICATIONS. An undivided interest equal to the Facility Lessor's Percentage in all Modifications to the Facility during the Head Lease Term in accordance with the Facility Lease, the Facility Sublease or the Rocky Mountain Operating Agreement shall automatically become subject to this Head Lease without any action by any Person whatsoever and shall be deemed to be a part of the Facility and the Undivided Interest for all purposes of this Head Lease. SECTION 9. TRANSFER OF UNDIVIDED INTEREST. The Head Lessor acknowledges that (x) the Head Lessee shall have the right to transfer and convey the Undivided Interest and any interest therein under and in accordance with Sections 10.2, 13.2, 14.4, 15.3, 17.1(c), 17.1(e) and 18 of the Facility Lease in connection with the Head Lessee's transfer thereunder of the Facility Lessor's Rocky Mountain Interest, and the Head Lessee and the Head Lessor agree to comply with the provisions of the applicable section of the Facility Lease in connection with such transfer to the extent required by the provisions of each such Section and (y) the Head Lessee's interest hereunder may be transferred to the Lender or any Affiliate of the Lender or any other Person who is the purchaser thereof in foreclosure, of the security title of the Deed to Secure Debt or the Lien of the Loan Agreement or by deed in lieu of any such foreclosure or after any such foreclosure or deed in lieu of foreclosure. The Head Lessor acknowledges that the Undivided Interest will be leased by the Facility Sublessor to the Facility Sublessee pursuant to the Facility Sublease and that the Facility Sublessor shall have the right to transfer and convey the Undivided Interest and any interest therein under and in accordance with Sections 10.2, 13.2, 14.3, 17.1(c), 17.1(e) or 18 of the Facility Sublease in connection with the Facility Sublessor's transfer thereunder of the Facility Sublessor's Rocky Mountain Interest. 5 SECTION 10. INSPECTION. During the Term of the Facility Lease, the rights of the Head Lessee, the Owner Participant, the Lender and their representatives to inspect the Facility and the Rocky Mountain Site shall be governed by Section 12 of the Facility Lease and the Head Lessor agrees to give to each such party the same inspection rights as are provided to the parties referred to in Section 12 of the Facility Lease. SECTION 11. HEAD LESSOR EVENT OF DEFAULT; REMEDIES. Section 11.1. Head Lessor Event of Default. Each of the following events (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court, or rule or regulation of any administrative or governmental body) shall constitute a Head Lessor Event of Default: (a) the principal and interest on any of the Oglethorpe Mortgage Bonds shall have been declared to be immediately due and payable; (b) the obligees or any trustee under the Oglethorpe Mortgage shall have (x) given the notice contemplated by Section 1(b) or Section 4 of the Intercreditor Agreement of, or shall have commenced or taken action to, foreclosure or otherwise to dispossess Oglethorpe or the Head Lessee from the Facility or otherwise effect an action referred to in Section 4 of the Intercreditor Agreement or (y) exercised any dispossessing remedy pursuant to the remedy provisions of the Oglethorpe Mortgage or pursuant to Applicable Law; (c) the mortgagees or trustee under the Oglethorpe Mortgage shall commence a foreclosure action under the relevant remedy provisions following an "event of default" under the Oglethorpe Mortgage or accept or agree to accept a deed in lieu of foreclosure of the Oglethorpe Mortgage; (d) the Undivided Interest, the Rocky Mountain Site and the Rocky Mountain Agreements shall not be returned to the Head Lessee free and clear of all Liens other than Liens permitted by paragraph (d) of Section 5.2 of the Facility Sublease as required by the Facility Lease; (e) the Head Lessor shall (i) commence a voluntary case or other proceeding seeking relief under Title 11 of the Bankruptcy Code or liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or apply for or consent to the appointment of a 6 trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or (ii) consent to, or fail to controvert in a timely manner, any such relief or the appointment of or taking possession by any such official in any voluntary bankruptcy case or other proceeding commenced against it, or (iii) file an answer admitting the material allegations of a petition filed against it in any such proceeding or (iv) fail to pay its debts generally as they become due or admit its inability to do so, or take any corporate steps with respect to any of the foregoing; (f) an involuntary case or other proceeding shall be commenced against the Head Lessor seeking (i) liquidation, reorganization or other relief with respect to it or its debts under Title 11 of the Bankruptcy Code or any bankruptcy, insolvency or other similar law now or hereafter in effect, or (ii) the appointment of a trustee, receiver, liquidator, custodian or other similar official with respect to it or any substantial part of its property, or (iii) the winding-up or liquidation of the Head Lessor; and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; (g) any other material breach by the Head Lessor of its obligations under Section 4 hereof or Section 4 of the Ground Lease and, if capable of remedy, no action to cure has commenced within 30 days after notice to the Head Lessor by the Head Lessee or, if such action has been taken and the Head Lessor is diligently pursuing such cure, such action has not succeeded within a period of 120 days after such notice; (h) the Head Lessor shall fail to comply with Section 8.5, 8.7 (as it relates to a Qualifying Letter of Credit provided in substitution for a Qualifying Head Lease Surety Bond), 8.8, 8.16 or 16.2 of the Participation Agreement and the Owner Participant shall have given written notice to the Head Lessor declaring a Head Lessor Event of Default under this paragraph (h); (i) the Head Lease, the Ground Lease or the Rocky Mountain Agreements Assignment and Assumption Agreement shall cease to be valid and enforceable obligations of the Head Lessor; (j) the FERC License is not renewed for a term of at least 17 years from the Expiration Date; (k) the Qualifying Head Lease Surety Bond (or the Qualifying Letter of Credit in replacement thereof) or any Qualifying Additional Security securing the Head Lessor's obligations under this Head Lease shall cease to be the valid and enforceable obligations of the issuer thereof (whether or not such bond or letter of credit meets the requirements for a "Qualifying Head Lease Surety Bond", "Qualifying Letter of Credit" or "Qualifying Additional Security"); or 7 (l) the Head Lessor shall have failed to perform or observe its covenants set forth in Section 8.15 of the Participation Agreement, and, if capable of remedy, no action to cure is commenced within 30 days after notice, or, if such action has been taken and the Head Lessor is diligently pursuing such cure, such action has not succeeded within a period of 60 days after such notice. Section 11.2. Remedies for Head Lessor Event of Default. Upon the occurrence of any Head Lessor Event of Default, and so long as the same shall be continuing, this Head Lease shall automatically be deemed to be in default without the need for giving any notice (the giving of which is waived to the fullest extent permitted by Applicable Law); and at any time thereafter Head Lessee may, subject to the proviso set forth in paragraph (b) of this Section 11.2, exercise the following remedies: (a) Head Lessee may demand by written notice to Head Lessor specifying a Termination Date occurring not less than 10 days following such demand, that the Head Lessor pay to Head Lessee, and the Head Lessor shall pay to the Head Lessee, on the Termination Date specified in such notice, as liquidated damages for loss of bargain and not as a penalty, an amount equal to the Termination Value, computed as of the Termination Date specified in such notice; provided, however, that such amount shall be deemed paid and satisfied to the extent of (i) the amount, if any, of any proceeds received by the Head Lessee pursuant to the exercise of any remedies under the Facility Lease, including but not limited to proceeds received from the exercise of rights against the Qualifying Equity Funding Agreement, and (ii) the amount of any proceeds received by the Head Lessee pursuant to a Qualifying Head Lease Surety Bond; and provided, further that, if requested by the Head Lessor, the Head Lessee shall pursue its remedies under Section 17 of the Facility Lease prior to making any demand for liquidated damages pursuant to this Section 11.2 in excess of the Equity Exposure Amount. Upon payment of all amounts payable to the Head Lessee, the Lender and the Owner Participant under this Head Lease and the other Operative Documents by any Person (the "Assignment Amount"), the Head Lessee will assign all its rights in the Facility Lease and any unapplied security therefor (including, without limitation, the Facility Sublease, the Facility Sublease Assignment Agreement and the Qualifying Sublease Surety Bond) to the Head Lessor. Should amounts in excess of the Assignment Amount be received by the Lender, the Head Lessee or the Owner Participant, such amounts shall be returned to the entity that paid such excess amounts. The Head Lessor's obligation to pay all amounts payable under this Section 11.2 shall be absolute and unconditional under any and all circumstances and shall not be affected by any circumstance of any character, including, without limitation, (v) any setoff, counterclaim, recoupment, defense or other right which the Head Lessor may have against the Head Lessee or any other Person, (w) the invalidity or unenforceability or lack of due authorization or other infirmity of this Head Lease, whether or not due to any failure of the Head Lessee to comply with any Applicable Law, (x) any legal requirement similar or dissimilar to the foregoing, any present or future law to the contrary notwithstanding, (y) any insolvency, bankruptcy, reorganization or similar 211229.1 8 proceeding by or against the Head Lessor or any other Person or any foreclosure or action taken by the Mortgagees under or in connection with the Oglethorpe Mortgage, or (z) the Head Lessor or any other Person at any time having immunity from suit, prejudgment attachment, attachment in aid of execution or execution on the grounds of sovereignty or otherwise; or (b) the Head Lessee may exercise any other right or remedy that may be available to it under Applicable Law or proceed by appropriate court action to enforce the terms of the Head Lease; provided, however, that the liquidated damage amount specified in subparagraph (a) of this Section, together with all other amounts due hereunder and under any of the other Operative Documents, shall be the sole and exclusive money damages remedy to Head Lessee for a Head Lessor Event of Default; provided, however, that notwithstanding any of the above, this Head Lease shall not be terminated unless and until the Loan has been paid in full and the security title and interest of the Lender under the Deed to Secure Debt and the Lien of the Loan Agreement shall have been finally discharged. The Head Lessor will upon demand pay to the Head Lessee the amount of any and all reasonable costs and expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which the Head Lessee may incur in connection with the exercise or enforcement of any of the rights of the Head Lessee under this Section 11. The Provisions of this Section 11.2 shall survive the termination of this Head Lease for any reason whatsoever and the termination or cancellation of the Head Lessee's leasehold estate in the Undivided Interest, for any reason whatsoever. SECTION 12. WAIVER OF PARTITION. The Head Lessee, on its own behalf and on behalf of its successors and assigns, hereby waives any right, whether pursuant to statute or common law, to partition the Facility, or any interest or portion thereof, and such waiver will continue in effect until the termination of the Rocky Mountain Ownership Agreement and Rocky Mountain Operating Agreement in accordance with their terms. Until the termination of such Agreements the Head Lessee agrees not to commence any action of any kind seeking any form of partition with respect thereto. SECTION 13. SECURITY FOR THE HEAD LESSEE'S OBLIGATION TO THE LENDER. In order to secure the Secured Indebtedness, the Trustees will by the Loan Agreement assign and grant a Lien, and by the Deed to Secure Debt convey security title, to the Lender in and to all of the Trustees' rights, title and interest in, to and under this Head Lease, the Facility Lessor's Rocky Mountain Interest including the Undivided Interest, other than Excepted Payments 9 and Excepted Rights. The Head Lessor hereby consents to such assignment and to the creation of such Lien and security title and acknowledges receipt of copies of the Loan Agreement and the Deed to Secure Debt, it being understood that such consent shall not affect any requirement or the absence of any requirement for any consent under any other circumstances. TO THE EXTENT, IF ANY, THAT THIS HEAD LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS HEAD LEASE MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN THE ORIGINAL COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE LENDER ON THE SIGNATURE PAGE THEREOF. Unless and until the Head Lessor shall have received written notice from the Lender that the Lien of the Loan Agreement and the security title of the Deed to Secure Debt have been fully released, the Lender shall have the right to exercise the rights of the Head Lessee under this Head Lease to the extent set forth in and subject in each case to the exceptions set forth in the Loan Agreement or the Deed to Secure Debt. SECTION 14. NONMERGER. The reversionary interest of the Head Lessor in the Undivided Interest shall not merge into any interest in the Undivided Interest leased by, through or under, this Head Lease even if such reversionary interest and such leased interest are at any time vested in or held directly or indirectly by the same Person, but this Head Lease shall nonetheless remain in full force and effect in accordance with its respective terms notwithstanding such vesting or holding. SECTION 15. APPLICATION OF PAYMENTS FROM GOVERNMENTAL ENTITY. Subject to the provisions of the Oglethorpe Mortgage, any payments received at any time by the Head Lessor or by the Head Lessee from any Governmental Entity with respect to an Event of Loss shall be paid over to the Head Lessor or the Head Lessee, or retained by the Head Lessor and the Head Lessee, as their respective interests may appear. Any payments received at any time during or with respect to the Head Lease Term by the Head Lessor or by the Head Lessee from any Governmental Entity with respect to the seizure, expropriation, condemnation or requisition of the use of, or title to, the Undivided Interest not constituting an Event of Loss shall be paid over to, or retained by, the Head Lessee. 10 SECTION 16. INSURANCE. Each of the Head Lessor and the Head Lessee shall have the right to carry insurance on the Undivided Interest for their own benefit. Upon the termination of the Facility Lease or any Replacement Facility Lease, if any, at the request of the Head Lessee, the Head Lessor shall, at the Head Lessee's sole cost and expense, carry insurance for the benefit of the Head Lessee in the same amounts and with the same coverage as the Facility Lessee is required to carry pursuant to the terms of the Facility Lease. SECTION 17. MISCELLANEOUS. Section 17.1. Amendments and Waivers. No term, covenant, agreement or condition of this Head Lease may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto. Section 17.2. Notices. Unless otherwise expressly specified or permitted by the terms of this Head Lease, all communications and notices provided for herein to a party hereto shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight or next business day mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to such party and copy party at its address set forth below or at such other address as such party or copy party may from time to time designate by written notice to the other parties: If to the Head Lessor: Oglethorpe Power Corporation 2100 East Exchange Place Tucker, Georgia 30085 Facsimile No.: (770) 270-7325 Telephone No.: (770) 270-7942 Attention: Vice President - Finance 11 with copy to the Lender: Utrecht-America Finance Co., c/o Rabobank Nederland, New York Branch 245 Park Avenue New York, New York 10167-0062 Facsimile No.: (212) 916-7880 Telephone No.: (212) 916-7864 Attention: General Counsel's Office If to the Head Lessee: SunTrust Bank, Atlanta P.O. Box 4625 Mail Code 008 Atlanta, Georgia 30302 Facsimile No.: (404) 332-3966 Telephone No.: (404) 588-7813 Attention: Corporate Trust Department with copies to the Owner Trustee: Fleet National Bank 777 Main Street Hartford, Connecticut 06115 Facsimile No.: (860) 986-7920 Telephone No.: (860) 986-4540 Attention: Corporate Trust Administration 12 to the Owner Participant: Philip Morris Capital Corporation 800 Westchester Avenue Rye Brook, New York 10573-1301 Facsimile No.: 914-335-1297 Telephone No.: 914-335-5000 Attention: Vice President, Leasing with a copy to Director, Portfolio Administration and to the Lender: Utrecht-America Finance Co., c/o Rabobank Nederland, New York Branch 245 Park Avenue New York, New York 10167-0062 Facsimile No.: (212) 916-7880 Telephone No.: (212) 916-7864 Attention: General Counsel's Office Section 17.3. Survival. Except as expressly set forth herein, the warranties and covenants made by each party hereto shall survive the expiration or termination of this Head Lease. Section 17.4. Successors and Assigns. (a) This Head Lease shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns as permitted by and in accordance with the terms hereof. (b) The Head Lessor hereby consents to the entry by the Head Lessee into, and the performance by the Head Lessee of, the Operative Documents, including any assignment by the Head Lessee pursuant thereto. Except as expressly provided herein or in any other Operative Document, the Head Lessor may not assign or transfer any of its interests herein or in its residual ownership interest in the Undivided Interest without the prior written consent of the Head Lessee. Except as expressly provided herein or in any of the other Operative Documents, the Head Lessee may not assign its interests herein prior to the expiration or early termination of the Facility Lease Term without the prior written consent of the Head Lessor. (c) This Head Lease conveys a leasehold estate and not a usufruct. 13 Section 17.5. Business Day. Notwithstanding anything herein to the contrary, if the date on which any payment or performance is to be made pursuant to this Head Lease is not a Business Day, the payment otherwise payable on such date shall be payable on the next succeeding Business Day with the same force and effect as if made on such scheduled date and (provided such payment is made on such succeeding Business Day) no interest shall accrue on the amount of such payment from and after such scheduled date to the time of such payment on the next succeeding Business Day. Section 17.6. Governing Law. This Head Lease shall be in all respects governed by and construed in accordance with the laws of the State of New York including all matters of construction, validity and performance except to the extent the law of the State of Georgia is mandatorily applicable. Section 17.7. Severability. If any provision hereof shall be invalid, illegal or unenforceable under Applicable Law, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. Section 17.8. Counterparts. This Head Lease may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. Section 17.9. Headings and Table of Contents. The headings of the sections of this Head Lease and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. Section 17.10. Further Assurances. Each party hereto will promptly and duly execute and deliver such further documents to make such further assurances for and take such further action reasonably requested by the other party hereto, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Head Lease. Section 17.11. Effectiveness of Head Lease. This Head Lease has been dated as of the date first above written for convenience only. This Head Lease shall be effective on the date of execution and delivery by the Head Lessor and the Head Lessee. Section 17.12. Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Head Lease is executed and delivered by SunTrust Bank, Atlanta, not individually or personally but solely as Co-Trustee under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the Co-Trustee is made and intended not as personal representations, undertakings and agreements by SunTrust Bank, Atlanta but is made and intended for the purpose for binding only the Co-Trustee, (c) nothing herein contained shall be construed as creating any liability on SunTrust Bank Atlanta, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly 14 waived by the parties hereto or by any Person claiming by, through or under the parties hereto and (d) under no circumstances shall SunTrust Bank, Atlanta be personally liable for the payment of any indebtedness or expenses of the Co-Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Co-Trustee under this Head Lease. In addition, each of the parties hereto acknowledges and agrees that the Co-Trustee has been appointed by the Owner Participant and Owner Trustee for the purpose of exercising those trust powers in the State of Georgia which may not be exercised by the Owner Trustee under applicable law, and that, except as otherwise required by applicable law, the Co-Trustee shall not be obligated to take any action hereunder unless expressly directed in writing by the Owner Trustee or the Owner Participant in accordance with the terms of the Trust Agreement. Section 17.13. Measuring Life. If and to the extent that any of the rights and privileges granted under this Head Lease, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule or law relating to the vesting of interests in property or the suspension of the power of alienation of property, then it is agreed that notwithstanding any other provision of this Head Lease, such options, rights and privileges, subject to the respective conditions hereof governing the exercise of such options, rights and privileges, will be exercisable only during (a) the longer of (i) a period which will end twenty-one (21) years after the death of the last survivor of the descendants living on the date of the execution of this Head Lease of the following Presidents of the United States: Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George H.W. Bush, and William J. Clinton or (ii) the period provided under the Uniform Statutory Rule Against Perpetuities or (b) the specific applicable period of time expressed in this Head Lease, whichever of (a) and (b) is shorter. 15 IN WITNESS WHEREOF, the Head Lessor and the Head Lessee have caused this Head Lease to be duly executed and delivered by their respective officers thereunto duly authorized. OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATING & TRANSMISSION CORPORATION), Head Lessor By: /s/ T. D. Kilgore ------------------------ Name: T.D. Kilgore Title: President and Chief Executive Officer Date: December 30, 1996 (CORPORATE SEAL) Attest: /s/ Gary M. Bullock -------------------- Name: Gary M. Bullock Title: Secretary - Treasurer Date: Signed and delivered in the presence of: /s/ Leonard Scott - ----------------- Unofficial Witness /s/ David M. Boehm - ------------------ Notary Public My Commission Expires:March 16, 1998 [Notary Seal] SUNTRUST BANK, ATLANTA, not in its individual capacity, but solely as Co-Trustee under the Trust Agreement, as Head Lessee By: /s/ Bryan Echols ---------------------- Name: Bryan Echols Title: Vice President Date: 12/30/96 By: /s/ Sandra Thompson ---------------------- Name: Sandra Thompson Title: Vice President Date: 12/30/96 Signed and delivered in the presence of: /s/ E. M. Shadru - ---------------- Unofficial Witness /s/ David M. Boehm - ------------------ Notary Public My Commission Expires:March 16, 1998 [Notary Seal] CERTAIN OF THE RIGHT, TITLE AND INTEREST OF THE HEAD LESSEE IN AND TO THIS HEAD LEASE HAVE BEEN ASSIGNED TO AND ARE SUBJECT TO A FIRST PRIORITY SECURITY INTEREST IN FAVOR OF THE UNDERSIGNED, AS LENDER, UNDER THE LOAN AGREEMENT AND THE DEED TO SECURE DEBT EACH DATED AS OF DECEMBER 30, 1996. THIS AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE ORIGINAL COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY THE UNDERSIGNED, ON THE SIGNATURE PAGES THEREOF. SEE SECTION 13 HEREOF FOR INFORMATION CONCERNING THE RIGHTS OF THE HOLDERS OF THE VARIOUS COUNTERPARTS THEREOF. Receipt of this original counterpart of this Head Lease is hereby acknowledged on this ___ day of December, 1996. UTRECHT-AMERICA FINANCE CO. By: ____________________________ Name: Title: Date: By: ____________________________ Name: Title: Date: SCHEDULE TO EXHIBIT 10.32.2 HEAD LEASE AGREEMENT (P1) The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant --------- ----- ----------------- P1 December 30, 1996 Philip Morris Capital Corporation P2 January 3, 1997 Philip Morris Capital Corporation F3 December 30, 1996 First Chicago Leasing Corporation F4 December 30, 1996 First Chicago Leasing Corporation N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation Other than Appendix A, the Exhibits and Schedules to the Head Lease Agreement (P1) are not filed herewith; however, the registrant hereby agrees that such Exhibits and Schedules will be provided to the Commission upon request. Appendix A Definitions Refer to Appendix A to Exhibit 10.32.1 to the Form 10-K. A-1 EX-10.32-3 20 EXHIBIT 10.32.3 EXHIBIT 10.32.3 This instrument, when recorded, should be returned to: Robert N. Farrar Attorney at Law The Carnegie Building 607 Broad Street, Suite 141 Rome, Georgia 30161-3059 ================================================================================ GROUND LEASE AGREEMENT (P1) Dated as of December 30, 1996 between OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), as Ground Lessor and SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee, as Ground Lessee Land Located in Floyd County, Georgia ================================================================================ TABLE OF CONTENTS Page ---- SECTION 1. DEFINITIONS..................................................... 2 SECTION 2. LEASE OF GROUND INTEREST........................................ 2 Section 2.1. Lease of Ground Interest........................... 2 Section 2.2. Basic Ground Lease Term............................ 2 Section 2.3. Renewal Ground Lease Term.......................... 2 Section 2.4. Return of Ground Interest.......................... 3 Section 2.5. Nonterminability................................... 3 Section 2.6. Termination Option................................. 3 SECTION 3. RENT FOR THE LEASE OF THE GROUND INTEREST....................... 4 Section 3.1. Annual Rent........................................ 4 Section 3.2. Taxes and Assessments.............................. 4 SECTION 4. QUIET ENJOYMENT IN FAVOR OF THE GROUND LESSEE................... 4 Section 4.1. Right of Quiet Enjoyment........................... 4 Section 4.2. Ground Lessor's Release Rights..................... 5 SECTION 5. USE OF THE GROUND INTEREST BY GROUND LESSEE..................... 5 SECTION 6. TRANSFER OF GROUND INTEREST..................................... 6 SECTION 7. LIENS........................................................... 7 SECTION 8. WAIVER OF PARTITION............................................. 7 SECTION 9. SECURITY FOR GROUND LESSEE'S OBLIGATION TO THE LENDER.......................................................... 7 SECTION 10. NONMERGER....................................................... 8 SECTION 11. APPLICATION OF PAYMENTS FROM GOVERNMENTAL ENTITY.......................................................... 8 SECTION 12. MISCELLANEOUS................................................... 8 Section 12.1. Amendments and Waivers............................ 8 Section 12.2. Notices........................................... 8 Section 12.3. Survival......................................... 10 Section 12.4. Successors and Assigns........................... 10 Section 12.5. Business Day..................................... 10 Section 12.6. Governing Law.................................... 10 Section 12.7. Severability..................................... 10 Section 12.8. Counterparts..................................... 10 Section 12.9. Headings and Table of Contents................... 10 Section 12.10. Further Assurances............................... 10 Section 12.11. Effectiveness of Ground Lease.................... 11 Section 12.12. Limitation of Liability.......................... 11 Section 12.13. Measuring Life................................... 11 LIST OF ATTACHMENTS: Appendix A - Definitions Schedule 1 - Description of the Rocky Mountain Site Facility Description Schedule Exhibit A-2 - Project Boundary Drawing Exhibit A-3 - Powertunnel and Powerhouse General Plan and Profile of the Rocky Mountain Project No. RM-00-CL-0013 R1 Exhibit A-4 - Description of Equipment ii GROUND LEASE AGREEMENT (P1) This GROUND LEASE AGREEMENT (P1), dated as of December 30, 1996 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof, this "Ground Lease"), between OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized under the laws of the State of Georgia (together with its successors and permitted assigns, the "Ground Lessor"), and SUNTRUST BANK, ATLANTA, a state banking corporation organized under the laws of the State of Georgia, not in its individual capacity but solely as Co-Trustee under the Trust Agreement (P1), dated as of December 30, 1996, with the Owner Trustee and Philip Morris Capital Corporation (together with its successors and permitted assigns, the "Ground Lessee"). WHEREAS, The Ground Lessor and Georgia Power Company, a corporation organized under the laws of the State of Georgia (together with its successors and assigns, "Georgia Power"); own the Rocky Mountain Site as tenants-in-common under the laws of the State of Georgia; WHEREAS, the Rocky Mountain Site is more particularly described in Schedule 1 hereto, such Schedule 1 being attached to this Ground Lease as part hereof; WHEREAS, by the Rocky Mountain Agreements, the Ground Lessor and Georgia Power established their respective rights and obligations as tenants-in-common of the Rocky Mountain Site and of all improvements thereafter to be constructed, and all personal property thereafter to be situated, on the Rocky Mountain Site. Such improvements and personal property owned by the Ground Lessor and Georgia Power as tenants-in-common under Georgia law include the Facility; WHEREAS, as tenants-in-common of such real and personal property, the Ground Lessor and Georgia Power hold a 74.61% and 25.39% undivided interest, respectively, in such real and personal property, including the right to nonexclusive possession of all such real and personal property, subject to the rights of the other to nonexclusive possession and the terms and conditions of the Rocky Mountain Agreements; WHEREAS, pursuant to the Head Lease, the Co-Trustee has acquired from the Ground Lessor, as Head Lessor, a leasehold interest in the Undivided Interest in the Facility for a term equal to approximately 120% of the estimated useful life of the Facility, subject to extension as provided therein; and WHEREAS, pursuant to this Ground Lease, the Ground Lessor is leasing the Ground Interest to the Ground Lessee for a term equal to approximately 120% of the estimated useful life of the Facility, subject to extension as provided herein. NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS. Capitalized terms used in this Ground Lease, including the recitals, and not otherwise defined herein shall have the respective meanings set forth in Appendix A hereto unless the context hereof shall otherwise require. The general provisions of Appendix A shall apply to terms used in this Ground Lease and specifically defined herein. SECTION 2. LEASE OF GROUND INTEREST. Section 2.1. Lease of Ground Interest. The Ground Lessor hereby leases the Ground Interest, upon the terms and conditions set forth herein, to the Ground Lessee for the term and renewal terms described below, and the Ground Lessee hereby leases the Ground Interest from the Ground Lessor. The Ground Lessor and the Ground Lessee understand and agree that (a) this lease of the Ground Interest is subject to the limitations identified in the definition of Ground Interest, (b) legal title to the Rocky Mountain Site remains vested in the Ground Lessor and Georgia Power as tenants-in-common, (c) this lease of the Ground Interest is subject and subordinate to the lien of the Oglethorpe Mortgage and the encumbrances described in the Title Report, and (d) this Ground Lease is subject to the provisions of the Resource Management Agreement. Section 2.2. Basic Ground Lease Term. The term of this Ground Lease shall commence on the Closing Date and shall terminate at 11:59 p.m. (New York City time) on November 1, 2067 (the "Basic Ground Lease Term") subject to earlier termination pursuant to the express terms hereof and extension for any number of Renewal Ground Lease Terms; provided, however, that notwithstanding anything to the contrary set forth herein, in no event shall the Basic Ground Lease Term terminate so long as the Ground Lessee's interest under this Ground Lease shall be subject to the Lien of the Loan Agreement or the security title of the Deed to Secure Debt. Section 2.3. Renewal Ground Lease Term. At the expiration of the Basic Ground Lease Term or any Renewal Ground Lease Term (as hereinafter defined), the Ground Lessee may extend this Ground Lease for any additional term or number of additional terms of not less than one year (each, a "Renewal Ground Lease Term" and, together with the Basic Ground Lease Term, the "Ground Lease Term"); provided that, the Ground Lessee shall be permitted to renew the term of this Ground Lease for a Renewal Ground Lease Term only if concurrently with such renewal, the Head Lease is renewed for a Head Lease Renewal Term equal to the Renewal Ground Lease Term; provided further however upon extension of the Head Lease pursuant to Section 3.2 2 thereof, this Ground Lease shall be automatically extended for a Renewal Ground Lease Term equal to the Head Lease Renewal Term for which the Head Lease is so extended. Section 2.4. Return of Ground Interest. Subject to Section 6 hereof, on the last day of the Ground Lease Term, the Ground Lessee shall return the Ground Interest to the Ground Lessor by returning the same unto the possession of the Ground Lessor without representation or warranty other than that the Ground Interest is free and clear of all Facility Lessor's Liens and a warranty by the Owner Participant as to the absence of any Owner Participant's Liens without any other liability or cost to the Ground Lessee. Upon returning the Ground Interest, the Ground Lessee shall execute, acknowledge and deliver a release of the Ground Interest, to be prepared by the Ground Lessor at its expense and in a form reasonably satisfactory to the Ground Lessee to be duly recorded at the Ground Lessor's expense in the Office of the Clerk of the Superior Court of Floyd County, Georgia. The obligations of the Ground Lessee under this Section 2.4 shall survive the termination of this Ground Lease. Section 2.5. Nonterminability. Subject to Sections 2.2 and 2.6 hereof, notwithstanding anything herein or otherwise to the contrary, neither the rights of the Ground Lessee nor the obligations of the Ground Lessor under this Ground Lease shall be terminated, extinguished, diminished, lost or otherwise impaired by any circumstance of any character or for any reason whatsoever, whether or not the same involves the loss of all or any part of the leasehold estate granted by this Ground Lease, including without limitation any of the following circumstances or reasons: (a) any damage to or loss or destruction of all or any part of the Facility for any reason whatsoever and of whatever duration, (b) the condemnation, requisition (by eminent domain or otherwise), seizure or other taking of title or use of all or any part of the Facility by any Governmental Entity or otherwise, (c) any prohibition, limitation or restriction on the use by any Person of all or any part of its property or the interference with such use by any Person, or any foreclosure or deed in lieu of foreclosure of the Oglethorpe Mortgage, or any termination of the leasehold estate granted by this Ground Lease as a result thereof by operation of law or contract, or any eviction by paramount title or otherwise, (d) any inadequacy, incorrectness or failure of the description of the Rocky Mountain Site or the Ground Interest or any part thereof or any rights or property in which an interest is intended to be granted or conveyed by this Ground Lease, the Ground Sublease or the Ground Sub-sublease, (e) the insolvency, bankruptcy, reorganization or similar proceedings by or against the Ground Lessor, the Ground Lessee or any other Person, (f) the failure by the Ground Lessee to comply with Section 2.4, 3 or 5 or any other provision hereof or of any other Operative Document, or (g) any other reason whatsoever, whether similar or dissimilar to any of the foregoing. The provisions of this Section 2.5 shall survive the termination of this Lease for any reason whatsoever. The obligations of the Ground Lessor under this Section 2.5 are covenants that are independent of the existence of such leasehold and shall survive the termination thereof for any reason whatsoever. Section 2.6. Termination Option. After the expiration or earlier termination of the Ground Sublease Term, subject to the proviso at the end of Section 2.2 hereof, the Ground Lessee may terminate this Ground Lease upon thirty days prior written notice to the Ground Lessor; 3 provided, however, that this Ground Lease shall simultaneously terminate upon the expiration or earlier termination of the Head Lease pursuant to Section 3.5 thereof. SECTION 3. RENT FOR THE LEASE OF THE GROUND INTEREST. Section 3.1. Annual Rent. As rent for the Ground Interest, the Ground Lessee agrees to pay to the Ground Lessor, for the period commencing on the Closing Date and ending on the Expiration Date, annual rent of $120,273 per year, in advance on July 1 of each year during the Ground Lease Term; provided that the first payment of rent shall be payable on the Closing Date and shall be prorated from the beginning of the Ground Lease Term to July 1, 1997. Notwithstanding the foregoing, so long as Oglethorpe is the Ground Sub-sublessee under the Ground Sub-sublease, the Ground Lessee shall not be required to pay such rent hereunder. For the period from and after the Expiration Date to the end of the Ground Lease Term the Ground Lessee agrees to pay to the Ground Lessor annual rent equal to the annual Fair Market Rental Value of the Ground Interest without regard to the existence of the Facility on the Rocky Mountain Site on a net-lease basis. Such Fair Market Rental Value shall be determined by July 1, 2027 and each fifth (5th) anniversary thereof through the remaining Ground Lease Term by agreement of the parties or, if they shall fail to agree, by the Appraisal Procedure, the costs of which shall be paid by the Ground Lessor. Such annual rent shall be payable semi-annually in arrears on January 1 and each July 1 and thereafter during the Ground Lease Term (apportioned for the number of days then elapsed since the last prior payment), except that if any date for payment falls on a day other than a Business Day, such date for payment shall be extended to the next succeeding Business Day. Section 3.2. Taxes and Assessments. From and after the expiration or termination of the Ground Sublease Term and until the expiration of the Ground Lease Term or surrender of the Ground Interest to the Ground Lessor pursuant to Section 6, the Ground Lessee agrees to pay to the Ground Lessor an amount equal to the Facility Lessor's Percentage of all Taxes and assessments, general or special, taxed, charged, levied, assessed or imposed upon the Rocky Mountain Site (it being understood that the Ground Lessee shall not be responsible for any income taxes imposed against the Ground Lessor for the rent hereunder; or for any sales, use, excise or similar taxes payable by the Ground Lessor; or any corporate franchise or doing business tax or similar tax or fee payable by the Ground Lessor). Such payment shall be due upon demand by the Ground Lessor, but in no event shall such amounts be due prior to the date such Taxes and assessments are due and payable to a taxing or assessing Governmental Entity. SECTION 4. QUIET ENJOYMENT IN FAVOR OF THE GROUND LESSEE. Section 4.1. Right of Quiet Enjoyment. The Ground Lessor warrants that it has full right and authority to lease the Ground Interest to the Ground Lessee pursuant to the terms of this Ground Lease and covenants that, notwithstanding any provision of any other Operative 4 Document, during the Ground Lease Term, neither the Ground Lessor nor any Affiliate nor any other Person claiming title superior to or by, through or under the Ground Lessor (other than the obligees or any trustee under the Oglethorpe Mortgage) shall interfere with or interrupt the quiet enjoyment of the use, operation and possession by the Ground Lessee of the Ground Interest pursuant to the terms hereof. Section 4.2. Ground Lessor's Release Rights. Notwithstanding Section 4.1 or any other provisions in this Ground Lease to the contrary, the Ground Lessor shall have the right from time to time, without being deemed to breach the foregoing covenant of quiet enjoyment or any other provision of this Ground Lease, to (a) sell, grant or convey one or more portions of or interests of any kind or nature in one or more portions of the Rocky Mountain Site, (b) grant, create or release one or more rights of way and easements over or in respect of any portions of the Rocky Mountain Site and (c) lease or convey one or more leasehold interests in one or more portions of the Rocky Mountain Site to one or more lessees of leasehold interests (collectively the "Ground Lessor's Release Rights"); provided, however, that (i) each such sale, grant, release, lease or conveyance shall be in accordance with the Rocky Mountain Agreements and (ii) no such sale, grant, release, lease or conveyance shall impair the use or operation of, or the ability to maintain, improve or rebuild, the Facility as contemplated by the Rocky Mountain Agreements and the Operative Documents or reduce the value, utility or useful life of the Facility, impair the use of the Ground Interest as it is then used in connection with the Facility, impair in any manner the use of the Facility or cause the Facility to become "limited use" property or materially reduce the value, utility or useful life of the Rocky Mountain Site or materially impair the use of the Rocky Mountain Site; provided, further, any third party may conclusively, and without further act, inquiry or investigation, rely upon an Officer's Certificate of the Ground Lessor to the effect that any such sale, grant, release or conveyance complies with clause (ii) of this Section 4.2 without the necessity of any further inquiry, investigation or determination; and provided further that any property, interest, right of way, easement, or leasehold interest (the "Released Property") so sold, granted, released, leased or conveyed shall no longer be a part of the Ground Interest and shall automatically be deemed to be released from the effect of this Ground Lease and any Lien on the Ground Interest or otherwise under this Ground Lease, without the necessity of the execution, delivery or recording of any further instrument whatsoever. The Ground Lessee agrees that during the Ground Lease Term, the Ground Lessee will not (a) grant any security interest, leasehold mortgage or deed to secure debt, except as provided in Section 9 or in the other Operative Documents, or any other Lien, (b) sub-lease or assign this Ground Lease or (c) otherwise encumber, cause to be encumbered or convey all or part of the Ground Lessee's interest hereunder unless such grant, sub-lease, assignment, encumbrance or conveyance expressly provides that the Ground Lessee's interest under this Ground Lease is subject to the Ground Lessor's Release Rights set forth in this Section 4 and that any Released Property shall automatically be deemed to be released from the effect of any such Lien, grant, sub-lease, assignment, encumbrance or conveyance without the necessity of the execution, delivery or recording of any further instrument whatsoever. 5 SECTION 5. USE OF THE GROUND INTEREST BY GROUND LESSEE. The Ground Lessee's rights hereunder to use the Ground Interest shall be limited to the right of the Ground Lessee, as Head Lessee, to use the Ground Interest in connection with the use, operation and maintenance of the Facility in accordance with the terms and provisions of the Rocky Mountain Agreements and the FERC License and any renewal or extension thereof and the Head Lease, which shall include the right to construct, install, operate, use, repair and relocate and remove facilities and structures on or under the Rocky Mountain Site, including buildings, roads, paths, walkways, sanitary sewers, storm drains, water and gas mains, waste disposal systems, electric power lines, telephone, television and telecommunication lines, fire protection systems, safety sensor and monitoring systems, utility lines and systems, all as reasonably necessary or advisable for the commercial operation of the Facility. Notwithstanding any provision contained in this Ground Lease or in any Operative Document, the Ground Lessee has the right to perform any and all acts required by an order of the FERC or its successor affecting the Facility or the Rocky Mountain Site without the prior approval of the Ground Lessor or any other party to the Operative Documents. SECTION 6. TRANSFER OF GROUND INTEREST. The Ground Lessee agrees that, prior to the expiration of or earlier termination of the Facility Sublease Term, it will not transfer or convey the Ground Interest except as part of the Head Lessee's transfer of the Facility Lessor's Rocky Mountain Interest pursuant to the Operative Documents. The Ground Lessor acknowledges that (x) the Ground Lessee shall have the right to transfer and convey the Ground Interest or any interest therein as part of a transfer under and in accordance with Sections 10.2, 13.2, 14.4, 15.3, 17.1(c), 17.1(e) and 18 of the Facility Lease in connection with the Ground Lessee's transfer thereunder of the Facility Lessor's Rocky Mountain Interest and the Ground Lessee and the Ground Lessor agree to comply with the provisions of the applicable sections of the Facility Lease and the Head Lease in connection with such transfer to the extent required thereunder, and (y) the Ground Lessee's interest hereunder may be transferred together with the Head Lessee's interest under the Head Lease to the Lender or any Affiliate of the Lender or any other Person who is the purchaser thereof in foreclosure of the security title of the Deed to Secure Debt or the Lien of the Loan Agreement or by deed in lieu of any such foreclosure or after any such foreclosure or deed in lieu of foreclosure. The Ground Lessor acknowledges that the Ground Interest will be leased to the Ground Sub-sublessee pursuant to the Ground Sub-sublease and that the Ground Sub-sublessor shall have the right to transfer and convey the Ground Interest or any interest therein under and in accordance with Sections 10.2, 13.2, 14.3, 17.1(c), 17.1(e) and 18 of the Facility Sublease in connection with the Facility Sublessor's transfer thereunder of the Facility Sublessor's Rocky Mountain Interest, and the Ground Sub-sublessee shall have the right to sublease the Ground Interest to a person which is a sublessee of the Undivided Interest in accordance with Section 19 of the Facility Sublease. The Ground Lessee may convey and transfer the Ground Interest to a Replacement Facility Lessee which enters into a Replacement Facility Lease in accordance with Section 15.3 of the Facility 6 Lease for a term coterminous with such Replacement Facility Lease. Notwithstanding anything else contained herein, the Ground Lessee may convey and transfer the Ground Lessee's right, title and interest in the Ground Interest to (i) Georgia Power in connection with Georgia Power's exercise of its rights under Section 5.2 of the Georgia Power Consent or (ii) to any other Person following expiration or earlier termination of the Facility Lease Term. SECTION 7. LIENS. Section 7.1. Ground Lessee Covenant. Prior to the expiration or termination of the Facility Sublease Term, the Ground Lessee agrees that it will not, directly or indirectly, create, incur, assume or suffer to exist any Facility Lessor's Liens on or with respect to the Ground Interest or the Rocky Mountain Site other than the Lien of the Loan Agreement and the security title of the Deed to Secure Debt, and the Ground Lessee shall promptly notify the Ground Lessor of the imposition of any such Lien of which the Ground Lessee is aware and shall promptly, at its own expense, take such action as may be necessary to fully discharge or release any such Lien. Section 7.2. Ground Lessor Covenant. The Ground Lessor agrees that it will not directly or indirectly, (i) create, incur, assume or suffer to exist any Lien on or with respect to the Ground Interest other than Permitted Liens, or (ii) subject to the Ground Lessor's Release Rights, assign, convey or otherwise transfer its interest in the Ground Interest, and the Ground Lessor shall promptly notify the Ground Lessee of the imposition of any such Lien of which the Ground Lessor is aware and shall promptly, at its own expense, take such action as may be necessary to fully discharge or release any such Lien. SECTION 8. WAIVER OF PARTITION. As permitted by Applicable Law, the Ground Lessor, on its own behalf and on behalf of its successors and assigns, hereby waives any right, whether pursuant to statute or common law, to partition the Rocky Mountain Site or any interest or portion thereof, including the Ground Interest or any interest or portion thereof, and such waiver will continue in effect until the termination of the Rocky Mountain Ownership Agreement and Rocky Mountain Operating Agreement in accordance with their terms. The Ground Lessor agrees not to commence during such period any action of any kind seeking any form of partition with respect thereto. SECTION 9. SECURITY FOR GROUND LESSEE'S OBLIGATION TO THE LENDER. In order to secure the Secured Indebtedness, the Ground Lessee will by the Loan Agreement assign and grant a Lien, and by the Deed to Secure Debt grant security title to the Lender in and to all of the Ground Lessee's right, title and interest in, to and under this Ground Lease and the Ground Interest (other than Excepted Payments and Excepted Rights). The Ground 7 Lessor hereby consents to such assignment and creation of such Lien and security title and acknowledges receipt of copies of the Loan Agreement and the Deed to Secure Debt, it being understood that such consent shall not affect any requirement or the absence of any requirement for any consent under any other circumstances. Unless and until the Ground Lessor shall have received written notice from the Lender that the Lien of the Loan Agreement and the security title of the Deed to Secure Debt have been fully released, the Lender under the Loan Agreement and the security title of the Deed to Secure Debt shall have the rights of the Ground Lessee under this Ground Lease to the extent set forth in and subject in each case to the exceptions set forth in the Loan Agreement or the Deed to Secure Debt. SECTION 10. NONMERGER. The reversionary interest of the Head Lessor in the Rocky Mountain Site shall not merge into any interest in the Ground Interest conveyed by the Ground Lease even if such reversionary interest and such interest leased are at any time vested in or held directly or indirectly by the same Person, but this Ground Lease shall nonetheless remain in full force and effect in accordance with its terms notwithstanding such vesting or holding. SECTION 11. APPLICATION OF PAYMENTS FROM GOVERNMENTAL ENTITY. Subject to the provisions of the Oglethorpe Mortgage, any payments received at any time by the Ground Lessor or by the Ground Lessee from any Governmental Entity with respect to an Event of Loss shall be paid over to the Ground Lessor or the Ground Lessee, or retained by the Ground Lessor and the Ground Lessee, as their respective interests may appear. Any payments received at any time during or with respect to the Ground Lease Term by the Ground Lessor or by the Ground Lessee from any Governmental Entity with respect to the seizure, expropriation, condemnation or requisition of the use of, or title to, the Ground Interest not constituting an Event of Loss shall be paid over to, or retained by, the Ground Lessee. SECTION 12. MISCELLANEOUS. Section 12.1. Amendments and Waivers. No term, covenant, agreement or condition of this Ground Lease may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto. Section 12.2. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein to a party hereto shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight 8 mail or next business day mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clause (a) or (b) above, in each case addressed to such party and copy party at its address set forth below or at such other address as such party or copy party may from time to time designate by written notice to the other parties: If to the Ground Lessor: Oglethorpe Power Corporation 2100 East Exchange Place Tucker, Georgia 30085-1349 Facsimile No.: (770) 270-7325 Telephone No.: (770) 270-7920 Attention: Vice President - Finance If to the Ground Lessee: SunTrust Bank, Atlanta P.O. Box 4625 Mail Code 008 Atlanta, Georgia 30302 Facsimile No.: (404) 332-3966 Telephone No.: (404) 588-7813 Attention: Corporate Trust Department with copies to the Lender: Utrecht-America Finance Co., c/o Rabobank Nederland, New York Branch 245 Park Avenue New York, New York 10167-0062 Facsimile No.: (212) 916-7880 Telephone No.: (212) 916-7864 Attention: General Counsel's Office and to the Owner Trustee: 9 Fleet National Bank 777 Main Street Hartford, Connecticut 06115 Facsimile No.: (860) 986-7920 Telephone No.: (860) 986-4540 Attention: Corporate Trust Administration Section 12.3. Survival. Except as expressly set forth herein, the warranties and covenants made by each party hereto shall not survive the expiration or termination of this Ground Lease. Section 12.4. Successors and Assigns. (a) The Ground Lessor hereby consents to the entry by the Ground Lessee into and performance by the Ground Lessee of the Operative Documents, including any assignment pursuant thereto. This Ground Lease shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns as permitted by and in accordance with the terms hereof. (b) Except as expressly provided herein or in the other Operative Documents, the Ground Lessor may not assign or transfer any of its interests herein without the consent of the other party hereto. (c) This Ground Lease conveys a leasehold estate and not a usufruct. Section 12.5. Business Day. Notwithstanding anything herein to the contrary, if the date on which any payment or performance is to be made pursuant to this Ground Lease is not a Business Day, the payment otherwise payable on such date shall be payable on the next succeeding Business Day with the same force and effect as if made on such scheduled date and (provided such payment is made on such succeeding Business Day) no interest shall accrue on the amount of such payment from and after such scheduled date to the time of such payment on such next succeeding Business Day. Section 12.6. Governing Law. This Ground Lease shall be in all respects governed by and construed in accordance with the laws of the State of New York including all matters of construction, validity and performance except to the extent the law of the State of Georgia is mandatorily applicable. Section 12.7. Severability. If any provision hereof shall be invalid, illegal or unenforceable under Applicable Law, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. 10 Section 12.8. Counterparts. This Ground Lease may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one instrument. Section 12.9. Headings and Table of Contents. The headings of the sections of this Ground Lease and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. Section 12.10. Further Assurances. Each party hereto will promptly and duly execute and deliver such further documents to make such further assurances for and take such further action reasonably requested by any party to whom such first party is obligated, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Ground Lease. Section 12.11. Effectiveness of Ground Lease. This Ground Lease has been dated as of the date first above written for convenience only. This Ground Lease shall be effective on the date of execution and delivery by the Ground Lessee and the Ground Lessor. Section 12.12. Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Ground Lease is executed and delivered by SunTrust Bank, Atlanta, not individually or personally but solely as Co-Trustee under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the Co-Trustee is made and intended not as personal representations, undertakings and agreements by SunTrust Bank, Atlanta, but is made and intended for the purpose for binding only the Co-Trustee, (c) nothing herein contained shall be construed as creating any liability on SunTrust Bank, Atlanta, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the Ground Lessor or by any Person claiming by, through or under the Ground Lessor and (d) under no circumstances shall SunTrust Bank, Atlanta be personally liable for the payment of any indebtedness or expenses of the Co-Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Co-Trustee under this Ground Lease. In addition, each of the parties hereto acknowledges and agrees that the Co-Trustee has been appointed by the Owner Participant and Owner Trustee for the purpose of exercising those trust powers in the State of Georgia which may not be exercised by the Owner Trustee under applicable law, and that, except as otherwise required by applicable law, the Co-Trustee shall not be obligated to take any action hereunder unless expressly directed in writing by the Owner Trustee or the Owner Participant in accordance with the terms of the Trust Agreement. Section 12.13. Measuring Life. If and to the extent that any of the rights and privileges granted under this Ground Lease, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule or law relating to the vesting of interests in property or the suspension of the power of alienation of property, then it is agreed that notwithstanding any other provision of this Ground 11 Lease, such options, rights and privileges, subject to the respective conditions hereof governing the exercise of such options, rights and privileges, will be exercisable only during (a) the longer of (i) a period which will end twenty-one (21) years after the death of the last survivor of the descendants living on the date of the execution of this Ground Lease of the following Presidents of the United States: Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George H.W. Bush and William J. Clinton or (ii) the period provided under the Uniform Statutory Rule Against Perpetuities or (b) the specific applicable period of time expressed in this Ground Lease, whichever of (a) and (b) is shorter. 12 IN WITNESS WHEREOF, the undersigned have caused this Ground Lease to be duly executed and delivered by their respective officers thereunto duly authorized. OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), as Ground Lessor By: /s/ T. D. Kilgore ------------------------------ Name: T. D. Kilgore Title: President and CEO Date: 12/30/96 Signed and delivered in the presence of: /s/ Gary M. Bullock - ------------------------------- Unofficial Witness /s/ Patricia R. Bouldin - ------------------------------- Notary Public My Commission Expires: June 2, 1998 [Notary Seal] SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee under the Trust Agreement, as Ground Lessee By: /s/ Bryan Echols ------------------------------ Name: Bryan Echols Title: Vice President Date: 12/30/96 By: /s/ Sandra Thompson ------------------------------ Name: Sandra Thompson Title: Vice President Date: 12/30/96 Signed and delivered in the presence of: /s/ E. M. Shadru - ------------------------------- Unofficial Witness /s/ Patricia R. Bouldin - ------------------------------- Notary Public My Commission Expires: June 2, 1998 [Notary Seal] SCHEDULE TO EXHIBIT 10.32.3 GROUND LEASE AGREEMENT (P1) The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant --------- ----------------- -------------------------------------- P1 December 30, 1996 Philip Morris Capital Corporation P2 January 3, 1997 Philip Morris Capital Corporation F3 December 30, 1996 First Chicago Leasing Corporation F4 December 30, 1996 First Chicago Leasing Corporation N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation Other than Appendix A, the Exhibits and Schedules to the Ground Lease Agreement (P1) are not filed herewith; however, the registrant hereby agrees that such Exhibits and Schedules will be provided to the Commission upon request. APPENDIX A to Ground Lease DEFINITIONS Refer to Appendix A to Exhibit 10.32.1 of the Form 10-K. A-1 EX-10.32-4 21 EXHIBIT 10.32.4 EXHIBIT 10.32.4 This instrument, when recorded, should be returned to: Robert N. Farrar Attorney at Law The Carnegie Building 607 Broad Street, Suite 141 Rome, Georgia 30161-3059 ================================================================================ ROCKY MOUNTAIN AGREEMENTS ASSIGNMENT AND ASSUMPTION AGREEMENT (P1) Dated as of December 30, 1996 between OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), as Assignor and SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee, as Assignee ROCKY MOUNTAIN PUMPED STORAGE HYDROELECTRIC PROJECT ================================================================================ ROCKY MOUNTAIN AGREEMENTS ASSIGNMENT AND ASSUMPTION AGREEMENT (P1) This ROCKY MOUNTAIN AGREEMENTS ASSIGNMENT AND ASSUMPTION AGREEMENT (P1), dated as of December 30, 1996 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof, this "Rocky Mountain Agreements Assignment"), between OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized under the laws of the State of Georgia (together with its successors and permitted assigns, the "Assignor"), and SUNTRUST BANK, ATLANTA, a state banking corporation, not in its individual capacity but solely as Co-Trustee under the Trust Agreement (P1), dated as of December 30, 1996, with the Owner Trustee and the Owner Participant (together with its successors and permitted assigns, the "Assignee"). WHEREAS, the Assignor and Georgia Power Company, a corporation organized under the laws of the State of Georgia (together with its successors and permitted assigns, Georgia Power") own the Rocky Mountain Site as tenants in common under Georgia law; WHEREAS, by the Rocky Mountain Agreements, the Assignor and Georgia Power established their respective rights and obligations as tenants in common of the Rocky Mountain Site and of all improvements thereafter to be constructed, and all personal property thereafter to be situated, on the Rocky Mountain Site. Such improvements and personal property owned by the Assignor and Georgia Power as tenants in common under Georgia law include the Facility; WHEREAS, as tenants in common of such real and personal property, the Assignor and Georgia Power hold a 74.61% and 25.39% undivided interest, respectively, in such real and personal property, including the right to nonexclusive possession of all such real and personal property, subject to the rights of the other to nonexclusive possession and the terms and conditions of the Rocky Mountain Agreements; WHEREAS, by this Rocky Mountain Agreements Assignment, the Assignor will assign the Assigned Rocky Mountain Interests to the Assignee for a term which is coterminous with the term of the Head Lease. NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS. Capitalized terms used in this Rocky Mountain Agreements Assignment, including the recitals, and not otherwise defined herein shall have the respective meanings specified in Appendix A to the Participation Agreement (P1), dated as of December 30, 1996, among the Assignor, the Assignee, Fleet National Bank, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (the "Owner Trustee"), Rocky Mountain Leasing Corporation, a Delaware corporation ("RMLC"), Philip Morris Capital Corporation, a Delaware corporation (the "Owner Participant") and Utrecht-America Finance Co. The general provisions of Appendix A shall apply to terms used in this Rocky Mountain Agreements Assignment and specifically defined herein. SECTION 2. ASSIGNMENT OF ASSIGNED ROCKY MOUNTAIN INTERESTS TO ASSIGNEE. The Assignor hereby assigns the Assigned Rocky Mountain Interests to the Assignee. The assignment effected by this Section 2 shall become effective on and as of the Closing Date and shall terminate on the expiration or earlier termination of the Head Lease Term. SECTION 3. ASSUMPTION BY ASSIGNEE. The Assignee hereby assumes, and agrees to perform, any and all liabilities and obligations of the Assignor incurred with respect to the Assigned Rocky Mountain Interests, recourse with respect to such obligations to be limited to the Assignee's interest in the Undivided Interest with respect to any obligations based on circumstances occurring prior to the termination of the Facility Lease. This assumption shall terminate (except with respect to any liability or obligation which has accrued prior to such termination) on the expiration or earlier termination of the Head Lease Term. Simultaneously herewith, RMLC is executing and delivering the Rocky Mountain Agreements Re-assignment pursuant to which RMLC will assume and agree to perform any and all liabilities and obligations of the Assignee incurred with respect to the Assigned Rocky Mountain Interests resulting from the Assignee's assumption of the liabilities and the obligations of the Assignor under this Section 3. The Assignor acknowledges such assumption and agreement by RMLC and agrees that during the effective period of the assumption and agreement by RMLC pursuant to the Rocky Mountain Agreements Re-assignment, (i) by entering into the Facility Lease and the Rocky Mountain Agreements Re-assignment, the Assignee shall be deemed to have complied with all duties or obligations with respect to the liabilities or obligations assumed or agreed to be performed by the Assignee in respect of the Assigned Rocky Mountain Interests under this Section 3, (ii) any default by RMLC in the performance of the liabilities and obligations assumed and agreed to be performed by RMLC in accordance with the Rocky Mountain Agreements Re-assignment, shall not be (or be deemed to be) a default by the Assignee in the performance of the liabilities and obligations assumed and agreed to be performed by the Assignee under this Section 3 and (iii) the consequences of any action or inaction on the part of RMLC (other than full and complete performance) in the performance of the liabilities and obligations assumed and agreed to be performed by RMLC in accordance with the Rocky Mountain Agreements Re-assignment, or otherwise with respect to the Assigned Rocky Mountain Interests, shall not be attributed to the Assignee (including, without limitation, any Liens, incurred, assumed or suffered to exist by RMLC on the Assigned Rocky Mountain Interests). 2 SECTION 4. NONTERMINABILITY. Subject to Section 2 hereof notwithstanding anything herein or otherwise to the contrary, neither the rights of the Assignee nor the obligations of the Assignor under this Rocky Mountain Agreements Assignment shall be terminated, extinguished, diminished, lost or otherwise impaired by any circumstances of any character or for any reason whatsoever, whether or not the same involves the loss of all or any part of the interest assigned by this Rocky Mountain Agreements Assignment, including, without limitation, any of the following circumstances or reasons: (a) any damage to or loss or destruction of all or any part of the Facility for any reason whatsoever and of whatever duration, (b) the condemnation, requisition (by eminent domain or otherwise), seizure or other taking of title or use of all or any part of the Facility by any Governmental Entity or otherwise, (c) any prohibition, limitation or restriction on the use by any Person of all or any part of its property or the interference with such use by any Person, or any foreclosure or deed in lieu of foreclosure of the Oglethorpe Mortgage, or any termination of the interests created by this Rocky Mountain Agreements Assignment as a result thereof by operation of law or contract, or any eviction by paramount title or otherwise, (d) any inadequacy, incorrectness or failure of the description of the Facility or the Assigned Rocky Mountain Interests or any part thereof or any rights or property in which an interest is intended to be granted or conveyed by this Rocky Mountain Agreements Assignment, (e) the insolvency, bankruptcy, reorganization or similar proceedings by or against the Assignor, the Assignee or any other Person, (f) the failure by the Assignee to comply with any provision hereof or of any other Operative Document or (g) any other reason whatsoever, whether similar or dissimilar to any of the foregoing. SECTION 5. TERMINATION OPTION. After the expiration or earlier termination of the Facility Lease Term, the Assignee may terminate this Rocky Mountain Agreements Assignment upon thirty days prior written notice to the Assignor; provided, however, that the Assignee shall simultaneously terminate the Head Lease pursuant to Section 3.5 thereof. SECTION 6. SECURITY FOR ASSIGNEE'S OBLIGATION TO THE LENDER. In the order to secure the Secured Indebtedness, the Assignee will by the Loan Agreement grant and assign a Lien, and by the Deed to Secure Debt convey security title, to the Lender in, to and under this Rocky Mountain Agreements Assignment and the Facility Lessor's Rocky Mountain Interest (other than Excepted Payments and Excepted Rights). The Assignor hereby consents to such assignment and the creation of such Lien and security title and acknowledges receipt of copies of the Loan Agreement and the Deed to Secure Debt, it being understood that such consent shall not affect any requirement or the absence of any requirement for any consent under any other circumstances. Unless and until the Assignor shall have received written notice from the Lender that the Lien of the Loan Agreement and 3 the security title of the Deed to Secure Debt have been fully terminated, the Lender shall have the right to exercise the rights of the Assignee under this Rocky Mountain Agreements Assignment to the extent set forth in and subject in each case to the exceptions set forth in the Loan Agreement or the Deed to Secure Debt. SECTION 7. MISCELLANEOUS. Section 7.1. Amendments and Waivers. No term, covenant, agreement or condition of this Rocky Mountain Agreements Assignment may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto. Section 7.2. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein to a party hereto shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clause (a) or (b) above, in each case addressed to such party and copy party at its address set forth below or at such other address as such party or copy party may from time to time designate by written notice to the other party: If to the Assignor: Oglethorpe Power Corporation 2100 East Exchange Place Tucker, Georgia 30085-1349 Facsimile No.: (770) 270-7325 Telephone No.: (770) 270-7940 Attention: Vice President - Finance 4 If to the Assignee: SunTrust Bank, Atlanta P.O. Box 4625 Mail Code 008 Atlanta, Georgia 30302 Facsimile No.: (404) 332-3966 Telephone No.: (404) 588-7813 Attention: Corporate Trust Department with copies to the Owner Participant: Philip Morris Capital Corporation 800 Westchester Avenue Rye Brook, New York 10573-1301 Facsimile No.: (914) 335-1297 Telephone No.: (914) 335-5000 Attention: Vice President, Leasing with a copy to Director, Portfolio Administration to the Owner Trustee: Fleet National Bank 777 Main Street Hartford, Connecticut 06115 Facsimile No.: (860) 986-7920 Telephone No.: (860) 986-4540 Attention: Corporate Trust Administration and to the Lender: Utrecht-America Finance Co., c/o Rabobank Nederland, New York Branch 245 Park Avenue New York, New York 10167-0062 Facsimile No.: (212) 916-7880 Telephone No.: (212) 916-7864 Attention: General Counsel's Office 5 Section 7.3. Survival. Except as expressly set forth herein, the warranties and covenants made by each party hereto shall not survive the expiration or termination of this Rocky Mountain Agreements Assignment. Section 7.4. Successors and Assigns. (a) This Rocky Mountain Agreements Assignment shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and assigns as permitted by and in accordance with the terms hereof. (b) Except as expressly provided herein or in any other Operative Document, the Assignor may not assign or transfer any of its interests herein without the consent of the Assignee. The Assignor expressly agrees that the Assignee shall be permitted to assign its rights under this Rocky Mountain Agreements Assignment without the written consent of the Assignor (i) to RMLC pursuant to the Rocky Mountain Agreements Re-assignment and (ii) in connection with a transfer of the Facility Lessor's Rocky Mountain Interest pursuant to the terms of the Facility Lease and the Head Lease. Except as expressly provided in the Operative Documents, the Assignee may not assign its interests herein prior to the expiration or early termination of the Facility Lease Term without the consent of the Assignor. Section 7.5. Governing Law. This Rocky Mountain Agreement Assignment shall be in all respects governed by and construed in accordance with the laws of the State of New York including all matters of construction, validity and performance, except to the extent the law of the State of Georgia is mandatorily applicable. Section 7.6. Severability. If any provision hereof shall be invalid, illegal or unenforceable under Applicable Law, the validity, legality or enforceability of the remaining provisions hereof shall not be affected or impaired thereby. Section 7.7. Counterparts. This Rocky Mountain Agreements Assignment may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one instrument. Section 7.8. Headings. The headings of the sections of this Rocky Mountain Agreements Assignment are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. Section 7.9. Further Assurances. Each party hereto will promptly and duly execute and deliver such further documents to make such further assurances for and take such further action reasonably requested by any party to whom such first party is obligated, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Rocky Mountain Agreements Assignment. Section 7.10. Effectiveness of Assignment and Assumption. This Rocky Mountain Agreements Assignment has been dated as of the date first above written for convenience only. 6 This Rocky Mountain Agreements Assignment shall be effective on the date of execution and delivery by each of the Assignee and the Assignor. Section 7.11. Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Rocky Mountain Agreements Assignment is executed and delivered by SunTrust Bank, Atlanta, not individually or personally but solely as Co-Trustee under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the Co-Trustee is made and intended not as personal representations, undertakings and agreements by SunTrust Bank, Atlanta, but is made and intended for the purpose for binding only the Co-Trustee, (c) nothing herein contained shall be construed as creating any liability on SunTrust Bank, Atlanta, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the Assignor or by any Person claiming by, through or under the Assignor and (d) under no circumstances shall SunTrust Bank, Atlanta be personally liable for the payment of any indebtedness or expenses of the Co-Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Co-Trustee under this Rocky Mountain Agreements Assignment. In addition, each of the parties hereto acknowledges and agrees that the Co-Trustee has been appointed by the Owner Participant and Owner Trustee for the purpose of exercising those trust powers in the State of Georgia which may not be exercised by the Owner Trustee under applicable law, and that, except as otherwise required by applicable law, the Co-Trustee shall not be obligated to take any action hereunder unless expressly directed in writing by the Owner Trustee or the Owner Participant in accordance with the terms of the Trust Agreement. Section 7.12. Measuring Life. If and to the extent that any of the rights and privileges granted under this Rocky Mountain Agreements Assignment, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule or law relating to the vesting of interests in property or the suspension of the power of alienation of property, then it is agreed that notwithstanding any other provision of this Rocky Mountain Agreements Assignment, such options, rights and privileges, subject to the respective conditions hereof governing the exercise of such options, rights and privileges, will be exercisable only during (a) the longer of (i) a period which will end twenty-one (21) years after the death of the last survivor of the descendants living on the date of the execution of this Rocky Mountain Agreements Assignment, of the following Presidents of the United States: Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George Bush and William J. Clinton or (ii) the period provided under the Uniform Statutory Rule Against Perpetuities or (b) the specific applicable period of time expressed in this Rocky Mountain Agreements Assignment, whichever of (a) and (b) is shorter. 7 IN WITNESS WHEREOF, the parties hereto have caused this Rocky Mountain Agreements Assignment to be duly executed by their respective officers thereunto duly authorized. OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), as Assignor By: /s/ T. D. Kilgore ------------------------------ Name: T. D. Kilgore Title: President and CEO Date: 12/30/96 Signed and delivered in the presence of: /s/ Gary M. Bullock - ------------------------------- Unofficial Witness /s/ Patricia R. Bouldin - ------------------------------- Notary Public My Commission Expires: March 16, 1998 [Notary Seal] SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee under the Trust Agreement, as Assignee, By: /s/ Bryan Echols ------------------------------ Name: Bryan Echols Title: Vice President Date: 12/30/96 By: /s/ Sandra Thompson ------------------------------ Name: Sandra Thompson Title: Vice President Date: 12/30/96 Signed and delivered in the presence of: /s/ Leonard Scott - ------------------------------- Unofficial Witness /s/ David M. Boehm - ------------------------------- Notary Public My Commission Expires: March 16, 1998 [Notary Seal] SCHEDULE TO EXHIBIT 10.32.4 ROCKY MOUNTAIN AGREEMENTS ASSIGNMENT AND ASSUMPTION AGREEMENT (P1) The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant --------- ----------------- -------------------------------------- P1 December 30, 1996 Philip Morris Capital Corporation P2 January 3, 1997 Philip Morris Capital Corporation F3 December 30, 1996 First Chicago Leasing Corporation F4 December 30, 1996 First Chicago Leasing Corporation N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation EX-10.32-5 22 EXHIBIT 10.32.5 EXHIBIT 10.32.5 This instrument, when recorded, THE PURPOSE OF THIS INSTRUMENT IS TO should be returned to: MAKE TECHNICAL CORRECTIONS TO THE "FACILITY LEASE" REFERRED TO IN THE Robert N. Farrar SHORT FORM OF FACILITY LEASE AGREEMENT Attorney at Law (P1), DATED DECEMBER 30, 1996, RECORDED The Carnegie Building IN DEED BOOK ____, PAGE ____, AND THE 607 Broad Street, Suite 141 LONG FORM OF SUCH FACILITY LEASE Rome, Georgia 30161-3059 RECORDED IN DEED BOOK ____, PAGE ____, OF THE RECORDS OF THE CLERK OF SUPERIOR ============================== COURT OF FLOYD COUNTY, GEORGIA. IT IS THE INTENTION OF THE PARTIES THAT THIS DOCUMENT SUPERCEDE SUCH OTHER DOCU-MENTS IN THEIR ENTIRETY. FACILITY LEASE AGREEMENT (P1) Dated as of December 30, 1996 between SUNTRUST BANK, ATLANTA, not in its individual capacity, except as expressly provided herein, but solely as Co-Trustee and ROCKY MOUNTAIN LEASING CORPORATION ROCKY MOUNTAIN PUMPED STORAGE HYDROELECTRIC PROJECT ======================================= CERTAIN OF THE RIGHT, TITLE AND INTEREST OF SUNTRUST BANK, ATLANTA IN AND TO THIS FACILITY LEASE AGREEMENT (P1) HAVE BEEN ASSIGNED TO AND ARE SUBJECT TO A FIRST PRIORITY SECURITY TITLE, LIEN AND SECURITY INTEREST IN FAVOR OF UTRECHT-AMERICA FINANCE CO., AS LENDER UNDER THE LOAN AGREEMENT AND THE DEED TO SECURE DEBT, EACH DATED AS OF DECEMBER 30, 1996. THIS FACILITY LEASE AGREEMENT (P1) HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE ORIGINAL COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY THE LENDER ON THE SIGNATURE PAGE THEREOF. SEE SECTION 24 FOR INFORMATION CONCERNING THE RIGHTS OF THE HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF. TABLE OF CONTENTS Page ---- SECTION 1. DEFINITIONS.................................................. 2 SECTION 2. LEASE OF THE UNDIVIDED INTEREST.............................. 2 SECTION 3. FACILITY LEASE TERM AND RENT................................. 2 Section 3.1 Basic Term.................................... 2 Section 3.2 Basic Rent.................................... 2 Section 3.3 Supplemental Rent............................. 2 Section 3.4 Adjustment of Basic Rent...................... 3 Section 3.5 Manner of Payments............................ 4 Section 3.6 Business Day.................................. 5 Section 3.7 Agreement with Respect to Amounts Payable Under Payment Undertaking Agreement .................................... 5 SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT.................................................... 6 Section 4.1 Disclaimer of Warranties...................... 6 Section 4.2 Quiet Enjoyment............................... 7 SECTION 5. RETURN OF UNDIVIDED INTEREST................................. 8 Section 5.1 Return........................................ 8 Section 5.2 Condition Upon Return......................... 8 Section 5.3 Environmental Reports......................... 10 Section 5.4 Expenses...................................... 10 SECTION 6. LIENS........................................................ 10 SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS...................... 11 Section 7.1 Maintenance................................... 11 Section 7.2 Replacement of Components..................... 11 Section 7.3 Records....................................... 12 SECTION 8. MODIFICATIONS................................................ 12 Section 8.1 Required Modifications........................ 12 Section 8.2 Optional Modifications........................ 12 Section 8.3 Title to Modifications; Subjection to Head Lease 12 Section 8.4 Report of Modifications....................... 13 SECTION 9. NET LEASE.................................................... 13 i TABLE OF CONTENTS, Continued Page ---- SECTION 10. EVENTS OF LOSS............................................... 14 Section 10.1 Occurrence of Events of Loss.................. 14 Section 10.2 Payment of Termination Value; Termination of Basic Rent..................... 15 Section 10.3 Rebuild....................................... 16 Section 10.4 Eminent Domain................................ 18 SECTION 11. INSURANCE.................................................... 18 Section 11.1 Property Insurance............................ 18 Section 11.2 Liability Insurance........................... 19 Section 11.3 Provisions With Respect to Insurance.......... 19 Section 11.4 Reports....................................... 20 Section 11.5 Additional Insurance by Facility Lessor....... 20 SECTION 12. INSPECTION................................................... 20 SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS..................... 21 Section 13.1 Election to Terminate......................... 21 Section 13.2 Procedure for Exercise of Termination Option.. 22 SECTION 14. TERMINATION FOR OBSOLESCENCE................................. 23 Section 14.1 Termination................................... 23 Section 14.2 Solicitation of Offers........................ 23 Section 14.3 Right of Facility Lessor to Retain the Facility Lessor's Rocky Mountain Interest ..................................... 23 Section 14.4 Procedure for Exercise of Termination Option ........................... 24 SECTION 15. END OF BASIC TERM OPTIONS.................................... 25 Section 15.1 The Facility Lessee's Purchase and Return Options ............................... 25 Section 15.2 The Facility Lessor's Replacement Lease Option and Renewal Term Option.......... 27 Section 15.3 Procedure for Replacement Lease Option........ 27 Section 15.4 Procedure for Renewal Term Option............. 29 Section 15.5 Loan Extension................................ 31 Section 15.6 Procedure for Retention Option................ 31 SECTION 16. EVENTS OF DEFAULT............................................ 32 ii TABLE OF CONTENTS, Continued Page ---- SECTION 17. REMEDIES..................................................... 34 Section 17.1 Remedies for Event of Default................. 34 Section 17.2 Cumulative Remedies........................... 37 Section 17.3 No Delay or Omission to be Construed as Waiver .......................... 37 SECTION 18. TERMINATION OPTIONS FOR APPEAL OF FERC ORDERS................ 37 Section 18.1 Options to Terminate.......................... 37 Section 18.2 Procedure for Exercise of Termination Options .......................... 38 SECTION 19. THE FACILITY LESSEE'S RIGHT TO SUBLEASE...................... 38 SECTION 20. FURTHER ASSURANCES........................................... 39 SECTION 21. FACILITY LESSOR'S RIGHT TO PERFORM........................... 39 SECTION 22. NOTICES...................................................... 39 SECTION 23 SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS........................................................ 41 SECTION 24. SECURITY FOR FACILITY LESSOR'S OBLIGATION TO THE LENDER....................................................... 42 SECTION 25. MISCELLANEOUS................................................ 42 Section 25.1 Governing Law................................. 42 Section 25.2 Severability.................................. 42 Section 25.3 Headings and Table of Contents................ 42 Section 25.4 Successors and Assigns........................ 42 Section 25.5 "True Lease".................................. 43 Section 25.6 Amendments and Waivers........................ 43 Section 25.7 Survival...................................... 43 Section 25.8 Counterparts.................................. 43 Section 25.9 Effectiveness................................. 43 Section 25.10 Limitation of Liability....................... 43 Section 25.11 Measuring Life................................ 44 iii TABLE OF CONTENTS, Continued Page ---- ATTACHMENTS TO FACILITY LEASE: Appendix A - Definitions............................................A-1 Exhibit A - Description of Undivided Interest......................A-1 Exhibit A-1 - Description of the Entire Rocky Mountain Property ..........................A-1-1 Exhibit A-2 - Project Boundary Drawing of Rocky Mountain Project............................A-2-1 Exhibit A-3 - Powertunnel and Powerhouse General Plan and Profile of the Rocky Mountain Project No. RM-00-CL-0013 R1................A-3-1 Exhibit A-4 - Description of Equipment......................A-4-1 Exhibit B-1 - Form of Facility Lessor's Notice of Non-Payment of Rent...........................B-1 Exhibit B-2 - Form of Facility Lessee's Request to Facility Lessor to Pursue Remedies Against Payment Undertaking Issuer............B-2 Schedule 1 - Basic Rent for Basic Term and Renewal Term ................................S1-1 Schedule 2 - Termination Values for Basic Term and Renewal Term ............................S2-1 iv FACILITY LEASE AGREEMENT (P1) This FACILITY LEASE AGREEMENT (P1), dated as of December 30, 1996 (as amended, supplemented or otherwise modified from time to time and in accordance with the provisions hereof, this "Facility Lease" or this "Agreement"), between SUNTRUST BANK, ATLANTA, a state banking corporation organized under the laws of the State of Georgia, not in its individual capacity, but solely as Co-Trustee under the Trust Agreement, dated as of December 30, 1996 with the Owner Trustee and the Owner Participant (together with its successors and permitted assigns, the "Facility Lessor"), and ROCKY MOUNTAIN LEASING CORPORATION, a corporation organized under the laws of the State of Delaware (together with its successors and permitted assigns, the "Facility Lessee"). WHEREAS, Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation), an electric membership corporation organized under the laws of the State of Georgia ("Oglethorpe") and Georgia Power Company, a corporation organized under the laws of the State of Georgia ("Georgia Power") own the Rocky Mountain Site (as hereinafter defined) as tenants in common under the laws of the State of Georgia; WHEREAS, Oglethorpe and Georgia Power own the Facility (as hereinafter defined) as tenants in common under the laws of the State of Georgia; WHEREAS, pursuant to the Ground Lease (as hereinafter defined) the Co-Trustee has acquired from Oglethorpe a leasehold interest in the Ground Interest; WHEREAS, pursuant to the Head Lease (as hereinafter defined) the Co-Trustee has acquired from Oglethorpe a leasehold interest in the Undivided Interest for a term equal to 120% of the estimated remaining useful life of the Facility, subject to renewal as provided in the Head Lease; WHEREAS, pursuant to the Ground Sublease (as hereinafter defined) the Co-Trustee will lease the Ground Interest leased to it by Oglethorpe pursuant to the Ground Lease to the Facility Lessee, as Ground Sublessee, for the term provided therein; and WHEREAS, pursuant to this Facility Lease, the Facility Lessor will lease the Undivided Interest leased to it by Oglethorpe pursuant to the Head Lease to the Facility Lessee for the term provided herein. NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS. Capitalized terms used in this Facility Lease, including the recitals, and not otherwise defined herein shall have the respective meanings set forth in Appendix A hereto. The general provisions of Appendix A shall apply to the terms used in this Facility Lease and specifically defined herein. SECTION 2. LEASE OF THE UNDIVIDED INTEREST. The Facility Lessor hereby leases the Undivided Interest, upon the terms and conditions set forth herein, to the Facility Lessee for the Basic Term and the Renewal Term, if any, and the Facility Lessee hereby leases the Undivided Interest, upon the terms and conditions set forth herein, from the Facility Lessor. The Facility Lessee and the Facility Lessor understand and agree that (a) this lease of the Undivided Interest is subject to the interest of the Head Lessee under the Head Lease and the interests identified in the definition of Undivided Interest, (b) legal title to the Facility remains vested in the Head Lessor and Georgia Power as tenants-in-common, (c) this lease of the Undivided Interest is subject and subordinate to the Lien of the Oglethorpe Mortgage, and (d) this lease is subject to those encumbrances set forth in the Title Report. The Undivided Interest shall be subject to the terms of this Facility Lease from the date on which this Facility Lease is executed and delivered. SECTION 3. FACILITY LEASE TERM AND RENT Section 3.1 Basic Term. The term of this Facility Lease shall commence on the Closing Date and shall terminate at 11:58 p.m. (New York City time) on the Expiration Date (the "Basic Term"), subject to earlier termination pursuant to Section 10, 13, 14, 17 or 18 hereof and extension for a Renewal Term pursuant to Sections 15.2 and 15.4 hereof; provided, however, that, notwithstanding anything to the contrary set forth herein, in no event shall the Basic Term terminate so long as the Facility Lessor's interest under this Facility Lease shall be subject to the Lien of the Loan Agreement or the security title of the Deed to Secure Debt. Section 3.2 Basic Rent. The Facility Lessee hereby agrees to pay to the Facility Lessor Basic Rent for the lease of the Undivided Interest for each Rent Payment Period throughout the Basic Term and the Renewal Term, if applicable, in the amounts payable in advance or in arrears or both, as the case may be, on each Rent Payment Date as indicated on Schedule 1 hereto under the caption "Advance Rent" in the case of Rent Payment Periods immediately following such Rent 2 Payment Date and/or "Arrears Rent" in the case of Rent Payment Periods ending on such Rent Payment Date. Each such payment of Basic Rent shall be in the amount set forth opposite such Rent Payment Date on Schedule 1 hereto, in each case, subject to Section 3.4 hereof. Section 3.3 Supplemental Rent. The Facility Lessee also agrees to pay to the Facility Lessor, or to any other Person entitled thereto as expressly provided herein or in any other Operative Document, as appropriate, any and all Supplemental Rent, promptly as the same shall become due and owing, or where no due date is specified, promptly after demand by the Person entitled thereto, and in the event of any failure on the part of the Facility Lessee to pay any Supplemental Rent, the Facility Lessor shall have all rights, powers and remedies provided for herein or by law or equity or otherwise for the failure to pay Basic Rent. The Facility Lessee will also pay as Supplemental Rent to the extent permitted by Applicable Law, an amount equal to interest at the applicable Overdue Rate on any part of any payment of Basic Rent not paid when due for any period for which the same shall be overdue and on any Supplemental Rent not paid when due (whether on demand or otherwise) for the period from such due date until the same shall be paid. All Supplemental Rent to be paid pursuant to this Section 3.3 shall be payable in the manner set forth in Section 3.5. The Facility Lessee shall promptly remit to the appropriate Person amounts of Sublease Supplemental Rent received by the Facility Lessee which are owed to Persons other than the Facility Lessee. Section 3.4 Adjustment of Basic Rent. (a) The Facility Lessee and the Facility Lessor agree that Basic Rent (including Basic Rent for the Renewal Term, if any), Termination Values, and Equity Exposure Amounts shall be adjusted, either upwards or downwards, to reflect the principal amount, amortization and interest rate on any Additional Loan Certificate issued pursuant to Section 2.10 of the Loan Agreement in connection with a refinancing of the Loan Certificate. Any adjustments pursuant to this Section 3.4 will be calculated to preserve the Owner Participant's Net Economic Return through the Basic Term and through the Basic Term plus the Renewal Term, if any; provided, however, that to the extent consistent with preserving such Net Economic Return, all adjustments shall minimize the present value to the Facility Lessee of the Basic Rent or, at the Facility Lessee's election, the Basic Rent and the Purchase Option Price. Adjustments will be made using the same method of computation and assumptions originally used (other than those that have changed as the result of the event giving rise to the adjustment) in the calculation of the Basic Rent and the Purchase Option Price. The adjustments contemplated by this Section 3.4 will result in corresponding adjustments to Termination Values. In addition, in connection with any adjustment pursuant to this Section 3.4, the Equity Exposure Amounts shall be increased or decreased by an increase or decrease, as the case may be, in the Equity Portion of Basic Rent or the Equity Portion of Termination Value. All Basic Rent adjustments shall be consistent with Rev. Procs. 75-21 and 75-28 and section 467 of the Code as in effect at the time of the adjustment, including any final, proposed or temporary regulations or other administrative announcements issued thereunder and in no event shall such adjustment cause this Facility Lease to become a "disqualified leaseback or long-term agreement" within the meaning of section 467 of the Code and any such regulations or announcements thereunder. 3 (b) Anything herein or in any other Operative Document to the contrary notwithstanding, each installment of Basic Rent payable hereunder, whether or not adjusted in accordance with this Section 3.4, shall be in an amount at least sufficient to pay in full principal and interest payable on the Loan Certificate on each Rent Payment Date. Anything herein or in any other Operative Document to the contrary notwithstanding, Termination Values (excluding the Equity Portion of Termination Value) payable on any date under this Facility Lease and the initial installment of the Purchase Option Price, whether or not adjusted in accordance with this Section 3.4, shall, together with all other Basic Rent due and owing on such date, exclusive of any portion thereof that is an Excepted Payment, be in an amount at least sufficient to pay in full the principal of and accrued interest on the Loan Certificate payable on such date. (c) Any adjustment pursuant to this Section 3.4 shall initially be computed by the Owner Participant. Once computed, the results of such computation shall promptly be delivered by the Owner Participant to the Facility Lessee, the Facility Lessor, the Lender and AMBAC. Within 20 days after the receipt of the results of any such adjustment, the Facility Lessee may request that an investment banking firm selected by the Facility Lessee and reasonably satisfactory to the Owner Participant (the "Intermediary") verify, after consultation with the Owner Participant and the Facility Lessee, the accuracy of such adjustment in accordance with this Section 3.4, and the Owner Participant and the Facility Lessee hereby agree to provide the Intermediary (on a confidential basis) with all information and materials as shall be reasonably necessary in connection therewith provided, however, that the Owner Participant shall not be required to disclose its tax returns or other proprietary information. If the Intermediary confirms that such adjustment is in accordance with this Section 3.4, it shall so certify to the Facility Lessee, the Facility Lessor, the Owner Participant and the Lender, and such certification shall be final, binding and conclusive on the Facility Lessee, the Owner Participant and the Facility Lessor. If the Intermediary concludes that such adjustment is not in accordance with this Section 3.4, it shall so certify to the Facility Lessee, the Facility Lessor, the Owner Participant and the Lender, and the Owner Participant shall again compute the required adjustment consistent with the advice of the Intermediary. Such re-computation shall be subject to the provisions of this Section 3.4 and the results of such re-computation shall be final, binding and conclusive on the Facility Lessee, the Facility Lessor and the Owner Participant. If the Facility Lessee does not request verification of any adjustment within the period specified above, the computation provided by the Owner Participant shall be final, binding and conclusive on the Facility Lessee, the Facility Lessor and the Owner Participant. The final determination of any adjustment hereunder shall be set forth in an amendment to this Facility Lease, executed and delivered by the Facility Lessor and the Facility Lessee and consented to by the Owner Participant; provided, however, that any omission to execute and deliver such amendment shall not affect the validity and effectiveness of any such adjustment. The reasonable fees, costs and expenses of the Intermediary in verifying an adjustment pursuant to this Section 3.4 shall be paid by the Facility Lessee; provided, further, that, in the event that such Intermediary determines that the present value of Basic Rent or, at the Facility Lessee's election, Basic Rent and the Purchase Option Price payments, to be made under this Facility Lease as calculated by the Owner Participant are greater than the present value of the correct Basic Rent and Purchase Option Price payments as certified by the Intermediary, 4 discounted annually at the Debt Rate, by more than 0.10% of the Undivided Interest Cost, then such expenses of the Intermediary shall be paid by the Owner Participant. Notwithstanding anything herein to the contrary, the sole responsibility of the Intermediary shall be to verify the calculations hereunder and matters of interpretation of this Facility Lease or any other Operative Document shall not be within the scope of the Intermediary's responsibilities. Section 3.5 Manner of Payments. (a) All Rent (whether Basic Rent or Supplemental Rent) shall be paid by the Facility Lessee in lawful currency of the United States of America in immediately available funds to the recipient not later than 11:00 a.m. (New York City time) on the date due. All Rent payable to the Facility Lessor (other than Excepted Payments) shall be paid by the Facility Lessee to the Owner Trustee at its account at Fleet National Bank (ABA Account No. 011-900-445) Credit - (Account No. 0067548290), or to such other place as the Facility Lessor shall notify the Facility Lessee in writing; provided, however, that so long as the Lien of the Loan Agreement and security title of the Deed to Secure Debt have not been discharged, the Facility Lessor hereby irrevocably directs (it being agreed and understood that such direction shall be deemed to have been revoked after the Lien of the Loan Agreement and security title of the Deed to Secure Debt shall have been fully discharged), and the Facility Lessee agrees, that all payments of Rent (other than Excepted Payments) payable to the Facility Lessor shall be paid by wire transfer directly to the Lender's Account or to such other place as the Lender shall notify the Facility Lessee in writing pursuant to the Loan Agreement. Payments constituting Excepted Payments shall be made to the Person entitled thereto at the address for such Person set forth in the Participation Agreement, or to such other place as such Person shall notify the Facility Lessee in writing. (b) Payments made to the Facility Lessor under the Payment Undertaking Agreement and the Qualifying Equity Funding Agreement shall satisfy the Facility Lessee's obligation to pay amounts of Basic Rent or Supplemental Rent, as the case may be, to the extent of such payments. Amounts paid to the Facility Lessor or the Owner Participant from the Qualifying Equity Funding Agreement in satisfaction of the Special Equity Facility Lease Remedy shall not satisfy or be treated as performance of any of the Facility Lessee's obligations under this Facility Lease or any other Operative Document (other than its obligations under Section 16.2 of the Participation Agreement) or in any way limit or offset any amounts payable by the Facility Lessee. Section 3.6 Business Day. Notwithstanding anything herein or in any other Operative Document to the contrary, if the date on which any payment is to be made pursuant to this Facility Lease or any other Operative Document is not a Business Day, the payment otherwise payable on such date shall be payable on the next succeeding Business Day with the same force and effect as if made on such scheduled date and, provided such payment is made on such succeeding Business Day, no interest shall accrue on the amount of such payment from and after such scheduled date to the time of such payment on such next succeeding Business Day. Section 3.7 Agreement with Respect to Amounts Payable Under Payment Undertaking Agreement. The Facility Lessor hereby acknowledges that, pursuant to the Payment 5 Undertaking Agreement, the Payment Undertaking Issuer has undertaken to make Scheduled Payments to the Facility Lessor or its assignee or pledgee on each date specified therein, and other specified amounts on the terms set forth therein. These payments are payable when Basic Rent, Termination Value or amounts computed by reference to Termination Value, are due and, assuming exercise of the Purchase Option, when the first installment of Purchase Option Price will be due under this Facility Lease, in an amount equal to that portion of Basic Rent, Termination Value and Purchase Option Price which corresponds to the principal and interest on the Loan Certificate due on such date (including in respect of acceleration). The Facility Lessor hereby agrees that, upon any failure of the Facility Lessee to pay any such amount of Basic Rent, Termination Value, amounts defined by reference to Termination Value or the Purchase Option Price, if any, when due, that prior to exercising any remedy pursuant to Section 17 of this Facility Lease, the Facility Lessor will give the Facility Lessee (with a copy to the Facility Sublessee at its address set forth in Section 18.4 of the Participation Agreement) notice of such failure in the form attached hereto as Exhibit B-1. Within four days of the Facility Lessee's receipt of such notice of such failure, the Facility Lessee may instruct the Facility Lessor by delivery of the notice to the Facility Lessor in the form of Exhibit B-2 hereto, that the Facility Lessee desires that the Facility Lessor credit against amounts owed to the Facility Lessor by the Facility Lessee, the amounts payable by the Payment Undertaking Issuer pursuant to the Payment Undertaking Agreement, in which case, the Facility Lessor shall, at the sole cost and expense of the Facility Lessee, pursue due diligence to collect such amounts from the Payment Undertaking Issuer prior to pursuing the Facility Lessee for payment of such amounts under this Facility Lease (including the exercise of any remedy under Section 17) or any other Operative Document. If the Payment Undertaking Issuer has fully performed its obligations under the Payment Undertaking Agreement in respect of such amounts of Rent, the Facility Lessor shall be conclusively presumed to have satisfied the foregoing requirement to give notice and pursue due diligence. SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT Section 4.1 Disclaimer of Warranties. (a) WITHOUT WAIVING ANY CLAIM THE FACILITY LESSEE MAY HAVE AGAINST ANY MANUFACTURER, VENDOR OR CONTRACTOR UNDER THE ROCKY MOUNTAIN AGREEMENTS, THE FACILITY LESSEE ACKNOWLEDGES AND AGREES SOLELY FOR THE BENEFIT OF THE FACILITY LESSOR AND THE OWNER PARTICIPANT THAT (i) THE FACILITY AND EACH COMPONENT THEREOF ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE ACCEPTABLE TO THE FACILITY LESSEE, (ii) THE FACILITY LESSEE IS SATISFIED THAT THE FACILITY AND EACH COMPONENT THEREOF ARE SUITABLE FOR THEIR RESPECTIVE PURPOSES, (iii) NEITHER THE FACILITY LESSOR NOR THE OWNER PARTICIPANT IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, (iv) THE UNDIVIDED INTEREST IS LEASED HEREUNDER TO THE EXTENT PROVIDED HEREBY FOR THE BASIC TERM AND THE RENEWAL TERM, IF ANY, SPECIFIED HEREIN SUBJECT TO ALL APPLICABLE LAWS NOW IN EFFECT OR HEREAFTER ADOPTED, INCLUDING WITHOUT LIMITATION (1) ZONING 6 REGULATIONS, (2) ENVIRONMENTAL LAWS OR (3) BUILDING RESTRICTIONS, AND IN THE STATE AND CONDITION OF EVERY PART THEREOF WHEN THE SAME FIRST BECAME SUBJECT TO THIS FACILITY LEASE WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE FACILITY LESSOR OR THE OWNER PARTICIPANT AND (v) THE FACILITY LESSOR LEASES FOR THE BASIC TERM AND THE RENEWAL TERM, IF ANY, SPECIFIED HEREIN AND THE FACILITY LESSEE TAKES THE UNDIVIDED INTEREST UNDER THIS FACILITY LEASE "AS-IS", "WHERE-IS" AND "WITH ALL FAULTS", AND THE FACILITY LESSEE ACKNOWLEDGES THAT NEITHER THE FACILITY LESSOR, AS THE FACILITY LESSOR OR IN ITS INDIVIDUAL CAPACITY, NOR THE OWNER PARTICIPANT MAKES NOR SHALL BE DEEMED TO HAVE MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS, WARRANTIES OR REPRESENTATIONS, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION, MERCHANTABILITY THEREOF OR AS TO THE TITLE OF THE FACILITY, THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO, except that the Facility Lessor represents and warrants that on the Closing Date, the Undivided Interest will be free of Facility Lessor's Liens. It is agreed that all such risks, as between the Facility Lessor, the Owner Participant and the Lender on the one hand and the Facility Lessee on the other hand are to be borne by the Facility Lessee. None of the Facility Lessor, the Owner Trustee, the Owner Participant nor the Lender shall have any responsibility or liability to the Facility Lessee or any other Person with respect to any of the following: (w) any liability, loss or damage caused or alleged to be caused directly or indirectly by the Facility or any Component or by any inadequacy thereof or deficiency or defect therein or by any other circumstances in connection therewith; (x) the use, operation or performance of the Facility or any Component or any risks relating thereto; (y) any interruption of service, loss of business or anticipated profits or consequential damages; or (z) the delivery, operation, servicing, maintenance, repair, improvement, replacement or decommissioning of the Facility or any Component. The provisions of this paragraph (a) of this Section 4.1 have been negotiated, and, except to the extent otherwise expressly stated, the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties of the Facility Lessor, express or implied, with respect to the Facility or any Components of either thereof or the Undivided Interest that may arise pursuant to any Applicable Law now or hereafter in effect, or otherwise. (b) During the Facility Lease Term, so long as no Event of Default shall have occurred and be continuing, the Facility Lessor hereby appoints irrevocably and constitutes the Facility Lessee its agent and attorney-in-fact, coupled with an interest, to assert and enforce, from time to time, in the name and for the account of the Facility Lessor and the Facility Lessee, as their interests may appear, but in all cases at the sole cost and expense of the Facility Lessee, 7 whatever claims and rights the Facility Lessor may have in respect of the Undivided Interest against the manufacturers of the Facility, or vendors or contractors under the Rocky Mountain Agreements or under any express or implied warranties relating to the Facility or the Undivided Interest. Section 4.2 Quiet Enjoyment. The Facility Lessor agrees that, notwithstanding any provision of any other Operative Document, so long as no Event of Default shall have occurred and be continuing, it shall not itself interfere with or interrupt the quiet enjoyment of the use, operation and possession by the Facility Lessee of the interest in the Facility or the Undivided Interest conveyed by this Facility Lease subject to the terms of this Facility Lease; provided that the Facility Lessor's covenant does not relate to actions of the Lender. SECTION 5. RETURN OF UNDIVIDED INTEREST Section 5.1 Return. Upon the expiration of the Facility Lease Term unless the Facility Lessee shall have purchased the Facility Lessor's interest in the Undivided Interest pursuant to Section 15.1, or upon any early termination of this Facility Lease other than a termination in accordance with Section 10, 13 or 18, the Facility Lessee, at its own expense, shall return the Undivided Interest by delivering possession of the same to the Facility Lessor at the location of the Facility on the Rocky Mountain Site near Rome, Georgia. Section 5.2 Condition Upon Return. Except with respect to a return of the Undivided Interest pursuant to Section 14.3, at the time of any return of the Undivided Interest by the Facility Lessee in accordance with Section 5.1, the following conditions shall be complied with, all at the Facility Lessee's sole cost and expense: (a) the right to use the Undivided Interest granted hereunder for the benefit of the Facility Lessee shall cease and terminate; (b) the Facility will be in at least as good condition as if it had been maintained, repaired and operated during the Facility Lease Term in compliance with the provisions of this Facility Lease, reasonable wear and tear excepted, and there shall be no deferred maintenance in respect of the Facility; (c) the Facility Lessee shall cooperate with all reasonable requests of the Owner Participant or the Facility Lessor, at the expense of the Facility Lessee, for purposes of obtaining, or enabling the Owner Participant or the Facility Lessor or their respective designees to obtain, any and all licenses, permits, approvals and consents of any Governmental Entities or other Persons that are or will be required to be obtained by the Owner Participant or the Facility Lessor in connection with its use, operation or maintenance of the Undivided Interest on or after such return in compliance with Applicable Law and in the manner contemplated by the Rocky Mountain Agreements; 8 (d) the Facility Lessee shall return and surrender possession of the Undivided Interest to the Facility Lessor (or its designee) free and clear of the Lien described in clause (i) of the definition of "Permitted Liens", except to the extent of the interests of Oglethorpe under the Head Lease and the Ground Lease; (e) the Facility shall have at least the capability and functional ability, including the existence of sufficient water flows in contributing streams, to perform substantially at the ratings for which it was designed, on a continuing basis in normal commercial operation, all functions for which it was designed (ordinary wear and tear excepted); (f) the Facility shall be in compliance with all requirements of manufacturers required for the maintenance in full force and effect of any material warranty then in effect with respect to the Facility; (g) no Component shall be a temporary Component and any replacement Component shall satisfy the standards of Section 7.2. Prior to redelivery of the Undivided Interest under this Section 5.2, upon not less than 45 days' prior request of the Facility Lessor, the Facility Lessee shall perform such maintenance on the Facility which is in addition to that otherwise required to be performed by the Facility Lessee hereunder as the Facility Lessor may reasonably specify (using its best efforts on a time-available basis for such work). If the Facility Lessee is unable to perform such requested maintenance, it will use its best efforts to arrange to have such maintenance performed by another Person acceptable to the Facility Lessor at rates comparable to those the Facility Lessee obtains for maintenance performed on its own facilities. The Facility Lessor shall either promptly reimburse the Facility Lessee for the Facility Lessee's cost or pay such rates charged by any such Person acceptable to the Facility Lessor in connection with such requested maintenance. The Facility Lessee shall also surrender to the Facility Lessor originals or copies of all documents, instruments, plans, maps, specifications, manuals, drawings and other documentary materials relating to the installation, operation, maintenance, construction, design, modification and repair of the Facility, as shall be in the Facility Lessee's possession and shall be reasonably appropriate or necessary for the continued operation of the Facility, and shall use its best efforts to obtain and surrender to the Facility Lessor originals or copies of any such documents, instruments, plans, maps, specifications, manuals, drawings or other documentary materials as shall be in the possession of any Affiliate of the Facility Lessee. The Facility Lessee shall effect delivery of the Undivided Interest at its own cost and expense by executing and delivering to the Facility Lessor an instrument or instruments in form and substance reasonably satisfactory to the Facility Lessor evidencing surrender by the Facility Lessee of the Facility Lessee's rights to the Undivided Interest under this Facility Lease and to the possession thereof. At least 60 but not more than 120 days prior to redelivery of the Undivided Interest pursuant to this Section 5.2, the Facility Lessee shall perform the Return Acceptance Tests and shall promptly provide the results to the Facility Lessor. If the Facility shall not pass such tests, the Facility Lessee shall, at its own expense, take such actions as may be 9 necessary to enable the Facility to pass such tests and certify to the Owner Participant such passage of such tests prior to such delivery date. At the Facility Lessor's request, if possible and commercially reasonable, the Facility Lessee shall provide insurance in accordance with Section 11 hereof for three months following the date of return of the Undivided Interest at the Facility Lessor's sole cost and expense which cost and expense shall equal Facility Lessee's actual cost and expense for such insurance; and (h) the FERC License shall have been renewed in favor of the Facility Lessor for a term of not less than 17 years from the Expiration Date on terms not materially more burdensome than those under the existing FERC License and shall be in full force and effect. At the time of any return of the Undivided Interest by the Facility Lessee pursuant to Section 14.3, the conditions set forth in clauses (a), (b), (c), (d) and (g) of this Section 5.2 shall be complied with at the Facility Lessee's sole cost and expense. Section 5.3 Environmental Reports. In connection with a return pursuant to Section 5.2 and Section 14.3, the Facility Lessee shall provide the Facility Lessor, the Owner Participant and AMBAC, not later than 270 days prior to the Expiration Date, or in connection with a return other than on the Expiration Date, not later than the date of return, an inspection report prepared by a reputable environmental consulting firm (selected by the Owner Participant and reasonably acceptable to the Facility Lessee) as to the environmental condition of the Facility and the Rocky Mountain Site and the compliance or non-compliance with applicable Environmental Laws, in form, scope and substance reasonably satisfactory to the Owner Participant. The cost and expense of preparing and providing such report shall be for the account of the Facility Lessee. The provisions of such report shall not relieve the Facility Lessee of liability with respect to environmental conditions, known or unknown, in respect of the Facility and the Rocky Mountain Site and the Facility Lessee will take any and all actions necessary to ensure that the Facility and the Rocky Mountain Site comply with all such Environmental Laws. If such report shall indicate that either the Facility or the Rocky Mountain Site is not in compliance with applicable Environmental Laws, the Facility Lessee shall, within 90 days of the Facility Lessor having received such inspection report, (a) provide the Owner Participant with a remediation plan approved by the applicable Governmental Entity designed to ensure that the Facility and the Rocky Mountain Site will be brought into compliance with applicable Environmental Laws as promptly as is reasonably practical and without materially adversely affecting the continued operation of the Facility or the Rocky Mountain Site and (b) (i) place in escrow funds in an amount corresponding to the Facility Lessor's Percentage of the cost estimate of such remediation plan (as certified by the environmental consulting firm that prepared such report or another expert reasonably satisfactory to the Owner Participant), which escrow shall provide for the payment of the costs of such plan as the same become due and payable or (ii) make other arrangements that are satisfactory to the Owner Participant, as determined in its sole discretion acting in good faith, for such purposes. The obligations of the Facility Lessee set forth in this Section 5.3 shall survive the termination of this Facility Lease and the expiration of the Facility Lease Term. 10 Section 5.4 Expenses. The Facility Lessee agrees to pay or reimburse, on an After-Tax Basis, on demand, all costs and expenses incurred by the Facility Lessor, the Trustees, the Owner Participant and the Lender in connection with any return contemplated by this Section 5. SECTION 6. LIENS The Facility Lessee will not directly or indirectly create, incur, assume or suffer to exist any Lien on or with respect to the Undivided Interest or the Facility Lessor's Rocky Mountain Interest, or any interest therein or in, to or on its interest in this Facility Lease or its interest in any other Operative Document, except Permitted Liens, and the Facility Lessee shall promptly notify the Facility Lessor of the imposition of any such Lien of which the Facility Lessee is aware and shall promptly, at its own expense, take such action as may be necessary to fully discharge or release any such Lien. SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS Section 7.1 Maintenance. The Facility Lessee, at its own cost and expense, will cause the Facility to be maintained in good condition (ordinary wear and tear excepted), repair and working order, in accordance with Prudent Utility Practice, and in compliance with all Applicable Laws of any Governmental Entity having jurisdiction and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, (a) all as in the reasonable judgment of the Facility Lessee may be necessary so that the business carried on in connection with the Undivided Interest may be properly and advantageously conducted by the Facility Lessee at all times and (b) in accordance with the Rocky Mountain Agreements and the Oglethorpe Mortgage. Notwithstanding any provision contained in this Facility Lease or in any other Operative Document, the Facility Lessee has the right to perform any and all acts required by an order of the FERC or its successor affecting the Facility or the Rocky Mountain Site without the prior approval of the Facility Lessor. Section 7.2 Replacement of Components. In the ordinary course of maintenance, service, repair or testing, the Facility Lessee, at its own cost and expense, may remove or cause to be removed from the Facility any Component; provided, however, that the Facility Lessee shall cause such Component to be replaced by a replacement Component which shall be free and clear of all Liens (except Permitted Liens) and shall be in as good operating condition as, and shall have a current and residual value, remaining useful life and utility at least equal to, that of the Component replaced, assuming such replaced Component was in at least the condition and repair required to be maintained in accordance with the terms of this Facility Lease (each such replacement Component being herein referred to as a "Replacement Component") as promptly as practicable. An undivided interest equal to the Facility Lessor's Percentage in each Component at any time removed from the Facility shall remain subject to the Head Lease and this Facility Lease, wherever located, until such time as such Component shall be replaced by a Replacement 11 Component which has been incorporated in the Facility and which meets the requirements for Replacement Components specified above. Immediately upon any Replacement Component becoming incorporated in the Facility, without further act (and at no cost to the Facility Lessor and with no adjustment to the Undivided Interest Cost or Basic Rent), (i) the replaced Component shall no longer be subject to the Head Lease or this Facility Lease, (ii) title to such Replacement Component shall vest in the Co-Owners and Oglethorpe's undivided interest therein shall become subject to the Oglethorpe Mortgage, (iii) an undivided interest equal to the Facility Lessor's Percentage in the Replacement Component shall thereupon become subject to the Head Lease, and (iv) an undivided interest equal to the Facility Lessor's Percentage in such Replacement Component shall become subject to this Facility Lease and be deemed a part of the Facility for all purposes hereof. Notwithstanding anything in this Section 7.2 or elsewhere in this Facility Lease to the contrary, if the Facility Lessee or the Facility Operator has determined that a Component is surplus or obsolete, it shall have the right to remove such Component without replacing it; provided that no such Component may be so removed without being replaced if such removal would diminish the current or residual value by more than a de minimis amount or diminish the remaining useful life or utility of the Facility or cause the Facility to become "limited use" property within the meaning of Rev. Proc. 76-30, 1976-1, 647. Section 7.3 Records. The Facility Lessee shall maintain logs of the Facility's operation and keep maintenance and repair reports in sufficient detail to indicate the nature and date of major work completed on the Facility, including, without limitation, the cost of maintenance and repair to the extent that such records are kept as a normal part of the Facility Lessee's operations. Such records shall be made available upon the Facility Lessor's request during any inspection of the Facility by the Facility Lessor or Owner Participant and shall be deemed the property of the Facility Lessor upon the expiration or earlier termination of the Facility Lease; provided, however, that the Facility Lessee shall be entitled to keep copies of such records. SECTION 8. MODIFICATIONS Section 8.1 Required Modifications. Subject to the Rocky Mountain Agreements, the Facility Lessee, at its own cost and expense, shall make or cause to be made all Modifications to the Facility as it relates to the Undivided Interest as are required by the Rocky Mountain Agreements and by Applicable Law (each, a "Required Modification"). Section 8.2 Optional Modifications. So long as no Bankruptcy Default, Payment Default or Event of Default exists, the Facility Lessee at any time may, at its own cost and expense, make or cause to be made any Modification to the Facility as the Facility Lessee considers desirable in the proper conduct of its business (an "Optional Modification"); provided that, no Optional Modification to the Facility shall impair the operation of the Facility or diminish the current or residual value, remaining useful life or utility of the Facility below the current or residual value, remaining useful life or utility thereof immediately prior to such Optional Modification assuming the Facility was then in the condition required to be maintained by the 12 terms of this Facility Lease, or cause the Undivided Interest to become "limited use" property, within the meaning of Rev. Proc. 76-30, 1976-1, 647. Section 8.3 Title to Modifications; Subjection to Head Lease. Title to all Modifications to the Facility shall immediately vest in the Co-Owners, and Oglethorpe's undivided interest therein shall become subject to the Lien of the Oglethorpe Mortgage and be deemed part of the Facility for all purposes of this Facility Lease. An undivided interest equal to the Facility Lessor's Percentage in all Modifications shall immediately become subject to the Head Lease and this Facility Lease (at no cost to the Facility Lessor and with no adjustment to the Undivided Interest Cost) and be deemed a part of the Undivided Interest for all purposes hereof, and the Facility Lessee, at its own cost and expense, shall take such steps as the Facility Lessor may require from time to time to confirm that the foregoing Modifications are subject to the Head Lease. Section 8.4 Report of Modifications. On or before March 1 of each year (commencing March 1, 1998) and on the expiration of the Facility Lease Term, the Facility Lessee shall furnish to the Facility Lessor a report stating the total cost of all Modifications and describing separately and in reasonable detail each Modification having a value in excess of $5,000,000 made during the period from the Closing Date to December 31, 1997 for the first report and annually thereafter based on a calendar year period for subsequent reports. SECTION 9. NET LEASE This Facility Lease is a "net lease" and, notwithstanding anything herein to the contrary, the Facility Lessee's obligation to pay all Rent payable hereunder (and all amounts, including, without limitation, Termination Value, in lieu of Rent following termination of this Facility Lease) shall be absolute and unconditional under any and all circumstances and shall not be terminated, extinguished, diminished, lost or otherwise impaired, nor shall the Facility Lessee's other obligations hereunder or the Facility Lessor's rights hereunder be terminated, extinguished, diminished, lost or otherwise impaired, by any circumstance of any character or for any reason whatsoever, whether or not the same involves the loss of all or any part of the leasehold estate granted by this Facility Lease, including, without limitation, (i) any setoff, counterclaim, recoupment, defense or other right which the Facility Lessee may have against the Facility Lessor, the Trustees, the Owner Participant, or the Lender or any other Person, including, without limitation, any breach by any of said parties of any covenant or provision under this Facility Lease or under any Operative Document, (ii) any lack or invalidity of title or any defect in the title, condition, design, operation, merchantability or fitness for use of the Facility or any Component, or any foreclosure or deed in lieu of foreclosure of the Oglethorpe Mortgage, or any termination of this Facility Lease as a result thereof by operation of law or contract, or any eviction by paramount title or otherwise, or any unavailability of the Facility, the Rocky Mountain Site, any Component, any other portion of the Facility Lessee's Rocky Mountain Interest or the interest of any other Person or any part of the foregoing for any reason whatsoever, (iii) any loss or 13 destruction of, or damage to, the Facility or any Component or interruption or cessation in the use or possession thereof or any part of the foregoing by the Facility Lessee for any reason whatsoever and of whatever duration, (iv) the condemnation, requisitioning, expropriation, seizure or other taking of title to or use of the Facility, the Rocky Mountain Site, any Component, any other portion of the Facility Lessee's Rocky Mountain Interest or any part of the foregoing by any Governmental Entity or otherwise, (v) the invalidity or unenforceability or lack of due authorization or other infirmity of this Facility Lease or any other Operative Document, (vi) the lack of right, power or authority of the Facility Lessor to enter into this Facility Lease or any other Operative Document, (vii) any ineligibility of the Facility or any Component for any particular use, whether or not due to any failure of the Facility Lessee or the Facility Operator to comply with any Applicable Law, (viii) any event of "force majeure" or any frustration, (ix) any legal requirement similar or dissimilar to the foregoing, any present or future law to the contrary notwithstanding, (x) any insolvency, bankruptcy, reorganization or similar proceeding by or against the Facility Lessee or any other Person, (xi) any Lien of any Person with respect to the Facility, the Rocky Mountain Site, any Component, any other portion of the Facility Lessee's Rocky Mountain Interest or any part of the foregoing, (xii) the existence of the Payment Undertaking Agreement or the Qualifying Equity Funding Agreement (other than to the extent of the Rent payments discharged from any remittance from the Payment Undertaking Agreement or the Qualifying Equity Funding Agreement) or (xiii) any other cause, whether similar or dissimilar to the foregoing, any present or future law notwithstanding, except as expressly set forth herein or in any other Operative Documents, it being the intention of the parties hereto that all Rent payable by the Facility Lessee hereunder shall continue to be payable in all events in the manner and at times provided for herein. Such Rent shall not be subject to any abatement and the payments thereof shall not be subject to any setoff or reduction for any reason whatsoever, including any present or future claims of the Facility Lessee or any other Person against the Facility Lessor or any other Person under this Facility Lease or otherwise. To the extent permitted by Applicable Law, the Facility Lessee hereby waives any and all rights which it may now have or which at any time hereafter may be conferred upon it, by statute or otherwise, to terminate, cancel, quit or surrender this Facility Lease with respect to the Undivided Interest, except in accordance with Sections 10, 13, 14, 15 or 18. If for any reason whatsoever this Facility Lease shall be terminated in whole or in part by operation of law or otherwise, except as specifically provided herein, the Facility Lessee nonetheless agrees to the extent permitted by Applicable Law, to pay to the Facility Lessor an amount equal to each installment of Basic Rent and all Supplemental Rent due and owing, at the time such payment would have become due and payable in accordance with the terms hereof had this Facility Lease not been so terminated. The provisions of this Section 9 shall survive the termination for any reason whatsoever of the leasehold interest created by this Facility Lease. Upon and after termination of the leasehold hereby granted for any reason whatsoever, the Facility Lessee shall pay to the Facility Lessor, in lieu of the Rent payable hereunder, an amount equal to such Rent, and this obligation is expressly agreed to be a covenant of the Facility Lessee that is independent of the existence of such leasehold. The obligations of the Facility Lessee to pay all amounts hereunder other than Rent are also covenants that are independent of the existence of such leasehold and shall survive the termination thereof for any reason whatsoever. 14 SECTION 10. EVENTS OF LOSS Section 10.1 Occurrence of Events of Loss. The Facility Lessee will notify the Facility Lessor, the Owner Participant, the Lender and AMBAC of any damage to the Facility which the Facility Lessee reasonably anticipates may cause an Event of Loss described in clause (i), (ii), (iii) or (v) of the definition of Event of Loss within 10 Business Days of such event. The Owner Participant or the Facility Lessor will promptly notify the Facility Lessee of any event of which it is aware that upon election of the Owner Participant would result in an Event of Loss described in clause (iv) of the definition of Event of Loss. If an Event of Loss described in clauses (i) or (ii) of the definition of Event of Loss shall occur, then no later than six months following such occurrence the Facility Lessee shall notify the Facility Lessor in writing of its election to either (a) if no Event of Default has occurred and is continuing and subject to the satisfaction of the conditions set forth in Section 10.3, rebuild and restore the Facility in accordance with the provisions of the Rocky Mountain Agreements so that the Facility shall have a fair market value (present and residual), remaining useful life and utility at least equal to that of the Facility prior to such rebuilding, assuming the Facility was in the condition and repair required to be maintained by this Facility Lease or (b) terminate this Facility Lease pursuant to Section 10.2 hereof. The Facility Lessee may elect the option provided in clause (b) of the preceding sentence regardless of whether the Facility is to be rebuilt. If the Facility Lessee fails to make an election as provided above, an Event of Loss shall be deemed to occur as of the end of the six month period referred to in the third sentence of this Section 10.1 and the Facility Lessee will be deemed to have made the election to terminate this Facility Lease pursuant to Section 10.2. Section 10.2 Payment of Termination Value; Termination of Basic Rent. (a) If (x) the Facility Lessee shall elect not to rebuild the Facility pursuant to Section 10.3 hereof following an Event of Loss described in clause (i) or (ii) of the definition of Event of Loss or an Event of Loss shall be deemed to occur pursuant to the last sentence of Section 10.1, or (y) an Event of Loss described in clause (iii), (iv) or (v) of the definition of Event of Loss shall occur, then, on the next Termination Date following the Facility Lessee's notice of its election referred to in the third sentence of Section 10.1 or the occurrence of a deemed Event of Loss pursuant to the last sentence of Section 10.1 in the case of clause (x) above, or on the next Termination Date occurring at least three months after such occurrence of such Event of Loss in the case of clause (y) above, the Facility Lessee shall pay to the Facility Lessor (A) the Termination Value determined as of the relevant Termination Date, plus (B) all amounts of Supplemental Rent (including, without limitation, all costs and expenses of the Facility Lessor, the Owner Trustee, the Owner Participant and the Lender, and all sales, use, value added and other Taxes required to be indemnified by the Facility Lessee pursuant to Section 12.2 of the Participation Agreement associated with the exercise of the termination option pursuant to this Section 10.2) due and payable on or prior to such Termination Date, plus (C) any unpaid Basic Rent due before such Termination Date and, if such Termination Date shall be a Rent Payment Date, the Basic Rent (to the extent payable in arrears) due and payable on such Rent Payment Date and terminate this Facility Lease. 15 (b) Concurrently with the payment of all sums required to be paid pursuant to this Section 10.2, (1) Basic Rent for the Undivided Interest shall cease to accrue, (2) the Facility Lessee shall cease to have any liability to the Facility Lessor with respect to the Undivided Interest except for Supplemental Rent and other obligations (including, without limitation, those under Sections 12.1 and 12.2 of the Participation Agreement) surviving pursuant to the express provisions of any Operative Document, (3) the Facility Lessor will prepay the Loan Certificate pursuant to Section 10 of the Loan Agreement, (4) the Facility Lessor will at the Facility Lessee's cost and expense execute and deliver to the Facility Lessee a release or termination of this Facility Lease, (5) the Facility Lessor shall transfer the Facility Lessor's Rocky Mountain Interest to the Facility Lessee pursuant to this Section 10.2, Section 6 of the Ground Sublease and Section 9 of the Head Lease on an "as is", "where is" and "with all faults" basis, without representations or warranties other than a warranty as to the absence of Facility Lessor's Liens attributable to it accompanied by a warranty of the Owner Participant as to the absence of Owner Participant's Liens and (6) this Facility Lease shall terminate and the Facility Lessor shall discharge the Lien of the Loan Agreement and the security title of the Deed to Secure Debt and execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepared, filed and recorded (as appropriate) at the cost and expense of the Facility Lessee. (c) Any payments with respect to the Undivided Interest received at any time by the Facility Lessor or the Facility Lessee from any Governmental Entity as a result of the occurrence of an Event of Loss described in clause (iii) of the definition of Event of Loss shall be applied as follows: (i) so much of such payments as shall not exceed the amount required to be paid by the Facility Lessee pursuant to clause (A) of paragraph (a) of this Section 10.2 shall be applied in reduction of the Facility Lessee's obligation to pay such amount if not already paid by the Facility Lessee or, if already paid by the Facility Lessee, shall be applied to reimburse the Facility Lessee for its payment of such amount; and (ii) the balance, if any, of such payments remaining thereafter shall be apportioned between the Facility Lessor and the Facility Lessee in the proportion that the value of the Facility Lessor's Rocky Mountain Interest bears to the value of the Facility Lessee's Rocky Mountain Interest. Section 10.3 Rebuild. The Facility Lessee's right to rebuild the Facility pursuant to clause (a) of Section 10.1 hereof shall be subject to the fulfillment, at the Facility Lessee's sole cost and expense, in addition to the conditions contained in said clause (a), of the following conditions: (a) on the date the Facility Lessee shall notify the Facility Lessor pursuant to Section 10.1 of its election to rebuild the Facility in accordance with this Section 10.3, the Facility Lessee 16 shall deliver to the Owner Participant a tax opinion of counsel such counsel to be selected by the Owner Participant and be reasonably acceptable to the Facility Lessee, to the effect that, such rebuilding will not cause any unindemnified adverse tax consequences to the Owner Participant or any Affiliate. Any such indemnity must be in form and substance satisfactory to the Owner Participant in its sole discretion exercised in good faith, including, without limitation, in respect of security arrangements which the Owner Participant, in its sole discretion exercised in good faith may require to collateralize any such indemnity. (b) on the date the Facility Lessee shall notify the Facility Lessor pursuant to Section 10.1 of its election to rebuild the Facility in accordance with this Section 10.3, the Facility Lessee shall deliver to the Owner Participant a report of an independent engineer, such engineer and such report to be reasonably satisfactory to the Owner Participant, to the effect that the rebuilding of the Facility is technologically feasible and economically viable and, unless the Facility Lessee shall have delivered to the Facility Lessor notice of its election to exercise the Purchase Option pursuant to Section 15.1, that such rebuilding can be completed by a date 18 months prior to the Expiration Date; (c) on the date the Facility Lessee shall notify the Facility Lessor pursuant to Section 10.1 of its election to rebuild the Facility in accordance with this Section 10.3, the Facility Lessee shall demonstrate to the reasonable satisfaction of the Owner Participant adequate financial resources, from insurance proceeds or otherwise, to complete such rebuilding, and that the provisions of the Rocky Mountain Agreements will not impede such rebuilding of the Facility or adversely affect the Facility Lessor's interest therein; (d) the Facility Lessee shall cause the rebuilding of the Facility to commence as soon as practicable after the occurrence of such Event of Loss and in all events within 18 months of the occurrence of the event that caused such Event of Loss and will cause work on such rebuilding to proceed diligently thereafter. As the rebuilding of the Facility progresses, title to an undivided interest in such rebuilt facilities shall immediately vest in Oglethorpe as a tenant in common with Georgia Power, subject to the Lien of the Oglethorpe Mortgage, and an undivided interest equal to the Facility Lessor's Percentage in such rebuilt facilities shall become subject to the Head Lease and to this Facility Lease, automatically, for all purposes hereof, without any further act by any Person; (e) there shall be no termination of the Facility Sublease, and the Facility Sublease shall continue in full force and effect; and (f) on the date of the completion of such rebuilding of the Facility (the "Rebuilding Closing Date") the following documents shall be duly authorized, executed and delivered and, if appropriate, filed for recordation by the respective party or parties thereto and shall be in full force and effect, and an executed counterpart of each thereto shall be delivered to the Facility Lessor, the Owner Participant and the Lender; (1) supplements to the Head Lease, this Facility Lease and the Facility Sublease subjecting an undivided interest equal to the Facility Lessor's 17 Percentage in the rebuilt facilities to the Head Lease, this Facility Lease and the Facility Sublease (with no change in Undivided Interest Cost, Basic Rent or Sublease Basic Rent as a result of such replacement), (2) supplements to the Loan Agreement, the Deed to Secure Debt and the Facility Sublease Assignment Agreement subjecting the Facility Lessor's Rocky Mountain Interest in such rebuilt facilities to the Lien of the Loan Agreement, the security title of the Deed to Secure Debt and the Lien of the Facility Sublease Assignment Agreement, (3) a supplement to the Subordinated Deed to Secure Debt and Security Agreement subjecting the Facility Lessor's Rocky Mountain Interest in such rebuilt facilities to the Lien of the Subordinated Deed to Secure Debt and Security Agreement, (4) such recordings and filings as may be reasonably requested by the Owner Participant, the Lender or AMBAC to be made or filed, (5) an opinion of counsel of the Facility Lessee, such counsel and such opinion to be reasonably satisfactory to the Owner Participant, the Lender and AMBAC, to the effect that (w) the supplements to the Head Lease, this Facility Lease and the Facility Sublease referred to in clause (1) above constitute effective instruments for subjecting such rebuilt facilities to the Head Lease, this Facility Lease and the Facility Sublease, (x) the supplements to the Loan Agreement, the Deed to Secure Debt and the Facility Sublease Assignment Agreement referred to in clause (2) above constitute effective instruments for subjecting the Facility Lessor's Rocky Mountain Interest in such rebuilt facilities to the Lien of the Loan Agreement, the security title of the Deed to Secure Debt and the Lien of the Facility Sublease Assignment Agreement, (y) the supplement to the Subordinated Deed to Secure Debt and Security Agreement referred to in clause (3) above constitutes an effective instrument for subjecting the Facility Lessor's Rocky Mountain Interest in such rebuilt facilities to the Lien of the Subordinated Deed to Secure Debt and Security Agreement, and (z) all filings and other action necessary to perfect and protect the Facility Lessor's interest in an undivided interest equal to the Facility Lessor's Percentage in the rebuilt facilities and to subject the Facility Lessor's Rocky Mountain Interest in such rebuilt facilities to the Lien of the Loan Agreement, the security title of the Deed to Secure Debt, the Lien of the Facility Sublease Assignment Agreement and the Lien of the Subordinated Mortgage and Security Agreement have been accomplished and (6) satisfactory evidence as to the compliance with Section 11 of this Facility Lease with respect to the Facility, as so rebuilt. Whether or not the transactions contemplated by this Section 10.3 are consummated, the Facility Lessee agrees to pay or reimburse, on an After-Tax Basis, any costs or expenses (including reasonable legal fees and expenses) incurred by the Facility Lessor, the Owner Participant, the Lender and AMBAC in connection with the transactions contemplated by this Section 10.3. Section 10.4 Eminent Domain. In the event that during the Facility Lease Term the use of all or any portion of the Undivided Interest is requisitioned or taken by or pursuant to a request of any Governmental Entity under the power of eminent domain or otherwise for a period which does not constitute an Event of Loss, the Facility Lessee's obligation to pay all installments of Basic Rent shall continue for the duration of such requisitioning or taking. The Facility Lessee shall be entitled to receive and retain for its own account all sums payable for any such period by such Governmental Entity as compensation for such requisition or taking of possession. Any 18 amount referred to in this Section 10.4 which is payable to the Facility Lessee shall not be paid to the Facility Lessee, or if it has been previously paid directly to the Facility Lessee, shall not be retained by the Facility Lessee, if at the time of such payment a Payment Default, Bankruptcy Default or Event of Default shall have occurred and be continuing, but shall be paid to and held by the Facility Lessor as security for the obligations of the Facility Lessee under this Facility Lease, and upon the earlier of (a) 180 days after the Facility Lessor shall have received such amount; provided the Facility Lessor has not proceeded to exercise any remedy under Section 17 and it is not stayed or prevented by law or otherwise from exercising such remedy and (b) such time as there shall not be continuing any such Payment Default, Bankruptcy Default or Event of Default, such amount shall be paid to the Facility Lessee. SECTION 11. INSURANCE. Section 11.1 Property Insurance. Subject to availability on commercially reasonable terms, the Facility Lessee will maintain (or cause to be maintained) all risk property insurance in amounts and with deductibles not to exceed $25,000,000 per occurrence as is customarily carried by prudent operators of hydroelectric facilities of comparable size and risk, and against loss or damage from such causes as are customarily insured against, which includes coverage for flood and earthquake and includes (subject to sublimits of $50,000,000 and $100,000,000, respectively) and boiler and machinery (subject to a sublimit of $100,000,000) coverage to cover mechanical breakdown, and as required under, and to the extent required by, the Oglethorpe Mortgage and the Rocky Mountain Agreements in an amount not less than $302,000,000. Section 11.2 Liability Insurance. Subject to availability on commercially reasonable terms, the Facility Lessee will maintain liability insurance, including contractual liability coverage, insuring against claims for bodily injury (including death) and property damage to third parties arising out of the ownership, operation, maintenance, condition and use of the Facility and the Rocky Mountain Site, in an amount and with deductibles customarily carried by prudent operators of hydroelectric facilities of comparable size and risk, but not less than $35 million per occurrence. Such liability insurance may be purchased either in a single limit or in combination with a general and an excess policy. In the event of a material increase in the development of the property adjacent to the Rocky Mountain Site or changes in product liability exposure or laws during the Facility Lease Term, the Facility Lessee will periodically review the liability insurance maintained by it or on its behalf. In connection with any such review, the Facility Lessee will consult with the Facility Lessor, the Owner Participant and the Lender. Following such review and consultation, if appropriate, the Facility Lessee will increase such coverage and limits in order that the liability insurance maintained by it or on its behalf is consistent with that maintained by prudent operators of hydroelectric facilities of comparable size and risk taking into account such increased 19 development, subject to the availability of such insurance in such amounts on commercially reasonable terms. Section 11.3 Provisions With Respect to Insurance. Subject to availability on commercially reasonable terms, the Facility Lessee will place the insurance maintained pursuant to this Section 11 with companies having an A.M. Best rating of at least "A-" or, if not so rated, of comparable financial strength. All insurance policies required to be maintained pursuant to Section 11.2 shall name the Trustees (both in their individual capacities and as trustees), the Owner Participant and the Lender as additional insureds, as their interest may appear. All insurance policies required to be maintained pursuant to this Section 11 shall also provide for at least 30 days' prior written notice (10 days for non-payment) by the insurance carrier to the Trustees, the Owner Participant and the Lender in the event of cancellation, non-renewal, termination, expiration or amendment. The Facility Lessee will place the insurance required by this Section 11 with insurance companies which agree to waive all claims for premiums from, and all subrogation rights against, the Trustees, the Owner Participant and the Lender. All the insurance maintained pursuant to this Section 11 shall be primary without right of contribution of any other insurance carried by or on behalf of the Trustees, the Owner Participant or the Lender with respect to their respective interests in the Facility and the Rocky Mountain Site. To the extent available on commercially reasonable terms, the Facility Lessee will use its best efforts to provide that the respective interests of the Trustees, the Owner Participant and the Lenders shall not be invalidated by any act or neglect of the Facility Lessee, or any breach or violation by the Facility Lessee of any warranties, declarations or conditions contained in such policies, or by the use of the Facility and the Rocky Mountain Site for purposes more hazardous than permitted by such policies. To the extent available on commercially reasonable terms, the Facility Lessee will use its best efforts to provide that such policies shall also be endorsed to: (i) provide that coverage will not be invalidated by any foreclosure or other proceeding or notice of sale relating to the Facility or the Rocky Mountain Site or any change in title or ownership of the Facility or the Rocky Mountain Site, (ii) provide that, inasmuch as the policies are written to cover more than one insured, all terms, conditions, insuring agreements and endorsements, with the exception of limits of liability, shall operate in the same manner as if there were a separate policy covering each insured and (iii) to provide that the coverage afforded by such policies shall not be affected by the performance of any work in or about any Modification. The Facility Lessee shall, at its own expense, make all proofs of loss and take all other steps necessary to collect the proceeds of such insurance. Section 11.4 Reports. On or prior to December 1 of each year commencing on December 1, 1997, the Facility Lessee shall furnish the Trustees, the Owner Participant and the Lender with a report signed by a Responsible Officer of the Facility Lessee identifying all insurance coverages in place and certifying that all premiums in respect of such policies are paid in full. Such report shall also identify any significant change in coverage, limits or change in carriers and will include a review of any significant changes in the development of the property adjacent to the Rocky Mountain Site, product liability exposure and laws. So long as the Facility 20 Sublease shall be in effect the requirement of the preceding sentence may be satisfied by delivery by the Facility Lessee to the Facility Lessor, the Owner Participant and the Lender of the report required by the first sentence of Section 11.4 of the Facility Sublease. The Facility Lessee shall use its best efforts prior to expiration and renewal, but in no event more than 5 Business Days after expiration and renewal of any policy required by this Section 11, to provide to the Trustees, the Owner Participant and the Lender, certificates from insurance brokers or carriers to the effect that such policy is in effect and indicating their status as additional insureds. Section 11.5 Additional Insurance by Facility Lessor. At any time the Facility Lessor (either directly or in the name of the Owner Participant) may at its own expense and for its own account carry insurance with respect to its interest in the Undivided Interest; provided, that such insurance does not in any way interfere with the Facility Lessee's ability to obtain insurance with respect to the Undivided Interest described in Section 11.1. Any insurance payments received from policies maintained by the Facility Lessor pursuant to the previous sentence shall be retained by the Facility Lessor without reducing or otherwise affecting the Facility Lessee's obligations hereunder. SECTION 12. INSPECTION During the Facility Lease Term, each of the Owner Participant, the Facility Lessor, the Trustees, Lender and their representatives may, at reasonable times, on reasonable notice to the Facility Lessee and the Facility Operator and at their own risk and expense (except, at the expense, but not risk, of the Facility Lessee when an Event of Default, Bankruptcy Default or Payment Default has occurred and is continuing), inspect the Facility (together with the records of the Facility Operator with respect to the operations and maintenance thereof) and the Rocky Mountain Site; provided, however, that any such inspection will not interfere with the Facility Operator's or the Facility Lessee's normal commercial operation of the Facility and will be in accordance with the Facility Operator's safety and insurance programs. Upon request of the Owner Participant, the Facility Lessor, or the Lender (but no more often than annually, provided no Event of Default has occurred and is continuing), the Facility Lessee shall make available a Responsible Officer to discuss the business, financial condition or accounts of the Facility Lessee. In no event shall the Facility Lessor, the Owner Participant or the Lender have any duty or obligation to make any such inspection and such Persons shall not incur any liability or obligation by reason of not making any such inspection. SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS Section 13.1 Election to Terminate. After the occurrence and during the continuance of any of the events specified below, the Facility Lessee shall have the right, at its option, so long as (a) no Event of Default shall have occurred and be continuing and (b) the Facility Lessee shall simultaneously exercise its election to terminate each Other Facility Lease to the extent any such 21 event constitutes a burdensome event under the provisions of such Other Facility Lease pursuant to Section 13.1 thereof, upon at least 30 days' prior written notice to the Facility Lessor, the Trustees, the Owner Participant and the Lender, to purchase the Facility Lessor's Rocky Mountain Interest and terminate this Facility Lease on the Termination Date specified in such notice (which shall be a date occurring not more than 90 days after such notice and which, in the case of a termination in consequence of clause (c) below shall be the Termination Date identified by the Facility Sublessee in its notice to the Facility Lessee pursuant to Section 13.1 of the Facility Sublease) if: (i) it shall have become illegal for the Facility Lessee to continue this Facility Lease or for the Facility Lessee to make payments under this Facility Lease and the transactions contemplated by the Operative Documents cannot be restructured in a manner acceptable to the Transaction Parties; (ii) one or more events outside the control of the Facility Lessee shall have occurred which, will give rise to an obligation by the Facility Lessee to pay or indemnify under Section 12.1 or 12.2 of the Participation Agreement (other than costs and expenses resulting from a replacement of the Payment Undertaking Agreement pursuant to Section 17.4 of the Participation Agreement or a refinancing of the Loan Certificate pursuant to Section 15 of the Participation Agreement); provided, however, that (a) the indemnity obligation (and the underlying cost or Tax) can be avoided in whole or in part by such termination and (b) the amount of such avoided payments would exceed (on a present value basis, discounted annually at the Debt Rate, to the date of the termination) three percent of the Undivided Interest Cost. If the Owner Participant shall waive its right to, or shall arrange for payment of (without reimbursement by the Facility Lessee), amounts of indemnification payments under Section 12.1 or 12.2 of the Participation Agreement in excess of such amount as to cause such avoided payments, computed in accordance with the preceding sentence, not to exceed three percent of the Undivided Interest Cost, no such termination option in favor of the Facility Lessee shall exist; or (iii) the Facility Sublessee shall exercise its option to terminate the Facility Sublease pursuant to Section 13 of the Facility Sublease. The Facility Lessee shall not consent to independent tax counsel selected by the Facility Sublessee pursuant to paragraph (iii) of Section 13.1 of the Facility Sublease without the consent of the Owner Participant, which consent will not be unreasonably withheld. If the Facility Lessee does not give notice of its exercise of the termination option under this Section 13.1 within six months of the date the Facility Lessee receives notice or Actual Knowledge of the event or condition described above, the Facility Lessee will lose its right to terminate this Facility Lease pursuant to this Section 13.1 as a result of such event or condition. Section 13.2 Procedure for Exercise of Termination Option. If the Facility Lessee shall have exercised its option under Section 13.1, on the Termination Date specified in the Facility 22 Lessee's notice of such exercise, the Facility Lessee shall pay to the Facility Lessor (a) the higher of Fair Market Sales Value of the Facility Sublessor's Rocky Mountain Interest and Termination Value, determined as of such Termination Date, plus (b) all amounts of Supplemental Rent (including all costs and expenses of the Facility Lessor, the Trustees, the Owner Participant and the Lender and all sales, use, value added and other Taxes covered by Section 12.2 of the Participation Agreement associated with the exercise of the termination option pursuant to this Section 13) due and payable on or prior to the Termination Date and (c) any unpaid Basic Rent due before such Termination Date and, if such Termination Date shall be a Rent Payment Date, the Basic Rent (to the extent payable in arrears) due and payable on such Rent Payment Date. Concurrently with the payment of all sums specified in this Section 13.2, (1) Basic Rent for the Undivided Interest shall cease to accrue, (2) the Facility Lessee shall cease to have any liability to the Facility Lessor with respect to the Undivided Interest, except for Supplemental Rent and other obligations (including those under Sections 12.1 and 12.2 of the Participation Agreement) surviving pursuant to the express terms of any Operative Document, (3) the Facility Lessor shall pay all outstanding principal and accrued interest on the Loan Certificate and all other amounts due under the Loan Agreement, (4) the Facility Lessor will execute and deliver to the Facility Lessee, to be prepared (and where appropriate recorded and filed), at the Facility Lessee's cost and expense, a release or termination of this Facility Lease, (5) the Facility Lessor will transfer, pursuant to this Section 13.2, Section 6 of the Ground Sublease and Section 9 of the Head Lease, the Facility Lessor's Rocky Mountain Interest to the Facility Lessee on an "as is", "where is" and "with all faults" basis, without representations or warranties other than a warranty as to the absence of Facility Lessor's Liens attributable to it accompanied by a warranty of the Owner Participant as to the absence of Owner Participant's Liens and (6) this Facility Lease shall terminate and the Facility Lessor shall cause to be discharged the Lien of the Loan Agreement and the security title of the Deed to Secure Debt and execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepaid, filed and recorded (if appropriate) at the cost and expense of the Facility Lessee. It shall be a condition of the termination of this Facility Lease pursuant to this Section 13, that the Facility Lessee shall pay all amounts it is obligated to pay under this Section 13.2 and all other amounts due by the Facility Lessee under this Facility Lease and the other Operative Documents. SECTION 14. TERMINATION FOR OBSOLESCENCE Section 14.1 Termination. Upon at least 270 days' prior written notice to the Facility Lessor, the Owner Trustee, the Owner Participant and the Lender, which notice shall contain the certification by the Board of Directors of the Facility Sublessee required by Section 14.1 of the Facility Sublease to the effect that the Undivided Interest is economically or technologically obsolete or that the Undivided Interest is surplus to the Facility Sublessee's needs, the Facility Lessee shall have the option, so long as no Bankruptcy Default, Payment Default or Event of Default shall have occurred and be continuing, to terminate this Facility Lease on any Termination Date occurring on or after the fifth anniversary of the Closing Date (the "Obsolescence Termination Date") on the terms and conditions set forth in this Section 14. 23 Section 14.2 Solicitation of Offers. If the Facility Lessee shall give the Facility Lessor notice pursuant to Section 14.1 and the Facility Lessor shall not have elected to retain the Facility Lessor's Rocky Mountain Interest pursuant to Section 14.3 hereof, the Facility Lessee may, as non-exclusive agent for the Facility Lessor, use its best efforts to obtain bids for the cash purchase of the Facility Lessor's Rocky Mountain Interest. The Facility Lessor shall also have the right to obtain bids for the cash purchase of the Facility Lessor's Rocky Mountain Interest either directly or through agents other than the Facility Lessee. At least 120 days prior to the Obsolescence Termination Date the Facility Lessee shall certify to the Facility Lessor each bid or offer, the amount and terms thereof and the name and address of the party (which shall not be the Facility Lessee, any cooperative member of Oglethorpe or any Affiliate of any thereof) submitting such bid or offer. Section 14.3 Right of Facility Lessor to Retain the Facility Lessor's Rocky Mountain Interest. The Facility Lessor may irrevocably elect to retain, rather than sell, the Facility Lessor's Rocky Mountain Interest by giving notice to the Facility Lessee at least 90 days prior to the Obsolescence Termination Date. If the Facility Lessor elects to retain the Facility Lessor's Rocky Mountain Interest pursuant to this Section 14.3, on the Obsolescence Termination Date (a) the Facility Lessee shall pay to the Facility Lessor all Supplemental Rent (including all costs and expenses of the Facility Lessor, the Trustees, the Owner Participant and the Lender and all sales, use, value added and other Taxes covered by Section 12.2 of the Participation Agreement associated with the exercise of the termination option pursuant to this Section 14.3) due and payable on such Obsolescence Termination Date and (b) the Facility Lessee shall pay to the Facility Lessor any unpaid Basic Rent due before such Obsolescence Termination Date and, if such Obsolescence Termination Date shall be a Rent Payment Date, the Basic Rent (to the extent payable in arrears) due and payable on such Rent Payment Date, but shall not be required to pay Termination Value. Concurrently with the payment of all sums required to be paid pursuant to this Section 14.3, (i) Basic Rent for the Undivided Interest shall cease to accrue, (ii) the Facility Lessee shall cease to have any liability hereunder to the Facility Lessor with respect to the Undivided Interest, except for Supplemental Rent and other obligations (including, without limitation, those under Sections 12.1 and 12.2 of the Participation Agreement) surviving pursuant to the express terms of any Operative Document, (iii) the Facility Lessor shall pay all outstanding principal and accrued interest on the Loan Certificate and all other amounts due under the Loan Agreement, (iv) the Facility Lessee will return the Undivided Interest to the Facility Lessor in accordance with Section 5.1, and (v) this Facility Lease shall terminate and the Facility Lessor shall cause to be discharged the Lien of the Loan Agreement and the security title of the Deed to Secure Debt and execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepaid, filed and recorded (if appropriate) at the cost and expense of the Facility Lessee. It shall be a condition to the termination of this Facility Lease pursuant to this Section 14.3, that the Facility Lessee shall pay all amounts that it is obligated to pay under this Section 14.3 and all other amounts due by the Facility Lessee under this Facility Lease and the other Operative Documents. 24 Section 14.4 Procedure for Exercise of Termination Option. If the Facility Lessor has not elected to retain the Undivided Interest in accordance with Section 14.3 hereof, on the Obsolescence Termination Date the Facility Lessor shall sell the Facility Lessor's Rocky Mountain Interest under this Section 14.4, Section 6 of the Ground Sublease and Section 9 of the Head Lease to the bidder or bidders (which shall not be the Facility Lessee, Oglethorpe or a cooperative member of Oglethorpe or any Affiliate of any of the foregoing), that shall have submitted the highest cash bid or bids with respect to the Facility Lessor's Rocky Mountain Interest, and the Facility Lessee shall certify to the Facility Lessor and the Owner Participant that such buyer is not the Facility Lessee, Oglethorpe or a cooperative member of Oglethorpe or any Affiliate of any of the foregoing. On the Obsolescence Termination Date, the Facility Lessee shall pay to the Facility Lessor (a) the excess, if any, of Termination Value determined as of such Obsolescence Termination Date over the total sale price for the Facility Lessor's Rocky Mountain Interest paid to or retained by the Facility Lessor, without deduction from the sale price of the expenses, if any, incurred by the Facility Lessee, the Facility Lessor, the Owner Participant and the Lender in connection with such sale, plus (b) any unpaid Basic Rent due before such Obsolescence Termination Date and, if such Obsolescence Termination Date shall be a Rent Payment Date, any Basic Rent (to the extent payable in arrears) due and payable on such Rent Payment Date, and (c) all amounts of Supplemental Rent (including all costs and expenses of the Facility Lessor, the Trustees, the Owner Participant and the Lender and all sales, use, value added and other Taxes covered by Section 12.2 of the Participation Agreement associated with the exercise of the termination option pursuant to this Section 14) due and payable on such Obsolescence Termination Date. Concurrently with the payment of all sums required to be paid pursuant to this Section 14.4, (i) Basic Rent for the Undivided Interest shall cease to accrue, (ii) the Facility Lessee shall cease to have any liability hereunder to the Facility Lessor with respect to the Undivided Interest, except for Supplemental Rent and other obligations (including Sections 12.1 and 12.2 of the Participation Agreement) surviving pursuant to the express terms of any Operative Document, (iii) the Facility Lessor will prepay the Loan Certificate pursuant to Section 10 of the Loan Agreement, (iv) the Facility Lessor will transfer (by an appropriate instrument of transfer in form and substance reasonably satisfactory to the Facility Lessor and prepared and recorded at the Facility Lessee's expense) the Facility Lessor's Rocky Mountain Interest under this Section 14.4, Section 6 of the Ground Sublease and Section 9 of the Head Lease to the purchaser on an "as is", "where is" and "with all faults" basis, without representations or warranties other than a warranty as to the absence of Facility Lessor's Liens accompanied by a warranty by the Owner Participant as to the absence of Owner Participant's Liens and (v) this Facility Lease shall terminate and the Facility Lessor shall cause to be discharged the Lien of the Loan Agreement and the security title of the Deed to Secure Debt and execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepaid, filed and recorded (if appropriate) at the cost and expense of the Facility Lessee. Unless the Facility Lessor shall have elected to retain the Undivided Interest pursuant to Section 14.3 or the Facility Lessor with the consent of the Facility Lessee shall have entered into a legally binding contract to sell the Facility Lessor's Rocky Mountain Interest, the Facility Lessee may, at its election, revoke its notice of termination on at least 30 days' prior notice to the Facility Lessor, the Trustees, the Owner Participant and the 25 Lender in which event this Facility Lease shall continue with respect to the Undivided Interest; provided, however, that a notice of termination may be revoked on not more than two occasions during the Facility Lease Term and the Facility Lessee shall not be permitted to initiate a notice to terminate pursuant to Section 14.1 following a second revocation in accordance with this sentence. The Facility Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Facility Lessee to obtain bids or otherwise take any action in arranging any such sale of the Facility Lessor's Rocky Mountain Interest other than, if the Facility Lessor has not elected to retain the Undivided Interest, to transfer the Facility Lessor's Rocky Mountain Interest in accordance with clause (iv) of the second preceding sentence. It shall be a condition of the Facility Lessor's obligation to consummate a sale of the Facility Lessor's Rocky Mountain Interest that the Facility Lessee shall pay all amounts it is obligated to pay under this Section 14.4. If no sale shall occur on the Obsolescence Termination Date, the notice of termination shall be deemed revoked and this Facility Lease shall continue as to the Undivided Interest in full force and effect in accordance with its terms. The Facility Lessee will be obligated to pay any expenses or damages of the Facility Lessor or the Owner Participant resulting from the failure to consummate a sale of the Facility Lessor's Rocky Mountain Interest for any reason other than the bad faith or willful misconduct by the Facility Lessor or the Owner Participant. SECTION 15. END OF BASIC TERM OPTIONS Section 15.1 The Facility Lessee's Purchase and Return Options. Unless this Facility Lease shall have been previously terminated pursuant to Section 10, 13, 14, 17 or 18 hereof, at any time not more than forty-eight months nor less than eighteen months prior to the Expiration Date, the Facility Lessee shall have the option, upon giving written notice to the Facility Lessor and the Owner Participant, (A) to irrevocably elect to purchase the Undivided Interest on the Expiration Date for the Purchase Option Price in accordance with this Section 15.1 (the "Purchase Option") or (B) to irrevocably elect to return the Undivided Interest to the Facility Lessor in accordance with Section 5 (the "Return Option"). If the Facility Lessee shall have elected the Return Option, on the Expiration Date it shall return the Undivided Interest to the Facility Lessor in accordance with the provisions of Section 5 of this Facility Lease. If the Facility Lessee shall have exercised the Purchase Option, the Facility Lessee shall become unconditionally obligated to pay (a) on the Expiration Date (i) the initial installment of the Purchase Option Price in the amount of $302,435,484.77 (which installment, in any event, shall be at least equal to the outstanding principal balance of the Loan Certificate on the Expiration Date), (ii) all amounts of Supplemental Rent (including, without limitation, all costs and expenses of the Facility Lessor, the Trustees, the Owner Participant and the Lender and all sales, use, value added and other Taxes covered by Section 12.2 of the Participation Agreement associated with the Purchase Option) due and payable on the Expiration Date, and (iii) any unpaid Basic Rent due before the Expiration Date and the Basic Rent due and payable on the Expiration Date and (b) subsequent installments of the Purchase Option Price in the amounts and on the dates set forth below: 26 Date Amount ---- ------ 4/15/2027 $ 38,600,899.58 6/15/2027 $ 38,600,899.58 9/15/2027 $ 38,600,899.58 12/15/2027 $ 38,600,899.58 The covenant to pay the subsequent installments of the Purchase Option Price in accordance with the preceding sentence shall survive the termination of this Facility Lease. The Qualifying Equity Funding Agreement shall continue to secure the Facility Lessee's obligation to pay the subsequent installments of the Purchase Option Price and this covenant shall also survive the termination of this Facility Lease. Concurrently with the payment of the sums specified in clause (a) of this Section 15.1 (w) Basic Rent for the Undivided Interest shall cease to accrue, (x) the Facility Lessee shall cease to have any liability to the Facility Lessor with respect to the Undivided Interest, except for Supplemental Rent and other obligations (including those under Sections 12.1 and 12.2 of the Participation Agreement and the additional installments of the Purchase Option Price payable in accordance with the third sentence of this Section 15.1) surviving pursuant to the express terms of any Operative Document, (y) the Facility Lessor will, by documents and instruments in form and substance reasonably satisfactory to the Facility Lessee, transfer the Facility Lessor's Rocky Mountain Interest to the Facility Lessee in accordance with this Section 15.1, Section 6 of the Ground Sublease and Section 9 of the Head Lease on an "as is", "where is" and "with all faults" basis, without representations or warranties other than a warranty as to the absence of Facility Lessor's Liens or Owner Participant's Liens and (z) this Facility Lease shall terminate and the Facility Lessor shall cause to be discharged the Lien of the Loan Agreement and the security title of the Deed to Secure Debt and execute and deliver appropriate releases and all other documents or instruments necessary or desirable to effect the foregoing, all to be prepared, filed and recorded (as appropriate) at the cost and expense of the Facility Lessee. If the Facility Lessee shall fail to exercise the Purchase Option or the Return Option by the date eighteen months prior to the Expiration Date, it will be deemed to have elected the Return Option on such date eighteen months prior to the Expiration Date. Section 15.2 The Facility Lessor's Replacement Lease Option and Renewal Term Option. If (i) this Facility Lease shall not have been previously terminated pursuant to Section 10, 13, 14, 17 or 18 hereof, and (ii) the Facility Lessee shall have elected, or be deemed to have elected, the Return Option pursuant to Section 15.1, the Facility Lessor shall elect either to sublease the Facility Lessor's interest in the Undivided Interest to a new, third party lessee in accordance with Section 15.3 (the "Replacement Lease Option") or to cause the Facility Lessee to renew this Facility Lease for a renewal term in accordance with Section 15.4 (the "Renewal Term Option") or to cause the Facility Lessee to return the Undivided Interest to the Facility Lessor in accordance with Section 15.6 (the "Retention Option"). If the Facility Lessor shall fail to make 27 any election by the date 30 days prior to the Expiration Date or shall elect the Replacement Lease Option and a Replacement Facility Lease shall not be executed with a Replacement Facility Lessee in accordance with Section 15.3 on or prior to the Expiration Date, the Facility Lessor will be deemed to have elected the Renewal Term Option and the Facility Lessee will be obligated to comply with Section 15.4 hereof. Section 15.3 Procedure for Replacement Lease Option. (a) If the Facility Lessor shall have elected the Replacement Lease Option pursuant to Section 15.2, the Facility Lessor shall cause a Replacement Facility Lessee acceptable to it to enter into a replacement lease of the Undivided Interest (a "Replacement Facility Lease") with the Facility Lessor. The rent payable under any Replacement Facility Lease and all terms and conditions of such Replacement Facility Lease shall be as agreed among the Owner Participant, the Replacement Facility Lessee and any party making a Loan Extension pursuant to Section 15.5. (b) The obligation by the Facility Lessor and the Owner Participant to enter into or accept, as the case may be, a Replacement Facility Lease and to consummate the Replacement Lease Option shall be subject to the fulfillment or waiver, on or before the Expiration Date, to the satisfaction of each such Person of the following conditions precedent: (i) each such Person shall have received such documents or other evidence as it shall reasonably have requested with respect to the prospective Replacement Facility Lessee to establish the taking of all requisite corporate or other similar actions and proceedings in connection therewith; (ii) each such Person shall have received an opinion of counsel for the Replacement Facility Lessee which counsel and opinion shall be reasonably acceptable to each such Person, (A) to the effect that the Replacement Facility Lease and each other agreement to which the Replacement Facility Lessee is a party in connection with such Replacement Facility Lease have been duly authorized, executed and delivered by the Replacement Facility Lessee and constitute the legal, valid and binding obligations of the Replacement Facility Lessee and (B) covering such other matters incident to such Replacement Facility Lease arrangement as each such Person may reasonably request; (iii) the Owner Participant shall have received an opinion from counsel for the Facility Lessor, which counsel and opinion shall be reasonably acceptable to the Owner Participant, to the effect that the Replacement Facility Lease and each other agreement to which the Facility Lessor is a party in connection with such Replacement Facility Lease have been duly authorized, executed and delivered by the Facility Lessor and constitute legal, valid and binding obligations of the Facility Lessor, and covering such other matters incident to the transactions contemplated by such Replacement Facility Lease arrangement as the Owner Participant may reasonably request; 28 (iv) the Owner Participant shall have received the following, in each case in form and substance reasonably satisfactory to it: (A) an incumbency certificate of the Replacement Facility Lessee regarding the officers of the Replacement Facility Lessee authorized to execute and deliver the documents referred to in this Section 15.3 to which it is a party and any other documents or agreements delivered in connection therewith; (B) certified copies of all documents evidencing the corporate (or similar) actions of the Replacement Facility Lessee including, without limitation, resolutions of the board of directors of the Replacement Facility Lessee duly authorizing the execution, delivery and performance by the Replacement Facility Lessee of each of the documents referred to in this Section 15.3 to which it is a party and the transactions contemplated thereby; (C) certified copies of the by-laws and certificate of incorpora- tion (or comparable organizational or governing documents) of the Replacement Facility Lessee; and (D) such other agreements (including, if deemed necessary by the Owner Participant, appropriate amendments to the Rocky Mountain Agreements), documents, certifications and opinions as the Owner Participant shall reasonably determine are necessary or appropriate in connection with the consummation of such Replacement Facility Lease; (v) the Replacement Facility Lease shall be duly executed and delivered by the Replacement Facility Lessee and shall have been approved by any relevant federal or state regulatory agency or agencies, if and to the extent required by Applicable Law, and such other recordings, filings, financing statements, continuation statements or other instruments shall have been filed or made and all other actions shall have been taken as are necessary or desirable in the opinion of the Owner Participant and the Facility Lessor to maintain all of the Facility Lessor's right, title and interest in and to the Facility Lessor's Rocky Mountain Interest; and (vi) all other matters and proceedings taken in connection with such transaction shall be reasonably satisfactory to the Owner Participant and the Facility Lessor. (c) The Facility Lessor agrees to pay or reimburse, or cause to be paid or reimbursed, on an After-Tax Basis, within 30 Business Days of the date of demand, all costs and expenses, 29 including reasonable legal fees and expenses incurred by the Facility Lessor, the Trustees, the Lender, the Payment Undertaking Issuer, any Person making a Loan Extension on the Expiration Date and the Facility Lessee, in connection with the implementation of the Replacement Lease Option, whether or not any such transactions are consummated. (d) The Facility Lessee shall deliver the Undivided Interest to the Replacement Facility Lessee on the Expiration Date in accordance with Section 5 and shall pay all accrued and unpaid Rent through and including the Expiration Date. Section 15.4 Procedure for Renewal Term Option. (a) If the Facility Lessor shall have elected the Renewal Term Option, or if the Renewal Term Option shall be deemed to have been elected pursuant to Section 15.2, the term of this Facility Lease will be extended for a renewal term that begins on the Expiration Date and extends for a period of 16 years, or such shorter period as may be acceptable to the Owner Participant and extends beyond the final maturity of the Loan or any Loan Extension (the "Renewal Term") made in accordance with the provisions of Section 15.5 and the Facility Lessee will arrange for a Loan Extension in accordance with Section 15.5. Termination Values during the Renewal Term will be as set forth on Schedule 2 to this Facility Lease as such amounts may be adjusted as provided in this Facility Lease; provided, that, notwithstanding anything to the contrary set forth herein, the amounts of such Termination Values during the Renewal Term, together with any Basic Rent payable on any Termination Date during the Renewal Term, shall never be less than the scheduled outstanding principal amount of, and accrued interest scheduled to be payable on, the Loan Extension on the date on which such Termination Values are payable. (b) The schedule of Basic Rent for the Renewal Term set forth in Schedule 1 shall be adjusted in accordance with the same assumptions and methodology originally employed by the Owner Participant in determining the Net Economic Return, so as to preserve Net Economic Return as provided in Section 3.4 and, to the extent consistent therewith, minimize the net present value of Basic Rent for the Renewal Term: (i) during the Basic Term in any circumstance in which Basic Rent, Termination Values and the Purchase Option Price are adjusted pursuant to Section 3.4 of the Facility Lease; (ii) on or prior to the Expiration Date, to reflect an adjustment in the interest expense (and related tax consequences) on the Loan or any Loan Extension from the interest rate on the Loan Certificate; and (iii) to reflect any amounts included in income by the Owner Participant at the end of the Basic Term (and future correlative tax benefits) resulting from any Modifications made during the Basic Term; 30 and, in the case of any such adjustment to the schedule of Basic Rent set forth on Schedule 1, (A) the amount of Basic Rent payable on the Rent Payment Dates set forth in Schedule 1 (as adjusted in accordance with this paragraph (b) of this Section 15.4) shall never be less than the amounts of principal and interest scheduled to be payable under the Loan (including the Reset Interest Rate) or the Loan Extension on such date and (B) the schedule of Termination Values set forth on Schedule 2 shall be appropriately adjusted in the same manner as provided above in this paragraph (b) of this Section 15.4 in respect of adjustments to the schedule of Basic Rent. Notwithstanding the foregoing or any other provision of this Section 15.4, any Termination Value payable during the Renewal Term shall in all circumstances and in all events be an amount which, together with any Basic Rent then due, will be at least sufficient to pay in full as of any date of determination the aggregate principal amount of the Loan or any Loan Extension at the time scheduled to be outstanding, together with all unpaid interest thereon scheduled to be due at such time. (c) If the Facility Lessor elects the Renewal Term Option, the Facility Lessee shall: (i) provide the Owner Participant with undertakings, opinions and certificates comparable to those delivered to it on the Closing Date and covering other matters with respect to the Facility Lessee, the Facility, the Rocky Mountain Site and the Operative Documents, in form and substance satisfactory to it; and (ii) provide the Facility Lessor collateral security for its obligation to pay Basic Rent and Termination Value during a Renewal Term acceptable to the Owner Participant in the Owner Participant's sole judgment. (d) If on the Expiration Date, the Facility Lessee is unable to arrange for a Loan Extension in accordance with Section 15.5(a), the Facility Lessee may exercise the Purchase Option in accordance with Section 15.1 (except that the Facility Lessee's purchase of the Undivided Interest may be consummated on the Business Day next following the Expiration Date so long as the Facility Lessee shall pay interest on the initial installment of the Purchase Option Price to (but not including) such Business Date at the Overdue Rate. (e) The Facility Lessee shall pay or reimburse, on demand, all costs and expenses (including reasonable legal fees and expenses) incurred by the Facility Lessor, the Owner Participant, the Trustees, the Lender and any third party lender in connection with the exercise of the Renewal Term Option, including, without limitation, the costs and expenses in connection with the Loan Extension, whether or not any of such transactions are consummated. Section 15.5 Loan Extension. (a) If the Facility Lessor shall have elected or shall have been deemed to have elected the Renewal Term Option, the Facility Lessee shall (x) satisfy the requirements of Section 15.4(c) (ii) and (y) arrange a Loan Extension from one or more third parties. If the Facility Lessee has exercised reasonable efforts to arrange for a Loan Extension with third party lenders and if third 31 party lenders cannot be arranged for 100% of the principal amount of the Loan Certificate then outstanding under the Loan Agreement, the Facility Lessee at the request of the Facility Lessor or the Owner Participant shall purchase up to 49% of the principal amount of the Loan Certificate then outstanding under the Loan Agreement from the Lender in accordance with Section 2.11 of the Loan Agreement. Loan Certificates purchased by the Facility Lessee pursuant to the preceding sentence shall be secured on a pari passu basis with all other outstanding Loan Certificates other than with respect to the granting of consents, waivers or amendments or exercising remedies following a default under the security documents securing the Loan Certificates. (b) If the Facility Lessor shall have elected the Replacement Lease Option, the Facility Lessor shall arrange for a Loan Extension, provided that if on the last day of the Basic Term a Replacement Facility Lessee shall be prepared to enter into a Replacement Facility Lease but the Facility Lessor has not been able to arrange for a Loan Extension by such date, the Facility Lessee at the request of the Facility Lessor or the Owner Participant shall purchase the Loan Certificate from the Lender in accordance with Section 2.11 of the Loan Agreement. Section 15.6 Procedure for Retention Option. If the Facility Lessor shall have elected the Retention Option: (i) Facility Lessor shall arrange, in a manner acceptable to the Lender in its sole discretion, for the payment or prepayment in full of the principal amount of the Loan Certificate outstanding on the Expiration Date plus accrued interest thereon and all other amounts due under the Loan Agreement; (ii) in the event the condition in clause (i) above has not been satisfied on or before the 30th day prior to the Expiration Date, Facility Lessor shall be deemed to have elected the Renewal Term Option; and (iii) the Facility Lessee shall deliver the Undivided Interest to the Facility Lessor on the Expiration Date in accordance with Section 5 and shall pay all unpaid Rent through and including the Expiration Date and all other amounts due and payable under the Operative Documents. SECTION 16. EVENTS OF DEFAULT The following events shall constitute "Event of Defaults" hereunder (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Entity): 32 (a) the Facility Lessee shall fail to make any payment of Basic Rent or the Purchase Option Price within five Business Days after the same shall have become due; or (b) the Facility Lessee shall fail to make any payment of Termination Value required by Section 10, 13 or 14 within ten Business Days after the same shall have become due; or (c) the Facility Lessee shall fail to make any payment of Supplemental Rent (other than the Purchase Option Price or as described in clause (b) of this Section 16), after the same shall have become due and such failure shall continue unremedied for a period of 30 Business Days after receipt by the Facility Lessee of written notice of such failure from the Facility Lessor, the Owner Participant or the Lender; or (d) any representation or warranty made by the Facility Lessee in the Operative Documents or any written certificate shall be untrue, inaccurate or misleading in any material respect and, if capable of remedy, no action to cure has commenced within 30 days after notice or, if such action has been taken and the Facility Lessee is diligently pursuing such cure, such action has not succeeded within a period of 180 days after such notice; or (e) the Facility Lessee shall have failed to perform or observe any covenant, obligation or agreement to be performed or observed by it under any Operative Document (other than any covenant, obligation or agreement contained in Section 16 of the Participation Agreement or any covenants, obligations or agreements referred to in clauses (a), (b), (c), (f), (g) and (h) of this Section 16) in any material respect and, if capable of remedy, no action to cure has commenced within 30 days after notice or, if such action has been taken and the Facility Lessee is diligently pursuing such cure, such action has not succeeded within a period of 180 days after such notice; provided, however, that in the case of the Facility Lessee's obligation set forth in the first sentence of Section 7.1 of this Facility Lease as it relates to compliance with Applicable Law, if, to the extent and for so long as, a test, challenge, appeal or proceeding for review of such compliance shall be prosecuted in good faith by the Facility Lessee, the Facility Sublessee or the Facility Operator, the failure by the Facility Lessee to comply with such requirement shall not constitute an Event of Default hereunder if, but only if, such test, challenge, appeal or proceeding shall not involve any danger of (i) the foreclosure, sale, forfeiture or loss of, or imposition of a Lien on, any part of the Facility, the Rocky Mountain Site or the impairment of the use, operation or maintenance of the Facility, or the Rocky Mountain Site in any material respect or the value, utility or useful life of the Facility or the Rocky Mountain Site, or (ii) the loss of the security interest of the Lender in the Collateral and the Property, or (iii) any criminal liability being incurred or any material adverse effect on, the Facility Lessor, the Owner Trustee, the Owner Participant or the Lender in the reasonable opinion of such Person including, without limitation, subjecting the Facility Lessor, the Owner Participant, the Owner Trustee or the Lender to regulation as a public utility under Applicable Law; and provided, further, in the case of the Facility Lessee's obligation set forth in the first sentence of Section 7.1 of this Facility Lease as it relates to compliance with Applicable Law, if the noncompliance is not of a type that can be immediately remedied, the failure to comply shall not be an Event of Default hereunder if the 33 Facility Lessee is taking all reasonable action to remedy such noncompliance and if, but only if, such noncompliance shall not involve any danger in the reasonable opinion of such Person described in clause (i), (ii) or (iii) of the preceding proviso; and provided, further, such noncompliance, or such test, challenge, appeal or proceeding to review shall not, unless the Facility Lessee has irrevocably elected the Purchase Option pursuant to Section 15.1, extend beyond a date that is 18 months prior to the Expiration Date; or (f) the Facility Lessee shall fail to observe or perform its obligation to maintain the insurance required by Section 11 or its obligations under Section 5; or (g) the Expiration Date shall occur and none of the following transactions shall have been completed: (i) exercise of the Purchase Option and payment by the Facility Lessee of all amounts required by Section 15.1; or (ii) exercise of the Renewal Term Option, arranging either a Loan Extension or a purchase or refinancing of the Loan Certificate in accordance with Section 15.5(a) and payment by the Facility Lessee of all amounts it is required to pay under Section 15.4, or (iii) exercise of the Replacement Lease Option and arranging either a Loan Extension or a purchase or refinancing of the Loan Certificate in accordance with Section 15.5(b) and payment by the Facility Lessee of all amounts it is required to pay under Section 15.2; or (iv) exercise of the Retention Option and payment by the Facility Lessor and the Facility Lessee of all amounts required by Section 15.6; or (h) the Facility Lessee shall have failed to observe or perform its obligation set forth in Section 9.2, 9.3, 9.6 or 9.10 of the Participation Agreement and the Owner Participant shall have given written notice to the Facility Lessee and the Facility Lessor declaring an Event of Default under this paragraph (h); or (i) an Event of Default under the Facility Sublease shall have occurred and be continuing; or (j) the Facility Lessee shall (i) commence a voluntary case or other proceeding seeking relief under Title 11 of the Bankruptcy Code or liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or apply for or consent to the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or (ii) consent to, or fail to controvert in a timely manner, any such relief or the appointment of or taking possession by any such official in any voluntary case or other proceeding commenced against it, (iii) file an 34 answer admitting the material allegations of a petition filed against it in any such proceeding, or (iv) fail to pay its debts generally as they become due or admit in writing its inability to do so or take any corporate steps with respect to the foregoing; or (k) an involuntary case or other proceeding shall be commenced against the Facility Lessee seeking (i) liquidation, reorganization or other relief with respect to it or its debts under Title 11 of the Bankruptcy Code or any bankruptcy, insolvency or other similar law now or hereafter in effect, or (ii) the appointment of a trustee, receiver, liquidator, custodian or other similar official with respect to it or any substantial part of its property or (iii) the winding-up or liquidation of the Facility Lessee; and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or (l) the Facility Lessee shall have failed to observe or perform its obligations set forth in Section 9.8 of the Participation Agreement and the Facility Lessee shall not cure such failure within 5 days after notice from the Facility Lessor, the Owner Participant or the Lender; or (m) the qualifying Equity Funding Agreement or the AIG Guaranty in the case of the AIG Equity Funding Agreement (or the Qualifying Letter of Credit in replacement thereof) shall cease to be the valid and enforceable obligations of the issuer thereof; or (n) the Facility Lessee shall fail to comply with Section 9.13 of the Participation Agreement. SECTION 17. REMEDIES Section 17.1 Remedies for Event of Default. Subject to Section 3.7 with respect to the Events of Default set forth in clauses (a) and (b) of Section 16, upon the occurrence of any Event of Default and at any time thereafter so long as the same shall be continuing, this Facility Lease shall automatically be deemed to be in default without the need for giving any notice (the giving of which is waived to the fullest extent permitted by Applicable Law); and at any time thereafter, so long as the Facility Lessee shall not have remedied all outstanding Events of Default, the Facility Lessor may do one or more of the following as the Facility Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with any mandatory requirements of, Applicable Law then in effect: (a) proceed by appropriate court action or actions, either at law or in equity, to enforce performance by the Facility Lessee, at the Facility Lessee's sole cost and expense, of the applicable covenants and terms of this Facility Lease, provided, however, that the liquidated damages amount set forth in paragraphs (e) and (f) below shall be the sole and exclusive monetary damages remedy available to the Facility Lessor for an Event of Default; 35 (b) by notice in writing to the Facility Lessee, terminate this Facility Lease and the Facility Lessee's Rocky Mountain Interest whereupon all right of the Facility Lessee to the possession and use of the Undivided Interest under this Facility Lease shall absolutely cease and terminate but the Facility Lessee shall remain liable as hereinafter provided; and thereupon, the Facility Lessor may demand that the Facility Lessee, and the Facility Lessee shall, upon written demand of the Facility Lessor and at the Facility Lessee's expense, forthwith return possession of the Undivided Interest to the Facility Lessor in the manner and condition required by, and otherwise in accordance with all of the provisions of Section 5, except those provisions relating to periods of notice; and the Facility Lessor may thenceforth hold, possess and enjoy the same free from any right of the Facility Lessee, or its successor or assigns, to use the Undivided Interest for any purpose whatever; (c) sell the Facility Lessor's Rocky Mountain Interest at public or private sale, as the Facility Lessor may determine, free and clear of any rights of the Facility Lessee under this Facility Lease and without any duty to account to the Facility Lessee with respect to such sale or for the proceeds thereof (except to the extent required by paragraph (f) below if the Facility Lessor elects to exercise its rights under said paragraph and by Applicable Law), in which event the Facility Lessee's obligation to pay Basic Rent hereunder due for any periods subsequent to the date of such sale shall terminate (except to the extent that Basic Rent is to be included in computations under paragraph (f) below if the Facility Lessor elects to exercise its rights under said paragraph); provided, however, that if the Facility Lessor shall have exercised its rights under this paragraph (c), the Facility Lessor may not exercise any remedy set forth in paragraph (e) of this Section 17.1; (d) hold, keep idle or lease to others the Facility Lessor's Rocky Mountain Interest as the Facility Lessor in its sole discretion may determine, free and clear of any rights of the Facility Lessee under this Facility Lease and without any duty to account to the Facility Lessee with respect to such action or inaction or for any proceeds with respect thereto, except that the Facility Lessee's obligation to pay Basic Rent with respect to the Undivided Interest due for any periods subsequent to the date upon which the Facility Lessee shall have been deprived of possession and use of the Undivided Interest pursuant to this Section 17 shall be reduced by the net proceeds, if any, received by the Facility Lessor from leasing the Facility Lessor's Rocky Mountain Interest to any Person other than the Facility Lessee; (e) whether or not the Facility Lessor shall have exercised, or shall thereafter at any time exercise, any of its rights under paragraph (b) above with respect to the Facility Lessee's Rocky Mountain Interest, the Facility Lessor, by written notice to the Facility Lessee specifying a Termination Date that shall be not earlier than 10 days after the date of such notice, may demand that the Facility Lessee pay to the Facility Lessor, and the Facility Lessee shall pay to the Facility Lessor, on the Termination Date specified in such notice, any unpaid Basic Rent due before such Termination Date and, if such Termination Date shall be a Rent Payment Date, any Basic Rent (to the extent payable in arrears) due and payable on such Rent Payment Date, any Supplemental Rent due and payable as of the payment date specified in such notice, plus as 36 liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent due after the Termination Date specified in such notice), (i) an amount equal to the excess, if any, of the Termination Value computed as of the Termination Date specified in such notice over the Fair Market Sales Value of the Facility Lessor's Rocky Mountain Interest as of the Termination Date specified in such notice; or (ii) an amount equal to the Termination Value computed as of the Termination Date specified in such notice and, upon payment of such Termination Value by the Facility Lessee pursuant to this clause (ii) and all other Rent then due and payable by the Facility Lessee, the Facility Lessor will forthwith transfer to the Facility Lessee in accordance with this Section 17.1(e), Section 6 of the Ground Sublease and Section 9 of the Head Lease on an "as is", "where is" and "with all faults" basis, without representation or warranty other than a warranty as to the absence of Facility Lessor's Liens accompanied by a warranty of the Owner Participant as to the absence of the Owner Participant's Liens, all of its interest in the Facility Lessor's Rocky Mountain Interest and execute, acknowledge and deliver, and record and file (as appropriate), appropriate releases and all other documents or instructions necessary or desirable to effect the foregoing all in form and substance reasonably satisfactory to the Facility Lessor and at the cost and expense of the Facility Lessee, and upon payment of such amounts under either clauses (i) and (ii) of this paragraph (e), this Facility Lease, and the Facility Lessee's obligation to pay Basic Rent hereunder due for any periods subsequent to the date of such payment shall terminate; (f) if the Facility Lessor shall have sold the Facility Lessor's Rocky Mountain Interest pursuant to paragraph (c) above, the Facility Lessor may, if it shall so elect, demand that the Facility Lessee pay to the Facility Lessor, and the Facility Lessee shall pay to the Facility Lessor, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent due for any periods subsequent to the date of such sale), an amount equal to (A) any unpaid Basic Rent due before the date of such sale and, (B)(i) if that date is a Rent Payment Date, the Basic Rent due on that date (to the extent payable in arrears), or, (ii) if that date is not a Rent Payment Date or a Termination Date, the daily equivalent of Basic Rent (to the extent payable in arrears) for the period from the preceding Termination Date to the date of such sale, plus (C) the amount, if any, by which the Termination Value computed as of the Termination Date next preceding the date of such sale or, if such sale occurs on a Rent Payment Date or a Termination Date then computed as of such date, exceeds the net proceeds of such sale, and, upon payment of such amount, this Facility Lease and the Facility Lessee's obligation to pay Basic Rent for any periods subsequent to the date of such payment shall terminate; or (g) the Facility Lessor may draw upon, or foreclose on, the Qualifying Equity Funding Agreement, and realize upon any other credit support provided to the Facility Lessor for the benefit of the Owner Participant only by the Facility Lessee, including the Facility Sublease and the Qualifying Sublease Surety Bond, and the payment of the proceeds of the Qualifying Equity Funding Agreement shall reduce the Facility Lessee's obligation to pay Termination Value to the extent of any such proceeds received by the Facility Lessor. In addition, the Facility Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due hereunder before, during or after the exercise of any of the foregoing 37 remedies (and for damages in an amount equal to such Rent which would otherwise have accrued after eviction of the Facility Lessee or other termination of the leasehold created hereby pursuant to or in the course of the Facility Lessor's exercise of such remedies), and, on an After-Tax Basis, for legal fees and other costs and expenses incurred by reason of the occurrence of any Event of Default or the exercise of the Facility Lessor's remedies with respect thereto, including the repayment in full of any costs and expenses necessary to be expended in connection with the return of the Undivided Interest in accordance with Section 5.2 hereof, including, without limitation, any costs and expenses incurred by the Trustees, the Owner Participant or the Lender in connection with retaking constructive possession of, or in repairing, the Undivided Interest in order to cause it to be in compliance with all maintenance standards imposed by this Facility Lease. The provisions of this Section 17.1 shall survive the termination for any reason whatsoever of this Facility Lease and the termination or cancellation for any reason whatsoever of the Facility Lessee's leasehold estate in the Undivided Interest. Section 17.2 Cumulative Remedies. The remedies in this Facility Lease provided in favor of the Facility Lessor shall not be deemed exclusive, but shall be cumulative and shall be in addition to all other remedies in its favor existing at law or in equity; and the exercise or beginning of exercise by the Facility Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Facility Lessor of any or all of such other remedies, provided, however, that the liquidated damages amount set forth in paragraphs (e) and (f) above, shall be the sole and exclusive money damages remedy available to the Facility Lessor for an Event of Default. To the extent permitted by Applicable Law, the Facility Lessee hereby waives any rights now or hereafter conferred by statute or otherwise which may require the Facility Lessor to sell, lease or otherwise use the Undivided Interest or any Component thereof in mitigation of Facility Lessor's damages as set forth in this Section 17 or which may otherwise limit or modify any of Facility Lessor's rights and remedies in this Section 17. Section 17.3 No Delay or Omission to be Construed as Waiver. No delay or omission to exercise any right, power or remedy accruing to the Facility Lessor upon any breach or default by the Facility Lessee under this Facility Lease shall impair any such right, power or remedy of the Facility Lessor, nor shall any such delay or omission be construed as a waiver of any breach or default, or of any similar breach or default hereafter occurring; nor shall any waiver of a single breach or default be deemed a waiver of any subsequent breach or default. SECTION 18. TERMINATION OPTIONS FOR APPEAL OF FERC ORDERS. Section 18.1 Options to Terminate. If, on or prior to February 1, 1997, (a) an appeal or request for rehearing shall be filed (including by post-order intervention) of the FERC Order, the Facility Lessee shall forthwith give notice of such appeal or request for rehearing to the Facility Lessor. If such an appeal or request for rehearing shall be filed, the Facility Lessor and the Facility Lessee shall each have the option to terminate this Facility Lease on the next Termination Date occurring at least ten days following such notice on the terms set forth in this Section 18 by giving not less than three Business Day's prior written notice to the Facility Lessor 38 or the Facility Lessee (as the case may be), the Owner Trustee, the Owner Participant and the Lender, such notice to be given not later than March 2, 1997. If the Facility Lessor or the Facility Lessee shall exercise its option provided by this Section 18.1 by giving the notice contemplated by the preceding sentence, the Facility Lessee shall acquire the Facility Lessor's Rocky Mountain Interest for the Termination Value determined as of the Termination Date specified in such notice and this Facility Lease shall terminate on such Termination Date. The Facility Lessee shall be permitted to exercise the option provided in this Section 18 only if the Facility Lessee shall simultaneously exercise the termination option provided by Section 18 of each of the Other Facility Leases. Section 18.2 Procedure for Exercise of Termination Options. If the Facility Lessor or the Facility Lessee shall have exercised its option under Section 18.1, on the Termination Date specified in the Facility Lessor's or the Facility Lessee's notice of such exercise, the Facility Lessee shall pay to the Facility Lessor (a) the Termination Value determined as of such Termination Date, plus (b) all amounts of Supplemental Rent (including all costs and expenses of the Facility Lessor, the Owner Trustee, the Owner Participant and the Lender and all sales, use, value added and other Taxes covered by Section 12.2 of the Participation Agreement associated with the exercise of the termination option pursuant to this Section 18) due and payable on or prior to the Termination Date, and (c) any unpaid Basic Rent due before such Termination Date and, if such Termination Date shall be a Rent Payment Date, the Basic Rent (to the extent payable in arrears) due and payable on such Rent Payment Date. Concurrently with the payment of all sums specified in this Section 18.2, (1) Basic Rent for the Undivided Interest shall cease to accrue, (2) the Facility Lessor shall cease to have any liability to the Facility Lease with respect to the Undivided Interest, except for Supplemental Rent and other obligations (including those under Sections 12.1 and 12.2 of the Participation Agreement) surviving pursuant to the express terms of any Operative Document, (3) the Facility Lessor shall pay all outstanding principal and accrued interest on the Loan Certificate and all other amounts due under the Loan Agreement, (4) the Facility Lessor will execute and deliver to the Facility Lessee, to be prepared (and where appropriate recorded and filed), at the Facility Lessee's cost and expense, a release or termination of this Facility Lease, (5) the Facility Lessor will transfer, pursuant to this Section 18.2, Section 6 of the Ground Sublease and Section 9 of the Head Lease, the Facility Lessor's Rocky Mountain Interest to the Facility Lessee on an "as is," "where is," and "with all faults" basis, without representations or warranties other than a warranty as to the absence of Facility Lessor's Liens accompanied by a warranty of the Owner Participant as to the absence of Owner Participant's Lien and (6) this Facility Lease shall terminate and the Facility Lessor shall discharge the Lien of the Loan Agreement and the security title of the Deed to Secure Debt and execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepaid, filed and recorded (if appropriate) at the sole cost and expense of the Facility Lessee. 39 SECTION 19. THE FACILITY LESSEE'S RIGHT TO SUBLEASE Other than the sublease of the Undivided Interest to the Facility Sublessee pursuant to the Facility Sublease and any subleases permitted by Section 19 of the Facility Sublease, the Facility Lessee will not, without the prior written consent of the Facility Lessor and the Lender, relinquish use, possession or control of the Undivided Interest, or any part thereof or sublease any of its rights or interests hereunder. SECTION 20. FURTHER ASSURANCES The Facility Lessee, at its own cost and expense, will duly execute and deliver to the Facility Lessor such further documents and assurances and take such further action as the Facility Lessor may from time to time reasonably request in order to establish and protect the rights and remedies created in favor of the Facility Lessor hereunder or the Facility Lessee's obligations under any of the Operative Documents. SECTION 21. FACILITY LESSOR'S RIGHT TO PERFORM If the Facility Lessee fails to make any payment required to be made by it hereunder (other than Supplemental Rent in respect of the Purchase Option Price) or fails to perform or comply with any of its other agreements contained herein after notice to the Facility Lessee and failure of the Facility Lessee to so perform or comply within 10 days thereafter, the Facility Lessor or the Owner Participant may itself make such payment or perform or comply with such agreement in a reasonable manner, but shall not be obligated hereunder to do so, and the amount of such payment and of the reasonable expenses of the Facility Lessor or the Owner Participant incurred in connection with such payment or the performance of or compliance with such agreement, as the case may be, together with interest thereon at the Overdue Rate, to the extent permitted by Applicable Law, shall be deemed to be Supplemental Rent, payable by the Facility Lessee to the Facility Lessor on demand. SECTION 22. NOTICES Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein to a party hereto shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clauses (a) and (b) above, in each case addressed to such party and 40 copy party at its address set forth below or at such other address as such party or copy party may from time to time designate by written notice to the other party: If to the Facility Lessor: SunTrust Bank, Atlanta P.O. Box 4625 Mail Code 008 Atlanta, Georgia 30303 Facsimile No.: (404) 332-3966 Telephone No.: (404) 588-7813 Attention: Corporate Trust Department with copies to the Owner Trustee: Fleet National Bank 777 Main Street Hartford, Connecticut 06115 Facsimile No.: (860) 986-7920 Telephone No.: (860) 986-4540 Attention: Corporate Trust Administration to the Owner Participant: Philip Morris Capital Corporation 800 Westchester Avenue Rye Brook, New York 10573-1301 Facsimile No.: (914) 335-1297 Telephone No.: (914) 335-5000 Attention: Vice President, Leasing with a copy to Director, Portfolio Administration and a copy to the Lender: 41 Utrecht-America Finance Co., c/o Rabobank Nederland, New York Branch 245 Park Avenue New York, New York 10167-0062 Facsimile No.: (212) 916-7880 Telephone No.: (212) 916-7864 Attention: General Counsel's Office If to the Facility Lessee: Rocky Mountain Leasing Corporation c/o Corporation Trust Center 1209 Orange Street, Room 123 Wilmington, Delaware 19801 Facsimile No.: (302) 688-5459 Telephone No.: (302) 777-0250 Attention: General Counsel's Office with a copy to: Sutherland, Asbill & Brennan 999 Peachtree Street, N.E. Atlanta, Georgia 30309-3996 Facsimile No.: (404) 853-8806 Telephone No.: (404) 853-8000 Attention: Managing Attorney and a copy to the Lender at the address for notices set forth above. SECTION 23. SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS Any moneys received by the Facility Lessor pursuant to Section 10.4 or pursuant to the Payment Undertaking Agreement following the purchase by the Owner Participant or its designee of the Loan Certificate pursuant to Section 4.07 of the Loan Agreement shall, until paid to the Facility Lessee as provided in Section 10.4 (with respect to amounts received pursuant to Section 10.4) or applied to the payment of the Facility Lessee's obligations hereunder, be held by the Facility Lessor as security for the Facility Lessee's obligations under this Facility Lease and invested in Permitted Investments by the Facility Lessor (at the sole risk of the Facility Lessee) from time to time as directed in writing by the Facility Lessee (and the Facility Lessor during the 42 continuation of a Payment Default, Bankruptcy Default or an Event of Default) if such investments are reasonably available for purchase. Any gain (including interest received) realized as the result of any such Permitted Investment (net of any fees, commissions, taxes and other expenses, if any, incurred in connection with such Permitted Investment) shall be (i) in the case of amounts received pursuant to Section 10.4, applied or remitted to the Facility Lessee in the same manner as the principal invested and (ii) in the case of amounts received pursuant to the Payment Undertaking Agreement in the circumstances described in the first sentence of this Section 23, applied to the Facility Lessee's obligation to pay Basic Rent hereunder. SECTION 24. SECURITY FOR FACILITY LESSOR'S OBLIGATION TO THE LENDER. In order to secure the Secured Indebtedness the Facility Lessor will by the Loan Agreement assign and grant a Lien, and by the Deed to Secure Debt convey security title, to the Lender all of the Facility Lessor's right, title and interest in, to and under this Facility Lease, the Facility Lessor's Rocky Mountain Interest and the Undivided Interest (other than Excepted Payments and Excepted Rights). The Facility Lessee hereby consents to such assignment and to the creation of such Lien and security title and acknowledges receipt of copies of the Loan Agreement and the Deed to Secure Debt, it being understood that such consent shall not affect any requirement or the absence of any requirement for any consent of the Facility Lessee under any other circumstances. Unless and until the Facility Lessee shall have received written notice from the Lender that the Lien of the Loan Agreement and the security title of the Deed to Secure Debt have been fully terminated, the Lender shall have the right to exercise the rights of the Facility Lessor under this Facility Lease to the extent set forth in and subject in each case to the exceptions set forth in the Loan Agreement and the Deed to Secure Debt. TO THE EXTENT, IF ANY, THAT THIS FACILITY LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS FACILITY LEASE MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN THE ORIGINAL COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE LENDER ON THE SIGNATURE PAGE THEREOF. SECTION 25. MISCELLANEOUS Section 25.1 Governing Law. This Facility Lease shall be in all respects governed by and construed in accordance with the laws of the State of New York including all matters of construction, validity and performance except to the extent the law of the State of Georgia is mandatorily applicable. 43 Section 25.2 Severability. If any provision hereof shall be invalid, illegal or unenforceable under Applicable Law, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. Section 25.3 Headings and Table of Contents. The headings of the sections of this Facility Lease and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. Section 25.4 Successors and Assigns. (a) This Facility Lease shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and assigns as permitted by and in accordance with the terms hereof. (b) Except as expressly provided herein or in the other Operative Documents, neither party hereto may assign its interests or transfer its obligations herein without the consent of the other party hereto. (c) This Facility Lease conveys a leasehold estate and not a usufruct. Section 25.5 "True Lease". It is the intent of the parties to this Facility Lease that it be, and this Facility Lease shall be, a "true lease," and that, notwithstanding the fact that legal title to the Undivided Interest is vested in the Co-Owners, as tenants-in-common, the interest of the Facility Lessor under the Head Lease shall cause the Facility Lessor to be the owner of the Undivided Interest for all United States income tax purposes and that this Facility Lease convey to the Facility Lessee no right, title or interest in the Undivided Interest except as "sublessee" of the Undivided Interest. Section 25.6 Amendments and Waivers. No term, covenant, agreement or condition of this Facility Lease may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto. Section 25.7 Survival. Except for the provisions of Sections 3.3, 3.5, 3.6, 3.7, 5, 9, 15.1 and 17 which shall survive, the warranties and covenants made by each party hereto shall not survive the expiration or termination of this Facility Lease. Section 25.8 Counterparts. This Facility Lease may be executed by the parties hereto in separate counterparts, each of which, subject to Section 24, when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 25.9 Effectiveness. This Facility Lease has been dated as of the date first above written for convenience only. This Facility Lease shall be effective on the date of execution and delivery by the Facility Lessee and the Facility Lessor. 44 Section 25.10 Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by SunTrust Bank, Atlanta, not individually or personally but solely as owner trustee under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the Co-Trustee is made and intended not as personal representations, undertakings and agreements by SunTrust Bank, Atlanta but is made and intended for the purpose for binding only the Co-Trustee, (c) nothing herein contained shall be construed as creating any liability on SunTrust Bank, Atlanta, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto or by any Person claiming by, through or under the parties hereto and (d) under no circumstances shall SunTrust Bank, Atlanta be personally liable for the payment of any indebtedness or expenses of the Co-Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Co-Trustee under this Agreement. In addition, each of the parties hereto acknowledges and agrees that the Co-Trustee has been appointed by the Owner Participant and Owner Trustee for the purpose of exercising those trust powers in the State of Georgia which may not be exercised by the Owner Trustee under Applicable Law, and that, except as otherwise required by Applicable Law, the Co-Trustee shall not be obligated to take any action hereunder unless expressly directed in writing by the Owner Trustee or the Owner Participant in accordance with the terms of the Trust Agreement. Section 25.11 Measuring Life. If and to the extent that any of the rights and privileges granted under this Facility Lease, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule or law relating to the vesting of interests in property or the suspension of the power of alienation or property, then it is agreed that notwithstanding any other provision of this Facility Lease, such options, rights and privileges, subject to the respective conditions hereof governing the exercise of such options, rights and privileges, will be exercisable only during (a) the longer of (i) a period which will end twenty-one (21) years after the death of the last survivor of the descendants living on the date of the execution of this Facility Lease of the following Presidents of the United States: Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George H.W. Bush and William J. Clinton or (ii) the period provided under the Uniform Statutory Rule Against Perpetuities or (b) the specific applicable period of time expressed in this Facility Lease, whichever of (a) and (b) is shorter. 45 IN WITNESS WHEREOF, the Facility Lessor and the Facility Lessee have caused this Facility Lease to be duly executed and delivered by their respective officers thereunto duly authorized. SUNTRUST BANK, ATLANTA, not in its individual capacity, but solely as Co-Trustee under the Trust Agreement By: /s/ Bryan Echols ------------------------------------- Name: Bryan Echols Title: Vice President Date: 12/30/96 Signed and delivered in the presence of: /s/ Thomas J. Brendiar - ------------------------------------- Unofficial Witness /s/ Patricia R. Bouldin - ------------------------------------- Notary Public My Commission Expires:June 2, 1998 [Notary Seal] ROCKY MOUNTAIN LEASING CORPORATION By: /s/ Eugen Heckl ------------------------------------- Name: Eugen Heckl Title: Vice President Date: 12/30/96 Signed and delivered in the presence of: /s/ Leonard Scott - ------------------------------------- Unofficial Witness /s/ Maija Braunfelds - ------------------------------------- Notary Public My Commission Expires:January 19, 1998 [Notary Seal] 46 CERTAIN OF THE RIGHT, TITLE AND INTEREST OF THE FACILITY LESSOR IN AND TO THIS FACILITY LEASE HAVE BEEN ASSIGNED TO AND ARE SUBJECT TO A FIRST PRIORITY SECURITY INTEREST IN FAVOR OF THE UNDERSIGNED, AS LENDER, UNDER THE LOAN AGREEMENT AND THE DEED TO SECURE DEBT DATED AS OF JANUARY 3, 1997. THIS AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE ORIGINAL COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY THE UNDERSIGNED, ON THE SIGNATURE PAGES THEREOF. SEE SECTION 24 HEREOF FOR INFORMATION CONCERNING THE RIGHTS OF THE HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF. Receipt of this original counterpart of this Facility Lease is hereby acknowledged on this ___ day of _____, 1997. UTRECHT-AMERICA FINANCE CO. By: ____________________________________ Name: Title: Date: By: ____________________________________ Name: Title: Date: CERTAIN OF THE RIGHT, TITLE AND INTEREST OF THE FACILITY LESSOR IN AND TO THIS FACILITY LEASE HAVE BEEN ASSIGNED TO AND ARE SUBJECT TO A FIRST PRIORITY SECURITY INTEREST IN FAVOR OF THE UNDERSIGNED, AS LENDER, UNDER THE LOAN AGREEMENT AND THE DEED TO SECURE DEBT DATED AS OF DECEMBER 30, 1996. THIS AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE ORIGINAL COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY THE UNDERSIGNED, ON THE SIGNATURE PAGES THEREOF. SEE SECTION 24 HEREOF FOR INFORMATION CONCERNING THE RIGHTS OF THE HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF. Receipt of this original counterpart of this Facility Lease is hereby acknowledged on this 30th day of December, 1996. UTRECHT-AMERICA FINANCE CO. By: ____________________________________ Name: Title: Date: By: ____________________________________ Name: Title: Date: SCHEDULE TO EXHIBIT 10.32.5 FACILITY LEASE AGREEMENT (P1) The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant - --------- ---- ----------------- P1 December 30, 1996 Philip Morris Capital Corporation P2 January 3, 1997 Philip Morris Capital Corporation F3 December 30, 1996 First Chicago Leasing Corporation F4 December 30, 1996 First Chicago Leasing Corporation N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation Other than Appendix A, the Exhibits and Schedules to the Facility Lease Agreement (P1) are not filed herewith; however, the registrant hereby agrees that such Exhibits and Schedules will be provided to the Commission upon request. APPENDIX A to Facility Lease DEFINITIONS Refer to Appendix A to Exhibit 10.32.1 of the Form 10-K. EX-10.32-6 23 EXHIBIT 10.32.6 EXHIBIT 10.32.6 This instrument, when recorded, should be returned to: Robert N. Farrar Attorney at Law The Carnegie Building 607 Broad Street, Suite 141 Rome, Georgia 30161-3059 ================================================================================ GROUND SUBLEASE AGREEMENT (P1) Dated as of December 30, 1996 between SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee, as Ground Sublessor and ROCKY MOUNTAIN LEASING CORPORATION, as Ground Sublessee Land Located in Floyd County, Georgia ================================================================================ TABLE OF CONTENTS Page ---- SECTION 1. DEFINITIONS..................................................... 2 SECTION 2. SUBLEASE OF GROUND INTEREST..................................... 2 Section 2.1. Sublease of Ground Interest........................ 2 Section 2.2. Basic Ground Sublease Term......................... 2 Section 2.3. Renewal Ground Sublease Term....................... 2 Section 2.4. Return of Ground Interest.......................... 3 Section 2.5. Early Termination.................................. 3 Section 2.6. Net Lease.......................................... 3 SECTION 3. RENT FOR THE SUBLEASE OF THE GROUND INTEREST.................... 4 SECTION 4. QUIET ENJOYMENT IN FAVOR OF THE GROUND SUBLESSEE................ 5 Section 4.1. Ground Sublessee's Right of Quiet Enjoyment........ 5 Section 4.2. Conveyances Pursuant to Section 4.2 of Ground Lease.............................................. 5 SECTION 5. USE OF THE GROUND INTEREST BY GROUND SUBLESSEE.................. 5 SECTION 6. TRANSFER OF GROUND INTEREST..................................... 5 SECTION 7. INSPECTION...................................................... 6 SECTION 8. SECURITY FOR GROUND SUBLESSOR'S OBLIGATION TO THE LENDER.......................................................... 6 SECTION 9. MISCELLANEOUS................................................... 7 Section 9.1. Amendments and Waivers............................. 7 Section 9.2. Notices............................................ 7 Section 9.3. Survival........................................... 8 Section 9.4. Successors and Assigns............................. 8 Section 9.5. Business Day....................................... 9 Section 9.6. Governing Law...................................... 9 Section 9.7. Severability....................................... 9 Section 9.8. Counterparts....................................... 9 Section 9.9. Headings and Table of Contents..................... 9 Section 9.10. Further Assurances............................... 9 Section 9.11. Effectiveness of Ground Sublease................. 9 Section 9.12. Limitation of Liability.......................... 9 Section 9.13. Measuring Life................................... 10 LIST OF ATTACHMENTS: Appendix A - Definitions Schedule 1 - Description of the Rocky Mountain Site Facility Description Schedule Exhibit A-2 - Project Boundary Drawing Exhibit A-3 - Powertunnel and Powerhouse General Plan and Profile of the Rocky Mountain Project No. RM-00-CL-0013 R1 Exhibit A-4 - Description of Equipment ii GROUND SUBLEASE AGREEMENT (P1) This GROUND SUBLEASE AGREEMENT (P1), dated as of December 30, 1996 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof, this "Ground Sublease"), between SUNTRUST BANK, ATLANTA, a state banking corporation organized under the laws of the State of Georgia, not in its individual capacity but solely as Co-Trustee under the Trust Agreement (P1), dated as of December 30, 1996 with the Owner Trustee and the Owner Participant (together with its successors and permitted assigns, the "Ground Sublessor"), and ROCKY MOUNTAIN LEASING CORPORATION, a corporation organized and existing under the laws of the State of Delaware (together with its successors and permitted assigns, the "Ground Sublessee"). WHEREAS, Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation), an electric membership corporation organized under the laws of the State of Georgia (together with its successors and assigns, "Oglethorpe") and Georgia Power Company, a corporation organized under the laws of the State of Georgia (together with its successors and assigns "Georgia Power") own the Rocky Mountain Site as tenants-in-common under the laws of the State of Georgia; WHEREAS, the Rocky Mountain Site is more particularly described in Schedule 1 hereto, such Schedule 1 being attached to this Ground Sublease as part hereof; WHEREAS, by the Rocky Mountain Agreements, Oglethorpe and Georgia Power established their respective rights and obligations as tenants-in-common of the Rocky Mountain Site and of all improvements thereafter to be constructed, and all personal property thereafter to be situated, on the Rocky Mountain Site. Such improvements and personal property owned by Oglethorpe and Georgia Power as tenants-in-common under Georgia law include the Facility; WHEREAS, as tenants-in-common of such real and personal property, Oglethorpe and Georgia Power hold a 74.61% and 25.39% undivided interest, respectively, in such real and personal property, including the right to nonexclusive possession of all such real and personal property, subject to the rights of the other to nonexclusive possession and the terms and conditions of the Rocky Mountain Agreements; WHEREAS, pursuant to the Head Lease, the Co-Trustee has acquired from Oglethorpe, as Head Lessor, a leasehold interest in the Undivided Interest in the Facility for a term equal to approximately 120% of the estimated useful life of the Facility, subject to extension as provided therein; WHEREAS, pursuant to the Ground Lease, the Co-Trustee has acquired from Oglethorpe, as Ground Lessor, a leasehold interest in the Ground Interest for a term equal to approximately 120% of the estimated useful life of the Facility, subject to extensions as provided therein; WHEREAS, pursuant to the Facility Lease, the Ground Sublessor, as Facility Lessor, will lease the Undivided Interest to the Facility Lessee for a term which shall end prior to the expiration of the term of the Head Lease; and WHEREAS, pursuant to this Ground Sublease, the Ground Sublessor is subleasing the Ground Interest to the Ground Sublessee for a term coterminous with that of the Facility Lease. NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained; and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS. Capitalized terms used in this Ground Sublease, including the recitals, and not otherwise defined herein shall have the respective meanings set forth in Appendix A hereto unless the context hereof shall otherwise require. The general provisions of Appendix A shall apply to terms used in this Ground Sublease and specifically defined herein. SECTION 2. SUBLEASE OF GROUND INTEREST. Section 2.1. Sublease of Ground Interest. The Ground Sublessor hereby subleases the Ground Interest, upon the terms and conditions set forth herein, to the Ground Sublessee for the term and renewal terms described below, and the Ground Sublessee hereby subleases the Ground Interest from the Ground Sublessor. The Ground Sublessor and the Ground Sublessee understand and agree that (a) this sublease of the Ground Interest is subject to the limitations identified in the definition of Ground Interest, (b) legal title to the Rocky Mountain Site remains vested in the Ground Lessor and Georgia Power as tenants-in-common, (c) this sublease of the Ground Interest is subject and subordinate to the Lien of the Oglethorpe Mortgage and encumbrances described in the Title Report, (d) this sublease of the Ground Interest is subject and subordinate to the interest of the Ground Sublessor in the Ground Interest created pursuant to Section 2.1 of the Ground Lease and (e) this sublease of the Ground Interest is subject to the provisions of the Resource Management Agreement. Section 2.2. Basic Ground Sublease Term. The term of this Ground Sublease shall commence on the Closing Date and shall terminate at 11:58 p.m. (New York City time) on the Expiration Date (the "Basic Ground Sublease Term") subject to early termination pursuant to Section 2.5 hereof and extension for the Renewal Ground Sublease Term. Section 2.3. Renewal Ground Sublease Term. If the term of the Facility Lease shall be renewed for a Renewal Term pursuant to Section 15.4 of the Facility Lease, the term of the sublease to the Ground Sublessee hereunder will be automatically renewed for a term which shall 2 be coterminous with the Renewal Term of the Facility Lease (a "Renewal Ground Sublease Term"). Section 2.4. Return of Ground Interest. Subject to Section 6 hereof, on the last day of the Ground Sublease Term the Ground Sublessee shall return the Ground Interest to the Ground Sublessor by returning the same unto the possession of the Ground Sublessor without representation or warranty other than that the Ground Interest is free and clear of all Liens other than Liens permitted on the Ground Interest by Section 6 of the Facility Lease without any other liability or cost to the Ground Sublessee. Upon returning the Ground Interest, the Ground Sublessee shall execute, acknowledge and deliver a release of the Ground Interest to be prepared by the Ground Sublessor at its expense and in a form reasonably satisfactory to the Ground Sublessee to be duly recorded at the Ground Sublessee's expense in the Office of the Clerk of the Superior Court of Floyd County, Georgia. The obligations of the Ground Sublessee under this Section 2.4 shall survive the termination of this Ground Sublease. Section 2.5. Early Termination. The Ground Sublease Term shall be deemed automatically terminated upon the expiration or early termination of the Facility Lease Term without any action of the Ground Sublessor or any other Person. Section 2.6. Net Lease. This Ground Sublease is a "net lease" and notwithstanding anything herein to the contrary, the Ground Sublessee's obligation to pay all rent and other sums payable hereunder (and all amounts payable in lieu of rent and other sums following termination of this Ground Sublease) shall be absolute and unconditional under any and all circumstances and shall not be terminated, extinguished, diminished, lost or otherwise impaired, nor shall the Ground Sublessee's other obligations hereunder or the Ground Sublessor's rights hereunder be terminated, extinguished, diminished, lost or otherwise impaired, by any circumstance of any character or for any reason whatsoever, whether or not the same involves the loss of all or any part of the leasehold estate granted by this Ground Sublease, including without limitation any of the following circumstances or reasons: (i) any setoff, counterclaim, recoupment, defense or other right which the Ground Sublessee may have against the Ground Sublessor, the Trustees, the Owner Participant, or the Lender or any other Person, including, without limitation, any breach by any of said parties of any covenant or provision under this Ground Sublease or under any Operative Document, (ii) any lack or invalidity of title or any defect in the title, condition, design, operation, merchantability or fitness for use of the Facility or any Component, or any foreclosure or deed in lieu of foreclosure of the Oglethorpe Mortgage, or any termination of the leasehold interest granted by this Ground Sublease as a result thereof by operation of law or contract, or any eviction by paramount title or otherwise, or any unavailability of the Facility, the Rocky Mountain Site, any Component, any other portion of the Facility Lessee's Rocky Mountain Interest or the interest of any other Person or any part of the foregoing for any reason whatsoever, (iii) any loss or destruction of, or damage to, the Facility or any Component or interruption or cessation in the use or possession thereof or any part of the foregoing by the Ground Sublessee for any reason whatsoever and of whatever duration, (iv) the condemnation, requisitioning, expropriation, seizure or other taking of title to or use of the Facility, the Rocky Mountain Site, any Component, any 3 other portion of the Ground Sublessee's Rocky Mountain Interest or any part of the foregoing by any Governmental Entity or otherwise, (v) the invalidity or unenforceability or lack of due authorization or other infirmity of this Ground Sublease or any other Operative Document, (vi) the lack of right, power or authority of the Ground Sublessor to enter into this Ground Sublease or any other Operative Document, (vii) any ineligibility of the Facility or any Component for any particular use, whether or not due to any failure of the Ground Sublessor or the Facility Operator to comply with any Applicable Law, (viii) any event of "force majeure" or any frustration, (ix) any legal requirement similar or dissimilar to the foregoing, any present or future law to the contrary notwithstanding, (x) any insolvency, bankruptcy, reorganization or similar proceeding by or against the Ground Sublessee or any other Person, (xi) any Lien of any Person with respect to the Facility, the Rocky Mountain Site, any Component, any other portion of the Ground Sublessee's Rocky Mountain Interest or any part of the foregoing, or (xii) any other cause, whether similar or dissimilar to the foregoing, any present or future law notwithstanding, except as expressly set forth herein or in any other Operative Documents, it being the intention of the parties hereto that all rent and other sums payable by the Ground Sublessee hereunder (and all amounts payable in lieu of rent and other sums following termination of this Ground Sublease) be paid in the manner and at the times provided for herein. Such rent and other sums payable hereunder shall not be subject to any abatement and the payments thereof shall not be subject to any setoff or reduction for any reason whatsoever, including any present or future claims of the Ground Sublessee or any other Person against the Ground Sublessor or any other Person under this Ground Sublease or otherwise. If for any reason whatsoever this Ground Sublease shall be terminated in whole or in part by operation of law or otherwise, except as specifically provided herein, the Ground Sublessee nonetheless agrees to the extent permitted by Applicable Law, to pay to the Ground Sublessor any amount due and owing, at the time such payment would have become due and payable in accordance with the terms hereof had this Ground Sublease not been so terminated. The provisions of this Section 2.6 shall survive the termination of this Ground Sublease for any reason whatsoever. Upon and after the termination of the leasehold hereby granted for any reason whatsoever, the Ground Sublessee shall pay to the Ground Sublessor, in lieu of the rent and other sums payable hereunder, an amount equal to such rent and other sums, and this obligation is expressly agreed to be a covenant of the Ground Sublessee that is independent of the existence of such leasehold. The obligations of the Ground Sublessee to pay all amounts hereunder other than rent and other sums are also covenants that are independent of the existence of such leasehold and shall survive the termination thereof for any reason whatsoever. SECTION 3. RENT FOR THE SUBLEASE OF THE GROUND INTEREST. As rent for the sublease of the Ground Interest for the Ground Sublease Term, the Ground Sublessee agrees to pay to the Ground Sublessor for the period commencing on the Closing Date and ending on the Expiration Date annual rent of $120,273 per year, payable in advance on July 1 of each year during the Ground Sublease Term; provided that the first payment of rent shall be payable on the Closing Date and shall be prorated from the beginning of the Ground Sublease 4 Term to July 1, 1997. Notwithstanding the foregoing, so long as the Ground Sublessor shall not be required to pay rent under the Ground Lease in accordance with Section 3.1 thereof, the Ground Sublessee shall not be required to pay rent hereunder. For the period from and after the Expiration Date to the end of the Ground Sublease Term the Ground Sublessee agrees to pay to the Ground Sublessor annual rent equal in timing and amount to the rent payable under the Ground Lease. SECTION 4. QUIET ENJOYMENT IN FAVOR OF THE GROUND SUBLESSEE. Section 4.1. Ground Sublessee's Right of Quiet Enjoyment. The Ground Sublessor warrants that it has full right and authority to sublease the Ground Interest to the Ground Sublessee pursuant to the terms of this Ground Sublease and agrees that, notwithstanding any provision of any other Operative Document, during the Ground Sublease Term, the Ground Sublessor shall not through its own actions or inactions interfere with or interrupt the quiet enjoyment of the use, operation and possession by the Ground Sublessee of the subleasehold interest in the Ground Interest pursuant to the terms hereof; provided that the Ground Sublessor's covenant does not relate to actions of the Lender. Section 4.2. Conveyances Pursuant to Section 4.2 of Ground Lease. Sales, grants of leases or easements and conveyances of portions of the Rocky Mountain Site, rights of way, easements or leasehold interest made by the Ground Lessor in accordance with Section 4.2 of the Ground Lease shall not constitute a breach of the Ground Sublessee's right of quiet enjoyment under this Ground Sublease. Any Released Property sold, leased or otherwise conveyed pursuant to the Ground Lessor's Release Rights shall automatically, without further act of any Person, be released from this Ground Sublease. SECTION 5. USE OF THE GROUND INTEREST BY GROUND SUBLESSEE. The Ground Sublessee's rights hereunder to use the Ground Interest shall be limited to the right of the Ground Sublessee, as Facility Lessee, to use the Ground Interest during the Ground Sublease Term in connection with the use, operation and maintenance of the Facility in accordance with the terms of the Rocky Mountain Agreements and the Facility Lease, which shall include the right to construct, install, operate, use, repair and relocate facilities and structures on or under the Rocky Mountain Site, including buildings, roads, paths, walkways, sanitary sewers, storm drains, water and gas mains, waste disposal systems, electric power lines, telephone, television and telecommunication lines, fire protection systems, safety sensor and monitoring systems and utility lines and systems, and any other uses as shall be permitted by the Rocky Mountain Agreements. Notwithstanding any provision contained in this Ground Sublease or in any Operative Document, the Ground Sublessee has the right to perform any and all acts required by 5 an order of the FERC or its successor affecting the Facility or the Rocky Mountain Site without the prior approval of the Ground Sublessor or any other party to the Operative Documents. SECTION 6. TRANSFER OF GROUND INTEREST. The Ground Sublessee expressly agrees that the Ground Sublessee shall not transfer its Ground Interest except as part of the Ground Sublessee's transfer of the Facility Sublessor's Rocky Mountain Interest pursuant to the Operative Documents. The Ground Sublessee acknowledges (x) that the Ground Sublessor shall have the right to transfer and convey the Ground Interest as part of a transfer under and in accordance with Section 10.2, 13.2, 14.4, 15.3, 17.1(c), 17.1(e), 18 or 19 of the Facility Lease in connection with the Ground Sublessor's transfer thereunder of the Facility Lessor's Rocky Mountain Interest and the Ground Sublessor and the Ground Sublessee agree to comply with the provisions of the applicable sections of the Facility Sublease and the Facility Lease in connection with such transfer to the extent required thereunder, and (y) the Ground Sublessor's interest hereunder may be transferred together with the Facility Lessor's interest under the Facility Lease to the Lender or an Affiliate of the Lender or any other Person who is the purchaser thereof in foreclosure of the security title of the Deed to Secure Debt or the lien of the Loan Agreement or by deed in lieu of any such foreclosure or after any such foreclosure or deed in lieu of foreclosure. The Ground Sublessor acknowledges that the Ground Interest will be leased to the Ground Sub-sublessee pursuant to the Ground Sub-sublease and that the Ground Sublessee, as Ground Sub-sublessor thereunder, shall have the right to transfer and convey the Ground Interest under and in accordance with Sections 10.2, 13.2, 14.3, 17.1(c), 17.1(e), 18 or 19 of the Facility Sublease in connection with the Facility Sublessor's transfer thereunder of the Facility Sublessor's Rocky Mountain Interest, and the Ground Sub-sublessee shall have the right to sublease the Ground Interest to a Person which is a sublessee of the Undivided Interest in accordance with Section 19 of the Facility Sublease. SECTION 7. INSPECTION During the Ground Sublease Term, at such times as reasonably requested, each of the Ground Sublessor, the Owner Trustee, the Owner Participant, the Lender and their representatives may, at reasonable times, on reasonable notice to the Co-Owners and at their own risk and expense (except, at the expense, but not risk, of the Ground Sublessee when an Event of Default has occurred and is continuing), inspect the Rocky Mountain Site; provided, however, that any such inspection will not interfere with the Co-Owners' normal commercial operation of the Rocky Mountain Site and will be in accordance with the Facility Operator's safety and insurance programs. 6 SECTION 8. SECURITY FOR GROUND SUBLESSOR'S OBLIGATION TO THE LENDER In order to secure the Secured Indebtedness, the Ground Sublessor will assign for security purposes its rights under this Ground Sublease. The Ground Sublessee hereby acknowledges that the security interest in this Ground Sublease will be assigned by the Ground Sublessor to the Lender pursuant to the Loan Agreement and the Deed to Secure Debt. The Ground Sublessor hereby consents to such assignment and the creation of such Liens and acknowledges receipt of copies of the Loan Agreement and the Deed to Secure Debt, it being understood that such consent shall not affect any requirement or the absence of any requirement for any consent under any other circumstances. Unless and until the Ground Sublessee shall have received written notice from the Lender that the Lien of the Loan Agreement and the security title of the Deed to Secure Debt have been fully released, the Lender under the Loan Agreement and the Deed to Secure Debt shall have the rights of the Ground Sublessor under this Ground Sublease and to the extent set forth in and subject to the exceptions set forth in the Loan Agreement or the Deed to Secure Debt. SECTION 9. MISCELLANEOUS. Section 9.1. Amendments and Waivers. No term, covenant, agreement or condition of this Ground Sublease may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto. Section 9.2. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein to a party hereto shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or next business day or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clause (a) or (b) above, in each case addressed to such party and copy party at its address set forth below or at such other address as such party a copy party may from time to time designate by written notice to the other parties: 7 If to the Ground Sublessor: SunTrust Bank, Atlanta P.O. Box 4625 Mail Code 008 Atlanta, Georgia 30302 Facsimile No.: (404) 332-3966 Telephone No.: (404) 588-7813 Attention: Corporate Trust Department with copies to the Owner Trustee: Fleet National Bank 777 Main Street Hartford, Connecticut 06115 Facsimile No.: (860) 986-7920 Telephone No.: (860) 986-4540 Attention: Corporate Trust Administration and to the Lender: Utrecht-America Finance Co., c/o Rabobank Nederland, New York Branch 245 Park Avenue New York, New York 10167-0062 Facsimile No.: (212) 916-7880 Telephone No.: (212) 916-7864 Attention: General Counsel's Office 8 If to the Ground Sublessee: Rocky Mountain Leasing Corporation c/o Corporation Trust Center 1209 Orange Street, Room 123 Wilmington, Delaware 19801 Facsimile No.: (302) 688-5459 Telephone No.: (302) 777-0250 with copies to: Sutherland, Asbill & Brennan, L.L.P. 999 Peachtree Street, N.E. Atlanta, Georgia 30309-3996 Facsimile No.: (404) 853-8806 Telephone No.: (404) 853-8000 Attention: Cada T. Kilgore, III and to the Lender at its address set forth above. Section 9.3. Survival. Except as expressly set forth herein, the warranties and covenants made by each party hereto shall not survive the expiration or termination of this Ground Sublease. Section 9.4. Successors and Assigns. (a) The Ground Sublessor hereby consents to the entry by the Ground Sublessee into and performance by the Ground Sublessee of the Operative Documents, including any assignment pursuant thereto. This Ground Sublease shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns as permitted by and in accordance with the terms hereof. (b) Except as expressly provided herein or in the other Operative Documents, the Ground Sublessor may not assign or transfer any of its interests herein without the consent of the other party hereto. (c) This Ground Sublease conveys a leasehold estate and not a usufruct. Section 9.5. Business Day. Notwithstanding anything herein to the contrary, if the date on which any payment or performance is to be made pursuant to this Ground Sublease is not a Business Day, the payment otherwise payable on such date shall be payable on the next succeeding Business Day with the same force and effect as if made on such scheduled date and (provided such 9 payment is made on such succeeding Business Day) no interest shall accrue on the amount of such payment from and after such scheduled date to the time of such payment on such next succeeding Business Day. Section 9.6. Governing Law. This Ground Sublease shall be in all respects governed by and construed in accordance with the laws of the State of New York including all matters of construction, validity and performance except to the extent the law of the State of Georgia is mandatorily applicable. Section 9.7. Severability. If any provision hereof shall be invalid, illegal or unenforceable under Applicable Law, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. Section 9.8. Counterparts. This Ground Sublease may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one instrument. Section 9.9. Headings and Table of Contents. The headings of the sections of this Ground Sublease and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. Section 9.10. Further Assurances. Each party hereto will promptly and duly execute and deliver such further documents to make such further assurances for and take such further action reasonably requested by any party to whom such first party is obligated, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Ground Sublease. Section 9.11. Effectiveness of Ground Sublease. This Ground Sublease has been dated as of the date first above written for convenience only. This Ground Sublease shall be effective on the date of execution and delivery by the Ground Sublessee and the Ground Sublessor. Section 9.12. Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Ground Sublease is executed and delivered by SunTrust Bank, Atlanta, not individually or personally but solely as Co-Trustee under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the Co-Trustee is made and intended not as personal representations, undertakings and agreements by SunTrust Bank, Atlanta, but is made and intended for the purpose for binding only the Co-Trustee, (c) nothing herein contained shall be construed as creating any liability on SunTrust Bank, Atlanta, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the Ground Sublessor or by any Person claiming by, through or under the Ground Sublessee and (d) under no circumstances shall SunTrust Bank, Atlanta, be personally liable for the payment of any indebtedness or expenses of the Co-Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by 10 the Co-Trustee under this Ground Sublease. In addition, each of the parties hereto acknowledges and agrees that the Co-Trustee has been appointed by the Owner Participant and Owner Trustee for the purpose of exercising those trust powers in the State of Georgia which may not be exercised by the Owner Trustee under applicable law, and that, except as otherwise required by applicable law, the Co-Trustee shall not be obligated to take any action hereunder unless expressly directed in writing by the Owner Trustee or the Owner Participant in accordance with the terms of the Trust Agreement. Section 9.13. Measuring Life. If and to the extent that any of the rights and privileges granted under this Ground Sublease, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule or law relating to the vesting of interests in property or the suspension of the power of alienation of property, then it is agreed that notwithstanding any other provision of this Ground Sublease, such options, rights and privileges, subject to the respective conditions hereof governing the exercise of such options, rights and privileges, will be exercisable only during (a) the longer of (i) a period which will end twenty-one (21) years after the death of the last survivor of the descendants living on the date of the execution of this Ground Sublease of the following Presidents of the United States: Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George H.W. Bush and William J. Clinton or (ii) the period provided under the Uniform Statutory Rule Against Perpetuities or (b) the specific applicable period of time expressed in this Ground Sublease, whichever of (a) and (b) is shorter. 11 IN WITNESS WHEREOF, the undersigned have caused this Ground Sublease to be duly executed and delivered by their respective officers thereunto duly authorized. SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee under the Trust Agreement, as Ground Sublessor By: /s/ Bryan Echols ------------------------------ Name: Bryan Echols Title: Vice President Date: 12/30/96 By: /s/ Sandra Thompson ------------------------------ Name: Sandra Thompson Title: Vice President Date: 12/30/96 Signed and delivered in the presence of: /s/ E. M. Schadru - ------------------------------- Unofficial Witness /s/ David M. Boehm - ------------------------------- Notary Public My Commission Expires: March 16, 1998 [Notary Seal] ROCKY MOUNTAIN LEASING CORPORATION, as Ground Sublessee By: /s/ Eugen Heckl ------------------------------ Name: Eugen Heckl Title: Vice President Date: 12/30/96 Signed and delivered in the presence of: /s/ Leonard Scott - ------------------------------- Unofficial Witness /s/ David M. Boehm - ------------------------------- Notary Public My Commission Expires: March 16, 1998 [Notary Seal] SCHEDULE TO EXHIBIT 10.32.6 GROUND SUBLEASE AGREEMENT (P1) The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant --------- --------------- -------------------------------------- P1 December 30, 1996 Philip Morris Capital Corporation P2 January 3, 1997 Philip Morris Capital Corporation F3 December 30, 1996 First Chicago Leasing Corporation F4 December 30, 1996 First Chicago Leasing Corporation N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation Other than Appendix A, the Exhibits and Schedules to the Ground Sublease Agreement (P1) are not filed herewith; however, the registrant hereby agrees that such Exhibits and Schedules will be provided to the Commission upon request. APPENDIX A to Ground Sublease DEFINITIONS Refer to Appendix A to Exhibit 10.32.1 of the Form 10-K. A-1 EX-10.32-7 24 EXHIBIT 10.32.7 EXHIBIT 10.32.7 This instrument, when recorded, should be returned to: Robert N. Farrar Attorney at Law The Carnegie Building 607 Broad Street, Suite 141 Rome, Georgia 30161-3059 ================================================================================ ROCKY MOUNTAIN AGREEMENTS RE-ASSIGNMENT AND ASSUMPTION AGREEMENT (P1) Dated as of December 30, 1996 between SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee, as Assignor and ROCKY MOUNTAIN LEASING CORPORATION, as Assignee ROCKY MOUNTAIN PUMPED STORAGE HYDROELECTRIC PROJECT ================================================================================ ROCKY MOUNTAIN AGREEMENTS RE-ASSIGNMENT AND ASSUMPTION AGREEMENT (P1) This ROCKY MOUNTAIN AGREEMENTS RE-ASSIGNMENT AND ASSUMPTION AGREEMENT (P1), dated as of December 30, 1996 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof, this "Rocky Mountain Agreements Re-assignment"), between SUNTRUST BANK, ATLANTA, a state banking corporation, not in its individual capacity but solely as Co-Trustee under the Trust Agreement (P1), dated as of December 30, 1996, with the Owner Trustee and the Owner Participant (together with its successors and permitted assigns, the "Assignor") and ROCKY MOUNTAIN LEASING CORPORATION, a corporation organized under the laws of the State of Delaware (together with its successors and permitted assigns, the "Assignee"). WHEREAS, Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation), an electric membership corporation organized under the laws of the State of Georgia (together with its successors and assigns, "Oglethorpe") and Georgia Power Company, a corporation organized under the laws of the State of Georgia ("Georgia Power") own the Rocky Mountain Site as tenants in common under Georgia law; WHEREAS, by the Rocky Mountain Agreements, Oglethorpe and Georgia Power established their respective rights and obligations as tenants in common of the Rocky Mountain Site and of all improvements thereafter to be constructed, and all personal property thereafter to be situated, on the Rocky Mountain Site. Such improvements and personal property owned by Oglethorpe and Georgia Power as tenants in common under Georgia law include the Facility; WHEREAS, as tenants in common of such real and personal property, Oglethorpe and Georgia Power hold a 74.61% and 25.39% undivided interest, respectively, in such real and personal property, including the right to nonexclusive possession of all such real and personal property, subject to the rights of the other to nonexclusive possession and the terms and conditions of the Rocky Mountain Agreements; WHEREAS, pursuant to the Rocky Mountain Agreements Assignment, Oglethorpe has assigned to the Assignor the Assigned Rocky Mountain Interests for a term coterminous with that of the Head Lease; and WHEREAS, by this Rocky Mountain Agreements Re-assignment, the Assignor will assign the Assigned Rocky Mountain Interests to the Assignee for a term coterminous with that of the Facility Lease. NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS. Capitalized terms used in this Rocky Mountain Agreements Re-assignment, including the recitals, and not otherwise defined herein shall have the respective meanings specified in Appendix A to the Participation Agreement (P1), dated as of December 30, 1996, among Oglethorpe, the Assignor, the Assignee, Fleet National Bank, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (the "Owner Trustee"), Philip Morris Capital Corporation, a Delaware corporation (the "Owner Participant") and Utrecht-America Finance Co. The general provisions of Appendix A shall apply to terms used in this Rocky Mountain Agreements Re-assignment and specifically defined herein. SECTION 2. ASSIGNMENT OF ASSIGNED ROCKY MOUNTAIN INTERESTS TO ASSIGNEE. The Assignor hereby assigns the Assigned Rocky Mountain Interests to the Assignee. The assignment effected by this Section 2 shall become effective on and as of the Closing Date and shall terminate on the expiration or earlier termination of the Facility Lease Term. SECTION 3. ASSUMPTION BY ASSIGNEE. The Assignee hereby assumes, and agrees to perform, any and all liabilities and obligations of the Assignor incurred with respect to the Assigned Rocky Mountain Interests. This assumption shall terminate (except with respect to any liability or obligation which has accrued prior to such termination) on the expiration or earlier termination of the Facility Lease Term. Simultaneously herewith, Oglethorpe is executing and delivering the Rocky Mountain Agreements Second Re-assignment pursuant to which Oglethorpe will assume and agree to perform any and all liabilities and obligations of the Assignee incurred with respect to the Assigned Rocky Mountain Interests resulting from the Assignee's assumption of the liabilities and the obligations of the Assignor under this Section 3. The Assignor acknowledges such assumption and agreement by Oglethorpe and agrees that during the effective period of the assumption and agreement by Oglethorpe pursuant to the Rocky Mountain Agreements Second Re-assignment, (i) by entering into the Rocky Mountain Agreements Second Re-assignment the Assignee shall be deemed to have complied with all duties or obligations with respect to the liabilities or obligations assumed or agreed to be performed by the Assignee in respect of the Assigned Rocky Mountain Interests under this Section 3, (ii) any default by Oglethorpe in the performance of the liabilities and obligations assumed and agreed to be performed by Oglethorpe in accordance with the Rocky Mountain Agreements Second Re-assignment shall not be (or be deemed to be) a default by the Assignee in the performance of the liabilities and obligations assumed and agreed to be performed by the Assignee under this Section 3 and (iii) the consequences of any action or inaction on the part of Oglethorpe (other than full and complete performance) in the performance of the liabilities and obligations assumed and agreed to be performed by Oglethorpe in accordance with the Rocky Mountain Agreements 2 Second Re-assignment, or otherwise with respect to the Assigned Rocky Mountain Interests, shall not be attributed to the Assignee (including, without limitation, any Liens, incurred, assumed or suffered to exist by Oglethorpe on the Assigned Rocky Mountain Interests). SECTION 4. AMENDMENTS TO AND ACTIONS UNDER THE ROCKY MOUNTAIN AGREEMENTS. The Assignee agrees that it will not, without the prior written consent of the Assignor and the Lender which consent may not be unreasonably withheld, amend, grant a waiver or consent under, or take any action or omit to take any action under the Rocky Mountain Ownership Agreement or the Rocky Mountain Operating Agreement, which could materially adversely affect the value, utility or useful life of the Facility or the interest of the Assignor or the Owner Participant therein, unless such amendment, waiver, consent, action or inaction is required by Applicable Law. The parties hereto agree that any grant of a waiver by Assignee of an assignment by Georgia Power of its independent dispatch rights under Section 7.02 of the Rocky Mountain Operating Agreement without an assignment of Oglethorpe's independent dispatch rights under such section to the Assignor could materially adversely affect the interest of the Owner Participant. The Assignee agrees that it will not grant any consent required pursuant to Section 4 of the Rocky Mountain Agreements Second Re-assignment without the prior written consent of the Assignor and the Lender. SECTION 5. SECURITY FOR ASSIGNOR'S OBLIGATION TO THE LENDER In order to secure the Secured Indebtedness, the Assignor will assign for security purposes its rights under this Rocky Mountain Agreements Re-assignment. The Assignee hereby acknowledges that the Assignor's security interest in this Rocky Mountain Agreements Re-assignment will be assigned by the Assignor to the Lender pursuant to the Loan Agreement and the Deed to Secure Debt. The Assignee hereby consents to such assignment and the creation of such Liens and acknowledges receipt of copies of the Loan Agreement and the Deed to Secure Debt, it being understood that such consent shall not affect any requirement or the absence of any requirement for any consent under any other circumstances. Unless and until the Assignee shall have received written notice from the Lender that the Lien of the Loan Agreement and the security title of the Deed to Secure Debt have been fully released, the Lender under the Loan Agreement and the Deed to Secure Debt shall have the rights of the Assignor under this Rocky Mountain Agreements Re-assignment to the extent set forth in and subject in each case to the exceptions set forth in the Loan Agreement or the Deed to Secure Debt. SECTION 6. MISCELLANEOUS. Section 6.1. Amendments and Waivers. No term, covenant, agreement or condition of this Rocky Mountain Agreements Re-assignment may be terminated, amended or compliance 3 therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto. Section 6.2. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein to a party hereto shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to such party and copy party at its address set forth below or at such other address as such party or copy party may from time to time designate by written notice to the other parties: If to the Assignor: SunTrust Bank, Atlanta P. O. Box 4625 Mail Code 008 Atlanta, Georgia 30302 Facsimile No.: (404) 332-3966 Telephone No.: (404) 588-7813 Attention: Corporate Trust Department with copies to the Owner Participant: Philip Morris Capital Corporation 800 Westchester Avenue Rye Brook, New York 10573-1301 Facsimile No.: (914) 335-1297 Telephone No.: (914) 335-5000 Attention: Vice President, Leasing with a copy to Director, Portfolio Administration to the Owner Trustee: 4 Fleet National Bank 777 Main Street Hartford, Connecticut 06115 Facsimile No.: (860) 986-7920 Telephone No.: (860) 986-4540 Attention: Corporate Trust Administration and to the Lender: Utrecht-America Finance Co., c/o Rabobank Nederland, New York Branch 245 Park Avenue New York, New York 10167-0062 Facsimile No.: (212) 916-7880 Telephone No.: (212) 916-7864 Attention: General Counsel's Office If to the Assignee: Rocky Mountain Leasing Corporation c/o Corporation Trust Center 1209 Orange Street, Room 123 Wilmington, Delaware 19801 Facsimile No.: (302) 658-5459 Telephone No.: (302) 777-0250 with copies to: Sutherland, Asbill & Brennan, L.L.P. 999 Peachtree Street, N.E. Atlanta, Georgia 30309-3996 Facsimile No.: (404) 853-8806 Telephone No.: (404) 853-3000 Attention: Cada T. Kilgore, III and to the Lender at the address set forth above. 5 Section 6.3. Survival. Except as expressly set forth herein, the warranties and covenants made by each party hereto shall not survive the expiration or termination of this Rocky Mountain Agreements Re-assignment. Section 6.4. Successors and Assigns. (a) This Rocky Mountain Agreements Re-assignment shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns as permitted by and in accordance with the terms hereof. (b) Except as expressly provided herein or in any other Operative Document, the Assignor may not assign or transfer any of its interests herein without the consent of the Assignee. The Assignor expressly agrees that the Assignee shall be permitted to assign its rights under this Rocky Mountain Agreements Re-assignment without the written consent of the Assignor to Oglethorpe pursuant to the Rocky Mountain Agreements Second Reassignment. Except as expressly provided in the Operative Documents, the Assignee may not assign its interests herein without the consent of the Assignor. Section 6.5. Governing Law. This Rocky Mountain Agreements Re-assignment shall be in all respects governed by and construed in accordance with the laws of the State of New York including all matters of construction, validity and performance, except to the extent the law of the State of Georgia is mandatorily applicable. Section 6.6. Severability. If any provision hereof shall be invalid, illegal or unenforceable under Applicable Law, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. Section 6.7. Counterparts. This Rocky Mountain Agreements Re-assignment may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one instrument. Section 6.8. Headings. The headings of the sections of this Rocky Mountain Agreements Re-assignment are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. Section 6.9. Further Assurances. Each party hereto will promptly and duly execute and deliver such further documents to make such further assurances for and take such further action reasonably requested by any party to whom such first party is obligated, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Rocky Mountain Agreements Re-assignment. Section 6.10. Effectiveness of Assignment. This Rocky Mountain Agreements Re-assignment has been dated as of the date first above written for convenience only. This 6 Rocky Mountain Agreements Re-assignment shall be effective on the date of execution and delivery by each of the Assignee and the Assignor. Section 6.11. Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Rocky Mountain Agreements Re-assignment is executed and delivered by SunTrust Bank, Atlanta, not individually or personally but solely as Co-Trustee under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the Co-Trustee is made and intended not as personal representations, undertakings and agreements by SunTrust Bank, Atlanta, but is made and intended for the purpose of binding only the Co-Trustee, (c) nothing herein contained shall be construed as creating any liability on SunTrust Bank, Atlanta, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the Assignor or by any Person claiming by, through or under the Assignor and (d) under no circumstances shall SunTrust Bank, Atlanta be personally liable for the payment of any indebtedness or expenses of the Co-Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Co-Trustee under this Rocky Mountain Agreements Re-assignment. In addition, each of the parties hereto acknowledges and agrees that the Co-Trustee has been appointed by the Owner Participant and Owner Trustee for the purpose of exercising those trust powers in the State of Georgia which may not be exercised by the Owner Trustee under applicable law, and that, except as otherwise required by applicable law, the Co-Trustee shall not be obligated to take any action hereunder unless expressly directed in writing by the Owner Trustee or the Owner Participant in accordance with the terms of the Trust Agreement. Section 6.12. Measuring Life. If and to the extent that any of the rights and privileges granted under this Rocky Mountain Agreements Re-assignment, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule or law relating to the vesting of interests in property or the suspension of the power of alienation of property, then it is agreed that notwithstanding any other provision of this Rocky Mountain Agreements Re-assignment, such options, rights and privileges, subject to the respective conditions hereof governing the exercise of such options, rights and privileges, will be exercisable only during (a) the longer of (i) a period which will end twenty-one (21) years after the death of the last survivor of the descendants living on the date of the execution of this Rocky Mountain Agreements Re-assignment, of the following Presidents of the United States: Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George Bush and William J. Clinton or (ii) the period provided under the Uniform Statutory Rule Against Perpetuities or (b) the specific applicable period of time expressed in this Rocky Mountain Agreements Re-assignment, whichever of (a) and (b) is shorter. 7 IN WITNESS WHEREOF, the parties hereto have caused this Rocky Mountain Agreements Re-assignment to be duly executed by their respective officers thereunto duly authorized. SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee under the Trust Agreement, as Assignor, By:/s/ Bryan Echols ------------------------------------------ Name: Bryan Echols Title: Vice President Date: December 30, 1996 By:/s/ Sandra Thompson ------------------------------------------ Name: Sandra Thompson Title: Vice President Date: December 30, 1996 Signed and delivered in the presence of: /s/ Kuon F. Kanbot - ------------------------------ Unofficial Witness /s/ David M. Boehm - ------------------------------ Notary Public My Commission Expires: March 16, 1998 [Notary Seal] ROCKY MOUNTAIN LEASING CORPORATION, as Assignee, By:/s/ Eugen Heckl ---------------------------------- Name: Eugen Heckl Title: Vice President Date: December 30, 1996 Signed and delivered in the presence of: /s/ Leonard Scott - ------------------------------------ Unofficial Witness /s/ David M. Boehm - ------------------------------------ Notary Public My Commission Expires: March 16, 1998 [Notary Seal] 9 SCHEDULE TO EXHIBIT 10.32.7 ROCKY MOUNTAIN AGREEMENTS RE-ASSIGNMENT AND ASSUMPTION AGREEMENT (P1) The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant --------- ---- ----------------- P1 December 30, 1996 Philip Morris Capital Corporation P2 January 3, 1997 Philip Morris Capital Corporation F3 December 30, 1996 First Chicago Leasing Corporation F4 December 30, 1996 First Chicago Leasing Corporation N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation 10 EX-10.32-8 25 EXHIBIT 10.32.8 EXHIBIT 10.32.8 THE PURPOSE OF THIS INSTRUMENT IS TO MAKE This instrument, when recorded, TECHNICAL CORRECTIONS TO THE "FACILITY should be returned to: SUBLEASE" REFERRED TO IN THE SHORT FORM OF FACILITY SUBLEASE AGREEMENT (P1), DATED Robert N. Farrar DECEMBER 30, 1996, RECORDED IN DEED BOOK Attorney at Law ____, PAGE ____, AND THE LONG FORM OF SUCH The Carnegie Building FACILITY SUBLEASE RECORDED IN DEED BOOK ____, 607 Broad Street, Suite 141 PAGE ____, OF THE RECORDS OF THE CLERK OF Rome, Georgia 30161-3059 SUPERIOR COURT OF FLOYD COUNTY, GEORGIA. IT IS THE INTENTION OF THE PARTIES THAT THIS DOCUMENT SUPERCEDE SUCH OTHER DOCUMENTS IN THEIR ENTIRETY. ======================================= FACILITY SUBLEASE AGREEMENT (P1) Dated as of December 30, 1996 between ROCKY MOUNTAIN LEASING CORPORATION and OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATING & TRANSMISSION CORPORATION) ROCKY MOUNTAIN PUMPED STORAGE HYDROELECTRIC PROJECT ======================================= ALL THE RIGHT, TITLE AND INTEREST OF ROCKY MOUNTAIN LEASING CORPORATION IN AND TO THIS FACILITY SUBLEASE AGREEMENT (P1) HAVE BEEN ASSIGNED TO AND ARE SUBJECT TO A FIRST PRIORITY SECURITY TITLE, LIEN AND SECURITY INTEREST IN FAVOR OF SUNTRUST BANK, ATLANTA, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS CO-TRUSTEE, UNDER A DEED TO SECURE DEBT, ASSIGNMENT OF SURETY BOND AND SECURITY AGREEMENT (P1), DATED AS OF DECEMBER 30, 1996 AND CERTAIN OF SUCH RIGHT, TITLE AND INTEREST HAVE BEEN FURTHER ASSIGNED TO UTRECHT-AMERICA FINANCE CO., AS LENDER UNDER THE LOAN AGREEMENT AND THE DEED TO SECURE DEBT, EACH DATED AS OF DECEMBER 30, 1996. THIS FACILITY SUBLEASE HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE ORIGINAL COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY THE LENDER ON THE SIGNATURE PAGE THEREOF. SEE SECTION 24 FOR INFORMATION CONCERNING THE RIGHTS OF THE HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF. 1 TABLE OF CONTENTS Page ---- SECTION 1. DEFINITIONS.................................................. 2 SECTION 2. LEASE OF THE UNDIVIDED INTEREST.............................. 2 SECTION 3. FACILITY SUBLEASE TERM AND SUBLEASE RENT..................... 2 Section 3.1 Sublease Basic Term.............................. 2 Section 3.2 Sublease Basic Rent.............................. 3 Section 3.3 Sublease Supplemental Rent....................... 3 Section 3.4 Adjustment of Sublease Basic Rent................ 3 Section 3.5 Manner of Payments............................... 3 Section 3.6 Business Day..................................... 4 SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT.................................................... 4 Section 4.1 Disclaimer of Warranties......................... 4 Section 4.2 Quiet Enjoyment.................................. 5 SECTION 5. RETURN OF UNDIVIDED INTEREST................................. 6 Section 5.1 Return........................................... 6 Section 5.2 Condition Upon Return............................ 6 Section 5.3 Environmental Reports............................ 8 Section 5.4 Expenses......................................... 8 SECTION 6. LIENS........................................................ 8 SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS...................... 9 Section 7.1 Maintenance; Compliance with Rocky Mountain Agreements....................................... 9 Section 7.2 Replacement of Components........................ 9 Section 7.3 Records.......................................... 10 SECTION 8. MODIFICATIONS................................................ 10 Section 8.1 Required Modifications........................... 10 Section 8.2 Optional Modifications........................... 10 Section 8.3 Title to Modifications; Subjection to Head Lease............................................ 10 Section 8.4 Report of Modifications.......................... 11 SECTION 9. NET LEASE.................................................... 11 i Page ---- TABLE OF CONTENTS, Continued SECTION 10. EVENTS OF LOSS............................................... 12 Section 10.1 Occurrence of Events of Loss.................... 12 Section 10.2 Payment of Sublease Termination Value; Termination of Sublease Basic Rent.............. 13 Section 10.3 Rebuild......................................... 14 Section 10.4 Eminent Domain.................................. 16 SECTION 11. INSURANCE.................................................... 17 Section 11.1 Property Insurance.............................. 17 Section 11.2 Liability Insurance............................. 17 Section 11.3 Provisions With Respect to Insurance............ 17 Section 11.4 Reports......................................... 18 Section 11.5 Additional Insurance by Facility Sublessor...... 18 SECTION 12. INSPECTION................................................... 19 SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS..................... 19 Section 13.1 Election to Terminate........................... 19 Section 13.2 Procedure for Exercise of Termination Option.... 20 SECTION 14. TERMINATION FOR OBSOLESCENCE................................. 21 Section 14.1 Termination..................................... 21 Section 14.2 Solicitation of Offers.......................... 21 Section 14.3 Procedure for Exercise of Termination Option.... 22 SECTION 15. END OF SUBLEASE BASIC TERM OPTIONS........................... 23 Section 15. The Facility Sublessee's Sublease Purchase Option and Sublease Return Option............... 23 Section 15.2 Sublease Renewal Term........................... 24 Section 15.3 Refinancing of Loan Certificate in Connection with Sublease Return Option..................... 25 SECTION 16. EVENTS OF DEFAULT............................................ 26 SECTION 17. REMEDIES..................................................... 29 Section 17.1 Remedies for Sublease Event of Default.......... 29 Section 17.2 Cumulative Remedies............................. 31 Section 17.3 No Delay or Omission to be Construed as Waiver.. 32 SECTION 18. TERMINATION OPTIONS FOR APPEAL OF FERC ORDERS................ 32 ii Page ---- TABLE OF CONTENTS, Continued Section 18.1 Options to Terminate............................ 32 Section 18.2 Procedure for Exercise of Termination Options... 33 SECTION 19. THE FACILITY SUBLESSEE'S RIGHT TO SUBLEASE................... 33 SECTION 20. FURTHER ASSURANCES........................................... 34 SECTION 21. FACILITY SUBLESSOR'S RIGHT TO PERFORM........................ 35 SECTION 22. NOTICES...................................................... 35 SECTION 23. SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS........................................................ 37 SECTION 24. SECURITY FOR FACILITY SUBLESSOR'S OBLIGATION TO THE FACILITY LESSOR.............................................. 37 SECTION 25. MISCELLANEOUS................................................ 38 Section 25.1 Governing Law................................... 38 Section 25.2 Severability.................................... 38 Section 25.3 Headings and Table of Contents.................. 38 Section 25.4 Successors and Assigns.......................... 38 Section 25.5 "True Lease".................................... 38 Section 25.6 Amendments and Waivers.......................... 38 Section 25.7 Survival........................................ 38 Section 25.8 Counterparts.................................... 39 Section 25.9 Effectiveness................................... 39 ATTACHMENTS TO FACILITY SUBLEASE: Appendix A - Definitions............................................. A-1 Exhibit A - Description of the Facility Exhibit A-1 - Description of the Entire Rocky Mountain Property Exhibit A-2 - Project Boundary Drawing of the Rocky Mountain Project Exhibit A-3 - Powertunnel and Powerhouse General Plan and Profile of the Rocky Mountain Project No. RM-00-CL-0013 R1 Exhibit A-4 - Equipment iii Page ---- TABLE OF CONTENTS, Continued Schedule 1 - Sublease Basic Rent.................................... S1-1 Schedule 2 - Sublease Termination Values............................ S2-1 iv FACILITY SUBLEASE AGREEMENT (P1) This FACILITY SUBLEASE AGREEMENT (P1), dated as of December 30, 1996 (as amended, supplemented or otherwise modified from time to time and in accordance with the provisions hereof, this "Facility Sublease"), between ROCKY MOUNTAIN LEASING CORPORATION, a corporation organized and existing under the laws of the State of Delaware (together with its successors and permitted assigns, the "Facility Sublessor"), and OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized under the laws of the State of Georgia (together with its successors and permitted assigns, the "Facility Sublessee"). WHEREAS, the Facility Sublessee and Georgia Power Company, a corporation organized under the laws of the State of Georgia (together with its successors and assigns, "Georgia Power") own the Rocky Mountain Site (as hereinafter defined) as tenants in common under the laws of the State of Georgia; WHEREAS, the Facility Sublessee and Georgia Power own the Facility (as hereinafter defined) as tenants in common under the laws of the State of Georgia; WHEREAS, pursuant to the Ground Lease (as hereinafter defined) the Co-Trustee has acquired from the Facility Sublessee a leasehold interest in the Ground Interest; WHEREAS, pursuant to the Head Lease (as hereinafter defined) the Co-Trustee has acquired from the Facility Sublessee the Undivided Interest for a term equal to 120% of the estimated remaining useful life of the Facility, subject to renewal as provided in the Head Lease; WHEREAS, pursuant to the Ground Sublease (as hereinafter defined) the Co-Trustee will lease the Ground Interest leased to it by the Facility Sublessee pursuant to the Ground Lease to RMLC, as Ground Sublessee, for the term provided therein; WHEREAS, pursuant to the Facility Lease (as hereinafter defined), the Co-Trustee will lease the Undivided Interest to RMLC, as Facility Lessee, for the term provided therein; WHEREAS, pursuant to the Ground Sub-sublease (as hereinafter defined), RMLC, as Ground Sub-sublessor, will lease the Ground Interest leased to it by the Co-Trustee pursuant to the Ground Sublease to the Facility Sublessee, for a term equal to that of the Ground Sublease; and WHEREAS, pursuant to this Facility Sublease, the Facility Sublessor will lease the Undivided Interest leased to it by the Facility Lessor pursuant to the Facility Lease to the Facility Sublessee, for a term equal to that of the Facility Lease. NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS Capitalized terms used in this Facility Sublease, including the recitals, and not otherwise defined herein shall have the respective meanings set forth in Appendix A hereto. The general provisions of Appendix A shall apply to terms used in this Facility Sublease and specifically defined herein. SECTION 2. LEASE OF THE UNDIVIDED INTEREST The Facility Sublessor hereby leases the Undivided Interest, upon the terms and conditions set forth herein, to the Facility Sublessee for the Sublease Basic Term and Sublease Renewal Term, if any, and the Facility Sublessee hereby leases the Undivided Interest, upon the terms and conditions set forth herein, from the Facility Sublessor. The Facility Sublessee and the Facility Sublessor understand and agree that (a) this lease of the Undivided Interest is subject to the interest of the Head Lessee under the Head Lease, the interest of the Facility Lessee under the Facility Lease and the interests identified in the definition of Undivided Interest, (b) legal title to the Facility remains vested in Oglethorpe and Georgia Power as tenants-in-common, (c) this lease of the Undivided Interest is subject and subordinate to the Lien of the Oglethorpe Mortgage and (d) this lease is subject to those encumbrances set forth in the Title Report. The Undivided Interest shall be subject to the terms of this Facility Sublease from the date on which this Facility Sublease is executed and delivered. SECTION 3. FACILITY SUBLEASE TERM AND SUBLEASE RENT Section 3.1 Sublease Basic Term. The term of this Facility Sublease shall commence on the Closing Date and shall terminate at 11:57 p.m. (New York City time) on the Expiration Date (the "Sublease Basic Term"), subject to earlier termination pursuant to Section 10, 13, 14, 17 or 18 hereof and extension for a Sublease Renewal Term pursuant to Section 15.2 hereof; provided, however, that notwithstanding anything to the contrary set forth herein, in no event shall the Sublease Basic Term terminate so long as the Facility Sublessor's interest under this Facility Sublease shall be subject to the Lien of the Facility Sublease Assignment Agreement. 2 Section 3.2 Sublease Basic Rent. The Facility Sublessee hereby agrees to pay to the Facility Sublessor Sublease Basic Rent for the lease of the Undivided Interest for each Rent Payment Period throughout the Sublease Basic Term and the Sublease Renewal Term, if applicable, in the amounts payable in advance or in arrears or both, as the case may be, on each Rent Payment Date as indicated on Schedule 1 hereto under the caption "Advance Rent" in the case of Rent Payment Periods immediately following such Rent Payment Date and/or "Arrears Rent" in the case of Rent Payment Periods ending on such Rent Payment Date. Each such payment of Sublease Basic Rent shall be in the amount set forth opposite such Rent Payment Date on Schedule 1 hereto, in each case, subject to Section 3.4 hereof. Section 3.3 Sublease Supplemental Rent. The Facility Sublessee also agrees to pay to the Facility Sublessor, or to any other Person entitled thereto as expressly provided herein or in any other Operative Document, as appropriate, any and all Sublease Supplemental Rent, promptly as the same shall become due and owing, or where no due date is specified, promptly after demand by the Person entitled thereto, and in the event of any failure on the part of the Facility Sublessee to pay any Sublease Supplemental Rent, the Facility Sublessor shall have all rights, powers and remedies provided for herein or by law or equity or otherwise for the failure to pay Sublease Basic Rent. The Facility Sublessee will also pay as Sublease Supplemental Rent to the extent permitted by Applicable Law, an amount equal to interest at the applicable Overdue Rate on any part of any payment of Sublease Basic Rent not paid when due for any period for which the same shall be overdue and on any Sublease Supplemental Rent not paid when due (whether on demand or otherwise) for the period from such due date until the same shall be paid. All Sublease Supplemental Rent to be paid pursuant to this Section 3.3 shall be payable (i) if to the Facility Sublessor in the manner set forth in Section 3.5 or (ii) if to other Persons in the manner set forth in the first sentence of Section 3.5. Section 3.4 Adjustment of Sublease Basic Rent. The Facility Sublessee and the Facility Sublessor agree that Sublease Basic Rent (including Sublease Basic Rent for the Renewal Term, if any), Sublease Termination Values and Equity Exposure Amounts shall be adjusted, either upwards or downwards, to reflect adjustments in Basic Rent payable under the Facility Lease. All adjustments pursuant to the preceding sentence shall be equal to adjustments made for any Rent Payment Date pursuant to Section 3.4 of the Facility Lease. Section 3.5 Manner of Payments. (a) All Sublease Rent (whether Sublease Basic Rent or Sublease Supplemental Rent) shall be paid by the Facility Sublessee in lawful currency of the United States of America in immediately available funds to the recipient not later than 11:00 a.m. (New York City time) on the date due. All Sublease Rent payable to the Facility Sublessor shall be paid by the Facility Sublessee to the Facility Sublessor at its account at SunTrust Bank, Atlanta (ABA Account No. 061-0001-04) Credit - Rocky Mountain Leasing Corporation (Account No. 8840611373), or to such other place as the Facility Sublessor shall notify the Facility Sublessee in writing. 3 (b) Payments made to the Facility Sublessor or its assignee under the Qualifying Sublease Surety Bond shall satisfy the Facility Sublessee's obligation to pay amounts of Sublease Basic Rent or Sublease Supplemental Rent, as the case may be, to the extent of such payments. Amounts paid to the Owner Participant from the Qualifying Head Lease Surety Bond in satisfaction of the Special Equity Head Lease Remedy shall not satisfy or be treated as performance of any of the Facility Sublessee's obligations under this Facility Sublease or any other Operative Document (other than its obligations under Section 16.2 of the Participation Agreement) or in any way limit or offset any amounts payable by the Facility Sublessee. Section 3.6 Business Day. Notwithstanding anything herein or in any other Operative Document to the contrary, if the date on which any payment is to be made pursuant to this Facility Sublease or any other Operative Document is not a Business Day, the payment otherwise payable on such date shall be payable on the next succeeding Business Day with the same force and effect as if made on such scheduled date and, provided such payment is made on such succeeding Business Day, no interest shall accrue on the amount of such payment from and after such scheduled date to the time of such payment on such next succeeding Business Day. SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT Section 4.1 Disclaimer of Warranties. (a) WITHOUT WAIVING ANY CLAIM THE FACILITY SUBLESSEE MAY HAVE AGAINST ANY MANUFACTURER, VENDOR OR CONTRACTOR UNDER THE ROCKY MOUNTAIN AGREEMENTS, THE FACILITY SUBLESSEE ACKNOWLEDGES AND AGREES SOLELY FOR THE BENEFIT OF THE FACILITY SUBLESSOR THAT (i) THE FACILITY AND EACH COMPONENT THEREOF ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE ACCEPTABLE TO THE FACILITY SUBLESSEE, (ii) THE FACILITY SUBLESSEE IS SATISFIED THAT THE FACILITY AND EACH COMPONENT THEREOF ARE SUITABLE FOR THEIR RESPECTIVE PURPOSES, (iii) THE FACILITY SUBLESSOR IS NOT A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, (iv) THE UNDIVIDED INTEREST IS LEASED HEREUNDER TO THE EXTENT PROVIDED HEREBY FOR THE SUBLEASE BASIC TERM AND THE SUBLEASE RENEWAL TERM, IF ANY, SPECIFIED HEREIN SUBJECT TO ALL APPLICABLE LAWS NOW IN EFFECT OR HEREAFTER ADOPTED INCLUDING WITHOUT LIMITATION (1) ZONING REGULATIONS, (2) ENVIRONMENTAL LAWS OR (3) BUILDING RESTRICTIONS, AND IN THE STATE AND CONDITION OF EVERY PART THEREOF WHEN THE SAME FIRST BECAME SUBJECT TO THIS FACILITY SUBLEASE WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE FACILITY SUBLESSOR AND (v) THE FACILITY SUBLESSOR LEASES FOR THE SUBLEASE BASIC TERM AND SUBLEASE RENEWAL TERM, IF ANY, SPECIFIED HEREIN AND THE FACILITY SUBLESSEE TAKES THE UNDIVIDED INTEREST UNDER THIS FACILITY SUBLEASE "AS-IS", "WHERE-IS" AND "WITH ALL FAULTS", AND THE 4 FACILITY SUBLESSEE ACKNOWLEDGES THAT THE FACILITY SUBLESSOR MAKES NO, NOR SHALL BE DEEMED TO HAVE MADE, AND EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS, WARRANTIES OR REPRESENTA TIONS, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION, MERCHANTABILITY THEREOF OR AS TO THE TITLE OF THE FACILITY, THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED REPRESEN TATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO, except that the Facility Sublessor represents and warrants that on the Closing Date, the Undivided Interest will be free of Facility Sublessor's Liens. It is agreed that all such risks, as between the Facility Sublessor on the one hand and the Facility Sublessee on the other hand are to be borne by the Facility Sublessee. The Facility Sublessor, shall not have any responsibility or liability to the Facility Sublessee or any other Person with respect to any of the following: (w) any liability, loss or damage caused or alleged to be caused directly or indirectly by the Facility or any Component or by any inadequacy thereof or deficiency or defect therein or by any other circumstances in connection therewith; (x) the use, operation or performance of the Facility or any Component or any risks relating thereto; (y) any interruption of service, loss of business or anticipated profits or consequential damages; or (z) the delivery, operation, servicing, maintenance, repair, improvement, replacement or decommissioning of the Facility or any Component. The provisions of this paragraph (a) of this Section 4.1 have been negotiated, and, except to the extent otherwise expressly stated, the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties of the Facility Sublessor, express or implied, with respect to the Facility or any components of either thereof or the Undivided Interest that may arise pursuant to any Applicable Law now or hereinafter in effect, or otherwise. (b) During the Facility Sublease Term, so long as no Sublease Event of Default shall have occurred and be continuing, the Facility Sublessor hereby appoints irrevocably and constitutes the Facility Sublessee its agent and attorney-in-fact, coupled with an interest, to assert and enforce, from time to time, in the name and for the account of the Facility Sublessor and the Facility Sublessee, as their interests may appear, but in all cases at the sole cost and expense of the Facility Sublessee, whatever claims and rights the Facility Sublessor may have in respect of the Undivided Interest against the manufacturers of the Facility, or vendors or contractors under the Rocky Mountain Agreements or under any express or implied warranties relating to the Facility or the Undivided Interest. Section 4.2 Quiet Enjoyment. The Facility Sublessor agrees that, notwithstanding any provision of any other Operative Document, so long as no Sublease Event of Default shall have occurred and be continuing, it shall not itself interfere with or interrupt the quiet 5 enjoyment of the use, operation and possession by the Facility Sublessee of the interest in the Facility or the Undivided Interest conveyed by this Facility Sublease subject to the terms of this Facility Sublease; provided that the Facility Sublessor's covenant does not relate to actions of the Facility Lessor or the Lender. SECTION 5. RETURN OF UNDIVIDED INTEREST Section 5.1 Return. Upon the expiration of the Facility Sublease Term unless the Facility Sublessee shall have purchased the Facility Sublessor's interest in the Undivided Interest pursuant to Section 15.1, or upon any early termination of this Facility Sublease other than a termination in accordance with Section 10, 13 or 18, the Facility Sublessee, at its own expense, shall return the Undivided Interest by delivering possession of the same to the Facility Sublessor at the location of the Facility on the Rocky Mountain Site near Rome, Georgia. Section 5.2 Condition Upon Return. At the time of any return of the Undivided Interest by the Facility Sublessee in accordance with Section 5.1, the following conditions shall be complied with, all at the Facility Sublessee's sole cost and expense: (a) the right to use the Undivided Interest granted hereunder for the benefit of the Facility Sublessee shall cease and terminate; (b) the Facility will be in at least as good condition as if it had been maintained, rebuilt and operated during the Facility Sublease Term in compliance with the provisions of this Facility Sublease, reasonable wear and tear excepted, and there shall be no deferred maintenance in respect of the Facility; (c) the Facility Sublessee shall cooperate with all reasonable requests of the Facility Sublessor, at the expense of the Facility Sublessee, for purposes of obtaining, or enabling the Facility Sublessor or its designee to obtain, any and all licenses, permits, approvals and consents of any Governmental Entities or other Persons that are or will be required to be obtained by the Facility Sublessor or its designee in connection with its use, operation or maintenance of the Undivided Interest on or after such return in compliance with Applicable Law and in the manner contemplated by the Rocky Mountain Agreements; (d) the Facility Sublessee shall return and surrender possession of the Undivided Interest to the Facility Sublessor (or its designee) free and clear of all Liens (other than Liens described in clauses (iv), (v), (vi), (viii), (x) and (xi) of the definition of "Permitted Liens" and Permitted Post-Term Encumbrances); 6 (e) the Facility shall have (ordinary wear and tear excepted) at least the capability and functional ability, including the existence of sufficient water flows in contributing streams, to perform substantially at the ratings for which it was designed, on a continuing basis in normal commercial operation, all functions for which it was designed; (f) the Facility shall be in compliance with all requirements of manufacturers required for the maintenance in full force and effect of any material warranty then in effect with respect to the Facility; and (g) no Component shall be a temporary Component and any replacement Component shall satisfy the standards of Section 7.2. Prior to redelivery of the Undivided Interest under this Section 5.2, upon not less than 40 days' prior request of the Facility Sublessor, the Facility Sublessee shall perform such maintenance on the Facility which is in addition to that otherwise required to be performed by the Facility Sublessee hereunder as the Facility Sublessor may reasonably specify (using its best efforts on a time-available basis for such work). If the Facility Sublessee is unable to perform such requested maintenance, it will use its best efforts to arrange to have such maintenance performed by another Person acceptable to the Facility Sublessor at rates comparable to those the Facility Sublessee obtains for maintenance performed on its own facilities. The Facility Sublessor shall either promptly reimburse the Facility Sublessee for the Facility Sublessee's cost or pay such rates charged by any such Person acceptable to the Facility Sublessor in connection with such requested maintenance. The Facility Sublessee shall also surrender to the Facility Sublessor originals or copies of all documents, instruments, plans, maps, specifications, manuals, drawings and other documentary materials relating to the installation, operation, maintenance, construction, design, modification and repair of the Facility, as shall be in the Facility Sublessee's or any Affiliate of the Facility Sublessee's possession and shall be reasonably appropriate or necessary for the continued operation of the Facility. The Facility Sublessee shall effect delivery of the Undivided Interest at its own cost and expense by executing and delivering to the Facility Sublessor an instrument or instruments in form and substance reasonably satisfactory to the Facility Sublessor evidencing surrender by the Facility Sublessee of the Facility Sublessee's rights to the Undivided Interest under this Facility Sublease and to the possession thereof. At least 60 but not more than 120 days prior to redelivery of the Undivided Interest pursuant to this Section 5.2, the Facility Sublessee shall perform the Return Acceptance Tests and shall promptly provide the results to the Facility Sublessor. If the Facility shall not pass such tests, the Facility Sublessee shall, at its own expense, take such actions as may be necessary to enable the Facility to pass such tests and certify to the Owner Participant such passage of such tests prior to such delivery date. At the Facility Sublessor's request, if possible and commercially reasonable, the Facility Sublessee shall provide insurance in accordance with Section 11 hereof for three months following the date of return of the Undivided Interest at the Facility Sublessor's sole 7 cost and expense which costs and expense shall equal Facility Sublessee's actual cost and expense for such insurance; (h) the FERC License shall have been renewed for a term of not less than 17 years from the Expiration Date on terms not materially more burdensome than those under the existing FERC License and shall be in full force and effect. At the time of any return of the Undivided Interest by the Facility Sublessee in circumstances where the Facility Lessor has elected its option pursuant to Section 14.3 of the Facility Lease, the condition set forth in clauses (a), (b), (c), (d) and (g) of this Section 5.2 shall be complied with at the Facility Sublessee's sole cost and expense. Section 5.3 Environmental Reports. In connection with a return pursuant to Section 5.2, the Facility Sublessee shall provide the Facility Sublessor, no later than 270 days prior to the Expiration Date, or in connection with a return other than on the Expiration Date, no later than the date of return, an inspection report prepared by a reputable environmental consulting firm (selected by the Facility Sublessor and reasonably acceptable to the Facility Sublessee) as to the environmental condition of the Facility and the Rocky Mountain Site and the compliance or non-compliance with applicable Environmental Laws, in form, scope and substance reasonably satisfactory to the Facility Sublessor. The cost and expense of preparing and providing such report shall all be for the account of the Facility Sublessee. The provisions of such report shall not relieve the Facility Sublessee of liability with respect to environmental conditions, known or unknown, in respect of the Facility and the Rocky Mountain Site and the Facility Sublessee will take any and all actions necessary to ensure that the Facility and the Rocky Mountain Site comply with all such Environmental Laws. If such report shall indicate that either the Facility or the Rocky Mountain Site is not in compliance with applicable Environmental Laws, the Facility Sublessee shall, within 90 days of the Facility Sublessor having received such inspection report, (a) provide the Facility Sublessor with a remediation plan approved by the applicable Governmental Entity designed to ensure that the Facility and the Rocky Mountain Site will be brought into compliance with applicable Environmental Laws as promptly as is reasonably practical and without materially adversely affecting the continued operation of the Facility or the Rocky Mountain Site and (b) (i) place in escrow funds in an amount corresponding to the Facility Sublessor's Percentage of the cost estimate of such remediation plan (as certified by the environmental consulting firm that prepared such report or another expert reasonably satisfactory to the Facility Sublessor), which escrow shall provide for the payment of the costs of such plan as the same become due and payable or (ii) make other arrangements that are satisfactory to the Facility Sublessor, as determined in its sole discretion acting in good faith, for such purposes. The obligations of the Facility Sublessee set forth in this Section 5.3 shall survive the termination of this Facility Sublease and the expiration of the Facility Sublease Term. Section 5.4 Expenses. The Facility Sublessee agrees to pay or reimburse, on an After-Tax Basis, on demand, all costs and expenses incurred by the Facility Sublessor 8 (including costs and expenses of the Trustees, the Owner Participant and the Lender incurred by the Facility Sublessor pursuant to Section 5.3 of the Facility Lease) in connection with any return contemplated by this Section 5. SECTION 6. LIENS The Facility Sublessee will not directly or indirectly create, incur, assume or suffer to exist any Lien on or with respect to the Undivided Interest or the Facility Sublessor's Rocky Mountain Interest or any interest therein or in, to or on its interest in this Facility Sublease, except Permitted Liens, and the Facility Sublessee shall promptly notify the Facility Sublessor of the imposition of any such Lien of which the Facility Sublessee is aware and shall promptly, at its own expense, take such action as may be necessary duly to discharge such Lien. SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS Section 7.1 Maintenance; Compliance with Rocky Mountain Agreements. The Facility Sublessee, at its own cost and expense, will cause the Facility to be maintained in good condition (ordinary wear and tear excepted), repair and working order in accordance with Prudent Utility Practice and in compliance with all Applicable Laws of any Governmental Entity having jurisdiction, and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, (a) all as in the reasonable judgment of the Facility Sublessee may be necessary so that the business carried on in connection with the Undivided Interest may be properly and advantageously conducted by the Facility Sublessee at all times and (b) in accordance with the Rocky Mountain Agreements and the Oglethorpe Mortgage. The Facility Sublessee will perform all of its obligations under the Rocky Mountain Agreements the failure to perform which would have a material adverse effect on the Facility Lessor's Rocky Mountain Interest or the Facility Sublessor's Rocky Mountain Interest or the current or residual value, utility or remaining useful life of the Facility. Notwithstanding any provision contained in this Facility Sublease or in any of the Operative Documents, the Facility Sublessee has the right to perform any and all acts required by an order of the FERC or its successor affecting the Facility or the Rocky Mountain Site without the prior approval of the Facility Sublessor. Section 7.2 Replacement of Components. In the ordinary course of maintenance, service, repair or testing, the Facility Sublessee, at its own cost and expense, may remove or cause to be removed from the Facility any Component; provided, however, that the Facility Sublessee shall cause such Component to be replaced by a replacement Component which shall be free and clear of all Liens (except Permitted Liens) and shall be in as good operating condition as, and shall have a current and residual value, remaining useful life and utility at least equal to, that of the Component replaced, assuming such replaced Component was in at 9 least the condition and repair required to be maintained in accordance with the terms of this Facility Sublease (each such replacement Component being herein referred to as a "Replacement Component") as promptly as practicable. An undivided interest equal to the Facility Sublessor's Percentage in each Component at any time removed from the Facility shall remain subject to the Head Lease, the Facility Lease and this Facility Sublease, wherever located, until such time as such Component shall be replaced by a Replacement Component which has been incorporated in the Facility and which meets the requirements for Replacement Components specified above. Immediately upon any Replacement Component becoming incorporated in the Facility, without further act (and at no cost to the Facility Sublessor and with no adjustment to Sublease Basic Rent) (i) the replaced Component shall no longer be subject to the Head Lease, the Facility Lease or this Facility Sublease, (ii) title to such Replacement Component shall vest in the Co-Owners and Oglethorpe's undivided interest therein shall become subject to the Oglethorpe Mortgage, (iii) an undivided interest equal to the Facility Lessor's Percentage in the Replacement Component shall thereupon become subject to the Head Lease and the Facility Lease, and (iv) an undivided interest equal to the Facility Sublessor's Percentage in such Replacement Component shall become subject to this Facility Sublease and be deemed a part of the Facility for all purposes hereof. Notwithstanding anything in this Section 7.2 or elsewhere in this Facility Sublease to the contrary, if the Facility Sublessee or the Facility Operator has determined that a Component is surplus or obsolete, it shall have the right to remove such Component without replacing it; provided that no such Component may be so removed without being replaced if such removal would diminish the current or residual value by more than a de minimis amount, or diminish the remaining useful life or utility of the Facility or cause the Facility to become "limited use" property within the meaning of Rev. Proc. 76-30, 1976-1, 647. Section 7.3 Records. The Facility Sublessee shall maintain logs of the Facility's operation and keep maintenance and repair reports in sufficient detail to indicate the nature and date of major work completed on the Facility, including, without limitation, the cost of maintenance and repair to the extent that such records are kept as a normal part of the Facility Sublessee's operations. Such records shall be made available upon the Facility Sublessor's request during any inspection of the Facility by the Facility Sublessor and shall be deemed the property of the Facility Sublessor upon the expiration or earlier termination of the Facility Sublease; provided, however, that the Facility Sublessee shall be entitled to keep copies of such records. SECTION 8. MODIFICATIONS Section 8.1 Required Modifications. Subject to the Rocky Mountain Agreements, the Facility Sublessee, at its own cost and expense, shall make or cause to be made all Modifications to the Facility as it relates to the Undivided Interest as are required by the Rocky Mountain Agreements and by Applicable Law (each, a "Required Modification"). 10 Section 8.2 Optional Modifications. So long as no Sublease Bankruptcy Default, Sublease Payment Default or Sublease Event of Default exists, the Facility Sublessee at any time may, at its own cost and expense, make or cause to be made any Modification to the Facility as the Facility Sublessee considers desirable in the proper conduct of its business (an "Optional Modification"); provided that, no Optional Modification to the Facility shall impair the operation of the Facility or diminish the current or residual value, remaining useful life or utility of the Facility below the current or residual value, remaining useful life or utility thereof immediately prior to such Optional Modification, assuming the Facility was then in the condition required to be maintained by the terms of this Facility Sublease or cause the Undivided Interest to become "limited use" property within the meaning of Rev. Proc. 76-30, 1976-1, 647. Section 8.3 Title to Modifications; Subjection to Head Lease. Title to all Modifications to the Facility shall immediately vest in the Co-Owners, and Oglethorpe's undivided interest therein shall become subject to the Lien of the Oglethorpe Mortgage and be deemed part of the Facility for all purposes of this Facility Sublease. An undivided interest equal to the Facility Sublessor's Percentage in all Modifications shall immediately become subject to the Head Lease, the Facility Lease and this Facility Sublease (at no cost to the Facility Sublessor and with no adjustment to Sublease Basic Rent) and be deemed a part of the Undivided Interest for all purposes hereof, and the Facility Sublessee, at its own cost and expense, shall take such steps as the Facility Sublessor may require from time to time to confirm that the foregoing Modifications are subject to the Head Lease, the Facility Lease and this Facility Sublease. Section 8.4 Report of Modifications. On or before March 1 of each year (commencing March 1, 1998) and on the expiration of the Facility Sublease Term, the Facility Sublessee shall furnish to the Facility Sublessor a report stating the total cost of all Modifications and describing separately and in reasonable detail each Modification having a value in excess of $5,000,000 made during the period from the Closing Date to December 31, 1997 for the first report and annually thereafter based on a calendar year period for subsequent reports. SECTION 9. NET LEASE This Facility Sublease is a "net lease" and, notwithstanding anything herein to the contrary, the Facility Sublessee's obligation to pay all Sublease Rent payable hereunder (and all amounts, including without limitation, Sublease Termination Value, payable in lieu of Sublease Rent following termination of this Facility Sublease) shall be absolute and unconditional under any and all circumstances and shall not be terminated, extinguished, diminished, lost or otherwise impaired nor shall the Facility Sublessee's other obligations hereunder or the Facility Sublessor's rights hereunder be terminated, extinguished, diminished, lost or otherwise impaired, by any circumstance of any character, or for any 11 reason whatsoever, whether or not the same involves the loss of all or any part of the leasehold estate granted by this Facility Sublease including, without limitation, (i) any setoff, counterclaim, recoupment, defense or other right which the Facility Sublessee may have against the Facility Sublessor or any other Person, including, without limitation, any breach by any of said parties of any covenant or provision under this Facility Sublease or under any other Operation Document, (ii) any lack or invalidity of title or any defect in the title, condition, design, operation, merchantability or fitness for use of the Facility or any Component, or any termination of this Facility Sublease as a result thereof by operation of law or contract, or any foreclosure or deed in lieu of foreclosure of the Oglethorpe Mortgage or deed in lieu of foreclosure or any eviction by paramount title or otherwise or any unavailability of the Facility, the Rocky Mountain Site, any Component, any other portion of the Facility Sublessee's Rocky Mountain Interest or the interest of any other Person or any part of the foregoing after its delivery and acceptance by the Facility Sublessee hereunder, for any reason, (iii) any loss or destruction of, or damage to, the Facility or any Component or interruption or cessation in the use or possession thereof or any part of the foregoing by the Facility Sublessee for any reason whatsoever and of whatever duration, (iv) the condemnation, requisitioning, expropriation, seizure or other taking of title to or use of the Facility, the Rocky Mountain Site, any Component, any other portion of the Facility Sublessee's Rocky Mountain Interest or any part of the foregoing by any Governmental Entity or otherwise, (v) the invalidity or unenforceability or lack of due authorization or other infirmity of this Facility Sublease or any other Operative Document, (vi) the lack of right, power or authority of the Facility Sublessor to enter into this Facility Sublease or any other Operative Document, (vii) any ineligibility of the Facility or any Component for any particular use, whether or not due to any failure of the Facility Sublessee or the Facility Operator to comply with any Applicable Law, (viii) any event of "force majeure" or any frustration, (ix) any legal requirement similar or dissimilar to the foregoing, any present or future law to the contrary notwithstanding, (x) any insolvency, bankruptcy, reorganization or similar proceeding by or against the Facility Sublessee or any other Person, (xi) any Lien of any Person with respect to the Facility, the Rocky Mountain Site, any Component, any other portion of the Facility Sublessee's Rocky Mountain Interest or any part of the foregoing, (xii) the existence of the Qualifying Sublease Surety Bond (other than to the extent of the Sublease Rent discharged from any remittance from the Qualifying Sublease Surety Bond) or (xiii) any other cause, whether similar or dissimilar to the foregoing, any present or future law notwithstanding, except as expressly set forth herein or in any other Operative Documents, it being the intention of the parties hereto that all Rent payable by the Facility Sublessee hereunder (and all amounts, including without limitation, Sublease Termination Value, payable in lieu of Sublease Rent following Termination of the Facility Sublease) shall continue to be payable in all events in the manner and at times provided for herein. Such Sublease Rent shall not be subject to any abatement and the payments thereof shall not be subject to any setoff or reduction for any reason whatsoever, including any present or future claims of the Facility Sublessee against the Facility Sublessor or any other Person under this Facility Sublease or otherwise. To the extent permitted by Applicable Law, the Facility Sublessee hereby waives any and all rights which it may now have or which at any time hereafter may be conferred upon it, by statute or 12 otherwise, to terminate, cancel, quit or surrender this Facility Sublease with respect to the Undivided Interest, except in accordance with Section 10, 13, 14, 15 or 18. If for any reason whatsoever this Facility Sublease shall be terminated in whole or in part by operation of law or otherwise, except as specifically provided herein, the Facility Sublessee nonetheless agrees to the extent permitted by Applicable Law, to pay to the Facility Sublessor an amount equal to each installment of Sublease Basic Rent and all Sublease Supplemental Rent due and owing, at the time such payment would have become due and payable in accordance with the terms hereof had this Facility Sublease not been so terminated. The provisions of this Section 9 shall survive the termination of the leasehold interest created by this Facility Sublease for any reason whatsoever upon and after the termination of the leasehold hereby granted for any reason whatsoever, the Facility Sublessee shall pay to the Facility Sublessor, in lieu of the Sublease Rent payable hereunder, an amount equal to such Sublease Rent, and this obligation is expressly agreed to be a covenant of the Facility Sublessee that is independent of this existence of such leasehold. The obligations of the Facility Sublessee to pay all amounts hereunder other than Sublease Rent are also covenants that are independent of the existence of such leasehold and shall survive the termination thereof for any reason whatsoever. SECTION 10. EVENTS OF LOSS Section 10.1 Occurrence of Events of Loss. The Facility Sublessee will notify the Facility Sublessor of any damage to the Facility, which the Facility Sublessee reasonably anticipates may cause an Event of Loss described in clause (i), (ii), (iii) or (v) of the definition of Event of Loss within 8 Business Days of such event. The Facility Sublessor will promptly notify the Facility Sublessee if it shall be notified by the Owner Participant or the Facility Lessor pursuant to Section 10.1 of the Facility Lease of any event of which upon election of the Owner Participant would result in an Event of Loss described in clause (iv) of the definition of Event of Loss. If an Event of Loss described in clauses (i) or (ii) of the definition of Event of Loss shall occur, then no later than six months following such occurrence the Facility Sublessee shall notify the Facility Sublessor in writing of its election to either (a) if no Sublease Event of Default has occurred and is continuing and subject to the satisfaction of the conditions set forth in Section 10.3, rebuild and restore the Facility in accordance with the provisions of the Rocky Mountain Agreements so that the Facility shall have a fair market value (present and residual), remaining useful life and utility at least equal to that of the Facility prior to such rebuilding, assuming the Facility was in the condition and repair required to be maintained by this Facility Sublease or (b) terminate this Facility Sublease pursuant to Section 10.2 hereof. The Facility Sublessee may elect the option provided in clause (b) of the preceding sentence regardless of whether the Facility is to be rebuilt. If the Facility Sublessee fails to make an election as provided above, an Event of Loss shall be deemed to occur as of the end of the six month period referred to in the third sentence of this Section 10.1. 13 Section 10.2 Payment of Sublease Termination Value; Termination of Sublease Basic Rent. (a) If (x) the Facility Sublessee shall elect not to rebuild the Facility pursuant to Section 10.3 hereof following an Event of Loss described in clause (i) or (ii) of the definition of Event of Loss or an Event of Loss shall be deemed to occur pursuant to the last sentence of Section 10.1, or (y) an Event of Loss described in clause (iii), (iv) or (v) of the definition of Event of Loss shall occur, then, on the next Termination Date following the Facility Sublessee's notice of its election referred to in the third sentence of Section 10.1 or the occurrence of a deemed Event of Loss pursuant to the last sentence of Section 10.1 in the case of clause (x) above, or on the next Termination Date occurring at least three months after such occurrence of such Event of Loss in the case of clause (y) above, the Facility Sublessee shall terminate this Facility Sublease and pay to the Facility Sublessor (A) the Sublease Termination Value determined as of the relevant Termination Date, plus (B) all amounts of Sublease Supplemental Rent (including, without limitation, all costs and expenses of the Facility Sublessor, including costs and expenses of the Co-Trustee, the Owner Trustee, the Owner Participant and the Lender incurred by the Facility Sublessor pursuant to Section 10.2 of the Facility Lease), and all sales, use, value added and other Taxes required to be indemnified by the Facility Sublessee pursuant to Section 11.2 of the Participation Agreement associated with the exercise of the termination option pursuant to this Section 10.2 due and payable on or prior to such Termination Date, plus (C) any unpaid Sublease Basic Rent due before such Termination Date and, if such Termination Date shall be a Rent Payment Date, the Sublease Basic Rent (to the extent payable in arrears) due and payable on such Rent Payment Date. (b) Concurrently with the payment of all sums required to be paid pursuant to this Section 10.2, (1) Sublease Basic Rent for the Undivided Interest shall cease to accrue, (2) the Facility Sublessee shall cease to have any liability to the Facility Sublessor with respect to the Undivided Interest except for Sublease Supplemental Rent or other obligations (including, without limitation, those under Sections 11.1 and 11.2 of the Participation Agreement and the Tax Indemnity Agreement) surviving pursuant to the express provisions of any Operative Document, (3) the Facility Sublessor will at the Facility Sublessee's cost and expense execute and deliver to the Facility Sublessee a release or termination of this Facility Sublease, (4) the Facility Sublessor shall transfer the Facility Sublessor's Rocky Mountain Interest to the Facility Sublessee pursuant to this Section 10.2 and Section 6 of the Ground Sub-sublease on an "as is", "where is" and "with all faults" basis, without representations or warranties other than a warranty as to the absence of Facility Sublessor's Liens and (5) this Facility Sublease shall terminate and the Facility Sublessor shall execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepared, filed and recorded (as appropriate) at the cost and expense of the Facility Sublessee. (c) Any payments with respect to the Undivided Interest received at any time by the Facility Sublessor (including, without limitation, payments received by the Facility Sublessor from the Facility Lessor pursuant to paragraph (c) of Section 10.2 of the Facility Lease) or the Facility Sublessee from any Governmental Entity as a result of the occurrence of 14 an Event of Loss described in clause (iii) of the definition of Event of Loss shall be applied as follows: (i) so much of such payments as shall not exceed the amount required to be paid by the Facility Sublessee pursuant to clause (A) of paragraph (a) of this Section 10.2 shall be applied in reduction of the Facility Sublessee's obligation to pay such amount if not already paid by the Facility Sublessee or, if already paid by the Facility Sublessee, shall be applied to reimburse the Facility Sublessee for its payment of such amount; and (ii) the balance, if any, of such payments remaining thereafter shall be apportioned between the Facility Sublessor and the Facility Sublessee in the proportion that the value of the Facility Sublessor's Rocky Mountain Interest bears to the value of the Facility Sublessee's Rocky Mountain Interest. Section 10.3 Rebuild. The Facility Sublessee's right to rebuild the Facility pursuant to clause (a) of Section 10.1 hereof shall be subject to the fulfillment, at the Facility Sublessee's sole cost and expense, in addition to the conditions contained in said clause (a), of the following conditions: (a) on the date the Facility Sublessee shall notify the Facility Sublessor pursuant to Section 10.1 of its election to rebuild the Facility, in accordance with this Section 10.3, the Facility Sublessee shall deliver to the Facility Sublessor a tax opinion of counsel (such counsel to be selected by the Facility Sublessor and reasonably acceptable to the Facility Sublessee) to the same effect as the opinion required by paragraph (a) of Section 10.3 of the Facility Lease; (b) on the date the Facility Sublessee shall notify the Facility Sublessor pursuant to Section 10.1 of its election to rebuild the Facility, in accordance with this Section 10.3, the Facility Sublessee shall deliver to the Facility Sublessor the report of an independent engineer (such independent engineer to be reasonably satisfactory to the Facility Sublessor) to the same effect as the report required by paragraph (b) of Section 10.3 of the Facility Lease; (c) on the date the Facility Sublessee shall notify the Facility Sublessor pursuant to Section 10.1 of its election to rebuild the Facility, in accordance with this Section 10.3, the Facility Sublessee shall demonstrate to the reasonable satisfaction of the Facility Sublessor adequate financial resources, from insurance proceeds or otherwise, to complete such rebuilding, and that the provisions of the Rocky Mountain Agreements will not impede such rebuilding of the Facility or adversely affect the Facility Sublessor's interest therein; (d) the Facility Sublessee shall cause the rebuilding of the Facility to commence as soon as practicable after the occurrence of such Event of Loss and in all events within 18 months of the occurrence of the event that caused such Event of Loss and will cause work on such rebuilding to proceed diligently thereafter. As the rebuilding of the Facility progresses, 15 title to an undivided interest in such rebuilt facilities shall immediately vest in Oglethorpe as a tenant in common with Georgia Power, subject to the Lien of the Oglethorpe Mortgage, and an undivided interest equal to the Facility Sublessor's Percentage in such rebuilt facilities shall become subject to the Head Lease, the Facility Lease and this Facility Sublease, automatically, for all purposes hereof, without any further act by any Person; and (e) on the date of the completion of such rebuilding of the Facility (the "Rebuilding Closing Date") the following documents shall be duly authorized, executed and delivered and, if appropriate, filed for recordation by the respective party or parties thereto and shall be in full force and effect, and an executed counterpart of each thereto shall be delivered to the Facility Sublessor, the Facility Lessor, the Owner Participant and the Lender: (1) supplements to the Head Lease, the Facility Lease and this Facility Sublease subjecting an undivided interest equal to the Facility Sublessor's Percentage in the rebuilt facilities to the Head Lease, the Facility Lease and this Facility Sublease (with no change in Sublease Basic Rent as a result of such replacement), (2) supplements to the Loan Agreement, the Deed to Secure Debt and the Facility Sublease Assignment Agreement subjecting the Facility Lessor's Rocky Mountain Interest in such rebuilt facilities to the Lien of the Loan Agreement, the security title of the Deed to Secure Debt and the Lien of the Assignment of Facility Sublease Agreement, (3) a supplement to the Subordinated Deed to Secure Debt and Security Agreement, subjecting the Facility Lessor's Rocky Mountain Interest in such rebuilt facilities to the Lien of the Subordinated Deed to Secure the Debt and Security Agreement, (4) such recordings and filings as may be reasonably requested by the Owner Participant or the Lender to be made or filed, (5) an opinion of counsel of the Facility Sublessee, such counsel and such opinion to be reasonably satisfactory to the Facility Sublessor, to the effect that (w) the supplements to the Head Lease, the Facility Lease and this Facility Sublease referred to in clause (1) above constitute effective instruments for subjecting such rebuilt facilities to the Head Lease, the Facility Sublease and this Facility Sublease, (x) the supplements to the Loan Agreement, the Deed to Secure Debt and the Facility Sublease Assignment Agreement referred to in clause (2) above constitute an effective instrument, for subjecting the Facility Lessor's Rocky Mountain Interest in such rebuilt facilities to the Lien of the Loan Agreement, the security title of the Deed to Secure Debt, and the Lien of the Assignment of Facility Sublease, (y) the supplement to the Subordinated Deed to Secure Debt and Security Agreement referred to in clause (3) above constitutes an effective instrument for subjecting the Facility Lessor's Rocky Mountain Interest in such rebuilt facilities to the Lien of the Subordinated Deed to Secure Debt and Security Agreement, and (z) all filings and other actions necessary to perfect and protect the Facility Sublessor's interest in an undivided interest equal to the Facility Sublessor's Percentage in the rebuilt facilities and to subject the Facility Lessor's Rocky Mountain Interest in such rebuilt facilities to the Lien of the Loan Agreement and Facility Sublease Assignment Agreement, security title of the Deed to Secure Debt and the Lien of the Subordinated Deed to Secure Debt and Security Agreement have been accomplished and (5) satisfactory evidence as to the compliance with Section 11 of this Facility Sublease with respect to the Facility, as so rebuilt. 16 Whether or not the transactions contemplated by this Section 10.3 are consummated, the Facility Sublessee agrees to pay or reimburse, on an After-Tax Basis, any costs or expenses (including reasonable legal fees and expenses and all costs and expenses incurred by the Facility Sublessor pursuant to the last sentence of paragraph (a) of Section 10.3 of the Facility Lease) incurred by the Facility Sublessor, in connection with the transactions contemplated by this Section 10.3. Section 10.4 Eminent Domain. In the event that during the Facility Sublease Term the use of all or any portion of the Undivided Interest is requisitioned or taken by or pursuant to a request of any Governmental Entity under the power of eminent domain or otherwise for a period which does not constitute an Event of Loss, the Facility Sublessee's obligation to pay all installments of Sublease Basic Rent shall continue for the duration of such requisitioning or taking. The Facility Sublessee shall be entitled to receive and retain for its own account all sums payable for any such period by such Governmental Entity as compensation for such requisition or taking of possession. Any amount referred to in this Section 10.4 which is payable to the Facility Sublessee shall not be paid to the Facility Sublessee, or if it has been previously paid directly to the Facility Sublessee, shall not be retained by the Facility Sublessee, if at the time of such payment a Sublease Payment Default, Sublease Bankruptcy Default or Sublease Event of Default shall have occurred and be continuing, but shall be paid to and held by the Facility Sublessor as security for the obligations of the Facility Sublessee under this Facility Sublease, and upon the earlier of (a) 180 days after the Facility Sublessor shall have received such amount; provided the Facility Sublessor has not proceeded to exercise any remedy under Section 17 and it is not stayed or prevented by law or otherwise from exercising such remedy and (b) such time as there shall not be continuing any such Sublease Payment Default, Sublease Bankruptcy Default or Sublease Event of Default, such amount shall be paid to the Facility Sublessee. SECTION 11. INSURANCE Section 11.1 Property Insurance. Subject to availability on commercially reasonable terms, the Facility Sublessee will maintain (or cause to be maintained) all risk property insurance in amounts and with deductibles not to exceed $25,000,000 per occurrence as is customarily carried by prudent operators of hydroelectric facilities of comparable size and risk, and against loss or damage from such causes as are customarily insured against, which includes coverage for flood and earthquake and includes (subject to sublimits of $50,000,000 and $100,000,000, respectively) boiler and machinery (subject to a sublimit of $100,000,000) coverage to cover mechanical breakdown, and as required under, and to the extent required by, the Oglethorpe Mortgage and the Rocky Mountain Agreements in an amount not less than $302,000,000. 17 Section 11.2 Liability Insurance. Subject to availability on commercially reasonable terms, the Facility Sublessee will maintain liability insurance, including contractual liability insurance, insuring against claims for bodily injury (including death) and property damage to third parties arising out of the ownership, operation, maintenance, condition and use of the Facility and the Rocky Mountain Site, in an amount and with deductibles customarily carried by prudent operators of hydroelectric facilities of comparable size and risk, but not less than $35 million per occurrence. Such liability insurance may be purchased either in a single limit or in combination with a general and an excess policy. In the event of a material increase in the development of the property adjacent to the Rocky Mountain Site or changes in product liability exposure or laws during the Facility Sublease Term, the Facility Sublessee will periodically review the liability insurance maintained by it or on its behalf. In connection with any such review, the Facility Sublessee will consult with the Facility Sublessor, the Owner Participant and the Lender. Following such review and consultation, if appropriate, the Facility Sublessee will increase such coverage and limits in order that the liability insurance maintained by it or on its behalf is consistent with that maintained by prudent operators of hydroelectric facilities of comparable size and risk taking into account such increased development, subject to the availability of such insurance in such amounts on commercially reasonable terms. Section 11.3 Provisions With Respect to Insurance. Subject to availability on commercially reasonable terms, the Facility Sublessee will place the insurance maintained pursuant to this Section 11 with companies having an A.M. Best rating of at least "A-" or, if not so rated, of comparable financial strength. All insurance policies required to be maintained pursuant to this Section 11.2 shall name the Trustees (both in their individual capacities and as trustees), the Owner Participant and the Lender as additional insureds, as their interest may appear. All insurance policies required to be maintained pursuant to this Section 11 shall also provide for at least 30 days' prior written notice (10 days for non-payment) by the insurance carrier to the Facility Sublessor, the Trustees, the Owner Participant and the Lender in the event of cancellation, non-renewal, termination, expiration or amendment. The Facility Sublessee will place the insurance required by this Section 11 with insurance companies which agree to waive all claims for premiums from, and all subrogation rights against, the Facility Sublessor, the Trustees, the Owner Participant and the Lender. All the insurance maintained pursuant to this Section 11 shall be primary without right of contribution of any other insurance carried by or on behalf of the Facility Sublessor, the Trustees, the Owner Participant or the Lender with respect to their respective interests in the Facility and the Rocky Mountain Site. To the extent available on commercially reasonable terms, the Facility Sublessee will use its best efforts to provide that the respective interests of the Facility Sublessor, the Trustees, the Owner Participant and the Lender shall not be invalidated by any act or neglect of the Facility Sublessee, or any breach or violation by the Facility Sublessee of any 18 warranties, declarations or conditions contained in such policies, or by the use of the Facility and the Rocky Mountain Site for purposes more hazardous than permitted by such policies. To the extent available on commercially reasonable terms, the Facility Sublessee will use its best efforts to provide that such policies shall also be endorsed to: (i) provide that coverage will not be invalidated by any foreclosure or other proceeding or notice of sale relating to the Facility or the Rocky Mountain Site or any change in title or ownership of the Facility or the Rocky Mountain Site, (ii) provide that, inasmuch as the policies are written to cover more than one insured, all terms, conditions, insuring agreements and endorsements, with the exception of limits of liability, shall operate in the same manner as if there were a separate policy covering each insured and (iii) provide that the coverage afforded by such policies shall not be affected by the performance of any work in or about any Modification. The Facility Sublessee shall, at its own expense, make all proofs of loss and take all other steps necessary to collect the proceeds of such insurance. Section 11.4 Reports. On or prior to December 1 of each year commencing on December 1, 1997, the Facility Sublessee shall furnish the Facility Sublessor, the Owner Participant and the Lender with a report signed by a Responsible Officer of the Facility Sublessee identifying all insurance coverages in place and certifying that all premiums in respect of such policies are paid in full. Such report shall also identify any significant change in coverage, limits or change in carriers and will include a review of any significant changes in the development of the property adjacent to the Rocky Mountain Site, product liability exposure and laws. The Facility Sublessee shall use its best efforts prior to expiration and renewal, but in no event more than 5 Business Days after expiration and renewal of any policy required by this Section 11, to provide the Facility Sublessor, the Owner Participant and the Lender certificates from insurance brokers or carriers to the effect that such policy is in effect and indicating their status as additional insureds. Section 11.5 Additional Insurance by Facility Sublessor. At any time the Facility Sublessor (either directly or in the name of the Owner Participant) may at its own expense and for its own account carry insurance with respect to its interest in the Undivided Interest; provided, that such insurance does not in any way interfere with the Facility Sublessee's ability to obtain insurance with respect to the Undivided Interest described in Section 11.1. Any insurance payments received from policies maintained by the Facility Sublessor pursuant to the previous sentence shall be retained by the Facility Sublessor without reducing or otherwise affecting the Facility Sublessee's obligations hereunder. SECTION 12. INSPECTION During the Facility Sublease Term, the Facility Sublessor, and its representatives (along with the Facility Sublessor, the Trustees, the Owner Participant or the Lender) may, at reasonable times, on reasonable notice to the Facility Sublessee and the Facility Operator and at their own risk and expense (except, at the expense, but not risk, of the Facility Sublessee 19 when a Sublease Event of Default, Sublease Bankruptcy Default or Sublease Payment Default has occurred and is continuing), inspect the Facility (together with the records of the Facility Operator with respect to the operations and maintenance thereof) and the Rocky Mountain Site; provided, however, that any such inspection will not interfere with the Facility Operator's normal commercial operation of the Facility and will be in accordance with the Facility Operator's or the Facility Sublessee's safety and insurance programs. Upon request of the Facility Sublessor (but no more often than annually, provided no Sublease Event of Default has occurred and is continuing) the Facility Sublessee shall make available a Responsible Officer to discuss the business, financial condition or accounts of the Facility Sublessee. In no event shall the Facility Sublessor, the Trustees, the Owner Participant or the Lender have any duty or obligation to make any such inspection and such Persons shall not incur any liability or obligation by reason of not making any such inspection. SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS Section 13.1 Election to Terminate. After the occurrence and during the continuance of any of the events specified below, the Facility Sublessee shall have the right, at its option, so long as (a) no Sublease Event of Default shall have occurred and be continuing and (b) the Facility Sublessee shall simultaneously exercise its election to terminate each Other Facility Sublease pursuant to Section 13.1 thereof to the extent such event constitutes a burdensome event under Section 13.1 of such Other Facility Subleases, upon at least 30 days' prior written notice to the Facility Sublessor, (a) cause the Facility Sublessor to purchase the Facility Lessor's Rocky Mountain Interest pursuant to Section 13 of the Facility Lease, (b) purchase the Facility Lessor's Rocky Mountain Interest purchased by the Facility Sublessor pursuant to Section 13 of the Facility Lease from the Facility Sublessor and (c) terminate this Facility Sublease on the Termination Date specified in such notice (which shall be a date occurring not more than 90 days after such notice) if: (i) it shall have become illegal for the Facility Sublessee to continue this Facility Sublease or for the Facility Sublessee to make payments under this Facility Sublease and the transactions contemplated by the Operative Documents cannot be restructured in a manner acceptable to the Transaction Parties; (ii) one or more events outside the control of the Facility Sublessee shall have occurred which will give rise to an obligation by the Facility Sublessee to pay or indemnify under Section 11.1 or 11.2 of the Participation Agreement or the Tax Indemnity Agreement (other than costs and expenses resulting from a replacement of the Payment Undertaking Agreement pursuant to Section 17.4 of the Participation Agreement or a refinancing of the Loan Certificate pursuant to Section 15 of the Participation Agreement); provided, however, that (a) the indemnity obligation (and the underlying cost or Tax) can be avoided in whole or in part by such termination and (b) the amount of such avoided payments would exceed (on a present value basis, 20 discounted annually at the Loan Rate, to the date of the termination) three percent of the Undivided Interest Cost. If the Owner Participant shall waive its right to, or arrange for payment of (without reimbursement by the Facility Sublessee), amounts of indemnification payments under Section 11.1 or 11.2 of the Participation Agreement or the Tax Indemnity Agreement in excess of such amount as to cause such avoided payments, computed in accordance with the preceding sentence, not to exceed three percent of the Undivided Interest Cost, no such termination option in favor of the Facility Sublessee shall exist; or (iii) on or after the eleventh anniversary of the Closing Date, (a) the Facility Sublessee shall be advised by independent tax counsel selected by the Facility Sublessee and reasonably acceptable to the Facility Sublessor, which advice shall be in the form of an opinion and shall be based on facts, circumstances, events, or conditions occurring after the Closing Date, that deductions will not be available to it to reduce income realized by the Facility Sublessee in connection with the Overall Transaction discounted to such Termination Date and (b) the income tax which will be payable by the Facility Sublessee in consequence of the loss of such deductions from such Termination Date to the Expiration Date, at the Loan Rate, will exceed the greater of (x) the Equity Exposure Amount for such Termination Date and (y) three percent of the Undivided Interest Cost. If the Facility Sublessee does not give notice of its exercise of the termination option under this Section 13.1 within six months of the date the Facility Sublessee receives notice or Actual Knowledge of the events or conditions described above (or in the case of the event or condition described in clause (iii) of this Section 13.1, in circumstances where the Facility Sublessee shall have Actual Knowledge on or prior to such eleventh anniversary, within six months of such eleventh anniversary), the Facility Sublessee will lose its rights to terminate this Facility Sublease pursuant to this Section 13.1 as a result of such event or condition. Section 13.2 Procedure for Exercise of Termination Option. If the Facility Sublessee shall have exercised its option under Section 13.1, on the Termination Date specified in the Facility Sublessee's notice of such exercise, the Facility Sublessee shall pay to the Facility Sublessor (a) the amount which the Facility Sublessor is obligated to pay to the Facility Lessor pursuant to clause (a) of the first sentence of Section 13.2 of the Facility Lease plus (b) all amounts of Sublease Supplemental Rent (including all costs and expenses of the Facility Sublessor (including costs and expenses of the Trustees, the Owner Participant and the Lender incurred by the Facility Sublessor pursuant to Section 13.2 of the Facility Lease) and all sales, use, value added and other Taxes covered by Section 11.2 of the Participation Agreement associated with the exercise of the termination option pursuant to this Section 13) due and payable on or prior to the Termination Date and (c) any unpaid Sublease Basic Rent due before such Termination Date and, if such Termination Date shall be a Rent Payment Date, the Sublease Basic Rent (to the extent payable in arrears) due and payable on such Rent Payment Date. Concurrently with the payment of all sums specified in this Section 13.2, (1) Sublease 21 Basic Rent for the Undivided Interest shall cease to accrue, (2) the Facility Sublessee shall cease to have any liability to the Facility Sublessor with respect to the Undivided Interest, except for Sublease Supplemental Rent and other obligations (including those under Sections 11.1 and 11.2 of the Participation Agreement and the Tax Indemnity Agreement) surviving pursuant to the express terms of any Operative Document, (3) the Facility Sublessor will execute and deliver to the Facility Sublessee, to be prepared (and where appropriate recorded and filed), at the Facility Sublessee's cost and expense, a release or termination of this Facility Sublease, (4) the Facility Sublessor will transfer, pursuant to this Section 13.2 and Section 6 of the Ground Sub-sublease, the Facility Lessor's Rocky Mountain Interest purchased by the Facility Sublessor pursuant to Section 13 of the Facility Lease to the Facility Sublessee on an "as is", "where is" and "with all faults" basis, without representations or warranties other than a warranty as to the absence of Facility Sublessor's Liens and (5) this Facility Sublease shall terminate and the Facility Sublessor shall execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepaid, filed and recorded (if appropriate) at the cost and expense of the Facility Sublessee. It shall be a condition of the termination of this Facility Sublease pursuant to this Section 13, that the Facility Sublessee shall pay all amounts it is obligated to pay under this Section 13.2 and all other amounts due under this Facility Sublease and the other Operative Documents. SECTION 14. TERMINATION FOR OBSOLESCENCE Section 14.1 Termination. Upon at least 280 days' prior written notice to the Facility Sublessor which notice shall contain certification by the Board of Directors of the Facility Sublessee to the effect that the Facility is economically or technologically obsolete or that the Facility is surplus to the Facility Sublessee's needs, the Facility Sublessee shall have the option, so long as no Sublease Payment Default, Sublease Bankruptcy Default or Sublease Event of Default shall have occurred and be continuing, to cause the Facility Sublessor to terminate the Facility Lease pursuant to Section 14 thereof and to terminate this Facility Sublease on any Termination Date occurring on or after the fifth anniversary of the Closing Date (the "Obsolescence Termination Date") on the terms and conditions set forth in this Section 14. Section 14.2 Solicitation of Offers. If the Facility Sublessee shall give the Facility Sublessor notice pursuant to Section 14.1, the Facility Sublessee may, as non-exclusive agent for the Facility Sublessor and the Facility Lessor, use its best efforts to obtain bids for the cash purchase of the Facility Lessor's Rocky Mountain Interest. The Facility Sublessor shall also have the right to obtain bids for the cash purchase of the Facility Lessor's Rocky Mountain Interest either directly or through agents other than the Facility Sublessee. At least 120 days prior to the Obsolescence Termination Date, the Facility Sublessee shall certify to the Facility Lessor and the Facility Sublessor each bid or offer, the amount and terms thereof and the name and address of the party (which shall not be the Facility Sublessee, any member cooperative of Oglethorpe or any Affiliate of any thereof) submitting such bid or offer. 22 Section 14.3 Procedure for Exercise of Termination Option. On the Obsolescence Termination Date the Facility Sublessor will cause the Facility Lessor to sell the Facility Lessor's Rocky Mountain Interest under this Section 14.3, Section 14.4 of the Facility Lease, Section 6 of the Ground Sublease and Section 6 of the Ground Sub-sublease and Section 9 of the Head Lease to the bidder or bidders (which shall not be the Facility Sublessee, Oglethorpe or a cooperative member of Oglethorpe or any Affiliate of any thereof), that shall have submitted the highest cash bid or bids with respect to the Facility Lessor's Rocky Mountain Interest before the Obsolescence Termination Date. On the Obsolescence Termination Date, the Facility Sublessee shall pay to the Facility Sublessor (a) the amount which the Facility Sublessor is obligated to pay the Facility Lessor pursuant to clause (a) of the second sentence of Section 14.4 of the Facility Lease in connection with such sale, plus (b) any unpaid Sublease Basic Rent due before such Obsolescence Termination Date and, if such Obsolescence Termination Date shall be a Rent Payment Date, any Sublease Basic Rent (to the extent payable in arrears) due and payable on such Rent Payment Date, and (c) all amounts of Sublease Supplemental Rent (including all costs and expenses of the Facility Lessor, the Trustees or the Lender incurred by the Facility Sublessor pursuant to Section 14.4 of the Facility Lease), and all sales, use, value added and other Taxes covered by Section 11.2 of the Participation Agreement associated with the exercise of the termination option pursuant to this Section 14 due and payable on such Obsolescence Termination Date. Concurrently with the payment of all sums required to be paid pursuant to this Section 14.3, (i) Sublease Basic Rent for the Undivided Interest shall cease to accrue, (ii) the Facility Sublessee shall cease to have any liability hereunder to the Facility Sublessor with respect to the Undivided Interest, except for Sublease Supplemental Rent and other obligations (including Sections 11.1 and 11.2 of the Participation Agreement and the Tax Indemnity Agreement) surviving pursuant to the express terms of any Operative Document and (iii) this Facility Sublease shall terminate and the Facility Sublessor shall execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepaid, filed and recorded (if appropriate) at the cost and expense of the Facility Sublessee. Unless the Facility Lessor shall have elected to retain the Undivided Interest pursuant to Section 14.3 of the Facility Lease or the Facility Lessor with the consent of the Facility Sublessor shall have entered into a legally binding contract to sell the Facility Lessor's Rocky Mountain Interest, the Facility Sublessee may, at its election, revoke its notice of termination on at least 35 days' prior notice to the Facility Sublessor, in which event this Facility Sublease shall continue with respect to the Undivided Interest; provided, however, that a notice of termination may be revoked on not more than two occasions during the Facility Sublease Term and the Facility Sublessee shall not be permitted to initiate a notice to terminate pursuant to Section 14.1 following a second revocation in accordance with this sentence. The Facility Sublessor shall be under no duty to solicit bids, to inquire into the efforts of the Facility Sublessee to obtain bids or otherwise take any action in arranging any such sale of the Facility Lessor's Rocky Mountain Interest. It shall be a condition of the Facility Sublessor's obligation to consummate a sale of the Facility Lessor's Rocky Mountain Interest in accordance this Section 14.3 that the Facility Sublessee shall pay all amounts it is obligated to pay under this Section 14.3. If no sale shall occur on the Obsolescence Termination Date, the notice of termination shall be deemed revoked and 23 this Facility Sublease shall continue as to the Undivided Interest in full force and effect in accordance with its terms (without prejudice to the Facility Sublessee's right to exercise its rights under this Section 14). The Facility Sublessee will be obligated to pay any expenses or damages of the Facility Sublessor (including expenses or damages of the Facility Lessor incurred by the Facility Sublessor pursuant to the last sentence of Section 14.4 of the Facility Lease) resulting from the failure to consummate a sale of the Facility Lessor's Rocky Mountain Interest for any reason not other than an act of bad faith or gross negligence by the Facility Sublessor. SECTION 15. END OF SUBLEASE BASIC TERM OPTIONS Section 15.1 The Facility Sublessee's Sublease Purchase Option and Sublease Return Option. Unless this Facility Sublease shall have been previously terminated pursuant to Section 10, 13, 14, 17 or 18 hereof, at any time not more than forty-eight months nor less than eighteen months prior to the Expiration Date, the Facility Sublessee shall have the option, upon giving written notice to the Facility Sublessor, (A) to irrevocably elect to cause the Facility Sublessor to exercise the Purchase Option pursuant to Section 15.1 of the Facility Lease and to purchase the Undivided Interest from the Facility Sublessor on the Expiration Date for the amount determined in accordance with this Section 15.1 (the "Sublease Purchase Option") or (B) to irrevocably elect to return the Undivided Interest to the Facility Sublessor in accordance with Section 5 (the "Sublease Return Option"). If the Facility Sublessee shall elect the Sublease Purchase Option, the Facility Sublessor shall forthwith exercise the Purchase Option in accordance with Section 15.1 of the Facility Lease. If the Facility Sublessee shall elect or is deemed to have elected the Sublease Return Option, the Facility Sublessor shall elect the Return Option pursuant to Section 15.1 of the Facility Lease. If the Facility Sublessee shall have elected or is deemed to have elected the Return Option, on the Expiration Date it shall return the Undivided Interest to the Facility Sublessor in accordance with the provisions of Section 5 of this Facility Sublease. If the Facility Sublessee shall have exercised the Purchase Option, the Facility Sublessee shall become unconditionally obligated to pay to the Facility Sublessor (a) on the Expiration Date (i) the initial installment of the Purchase Option Price in the amount of $302,435,484.77, (ii) all amounts of Sublease Supplemental Rent (including, without limitation, all costs and expenses of the Facility Sublessor including all amounts payable by the Facility Sublessor to the Trustees, the Owner Participant and the Lender pursuant to Section 15.1 of the Facility Lease and all sales, use, value added and other Taxes covered by Section 11.2 of the Participation Agreement associated with the Purchase Option) due and payable on the Expiration Date, and (iii) any unpaid Sublease Basic Rent due before the Expiration Date and the Sublease Basic Rent due and payable on the Expiration Date and (b) subsequent installments of the Purchase Option Price in the amounts and on the dates set forth in clause (b) of the third sentence of Section 15.1 of the Facility Lease. The covenant to pay the subsequent installments of the Purchase Option Price in accordance with the preceding sentence shall survive the termination of this Facility Sublease. Concurrently with the payment of the sums specified in clause (a) of this 24 Section 15.1, (w) Sublease Basic Rent for the Undivided Interest shall cease to accrue, (x) the Facility Sublessee shall cease to have any liability to the Facility Sublessor with respect to the Undivided Interest, except for Sublease Supplemental Rent and other obligations (including those under Sections 11.1 and 11.2 of the Participation Agreement, the Tax Indemnity Agreement and the additional installments of the Purchase Option Price payable in accordance with the fifth sentence of this Section 15.1) surviving pursuant to the express terms of any Operative Document, (y) the Facility Sublessor will, by documents and instruments in form and substance reasonably satisfactory to the Facility Sublessee, transfer the Facility Lessor's Rocky Mountain Interest purchased by the Facility Sublessor pursuant to Section 15.1 of the Facility Lease to the Facility Sublessee in accordance with this Section 15.1 and Section 6 of the Ground Sub-sublease on an "as is", "where is" and "with all faults" basis, without representations or warranties other than a warranty as to the absence of Facility Sublessor's Liens and (z) this Facility Sublease shall terminate and the Facility Sublessor shall execute and deliver appropriate releases and all other documents or instruments necessary or desirable to effect the foregoing, all to be prepared, filed and recorded (as appropriate) at the cost and expense of the Facility Sublessee. The Facility Sublessor agrees that it will not exercise its options pursuant to Section 15.1 of the Facility Lease in a manner which will preclude the exercise of the Facility Sublessee's Purchase or Return Options under this Section 15.1. If the Facility Sublessee shall fail to exercise the Sublease Purchase Option or the Sublease Return Option by the date eighteen months prior to the Expiration Date, it will be deemed to have elected the Sublease Return Option on such date eighteen months prior to the Expiration Date. Section 15.2 Sublease Renewal Term. (a) If the Facility Lessor shall have elected or shall be deemed to have elected the Renewal Term Option, pursuant to the provisions of Section 15.2 or Section 15.6 of the Facility Lease, the term of this Facility Sublease will be automatically extended for a renewal term that begins on the Expiration Date and extends for a period equal to that of the Renewal Term under the Facility Lease (the "Sublease Renewal Term"). Sublease Basic Rent during the Sublease Renewal Term will be payable on Rent Payment Dates in amounts equal to the Basic Rent payable under the Facility Lease on the corresponding Rent Payment Date (as such amounts may be adjusted in accordance with paragraph (b) of Section 15.4 of the Facility Lease). Sublease Termination Values during the Sublease Renewal Term will be equal to those for the corresponding Termination Dates under the Facility Lease. (b) If on the Expiration Date, the Facility Lessee or Facility Sublessee is unable to arrange for a Loan Extension in accordance with Section 15.3(a), the Facility Sublessee may exercise the Purchase Option in accordance with Section 15.1 (except that the Facility Sublessee's purchase of the Undivided Interest may be consummated on the Business Day next following the Expiration Date so long as Facility Sublessee shall pay interest on the initial installment of the Purchase Option Price to (but not including) such Business Day at the Overdue Rate. 25 (c) The Facility Sublessee shall pay or reimburse, on demand, all costs and expenses (including reasonable legal fees and expenses) incurred by the Facility Sublessor, including costs and expenses of the Owner Participant, the Trustees, the Lender and any third party lender incurred by the Facility Sublessor pursuant to Section 15.2 of the Facility Lease, in connection with the exercise of the Renewal Term Option, including without limitation, the costs and expenses in connection with the Loan Extension, whether or not any of such transactions are consummated. Section 15.3 Refinancing of Loan Certificate in Connection with Sublease Return Option. (a) If the Facility Lessor shall have elected or shall have been deemed to have elected the Renewal Term Option the Facility Sublessee shall (i) satisfy the requirements of Section 15.4(c) of the Facility Lease and (ii) arrange a Loan Extension from third parties. If the Facility Lessee has exercised reasonable efforts to arrange for a Loan Extension with one or more third party lenders and if third party lenders cannot be arranged for 100% of the principal amount of the Loan Certificate then outstanding under the Loan Agreement (other than as a result of an Event of Default that is not a Sublease Event of Default or Head Lessor Event of Default), and the Facility Sublessor is not in default of any obligations to purchase the Loan Certificates under Section 15.5 of the Facility Lease, the Facility Sublessee at the request of the Facility Lessor or the Owner Participant shall purchase up to 49% of the principal amount of the Loan Certificate then outstanding under the Loan Agreement from the Lender in accordance with Section 2.11 of the Loan Agreement. Loan Certificates purchased by the Facility Sublessee pursuant to the preceding sentence shall be secured on a pari passu basis with all other outstanding Loan Certificates other than with respect to the granting of consents, waivers or amendments or exercising remedies following a default under the security documents securing the Loan Certificates. (b) If the Facility Lessor shall have elected the Replacement Lease Option, the Facility Lessor shall arrange for a Loan Extension, provided that if on the last day of the Basic Term a Replacement Facility Lessee shall be prepared to enter into a Replacement Facility Lease but the Facility Lessor has not been able to arrange for a Loan Extension by such date (other than as a result of an Event of Default that is not a Sublease Event of Default or Head Lessor Event of Default) and the Facility Sublessor is not in default of any obligations to purchase the Loan Certificates under Section 15.5 of the Facility Lease, the Facility Sublessee at the request of the Facility Lessor or the Owner Participant shall purchase the Loan Certificates from the Lender in accordance with Section 2.11 of the Loan Agreement. SECTION 16. EVENTS OF DEFAULT The following events shall constitute "Sublease Event of Defaults" hereunder (whether any such event shall be voluntary or involuntary or come about or be effected by operation of 26 law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Entity): (a) the Facility Sublessee shall fail to make any payment of Sublease Basic Rent or the Purchase Option Price within five Business Days after the same shall have become due; or (b) the Facility Sublessee shall fail to make any payment of Sublease Termination Value required by Section 10, 13 or 14 within ten Business Days after the same shall have become due; or (c) the Facility Sublessee shall fail to make any payment of Sublease Supplemental Rent (other than the Purchase Option Price or as described in clause (a) or (b) of this Section 16), after the same shall have become due and such failure shall continue unremedied for a period of 30 Business Days after receipt by the Facility Sublessee of written notice of such failure from the Facility Sublessor; or (d) any representation or warranty made by the Facility Sublessee in the Operative Documents (other than the Tax Indemnity Agreement) or any written certificate shall be untrue, inaccurate or misleading in any material respect and, if capable of remedy, no action to cure has commenced within 30 days after notice or, if such action has been taken and the Facility Sublessee is diligently pursuing such cure, such action has not succeeded within a period of 180 days after such notice; or (e) the Facility Sublessee shall have failed to perform or observe any covenant, obligation or agreement to be performed or observed by it under any Operative Document (other than any covenant, obligation or agreement contained in the Tax Indemnity Agreement or Section 16 of the Participation Agreement or any covenants, obligations or agreements referred to in clauses (a), (b), (c), (f), (g), (h) and (i) of this Section 16) in any material respect and, if capable of remedy, no action to cure has commenced within 30 days after notice or, if such action has been taken and the Facility Sublessee is diligently pursuing such cure, such action has not succeeded within a period of 180 days after such notice; provided, however, that in the case of the Facility Sublessee's obligation set forth in the first sentence of Section 7.1 of this Facility Sublease as it relates to compliance with Applicable Law, if, to the extent and for so long as, a test, challenge, appeal or proceeding for review of such compliance shall be prosecuted in good faith by the Facility Sublessee or the Facility Operator, the failure by the Facility Sublessee to comply with such requirement shall not constitute a Sublease Event of Default hereunder if, but only if, such test, challenge, appeal or proceeding shall not involve any danger of (i) the foreclosure, sale, forfeiture or loss of, or imposition of a Lien on, any part of the Facility, the Rocky Mountain Site or the impairment of the use, operation or maintenance of the Facility or the Rocky Mountain Site in any material respect or the value, utility or useful life of the Facility or the Rocky Mountain Site, (ii) the loss of the security interest of the Lender in the Collateral, or (iii) any criminal liability being incurred or any material adverse effect on, the Facility Sublessor, the Facility Lessor, the Owner 27 Participant or the Lender in the reasonable opinion of such Person including, without limitation, subjecting the Facility Lessor, the Owner Trustee, or the Owner Participant to regulation as a public utility under Applicable Law; and provided, further, in the case of the Facility Sublessee's obligation set forth in the first sentence of Section 7.1 of this Facility Sublease as it relates to compliance with Applicable Law, if the noncompliance is not of a type that can be immediately remedied, the failure to comply shall not be a Sublease Event of Default hereunder if the Facility Sublessee is taking all reasonable action to remedy such noncompliance and if, but only if, such noncompliance shall not involve any danger in the reasonable opinion of such Person described in clause (i), (ii) or (iii) of the preceding proviso; and provided, further, such noncompliance, or such test, challenge, appeal or proceeding to review shall not, unless the Facility Sublessee has irrevocably elected the Sublease Purchase Option pursuant to Section 15.1, extend beyond a date that is 18 months prior to the Expiration Date; or (f) the Facility Sublessee shall fail to observe or perform its obligation to maintain the insurance required by Section 11; or (g) the Facility Sublessee shall fail to observe or perform its obligations under Section 5, Section 15 or Section 19 of this Facility Sublease; or (h) the Facility Sublessee shall have failed to observe or perform its obligations under Section 8.2 or Section 8.12 of the Participation Agreement; or (i) the Facility Sublessee shall have failed to observe or perform its obligations set forth in Section 8.5, Section 8.6, Section 8.7, Section 8.8 or Section 8.16 of the Participation Agreement; or (j) Oglethorpe's right to the output of capacity and energy from the Facility, or any of its other rights as a "Participant," under the Rocky Mountain Operating Agreement, shall be suspended pursuant to Section 6.02 of the Rocky Mountain Operating Agreement and such suspension shall not be cured within 30 days; or (k) Oglethorpe shall be removed as "agent" under the Rocky Mountain Operating Agreement pursuant to Section 8.02 and 8.03 of such Agreement; or (l) the principal and interest on the bonds issued under the Oglethorpe Mortgage shall have been declared to be immediately due and payable; or (m) the Head Lease, the Ground Lease or the Rocky Mountain Agreements Assignment shall become invalid or unenforceable; or (n) the Facility Sublessee shall (i) commence a voluntary case or other proceeding seeking relief under Title 11 of the Bankruptcy Code or liquidation, reorganization or other 28 relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or apply for or consent to the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or (ii) consent to, or fail to controvert in a timely manner, any such relief or the appointment of or taking possession by any such official in any voluntary case or other proceeding commenced against it, (iii) file an answer admitting the material allegations of a petition filed against it in any such proceeding or (iv) fail to pay its debts generally as they become due or admit in writing its inability to do so or take any corporate steps with respect to any of the foregoing; or (o) an involuntary case or other proceeding shall be commenced against the Facility Sublessee seeking (i) liquidation, reorganization or other relief with respect to it or its debts under Title 11 of the Bankruptcy Code or any bankruptcy, insolvency or other similar law now or hereafter in effect, or (ii) the appointment of a trustee, receiver, liquidator, custodian or other similar official over it or any substantial part of its property, or (iii) the winding-up or liquidation of the Facility Sublessee; and such involuntary case of other proceeding shall remain undismissed and unstayed for a period of 60 days; or (p) the obligees or any trustee under the Oglethorpe Mortgage shall have (i) given the notice contemplated by Section 1(b) or Section 4 of the Intercreditor Agreement, or shall have commenced or taken action to foreclose or otherwise dispossess the Facility Sublessee or the Head Lessee from the Facility or otherwise taken an action referred to in Section 4 of the Intercreditor Agreement or (ii) exercised any dispossessing remedy pursuant to the remedy provisions of the Oglethorpe Mortgage or pursuant to Applicable Law; or (q) the obligees or any trustee under the Oglethorpe Mortgage shall have commenced a foreclosure action under the relevant remedy provisions following an "event of default" under the Oglethorpe Mortgage; or (r) the Qualifying Sublease Surety Bond (or the Qualifying Letter of Credit in replacement thereof) or any Qualifying Additional Security securing the Facility Sublessor's obligations under the Facility Sublease shall cease to be valid and enforceable obligations of the issuer thereof (regardless whether such Bond or Letter of Credit meets the requirements for a "Qualifying Sublease Surety Bond" or a "Qualifying Letter of Credit" or "Qualifying Additional Security"); or (s) the Facility Sublessee shall have failed to perform or observe its covenant set forth in Section 8.15 of the Participation Agreement, and, if capable of remedy, no action to cure is commenced within 30 days after notice, or, if such action has been taken and the Facility Sublessee is diligently pursuing such cure, such action has not succeeded within a period of 60 days after such notice. 29 SECTION 17. REMEDIES Section 17.1 Remedies for Sublease Event of Default. Upon the occurrence of any Sublease Event of Default and at any time thereafter so long as the same shall be continuing, this Facility Sublease shall automatically be deemed to be in default without the need for giving any notice (the giving of which is waived to the fullest extent permitted by Applicable Law); and at any time thereafter, so long as the Facility Sublessee shall not have remedied all outstanding Sublease Events of Default, the Facility Sublessor may do one or more of the following as the Facility Sublessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with any mandatory requirements of, Applicable Law then in effect: (a) proceed by appropriate court action or actions, either at law or in equity, to enforce performance by the Facility Sublessee, at the Facility Sublessee's sole cost and expense, of the applicable covenants and terms of this Facility Sublease, provided, however, that the liquidated damages amount set forth in paragraphs (e) and (f) below shall be the sole and exclusive money damages remedy available to the Facility Sublessor for a Sublease Event of Default; (b) by notice in writing to the Facility Sublessee, terminate this Facility Sublease and the Facility Sublessee's Rocky Mountain Interest whereupon all right of the Facility Sublessee to the possession and use of the Undivided Interest under this Facility Sublease shall absolutely cease and terminate but the Facility Sublessee shall remain liable as hereinafter provided; and thereupon, the Facility Sublessor may demand that the Facility Sublessee, and the Facility Sublessee shall, upon written demand of the Facility Sublessor and at the Facility Sublessee's expense, forthwith return possession of the Undivided Interest to the Facility Sublessor or its order in the manner and condition required by, and otherwise in accordance with all of the provisions of Section 5, except those provisions relating to periods of notice; and the Facility Sublessor may thenceforth hold, possess and enjoy the same free from any right of the Facility Sublessee, or its successor or assigns, to use the Undivided Interest for any purpose whatsoever; (c) sell the Facility Sublessor's Rocky Mountain Interest at public or private sale, as the Facility Sublessor may determine, free and clear of any rights of the Facility Sublessee under this Facility Sublease and without any duty to account to the Facility Sublessee with respect to such sale or for the proceeds thereof (except to the extent required by paragraph (f) below if the Facility Sublessor elects to exercise its rights under said paragraph and by Applicable Law), in which event the Facility Sublessee's obligation to pay Sublease Basic Rent hereunder due for any periods subsequent to the date of such sale shall terminate (except to the extent that Sublease Basic Rent is to be included in computations under paragraph (f) below if the Facility Sublessor elects to exercise its rights under said paragraph), provided, however, that if the Facility Sublessor shall have exercised its rights under this paragraph (c), the Facility Sublessor may not exercise any remedy set forth in paragraph (e) of this Section 17.1; 30 (d) hold, keep idle or lease to others the Facility Sublessor's Rocky Mountain Interest as the Facility Sublessor in its sole discretion may determine, free and clear of any rights of the Facility Sublessee under this Facility Sublease and without any duty to account to the Facility Sublessee with respect to such action or inaction or for any proceeds with respect thereto, except that the Facility Sublessee's obligation to pay Sublease Basic Rent with respect to the Undivided Interest due for any periods subsequent to the date upon which the Facility Sublessee shall have been deprived of possession and use of the Undivided Interest pursuant to this Section 17 shall be reduced by the net proceeds, if any, received by the Facility Sublessor from leasing the Facility Sublessor's Rocky Mountain Interest to any Person other than the Facility Sublessee; (e) whether or not the Facility Sublessor shall have exercised, or shall thereafter at any time exercise, any of its rights under paragraph (b) above with respect to the Facility Sublessor's Rocky Mountain Interest, the Facility Sublessor, by written notice to the Facility Sublessee specifying a Termination Date that shall be not earlier than 10 days after the date of such notice, may demand that the Facility Sublessee pay to the Facility Sublessor, and the Facility Sublessee shall pay to the Facility Sublessor, on the Termination Date specified in such notice, any unpaid Sublease Basic Rent due before such Termination Date and, if such Termination Date shall be a Rent Payment Date, any Sublease Basic Rent (to the extent payable in arrears) due and payable on such Rent Payment Date, any Sublease Supplemental Rent due and payable as of the payment date specified in such notice, plus as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Sublease Basic Rent due after the Termination Date specified in such notice), (i) an amount equal to the excess, if any, of the Sublease Termination Value computed as of the Termination Date specified in such notice over the Fair Market Sales Value of the Facility Sublessor's Rocky Mountain Interest as of the Termination Date specified in such notice; or (ii) an amount equal to the Sublease Termination Value computed as of the Termination Date specified in such notice and, upon payment of such Sublease Termination Value by the Facility Sublessee pursuant to this clause (ii) and all other Sublease Rent then due and payable by the Facility Sublessee, the Facility Sublessor will forthwith transfer to the Facility Sublessee in accordance with this Section 17.1(e) and Section 6 of the Ground Sub-sublease on an "as is", "where is" and "with all faults" basis, without representation or warranty other than a warranty as to the absence of Facility Sublessor's Liens, all of its interest in the Facility Sublessor's Rocky Mountain Interest and, execute, acknowledge and deliver, and record and file (as appropriate), appropriate releases and all other documents or instructions necessary or desirable to effect the foregoing, all in form and substance reasonably satisfactory to the Facility Sublessor and at the cost and expense of the Facility Sublessee) and upon payment of such amounts under clauses (i) or (ii) of this paragraph (e), this Facility Sublease, and the Facility Sublessee's obligation to pay Sublease Basic Rent hereunder due for any periods subsequent to the date of such payment shall terminate; and (f) if the Facility Sublessor shall have sold the Facility Sublessor's Rocky Mountain Interest pursuant to paragraph (c) above, the Facility Sublessor may, if it shall so elect, 31 demand that the Facility Sublessee pay to the Facility Sublessor, and the Facility Sublessee shall pay to the Facility Sublessor, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Sublease Basic Rent due for any periods subsequent to the date of such sale), an amount equal to (A) any unpaid Sublease Basic Rent due before the date of such sale and, (B)(i) if that date is a Rent Payment Date, the Sublease Basic Rent due on that date (to the extent payable in arrears), or, (ii) if that date is not a Rent Payment Date or the Termination Date, the daily equivalent (based on a 30-day month) of Sublease Basic Rent (to the extent payable in arrears) for the period from the preceding Rent Payment Date to the date of such sale, plus (C) the amount, if any, by which the Sublease Termination Value computed as of a Termination Date next preceding the date of such sale or, if such sale occurs on a Termination Date the Termination Value computed as of such Termination Date, exceeds the net proceeds of such sale and, upon payment of such amount, this Facility Sublease and the Facility Sublessee's obligation to pay Sublease Basic Rent for any periods subsequent to the date of such payment shall terminate; or (g) the Facility Sublessor or upon an Event of Default, the Facility Lessor, as security assignee, may draw upon the Qualifying Sublease Surety Bond and the proceeds of the Qualifying Sublease Surety Bond shall reduce the Facility Sublessee's obligation to pay Sublease Termination Value to the extent of any such proceeds received by the Facility Sublessor. In addition, the Facility Sublessee shall be liable, except as otherwise provided above, for any and all unpaid Sublease Rent due hereunder before, during or after the exercise of any of the foregoing remedies (or for damages in an amount equal to such Sublease Rent which would otherwise have accrued after eviction of the Facility Sublessee or other termination of the leasehold created hereby pursuant to or in the course of the Facility Sublessor's exercise of such remedies), and, on an After-Tax Basis, for legal fees and other costs and expenses incurred by reason of the occurrence of any Sublease Event of Default or the exercise of the Facility Sublessor's remedies with respect thereto, including the repayment in full of any costs and expenses necessary to be expended in connection with the return of the Undivided Interest in accordance with Section 5 hereof, including, without limitation, any costs and expenses incurred by the Facility Sublessor (including the costs and expenses of the Trustees, the Owner Participant or the Lender payable by the Facility Sublessor pursuant to Section 17.1 of the Facility Lease) in connection with retaking constructive possession of, or in repairing, the Undivided Interest in order to cause it to be in compliance with all maintenance standards imposed by this Facility Sublease. The provisions of this Section 17.1 shall survive the termination of this Facility Sublease for any reason whatsoever and the termination or cancellation of the Facility Sublessee's leasehold estate in the Undivided Interest for any reason. Section 17.2 Cumulative Remedies. The remedies in this Facility Sublease provided in favor of the Facility Sublessor shall not be deemed exclusive, but shall be cumulative and shall be in addition to all other remedies in its favor existing at law or in equity, and the 32 exercise or beginning of exercise by the Facility Sublessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Facility Sublessor of any or all of such other remedies; provided, however, that the liquidated damages amount set forth in paragraphs (e) and (f) above shall be the sole and exclusive money damages remedy available to the Facility Sublessor for a Sublease Event of Default. To the extent permitted by Applicable Law, the Facility Sublessee hereby waives any rights now or hereafter conferred by statute or otherwise which may require the Facility Sublessor to sell, lease or otherwise use the Undivided Interest or any Component thereof in mitigation of Facility Sublessor's damages as set forth in this Section 17 or which may otherwise limit or modify any of Facility Sublessor's rights and remedies in this Section 17. Section 17.3 No Delay or Omission to be Construed as Waiver. No delay or omission to exercise any right, power or remedy accruing to the Facility Sublessor upon any breach or default by the Facility Sublessee under this Facility Sublease shall impair any such right, power or remedy of the Facility Sublessor, nor shall any such delay or omission be construed as a waiver of any breach or default, or of any similar breach or default hereafter occurring; nor shall any waiver of a single breach or default be deemed a waiver of any subsequent breach or default. SECTION 18. TERMINATION OPTIONS FOR APPEAL OF FERC ORDERS. Section 18.1 Options to Terminate. If an appeal or request for a rehearing shall be filed (including by post-order intervention) of the FERC Order, the Facility Sublessee shall forthwith give notice of such appeal or request for rehearing to the Facility Sublessor. If such an appeal or request for rehearing shall be filed, the Facility Sublessor and the Facility Sublessee shall each have the option, upon not less than four Business Days' prior written notice to the other, given not later than March 1, 1997, to terminate this Facility Sublease on the next succeeding Termination Date occurring at least ten days following such notice on the terms set forth in this Section 18.1. If the Facility Sublessee shall exercise its option provided by this Section 18.1 by giving the notice contemplated by the preceding sentence, the Facility Sublessee shall have the right to cause the Facility Sublessor to (i) exercise the option provided in Section 18.1 of the Facility Lease and (ii) purchase the Facility Lessor's Rocky Mountain Interest pursuant to Section 18 of the Facility Lease, (b) purchase the Facility Lessor's Rocky Mountain Interest purchased by the Facility Sublessor pursuant to Section 18 of the Facility Lease from the Facility Sublessor and (c) terminate this Facility Sublease on the Termination Date specified in such notice, upon payment to the Facility Lessor of the Sublease Termination Value, determined as of such Termination Date. The Facility Sublessee shall be permitted to exercise its option provided by this Section 18 only if the Facility Sublessee shall simultaneously exercise the termination option provided by Section 18.1 of each Other Facility Lease. If the Facility Sublessor shall exercise its option provided by this Section 18.1 giving the notice contemplated by the second preceding sentence, the Facility Sublessor shall have the right to cause the Facility Sublessee to (a) purchase from the Facility Sublessor the Facility 33 Lessor's Rocky Mountain Interest purchased by the Facility Sublessor pursuant to Section 18 of the Facility Lease for the Sublease Termination Value on the Termination Date specified in such notice and (b) terminate this Facility Sublease on such Termination Date. Section 18.2 Procedure for Exercise of Termination Options. If the Facility Sublessor or the Facility Sublessee shall have exercised its option under Section 18.1, on the Termination Date specified in the Facility Sublessor's or the Facility Sublessee's notice of such exercise, the Facility Sublessee shall pay to the Facility Sublessor (a) the Sublease Termination Value determined as of such Termination Date, plus (b) all amounts of Sublease Supplemental Rent (including all costs and expenses of the Facility Sublessor, the Owner Trustee, the Owner Participant and the Lender incurred by the Facility Sublessor pursuant to Section 18.2 of the Facility Lease and all sales, use, value added and other Taxes covered by Section 12.2 of the Participation Agreement associated with the exercise of the termination option pursuant to this Section 18) due and payable on or prior to the Termination Date, and (c) any unpaid Sublease Basic Rent due before such Termination Date and, if such Termination Date shall be a Rent Payment Date, the Sublease Basic Rent (to the extent payable in arrears) due and payable on such Rent Payment Date. Concurrently with the payment of all sums specified in this Section 18.2 (1) Sublease Basic Rent for the Undivided Interest shall cease to accrue, (2) the Facility Sublessee shall cease to have any liability to the Facility Sublessor with respect to the Undivided Interest, except for Sublease Supplemental Rent and other obligations (including those under Sections 11.1 and 11.2 of the Participation Agreement and the Tax Indemnity Agreement) surviving pursuant to the express terms of any Operative Document, (3) the Facility Sublessor will execute and deliver to the Facility Sublessee to be prepared (and where appropriate recorded and filed), at the Facility Sublessee's cost and expense, a release and termination of this Facility Sublease, (4) the Facility Sublessor will transfer, pursuant to this Section 18.2 and Section 6 of the Ground Sub-sublease, the Facility Lessor's Rocky Mountain Interest acquired by the Facility Sublessor pursuant to Section 18 of the Facility Lease to the Facility Sublessee on an "as is," "where is," "with all faults" basis, without representations or warranties other than a warranty as to the absence of Facility Sublessor's Liens and (5) this Facility Sublease shall terminate and the Facility Sublessor shall execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepaid, filed and recorded (if appropriate) at the cost and expense of the Facility Sublessee. SECTION 19. THE FACILITY SUBLESSEE'S RIGHT TO SUBLEASE. The Facility Sublessee will not have the right to sublease the Undivided Interest without the consent of the Facility Sublessor except under the following conditions: (a) the sublessee is (i) a solvent corporation not subject to bankruptcy proceedings and (ii) the sublessee is, or its obligations under the sublease are guaranteed by, an experienced, reputable operator of electric utility assets; 34 (b) the sublease does not extend beyond the Expiration Date and is expressly subject and subordinate to the Head Lease, the Facility Lease and this Facility Sublease; (c) RMLC and Oglethorpe remain fully and primarily liable for their obligations under the Operative Documents and RMLC remains fully, and Oglethorpe remains fully and primarily, liable for their obligations under the Rocky Mountain Agreements; (d) all terms and conditions of the Head Lease, the Facility Lease, this Facility Sublease and the other Operative Documents remain in effect; (e) the entering into such sublease is permitted by the Rocky Mountain Agreements and the Oglethorpe Mortgage; (f) no Sublease Payment Default, Sublease Bankruptcy Default or Sublease Event of Default shall be continuing; (g) the sublease prohibits further assignment or subletting; (h) the sublease requires the sublessee to operate and maintain the Undivided Interest in a manner consistent with this Facility Sublease; (i) the sublease is collaterally assigned to the Facility Sublessor and by the Facility Sublessor to the Facility Lessor as security for the obligations of the Facility Sublessee and the Facility Lessee under the Facility Sublease and Facility Lease, respectively, in a manner that is reasonably acceptable to the Facility Sublessor; (j) at the time of entering into such sublease the Oglethorpe Mortgage Bonds shall be rated at least the minimum "investment grade" by both Moody's and Standard & Poor's; and (k) such sublease shall not cause the property to become "tax-exempt use property" within the meaning of Section 168(h) of the Code. SECTION 20. FURTHER ASSURANCES The Facility Sublessee, at its own cost and expense, will duly execute and deliver to the Facility Sublessor such further documents and assurances and take such further action as the Facility Sublessor may from time to time reasonably request in order to establish and protect the rights and remedies created in favor of the Facility Sublessor hereunder. 35 SECTION 21. FACILITY SUBLESSOR'S RIGHT TO PERFORM If the Facility Sublessee fails to make any payment required to be made by it hereunder (other than Sublease Supplemental Rent in respect of the Purchase Option Price) or fails to perform or comply with any of its other agreements contained herein after notice to the Facility Sublessee and failure of the Facility Sublessee to so perform or comply within 10 days thereafter, the Facility Sublessor may itself make such payment or perform or comply with such agreement in a reasonable manner, but shall not be obligated hereunder to do so, and the amount of such payment and of the reasonable expenses of the Facility Sublessor incurred in connection with such payment or the performance of or compliance with such agreement, as the case may be, together with interest thereon at the Overdue Rate, to the extent permitted by Applicable Law, shall be deemed to be Sublease Supplemental Rent, payable by the Facility Sublessee to the Facility Sublessor on demand. SECTION 22. NOTICES Unless otherwise expressly specified or permitted by the terms hereof, all communica tions and notices provided for herein to a party hereto shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clauses (a) and (b) above, in each case addressed to such party and copy party at its address set forth below or at such other address as such party or copy party may from time to time designate by written notice to the other parties: 36 If to the Facility Sublessor: Rocky Mountain Leasing Corporation c/o Corporation Trust Center 1209 Orange Street, Room 123 Wilmington, Delaware 19801 Facsimile No.: (302) 688-5459 Telephone No.: (302) 777-0250 with copies to: Sutherland, Asbill & Brennan, L.L.P. 999 Peachtree Street, N.E. Atlanta, Georgia 30309-3996 Facsimile No.: (404) 853-8806 Telephone No.: (404) 853-8000 Attention: Managing Attorney and to: Utrecht-America Finance Co., c/o Rabobank Nederland, New York Branch 245 Park Avenue New York, New York 10167-0062 Facsimile No.: (212) 916-7880 Telephone No.: (212) 916-7864 Attention: General Counsel's Office If to the Facility Sublessee: Oglethorpe Power Corporation 2100 East Exchange Place Tucker, Georgia 30085 Facsimile No.: (770) 270-7325 Telephone No.: (770) 270-7940 Attention: Vice President Finance with a copy to the Lender at its address set forth above. 37 SECTION 23. SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS Any moneys received by the Facility Sublessor pursuant to Section 10.4 shall, until paid to the Facility Sublessee as provided in Section 10.4, be held by the Facility Sublessor as security for the Facility Sublessee's obligations under this Facility Sublease and invested in Permitted Investments by the Facility Sublessor (at the sole risk of the Facility Sublessee) from time to time as directed in writing by the Facility Sublessee (and the Facility Sublessor during the continuation of a Sublease Payment Default, Sublease Bankruptcy Default or a Sublease Event of Default) if such investments are reasonably available for purchase. Any gain (including interest received) realized as the result of any such Permitted Investment (net of any fees, commissions, taxes and other expenses, if any, incurred in connection with such Permitted Investment) shall be, applied or remitted to the Facility Sublessee in the same manner as the principal invested. SECTION 24. SECURITY FOR FACILITY SUBLESSOR'S OBLIGATION TO THE FACILITY LESSOR In order to secure all amounts payable by and all obligations to be performed by the Facility Sublessor under the Facility Lease, the Facility Sublessor will assign for security purposes its rights under this Facility Sublease, including all Sublease Rent payable hereunder, to the Facility Lessor pursuant to the Facility Sublease Assignment Agreement. In order to secure the Secured Indebtedness, the Facility Lessor's right, title and interest in the Facility Sublease Assignment Agreement will be assigned by the Facility Lessor to the Lender pursuant to the Loan Agreement and the Deed to Secure Debt. The Facility Sublessee hereby consents to such assignments and the creation of such Liens and acknowledges receipt of copies of the Facility Sublease Assignment Agreement, the Loan Agreement and the Deed to Secure Debt, it being understood that such consent shall not affect any requirement or the absence of any requirement for any consent under any other circumstances. Unless and until the Facility Sublessee shall have received written notice from the Lender that the assignment pursuant to the Loan Agreement and the Deed to Secure Debt have been fully terminated the Lender shall have the right to exercise the rights of the Facility Sublessor under this Facility Sublease to the extent set forth in the Facility Sublease Assignment Agreement and subject in each case to the exceptions set forth in the Loan Agreement. TO THE EXTENT, IF ANY, THAT THIS FACILITY SUBLEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS FACILITY SUBLEASE MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN THE ORIGINAL COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE 38 COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE LENDER ON THE SIGNATURE PAGE THEREOF. SECTION 25. MISCELLANEOUS Section 25.1 Governing Law. This Facility Sublease shall be in all respects governed by and construed in accordance with the laws of the State of New York including all matters of construction, validity and performance except to the extent the law of the State of Georgia is mandatorily applicable. Section 25.2 Severability. If any provision hereof shall be invalid, illegal or unenforceable under Applicable Law, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. Section 25.3 Headings and Table of Contents. The headings of the sections of this Facility Sublease and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. Section 25.4 Successors and Assigns. (a) This Facility Sublease shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and assigns as permitted by and in accordance with the terms hereof. (b) Except as expressly provided herein or in the other Operative Documents, neither party hereto may assign its interests or transfer its obligations herein without the consent of the other party hereto. (c) This Facility Sublease conveys a leasehold estate and not a usufruct. Section 25.5 "True Lease". It is the intent of the parties to this Facility Sublease that it be, and this Facility Sublease shall be, a "true lease," and that, recognizing the fact that legal title to the Undivided Interest is vested in the Co-Owners as tenants-in-common, and the interest of the Facility Sublessee is subject and subordinate to the interest of the Facility Lessor under the Head Lease and the interest of the Facility Lessee under the Facility Lease, this Facility Sublease conveys to the Facility Sublessee no right, title or interest in the Undivided Interest except as "sub-sublessee" of the Undivided Interest. Section 25.6 Amendments and Waivers. No term, covenant, agreement or condition of this Facility Sublease may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto. 39 Section 25.7 Survival. Except for Sections 3.3, 3.5, 3.6, 5,9, 15.1 and 17, the warranties and covenants made by each party hereto shall not survive the expiration or termination of this Facility Sublease. Section 25.8 Counterparts. This Facility Sublease may be executed by the parties hereto in separate counterparts, each of which, subject to Section 24, when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 25.9 Effectiveness. This Facility Sublease has been dated as of the date first above written for convenience only. This Facility Sublease shall be effective on the date of execution and delivery by each of the Facility Sublessee and the Facility Sublessor. Section 25.10 Measuring Life. If and to the extent that any of the rights and privileges granted under this Facility Sublease, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule or law relating to the vesting of interests in property or the suspension of the power of alienation of property, then it is agreed that notwithstanding any other provision of this Facility Sublease, such options, rights and privileges, subject to the respective conditions herein governing the exercise of such options, rights and privileges, will be exercisable only during (a) the longer of (i) a period which will end twenty-one (21) years after the death of the last survivor of the descendants living on the date of the execution of this Facility Sublease of the following Presidents of the United States: Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George H. W. Bush and William J. Clinton or (ii) the period provided under the Uniform Statutory Rule Against Perpetuities or (b) the specific applicable period of time expressed in this Facility Sublease, whichever of (a) and (b) is shorter. 40 IN WITNESS WHEREOF, the Facility Sublessor and the Facility Sublessee have caused this Facility Sublease to be duly executed and delivered by their respective officers thereunto duly authorized. ROCKY MOUNTAIN LEASING CORPORATION By:/s/ Eugen Heckl ----------------------------------- Name: Eugen Heckl Title: Vice President Date: 12/30/96 Signed and delivered in the presence of: /s/ Leonard Scott - --------------------------------------- Unofficial Witness /s/ David M. Boehm - --------------------------------------- Notary Public My Commission Expires: March 16, 1998 [Notary Seal] OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATING & TRANSMISSION CORPORATION), as Assignor By:/s/ T. D. Kilgore --------------------------------------- Name: T.D. Kilgore Title: President and Chief Executive Officer Date: December 30, 1996 Signed and delivered in the presence of: /s/ Gary M. Bullock - ------------------------------------- Unofficial Witness /s/ David M. Boehm - ------------------------------------- Notary Public My Commission Expires: March 16, 1998 [Notary Seal] CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS FACILITY SUBLEASE HAVE BEEN ASSIGNED TO AND ARE SUBJECT TO A FIRST PRIORITY SECURITY INTEREST IN FAVOR OF THE UNDERSIGNED, AS ASSIGNEE OF THE FACILITY LESSOR, UNDER THE ASSIGNMENT OF FACILITY SUBLEASE DATED AS OF DECEMBER 30, 1996. THIS AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE ORIGINAL COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY THE UNDERSIGNED, ON THE SIGNATURE PAGES THEREOF. SEE SECTION 24 HEREOF FOR INFORMATION CONCERNING THE RIGHTS OF THE HOLDERS OF THE VARIOUS COUNTERPARTS THEREOF. Receipt of this original counterpart of this Facility Sublease is hereby acknowledged on this 30th day of December, 1996. UTRECHT-AMERICA FINANCE CO. By: __________________________________ Name: Title: Date: SCHEDULE TO EXHIBIT 10.32.8 FACILITY SUBLEASE AGREEMENT (P1) The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant ------------- ----------------- ------------------------------------- P1 December 30, 1996 Philip Morris Capital Corporation P2 January 3, 1997 Philip Morris Capital Corporation F3 December 30, 1996 First Chicago Leasing Corporation F4 December 30, 1996 First Chicago Leasing Corporation N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation Other than Appendix A, the Exhibits and Schedules to the Facility Sublease (P1) are not filed herewith; however, the registrant hereby agrees that such Exhibits and Schedules will be provided to the Commission upon request. APPENDIX A to Facility Sublease DEFINITIONS Refer to Appendix A to Exhibit 10.32.1 of the Form 10-K. EX-10.32-9 26 EXHIBIT 10.32.9 Exhibit 10.32.9 This instrument, when recorded, should be returned to: Robert N. Farrar Attorney at Law The Carnegie Building 607 Broad Street, Suite 141 Rome, Georgia 30161-3059 ================================================================================ GROUND SUB-SUBLEASE AGREEMENT (P1) Dated as of December 30, 1996 between ROCKY MOUNTAIN LEASING CORPORATION, as Ground Sub-sublessor and OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), as Ground Sub-sublessee Land Located in Floyd County, Georgia TABLE OF CONTENTS Page SECTION 1. DEFINITIONS....................................................2 SECTION 2. SUB-SUBLEASE OF GROUND INTEREST................................2 Section 2.1. Sub-sublease of Ground Interest...................2 Section 2.2. Basic Ground Sub-sublease Term....................3 Section 2.3. Renewal Ground Sub-sublease Term..................3 Section 2.4. Return of Ground Interest.........................3 Section 2.5. Early Termination.................................3 Section 2.6. Net Lease.........................................3 SECTION 3. RENT FOR THE SUB-SUBLEASE OF THE GROUND INTEREST...............5 SECTION 4. QUIET ENJOYMENT IN FAVOR OF THE GROUND SUB- SUBLESSEE..............................................................5 Section 4.1. Ground Sub-sublessee's Right of Quiet Enjoyment...5 Section 4.2. Conveyances Pursuant to Section 4.2 of the Ground Lease. .............................................................5 SECTION 5. USE OF THE GROUND INTEREST BY GROUND SUB- SUBLESSEE......................................................5 SECTION 6. TRANSFER OF GROUND INTEREST....................................6 SECTION 7. INSPECTION.....................................................6 SECTION 8. SECURITY FOR GROUND SUBLESSOR'S OBLIGATIONS....................6 SECTION 9. MISCELLANEOUS..................................................7 Section 9.1. Amendments and Waivers............................7 Section 9.2. Notices...........................................7 Section 9.3. Survival..........................................8 Section 9.4. Successors and Assigns............................8 Section 9.5. Business Day......................................9 Section 9.6. Governing Law.....................................9 Section 9.7. Severability......................................9 Section 9.8. Counterparts......................................9 Section 9.9. Headings and Table of Contents....................9 Section 9.10. Further Assurances..............................9 Section 9.11. Effectiveness of Ground Sub-sublease............9 i LIST OF ATTACHMENTS: Appendix A - Definitions Schedule 1 - Description of the Rocky Mountain Site Facility Description Schedule Exhibit A-2 - Project Boundary Drawing Exhibit A-3 - Powertunnel and Powerhouse General Plan and Profile of the Rocky Mountain Project No. RM-00-CL-0013 R1 Exhibit A-4 - Description of Equipment ii GROUND SUB-SUBLEASE AGREEMENT (P1) This GROUND SUB-SUBLEASE AGREEMENT (P1), dated as of December 30, 1996 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof, this "Ground Sub-sublease"), between ROCKY MOUNTAIN LEASING CORPORATION, a corporation organized and existing under the laws of the State of Delaware (together with its successors and permitted assigns, the "Ground Sub-sublessor"), and OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized under the laws of the State of Georgia (together with its successors and permitted assigns the "Ground Sub-sublessee"). WHEREAS, the Ground Sublessee and Georgia Power Company, a corporation organized under the laws of the State of Georgia (together with its successors and assigns, "Georgia Power"), own the Rocky Mountain Site as tenants in common under the laws of the State of Georgia; WHEREAS, the Rocky Mountain Site is more particularly described in Schedule 1 hereto, such Schedule 1 being attached to this Ground Sub-sublease as part hereof; WHEREAS, by the Rocky Mountain Agreements, the Ground Sublessee and Georgia Power established their respective rights and obligations as tenants-in-common of the Rocky Mountain Site and of all improvements thereafter to be constructed, and all personal property thereafter to be situated, on the Rocky Mountain Site. Such improvements and personal property owned by the Ground Sublessee and Georgia Power as tenants-in-common under Georgia law include the Facility; WHEREAS, as tenants-in-common of such real and personal property, the Ground Sublessee and Georgia Power hold a 74.61% and 25.39% undivided interest, respectively, in such real and personal property, including the right to nonexclusive possession of all such real and personal property, subject to the rights of the other to nonexclusive possession and the terms and conditions of the Rocky Mountain Agreements; WHEREAS, pursuant to the Head Lease, the Co-Trustee has acquired from the Ground Sublessee, as Head Lessor, a leasehold interest in the Undivided Interest in the Facility for a term equal to approximately 120% of the estimated useful life of the Facility, subject to extension as provided therein; WHEREAS, pursuant to the Ground Lease, the Co-Trustee has acquired from Oglethorpe, as Ground Lessor, a leasehold interest in the Ground Interest for a term equal to approximately 120% of the estimated useful life of the Facility, subject to extension as provided therein; WHEREAS, pursuant to the Facility Lease, the Facility Lessor has leased the Undivided Interest to the Ground Sub-sublessor, as Facility Lessee, for a term which shall end prior to the expiration of the term of the Head Lease; WHEREAS, pursuant to the Ground Sublease, the Ground Sublessor has leased to the Ground Sub-sublessor, as Ground Sublessee, the Ground Interest for a term coterminous with that of the Facility Lease; WHEREAS, pursuant to the Facility Sublease, the Ground Sub-sublessor, as Facility Sublessor, will sublease the Undivided Interest to the Ground Sub-sublessee, as Facility Sublessee, for a term which shall end prior to the expiration of the term of the Head Lease; and WHEREAS, pursuant to this Ground Sub-sublease, the Ground Sub-sublessor is sub-subleasing the Ground Interest to the Ground Sub-sublessee for a term coterminous with that of the Facility Sublease. NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained; and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS. Capitalized terms used in this Ground Sub-sublease, including the recitals; and not otherwise defined herein shall have the respective meanings set forth in Appendix A hereto unless the context hereof shall otherwise require. The general provisions of Appendix A shall apply to terms used in this Ground Sub-sublease and specifically defined herein. SECTION 2. SUB-SUBLEASE OF GROUND INTEREST. Section 2.1. Sub-sublease of Ground Interest. The Ground Sub-sublessor hereby sub-subleases the Ground Interest, upon the terms and conditions set forth herein, to the Ground Sub-sublessee for the term and renewal terms described below, and the Ground Sub-sublessee hereby sub-subleases the Ground Interest from the Ground Sub-sublessor. The Ground Sub-sublessor and the Ground Sub-sublessee understand and agree that (a) this sub-sublease of the Ground Interest is subject to the limitations identified in the definition of Ground Interest, (b) legal title to the Rocky Mountain Site remains vested in the Ground Lessor and Georgia Power as tenants-in-common, (c) this sub-sublease of the Ground Interest is subject and subordinate to the Lien of the Oglethorpe Mortgage and encumbrances described in the Title Report, (d) this sub-sublease of the Ground Interest is subject and subordinate to the interest of the Ground Sublessor in the Ground Interest created pursuant to Section 2.1 of the Ground Lease, (e) this sub-sublease of the Ground Interest is subject and subordinate to the interest of the Ground Sub- 2 sublessor in the Ground Interest created pursuant to Section 2.1 of the Ground Sublease and (f) this sub-sublease of the Ground Interest is subject to the provisions of the Resource Management Agreement. Section 2.2. Basic Ground Sub-sublease Term. The term of this Ground Sub-sublease shall commence on the Closing Date and shall terminate at 11:57 p.m. (New York City time) on the Expiration Date (the "Basic Ground Sub-sublease Term") subject to early termination pursuant to Section 2.4 terms hereof and extension for the Renewal Ground Sub-sublease Term. Section 2.3. Renewal Ground Sub-sublease Term. If the term of the Facility Sublease shall be renewed for a Sublease Renewal Term pursuant to Section 15.3 of the Facility Sublease, the term of the sub-sublease to the Ground Sub-sublessee hereunder will be automatically renewed for a term which shall be coterminous with the Sublease Renewal Term of the Facility Sublease (a "Renewal Ground Sub-sublease Term"). Section 2.4. Return of Ground Interest. Subject to Section 6 hereof, on the last day of the Ground Sub-sublease Term the Ground Sub-sublessee shall return the Ground Interest to the Ground Sub-sublessor by returning the same unto the possession of the Ground Sub-sublessor without representation or warranty other than that the Ground Interest is free and clear of all Liens other than Liens permitted on the Ground Interest by Section 6 of the Facility Sublease without any other liability or cost to the Ground Sub-sublessee. Upon returning the Ground Interest, the Ground Sub-sublessee shall execute, acknowledge and deliver a release of the Ground Interest to be prepared by the Ground Sub-sublessor at its expense and in a form reasonably satisfactory to the Ground Sub-sublessee to be duly recorded at the Ground Sub-sublessor's expense in the Office of the Clerk of the Superior Court of Floyd County, Georgia. The obligations of the Ground Sub-sublessee under this Section 2.4 shall survive the termination of this Ground Sub-sublease. Section 2.5. Early Termination. The Ground Sub-sublease Term shall be deemed automatically terminated upon the early termination of the Facility Sublease Term without any action of the Ground Sub-sublessor or any other Person. Section 2.6. Net Lease. This Ground Sub-sublease is a "net lease" and notwithstanding anything herein to the contrary, the Ground Sub-sublessee's obligation to pay all rent and other sums payable hereunder (and all amounts payable in lieu of rent and other sums following termination of this Ground Sub-sublease) shall be absolute and unconditional under any and all circumstances and shall not be terminated, extinguished, diminished, lost or otherwise impaired, nor shall the Ground Sub-sublessee's other obligations hereunder or the Ground Sub-sublessor's rights hereunder be terminated, extinguished, diminished, lost or otherwise impaired affected, by any circumstance of any character or for any reason whatsoever, whether or not the same involves the loss of all or any part of the leasehold estate granted by this Ground Sub-sublease, including without limitation any of the following circumstances or reasons: (i) any setoff, counterclaim, recoupment, defense or other right which the Ground Sub-sublessee may have against the Ground Sub-sublessor, the Trustees, the Owner Participant, or the Lender or any other Person, including, 3 without limitation, any breach by any of said parties of any covenant or provision under this Ground Sub-sublease or under any Operative Document, (ii) any lack or invalidity of title or any defect in the title, condition, design, operation, merchantability or fitness for use of the Facility or any Component, or any foreclosure or deed in lieu of foreclosure of the Oglethorpe Mortgage, or any termination of the leasehold estate granted by this Ground Sub-sublease as a result thereof by operation of law or contract, or any eviction by paramount title or otherwise, or any unavailability of the Facility, the Rocky Mountain Site, any Component, any other portion of the Facility Lessee's Rocky Mountain Interest or the interest of any other Person or any part of the foregoing for any reason whatsoever, (iii) any loss or destruction of, or damage to, the Facility or any Component or interruption or cessation in the use or possession thereof or any part of the foregoing by the Ground Sub-sublessee for any reason whatsoever and of whatever duration, (iv) the condemnation, requisitioning, expropriation, seizure or other taking of title to or use of the Facility, the Rocky Mountain Site, any Component, any other portion of the Ground Sub-sublessee's Rocky Mountain Interest or any part of the foregoing by any Governmental Entity or otherwise, (v) the invalidity or unenforceability or lack of due authorization or other infirmity of this Ground Sub-sublease or any other Operative Document, (vi) the lack of right, power or authority of the Ground Sub-sublessor to enter into this Ground Sub-sublease or any other Operative Document, (vii) any ineligibility of the Facility or any Component for any particular use, whether or not due to any failure of the Ground Sub-sublessor or the Facility Operator to comply with any Applicable Law, (viii) any event of "force majeure" or any frustration, (ix) any legal requirement similar or dissimilar to the foregoing, any present or future law to the contrary notwithstanding, (x) any insolvency, bankruptcy, reorganization or similar proceeding by or against the Ground Sub-sublessee or any other Person, (xi) any Lien of any Person with respect to the Facility, the Rocky Mountain Site, any Component, any other portion of the Ground Sub-sublessee's Rocky Mountain Interest or any part of the foregoing, or (xii) any other cause, whether similar or dissimilar to the foregoing, any present or future law notwithstanding, except as expressly set forth herein or in any other Operative Documents, it being the intention of the parties hereto that all rent and other sums payable by the Ground Sub-sublessee hereunder (and all amounts payable in lieu of rent and other sums following termination of this Ground Sub-sublease) be paid in the manner and at the times provided for herein. Such rent and other sums payable hereunder shall not be subject to any abatement and the payments thereof shall not be subject to any setoff or reduction for any reason whatsoever, including any present or future claims of the Ground Sub-sublessee or any other Person against the Ground Sub-sublessor or any other Person under this Ground Sub-sublease or otherwise. If for any reason whatsoever this Ground Sub-sublease shall be terminated in whole or in part by operation of law or otherwise, except as specifically provided herein, the Ground Sub-sublessee nonetheless agrees to the extent permitted by Applicable Law, to pay to the Ground Sub-sublessor any amount due and owing, at the time such payment would have become due and payable in accordance with the terms hereof had this Ground Sub-sublease not been so terminated. The provisions of this Section 2.6 shall survive the termination of this Ground Sub-sublease for any reason whatsoever. Upon and after the termination of the leasehold hereby granted for any reason whatsoever, the Ground Sub-sublessee shall pay to the Ground Sub-sublessor in lieu of the rent and other sums payable hereunder, an amount equal to such rent and other sums, and this obligation is expressly agreed 4 to be a covenant of the Ground Sub-sublessee that is independent of the existence of such leasehold. The obligations of the Ground Sub-sublessee to pay all amounts hereunder other than rent and other sums are also covenants that are independent of the existence of such leasehold and shall survive the termination thereof for any reason whatsoever. SECTION 3. RENT FOR THE SUB-SUBLEASE OF THE GROUND INTEREST. As rent for the sub-sublease of the Ground Interest for the Ground Sub-sublease Term, the Ground Sub-sublessee agrees to pay to the Ground Sub-sublessor for the period commencing on the Closing Date and ending on the Expiration Date annual rent of $120,273 per year, payable in advance on July 1 of each year during the Ground Sub-sublease Term; provided that the first payment of rent shall be payable on the Closing Date and shall be prorated from the beginning of the Ground Sub-sublease Term to July 1, 1997. Notwithstanding the foregoing, so long as the Ground Sub-sublessor shall not be required to pay rent under the Ground Sublease in accordance with Section 3 thereof, the Ground Sub-sublessee shall not be required to pay rent hereunder. For the period from and after the Expiration Date to the end of the Ground Sub-sublease Term, the Ground Sub-sublessee agrees to pay to the Ground Sub-sublessor annual rent equal in timing and amount to the rent payable by the Ground Sublessee under the Ground Sublease. SECTION 4. QUIET ENJOYMENT IN FAVOR OF THE GROUND SUB-SUBLESSEE. Section 4.1. Ground Sub-sublessee's Right of Quiet Enjoyment. The Ground Sub-sublessor warrants that it has full right and authority to sub-sublease the Ground Interest to the Ground Sub-sublessee pursuant to the terms of this Ground Sub-sublease and agrees that, notwithstanding any provision of any other Operative Document, during the Ground Sub-sublease Term, the Ground Sub-sublessor shall not through its own actions or inactions interfere with or interrupt the quiet enjoyment of the use, operation and possession by the Ground Sub-sublessee of the sub-subleasehold interest in the Ground Interest pursuant to the terms hereof. Section 4.2. Conveyances Pursuant to Section 4.2 of the Ground Lease. Sales, grants of leases or easements and conveyances of portions of the Rocky Mountain Site, rights of way, easements or leasehold interests made by the Ground Lessor in accordance with Section 4.2 of the Ground Lease shall not constitute a breach of the Ground Sub-sublessee's right of quiet enjoyment under this Ground Sub-sublease. Any Released Property sold, leased or otherwise conveyed pursuant to the Ground Lessor's Release Rights shall automatically, without further act of any Person, be released from this Ground Sub-sublease. 5 SECTION 5. USE OF THE GROUND INTEREST BY GROUND SUB-SUBLESSEE. The Ground Sub-sublessee's rights hereunder to use the Ground Interest shall be limited to the right of the Ground Sub-sublessee, as Facility Sublessee, to use the Ground Interest during the Ground Sub-sublease Term in connection with the use, operation and maintenance of the Facility in accordance with the terms of the Rocky Mountain Agreements and the Facility Sublease which shall include the right to construct, install, operate, use, repair and relocate facilities and structures on or under the Rocky Mountain Site, including buildings, roads, paths, walkways, sanitary sewers, storm drains, water and gas mains, waste disposal systems, electric power lines, telephone, television and telecommunication lines, fire protection systems, safety sensor and monitoring systems, and utility lines and systems, and any other uses as shall be permitted by the Rocky Mountain Agreements. Notwithstanding any provision contained in this Ground Sub-sublease or in any Operative Document, the Ground Sub-sublessee has the right to perform any and all acts required by an order of the FERC or its successor affecting the Facility or the Rocky Mountain Site without the prior approval of the Ground Sub-sublessor or any other party to the Operative Documents. SECTION 6. TRANSFER OF GROUND INTEREST. The Ground Sub-sublessee expressly agrees that the Ground Sub-sublessee shall not transfer its Ground Interest except as part of the Ground Sub-sublessee's transfer of the Facility Sub-sublessee's Rocky Mountain Interest. The Ground Sub-sublessee acknowledges that the Ground Sub-sublessor shall have the right to transfer and convey the Ground Interest under and in accordance with Sections 10.2, 13.2, 14.3, 17.1(c), 17.1(e) or 18 of the Facility Sublease in connection with the Ground Sub-sublessor's transfer thereunder of the Facility Sublessor's Rocky Mountain Interest and the Ground Sub-sublessor agrees to comply with the provisions of the applicable sections of the Facility Sublease in connection with such transfer to the extent required thereunder, and the Ground Sub-sublessee shall have the right to sublease the Ground Interest to a Person which is a sublessee of the Undivided Interest in accordance with Section 19 of the Facility Sublease. SECTION 7. INSPECTION During the Ground Sub-sublease Term, at such times as reasonably requested, each of the Ground Sub-sublessor, the Co-Trustee, the Owner Participant, and the Lender and their representatives may, at reasonable times, on reasonable notice to the Co-Owners and at their own risk and expense (except, at the expense, but not risk, of the Ground Sub-sublessee when a Sublease Event of Default has occurred and is continuing), inspect the Rocky Mountain Site; provided, however, that any such inspection will not interfere with the Co-Owners' normal commercial operation of the Rocky Mountain Site and will be in accordance with the Rocky Mountain Operator's safety and insurance programs. 6 SECTION 8. SECURITY FOR GROUND SUBLESSOR'S OBLIGATIONS In order to secure all amounts payable by and all obligations to be performed by the Ground Sub-sublessor under the Facility Lease, the Ground Sub-sublessor will assign for security purposes its rights under this Ground Sub-sublease to the Facility Lessor pursuant to the Facility Sublease Assignment Agreement. In order to secure the Secured Indebtedness, the Facility Lessor's right, title and interest in the Facility Sublease Assignment Agreement will be assigned by the Facility Lessor to the Lender pursuant to the Loan Agreement and the Deed to Secure Debt. The Ground Sub-sublessee hereby consents to such assignments and the creation of such Liens and acknowledges receipt of copies of the Facility Sublease Assignment Agreement, the Loan Agreement and the Deed to Secure Debt, it being understood that such consent shall not affect any requirement or the absence of any requirement for any consent under any other circumstances. Unless and until the Ground Sub-sublessee shall have received written notice from the Lender that the assignments pursuant to the Facility Sublease Assignment Agreement, the Loan Agreement and the Deed to Secure Debt have been fully terminated the Lender shall have the right to exercise the rights of the Ground Sub-sublessor under this Ground Sub-sublease to the extent set forth in the Facility Sublease Assignment Agreement and subject in each case to the exceptions set forth in the Loan Agreement or the Deed to Secure Debt. SECTION 9. MISCELLANEOUS. Section 9.1. Amendments and Waivers. No term, covenant, agreement or condition of this Ground Sub-sublease may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto. Section 9.2. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein to a party hereto shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or next business day mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clause (a) or (b) above, in each case addressed to such party and copy party at its address set forth below or at such other address as such party or copy party may from time to time designate by written notice to the other parties: 7 If to the Ground Sub-sublessor: Rocky Mountain Leasing Corporation c/o Corporation Trust Center 1209 Orange Street, Room 123 Wilmington, Delaware 19801 Facsimile No.: (302) 688-5459 Telephone No.: (302) 777-0250 with copies to: Sutherland, Asbill & Brennan, L.L.P. 999 Peachtree Street, N.E. Atlanta, Georgia 30309-3996 Facsimile No.: (404) 853-8806 Telephone No.: (404) 853-8000 Attention:Cada T. Kilgore, III and to: Utrecht-America Finance Co., c/o Rabobank Nederland, New York Branch 245 Park Avenue New York, New York 10167-0062 Facsimile No.: (212) 916-7880 Telephone No.: (212) 916-7864 Attention: General Counsel's Office If to the Ground Sub-sublessee: Oglethorpe Power Corporation 2100 East Exchange Place Tucker, Georgia 30085-1349 Facsimile No.: (770) 270-7325 Telephone No.: (770) 270-7920 Attention: Vice President-Finance with a copy to Utrecht-America Finance Co. at the address set forth above. 8 Section 9.3. Survival. Except as expressly set forth herein, the warranties and covenants made by each party hereto shall not survive the expiration or termination of this Ground Sub- sublease. Section 9.4. Successors and Assigns. (a) The Ground Sub-sublessor hereby consents to the entry by the Ground Sub-sublessee into and performance by the Ground Sub-sublessee of the Operative Documents, including any assignment pursuant thereto. This Ground Sub-sublease shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns as permitted by and in accordance with the terms hereof. (b) Except as expressly provided herein or in the other Operative Documents, the Ground Sub-sublessor may not assign or transfer any of its interests herein without the consent of the other party hereto. (c) This Ground Sub-sublease conveys a leasehold estate and not a usufruct. Section 9.5. Business Day. Notwithstanding anything herein to the contrary, if the date on which any payment or performance is to be made pursuant to this Ground Sub-sublease is not a Business Day, the payment or performance otherwise payable on such date shall be payable on the next succeeding Business Day with the same force and effect as if made on such scheduled date and (provided such payment is made on such succeeding Business Day) no interest shall accrue on the amount of such payment from and after such scheduled date to the time of such payment on such next succeeding Business Day. Section 9.6. Governing Law. This Ground Sub-sublease shall be in all respects governed by and construed in accordance with the laws of the State of New York including all matters of construction, validity and performance except to the extent the law of the State of Georgia is mandatorily applicable. Section 9.7. Severability. If any provision hereof shall be invalid, illegal or unenforceable under Applicable Law, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. Section 9.8. Counterparts. This Ground Sub-sublease may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one instrument. Section 9.9. Headings and Table of Contents. The headings of the sections of this Ground Sub-sublease and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. 9 Section 9.10. Further Assurances. Each party hereto will promptly and duly execute and deliver such further documents to make such further assurances for and take such further action reasonably requested by any party to whom such first party is obligated, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Ground Sub-sublease. Section 9.11. Effectiveness of Ground Sub-sublease. This Ground Sub-sublease has been dated as of the date first above written for convenience only. This Ground Sub-sublease shall be effective on the date of execution and delivery by the Ground Sub-sublessee and the Ground Sub-sublessor. Section 9.12. Measuring Life. If and to the extent that any of the rights and privileges granted under this Ground Sub-sublease, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule or law relating to the vesting of interests in property or the suspension of the power of alienation of property, then it is agreed that notwithstanding any other provision of this Ground Sub-sublease, such options, rights and privileges, subject to the respective conditions herein governing the exercise of such options, rights and privileges, will be exercisable only during (a) the longer of (i) a period which will end twenty-one (21) years after the death of the last survivor of the descendants living on the date of the execution of this Ground Sub-sublease of the following Presidents of the United States: Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George H.W. Bush and William J. Clinton or (ii) the period provided under the Uniform Statutory Rule Against Perpetuities or (b) the specific applicable period of time expressed in this Ground Sub-sublease, whichever of (a) and (b) is shorter. 10 IN WITNESS WHEREOF, the undersigned have caused this Ground Sub-sublease to be duly executed and delivered by their respective officers thereunto duly authorized. ROCKY MOUNTAIN LEASING CORPORATION, as Ground Sub-sublessor By: /s/ Eugen Heckl ------------------- Name: Eugen Heckl Title: Vice President Date: 12/30/96 Signed and delivered in the presence of: /s/ Leonard Scott - ----------------- Unofficial Witness /s/ Patricia R. Bouldin - ----------------------- Notary Public My Commission Expires: June 2, 1998 ------------ [Notary Seal] OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), as Ground Sub-sublessee By: /s/ T. D. Kilgore ----------------- Name: T. D. Kilgore Title: President and CEO Date: 12/30/96 Signed and delivered in the presence of: /s/ Gary M. Bullock - ------------------- Unofficial Witness /s/ Patricia R. Bouldin - ----------------------- Notary Public My Commission Expires:June 2, 1998 [Notary Seal] SCHEDULE TO EXHIBIT 10.32.9 GROUND SUB-SUBLEASE (P1) The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant --------- ---- ----------------- P1 December 30, 1996 Philip Morris Capital Corporation P2 January 3, 1997 Philip Morris Capital Corporation F3 December 30, 1996 First Chicago Leasing Corporation F4 December 30, 1996 First Chicago Leasing Corporation N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation Other than Appendix A, the Exhibits and Schedules to the Ground Sub-sublease (P1) are not filed herewith; however, the registrant hereby agrees that such Exhibits and Schedules will be provided to the Commission upon request. APPENDIX A to Ground Sub-sublease ------------------- DEFINITIONS Refer to Appendix A to Exhibit 10.32.1 of the Form 10-K. EX-10.32-10 27 EXHIBIT 10.32.10 EXHIBIT 10.32.10 This instrument, when recorded, should be returned to: Robert N. Farrar Attorney at Law The Carnegie Building 607 Broad Street, Suite 141 Rome, Georgia 30161-3059 THE PURPOSE OF THIS INSTRUMENT IS TO MAKE TECHNICAL CORRECTIONS TO THAT CERTAIN ROCKY MOUNTAIN AGREEMENTS SECOND REASSIGNMENT AND ASSUMPTION AGREEMENT (P1), DATED DECEMBER 30, 1996, RECORDED IN DEED BOOK ____, PAGE ____, OF THE RECORDS OF THE CLERK OF SUPERIOR COURT OF FLOYD COUNTY, GEORGIA. IT IS THE INTENTION OF THE PARTIES THAT THIS DOCUMENT SUPERCEDE SUCH OTHER DOCUMENT IN ITS ENTIRETY. ================================================================================ ROCKY MOUNTAIN AGREEMENTS SECOND RE-ASSIGNMENT AND ASSUMPTION AGREEMENT (P1) Dated as of December 30, 1996 between ROCKY MOUNTAIN LEASING CORPORATION, as Assignor and OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), as Assignee ROCKY MOUNTAIN PUMPED STORAGE HYDROELECTRIC FACILITY ================================================================================ ROCKY MOUNTAIN AGREEMENTS SECOND RE-ASSIGNMENT AND ASSUMPTION AGREEMENT (P1) This ROCKY MOUNTAIN AGREEMENTS SECOND RE-ASSIGNMENT AND ASSUMPTION AGREEMENT (P1), dated as of December 30, 1996 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof, this "Rocky Mountain Agreements Second Re-assignment"), between ROCKY MOUNTAIN LEASING CORPORATION, a special purpose Delaware corporation organized under the laws of the State of Delaware (together with its successors and permitted assigns, the "Assignor") and OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized under the laws of the State of Georgia (together with its successors and permitted assigns, the "Assignee"). WHEREAS, Oglethorpe and Georgia Power Company, a corporation organized under the laws of the State of Georgia (together with its successors and assigns, "Georgia Power") own the Rocky Mountain Site as tenants in common under Georgia law; WHEREAS, by the Rocky Mountain Agreements, Oglethorpe and Georgia Power established their respective rights and obligations as tenants in common of the Rocky Mountain Site and of all improvements thereafter to be constructed, and all personal property thereafter to be situated, on the Rocky Mountain Site. Such improvements and personal property owned by Oglethorpe and Georgia Power as tenants in common under Georgia law include the Facility; WHEREAS, as tenants in common of such real and personal property, Oglethorpe and Georgia Power hold a 74.61% and 25.39% undivided interest, respectively, in such real and personal property, including the right to nonexclusive possession of all such real and personal property, subject to the rights of the other to nonexclusive possession and the terms and conditions of the Rocky Mountain Agreements; WHEREAS, pursuant to the Rocky Mountain Agreements Assignment, Oglethorpe has assigned to the Co-Trustee the Assigned Rocky Mountain Interests for a term coterminous with that of the Head Lease; WHEREAS, pursuant to the Rocky Mountain Agreements Re-assignment, the Co-Trustee has assigned to the Assignor, the Assigned Rocky Mountain Interests for a term coterminous with that of the Facility Lease; WHEREAS, by this Rocky Mountain Agreements Second Re-assignment, the Assignor will assign the Assigned Rocky Mountain Interests to the Assignee for a term coterminous with that of the Facility Sublease. NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS. Capitalized terms used in this Rocky Mountain Agreements Second Re-assignment and not otherwise defined herein shall have the respective meanings specified in Appendix A to the Participation Agreement (P1), dated as of December 30, 1996, among the Assignor, the Assignee, the Owner Trustee, the Co-Trustee, the Owner Participant and Utrecht-America Finance Co. The general provisions of Appendix A shall apply to terms used in this Rocky Mountain Agreements Second Re-assignment as specifically defined herein. SECTION 2. ASSIGNMENT OF ASSIGNED ROCKY MOUNTAIN INTERESTS TO ASSIGNEE. The Assignor hereby assigns the Assigned Rocky Mountain Interests to the Assignee. The assignment effected by this Section 2 shall become effective on and as of the Closing Date and shall terminate on the expiration or earlier termination of the Facility Sublease Term. SECTION 3. ASSUMPTION BY ASSIGNEE. The Assignee hereby assumes, and agrees to perform, any and all liabilities and obligations of the Assignor incurred with respect to the Assigned Rocky Mountain Interests. This assumption shall terminate (except with respect to any liability or obligation which has accrued prior to such termination) on the expiration or earlier termination of the Facility Sublease Term. SECTION 4. AMENDMENTS TO AND ACTIONS UNDER THE ROCKY MOUNTAIN AGREEMENTS. The Assignee agrees that it will not, without the prior written consent of the Assignor, the Owner Trustee and the Lender which consents may not be unreasonably withheld, amend, grant a waiver or consent under, or take any action or omit to take any action under the Rocky Mountain Ownership Agreement or the Rocky Mountain Operating Agreement, which could materially, adversely affect the value, utility or useful life of the Facility or the interest of the Assignor or the Owner Participant therein, unless such amendment, waiver, consent, action or inaction is required by law. The parties hereto agree that any grant of a waiver by Assignee of an assignment by Georgia Power of its independent dispatch rights under Section 7.02 of the 2 Rocky Mountain Operating Agreement without an assignment of Oglethorpe's independent dispatch rights under such section to the Owner Trustee could materially adversely affect the interest of the Owner Participant. SECTION 5. SECURITY FOR ASSIGNOR'S OBLIGATION TO THE LENDER. In order to secure all amounts payable by and all obligations to be performed by the Assignor under the Facility Lease, the Assignor will assign for security purposes its rights under this Rocky Mountain Agreements Second Re-assignment to the Facility Lessor pursuant to the Facility Sublease Assignment Agreement. In order to secure the Secured Indebtedness, the Facility Lessor's right, title and interest in the Facility Sublease Assignment Agreement will be assigned by the Facility Lessor to the Lender pursuant to the Loan Agreement and the Deed to Secure Debt. The Assignee hereby consents to such assignments and the creation of such Liens and acknowledges receipt of copies of the Facility Sublease Assignment Agreement, the Loan Agreement and the Deed to Secure Debt, it being understood that such consent shall not affect any requirement or the absence of any requirement for any consent under any other circumstances. Unless and until the Assignor shall have received written notice from the Lender that the assignment pursuant to the Facility Sublease Assignment Agreement, the Loan Agreement and the Deed to Secure Debt have been fully terminated the Lender shall have the right to exercise the rights of the Assignor under this Rocky Mountain Agreements Second Re-assignment to the extent set forth in the Facility Sublease Assignment Agreement and subject in each case to the exceptions set forth in the Loan Agreement and the Deed to Secure Debt. SECTION 6. MISCELLANEOUS. Section 6.1. Amendments and Waivers. No term, covenant, agreement or condition of this Assignment and Assumption may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto. Section 6.2. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein to a party hereto shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to such party and copy party at its address set forth below or at 3 such other address as such party or copy party may from time to time designate by written notice to the other parties: If to the Assignor: Rocky Mountain Leasing Corporation c/o Corporation Trust Center 1209 Orange Street, Room 123 Wilmington, Delaware 19801 Facsimile No.: (302) 658-5459 Telephone No.: (302) 777-0250 with copies to: Sutherland, Asbill & Brennan, L.L.P. 999 Peachtree Street, N.E. Atlanta, Georgia 30309-3996 Facsimile No.: (404) 853-8806 Telephone No.: (404) 853-8000 Attention: Cada T. Kilgore, III to the Owner Participant: Philip Morris Capital Corporation 800 Weschester Avenue Rye Brook, New York 10573-1301 Facsimile No.: (914) 335-1297 Telephone No.: (914) 335-5000 Attention: Vice President, Leasing with a copy to Director, Portfolio Administration and to the Lender: Utrecht-America Finance Co., c/o Rabobank Nederland, New York Branch 245 Park Avenue New York, New York 10167-0062 Facsimile No.: (212) 916-7880 4 Telephone No.: (212) 916-7864 Attention: General Counsel's Office If to the Assignee: Oglethorpe Power Corporation 2100 East Exchange Place Tucker, Georgia 30085-1349 Facsimile No.: (770) 270-7325 Telephone No.: (770) 270-7920 Attention: Vice President - Finance Section 6.3. Survival. Except as expressly set forth herein, the warranties and covenants made by each party hereto shall not survive the expiration or termination of this Rocky Mountain Agreements Second Re-assignment. Section 6.4. Successors and Assigns. (a) This Rocky Mountain Agreements Second Re-assignment shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns as permitted by and in accordance with the terms hereof. (b) Except as expressly provided herein or in any other Operative Document, the Assignor may not assign or transfer any of its interests herein without the consent of the Assignee. Except as expressly provided in the Operative Documents, the Assignee may not assign its interests herein without the consent of the Assignor and the Owner Trustee. Section 6.5. Governing Law. This Rocky Mountain Agreements Second Re-assignment shall be in all respects governed by and construed in accordance with the laws of the State of New York including all matters of construction, validity and performance, except to the extent the law of the State of Georgia is mandatorily applicable. Section 6.6. Severability. If any provision hereof shall be invalid, illegal or unenforceable under Applicable Law, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. Section 6.7. Counterparts. This Rocky Mountain Agreements Second Re-assignment may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one instrument. 5 Section 6.8. Headings. The headings of the sections of this Rocky Mountain Agreements Second Re-assignment are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. Section 6.9. Further Assurances. Each party hereto will promptly and duly execute and deliver such further documents to make such further assurances for and take such further action reasonably requested by any party to whom such first party is obligated, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Rocky Mountain Agreements Second Re-assignment. Section 6.10. Effectiveness of Rocky Mountain Agreements Second Re-assignment. This Rocky Mountain Agreements Second Re-assignment has been dated as of the date first above written for convenience only. This Rocky Mountain Agreements Second Re-assignment shall be effective on the date of execution and delivery by each of the Assignee and the Assignor. Section 6.11. Measuring Life. If and to the extent that any of the rights and privileges granted under this Rocky Mountain Agreements Second Re-assignment, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule or law relating to the vesting of interests in property or the suspension of the power of alienation of property, then it is agreed that notwithstanding any other provision of this Rocky Mountain Agreements Second Re- assignment, such options, rights and privileges, subject to the respective conditions hereof governing the exercise of such options, rights and privileges, will be exercisable only during (a) the longer of (i) a period which will end twenty-one (21) years after the death of the last survivor of the descendants living on the date of the execution of this Rocky Mountain Agreements Second Re-assignment, of the following Presidents of the United States: Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George H.W. Bush and William J. Clinton or (ii) the period provided under the Uniform Statutory Rule Against Perpetuities or (b) the specific applicable period of time expressed in this Rocky Mountain Agreements Second Re-assignment, whichever of (a) and (b) is shorter. 6 IN WITNESS WHEREOF, the parties hereto have caused this Rocky Mountain Agreements Second Re-assignment to be duly executed by their respective officers thereunto duly authorized. ROCKY MOUNTAIN LEASING CORPORATION, as Assignor By: /s/ Eugen Heckl ----------------------------------------- Name: Eugen Heckl Title: Vice President Date: December 30, 1996 Signed and delivered in the presence of: /s/ Leonard Scott - ----------------------- Unofficial Witness /s/ David M. Boehm - ----------------------- Notary Public My Commission Expires: March 16, 1998 [Notary Seal] --------------- OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), As Assignee By: /s/ T. D. Kilgore ------------------------------- Name: T. D. Kilgore Title: President and CEO Date: December 30, 1996 Signed and delivered in the presence of: /a/ Gary M. Bullock - ----------------------- Unofficial Witness /s/ David M. Boehm - ----------------------- Notary Public My Commission Expires: March 16, 1998 [Notary Seal] -------------- SCHEDULE TO EXHIBIT 10.32.10 ROCKY MOUNTAIN AGREEMENTS SECOND RE-ASSIGNMENT AND ASSUMPTION AGREEMENT (P1) The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant ---------- ------------------ -------------------------------------- P1 December 30, 1996 Philip Morris Capital Corporation P2 January 3, 1997 Philip Morris Capital Corporation F3 December 30, 1996 First Chicago Leasing Corporation F4 December 30, 1996 First Chicago Leasing Corporation N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation EX-10.32-11 28 EXHIBIT 10.32.11 EXHIBIT 10.32.11 ================================================================================ PAYMENT UNDERTAKING AGREEMENT (P1) Dated as of December 30, 1996 among COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., NEW YORK BRANCH and ROCKY MOUNTAIN LEASING CORPORATION ----------------------------- Oglethorpe Power Corporation Rocky Mountain Pumped Storage Hydroelectric Project ================================================================================ TABLE OF CONTENTS ------------------ Page ---- ARTICLE 1 Definitions Section 1.01. Definitions.............................................1 ARTICLE 2 Payments Section 2.01. Payment of Undertaking Fee by the Facility Lessee.......3 Section 2.02. Payment of Scheduled Amounts............................4 Section 2.03. Payment of Full Termination Amount......................4 Section 2.04. Release.................................................4 Section 2.05. Overdue Interest........................................5 Section 2.06. Payments by the Payment Undertaking Issuer..............5 Section 2.07. Withholding Taxes.......................................5 Section 2.08. Breakage Costs..........................................6 Section 2.09. Increased Costs.........................................6 Section 2.10. Direct Obligations......................................8 ARTICLE 3 Representations, Warranties and Covenants Section 3.01. Representations and Warranties of the Payment Undertaking Issuer..............................................8 Section 3.02. Covenants of the Payment Undertaking Issuer.............9 Section 3.03. Covenant of the Facility Lessee to Give Certain Notices.9 ARTICLE 4 Miscellaneous Section 4.01. Termination.............................................9 Section 4.02. Assignment.............................................10 Section 4.03. Notices................................................10 Section 4.04. Waiver.................................................10 Section 4.05. Amendment and Waiver...................................10 Section 4.06. Governing Law..........................................10 Section 4.07. Interpretation.........................................11 Section 4.08. Counterparts...........................................11 Section 4.09. Severability...........................................11 Section 4.10. Service of Process and Jurisdiction....................11 Section 4.11. Waiver of Jury Trial...................................12 Section 4.12. Judgment Currency......................................12 Section 4.13. Further Assurances.....................................13 Section 4.14. Third-Party Beneficiaries..............................13 i PAYMENT UNDERTAKING AGREEMENT (P1) This PAYMENT UNDERTAKING AGREEMENT (P1), dated as of December 30, 1996, among COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., NEW YORK BRANCH, as the Payment Undertaking Issuer (the "Payment Undertaking Issuer"), and ROCKY MOUNTAIN LEASING CORPORATION (the "Facility Lessee"). WITNESSETH THAT: WHEREAS, Oglethorpe Power Corporation (an Electric Membership Generation & Transmission Corporation), the Facility Lessee, Fleet National Bank, not in its individual capacity, except as specifically provided therein, but solely as Owner Trustee (the "Owner Trustee"), SunTrust Bank, Atlanta, not in its individual capacity but solely as Co-Trustee (the "Co-Trustee"), Philip Morris Capital Corporation (the "Owner Participant") and Utrecht-America Finance Co. (the "Lender") have entered into the Participation Agreement (P1) dated as of December 30, 1996 (the "Participation Agreement"); WHEREAS, the Co-Trustee and the Facility Lessee have entered into the Facility Lease Agreement (P1) dated as of December 30, 1996 (the "Facility Lease"); WHEREAS, the Trustees and the Lender have entered into the Loan and Security Agreement (P1) dated as of December 30, 1996 (the "Loan Agreement"); WHEREAS, in consideration for the payment by the Facility Lessee of certain amounts, the Payment Undertaking Issuer is willing to make certain payments on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the foregoing, it is HEREBY AGREED that: ARTICLE 1 Definitions Section 1.01. Definitions. For the purposes of this Agreement, terms defined in Appendix A to the Participation Agreement shall have the meanings given such terms in such Appendix A, and the following terms shall have the meanings indicated: "Full Termination Amount" means, as to the Full Termination Date, the amount set forth on Schedule B opposite the Full Termination Date. "Full Termination Date" means (1) prior to the Release Event, the first to occur of : (i) the Expiration Date (without giving effect to any extension or renewal thereof); or (ii) the date upon which Termination Value or an amount computed with reference to, or in lieu of, Termination Value is payable under the Facility Lease; or (iii) the date on which the Loan Certificate is refinanced pursuant to Section 15.1 of the Participation Agreement; or (iv) the date on which the Loan Certificate is purchased by any party to an Operative Document or its designee (in each case other than by any Affiliate of the Lender) pursuant to the terms of any Operative Document (except pursuant to Section 17.3 of the Participation Agreement in connection with providing Acceptable Substitute Credit Protection); or (v) any other date on which the Facility Lease terminates by its terms; and (2) after the Release Event, the earlier of the Expiration Date and the date set forth in Schedule B hereto next following the date on which a notice of termination of this Agreement is delivered in accordance with clause (b) of Section 4.01 hereof. "Release Event" means the delivery to the Payment Undertaking Issuer of notice by the Owner Trustee or the Lender and the acknowledgment by the Lender pursuant to Section 17.1(a) of the Participation Agreement. "Scheduled Amount" means, as to each Scheduled Payment Date, the amount set forth opposite such date on Schedule A hereto. "Scheduled Payment Date" means each date set forth on Schedule A hereto. "Undertaking Fee" means the sum of $268,753,750.00 payable on the Closing Date by the Facility Lessee to the Payment Undertaking Issuer. 2 ARTICLE 2 Payments Section 2.01. Payment of Undertaking Fee by the Facility Lessee. (a) Time and Manner of Payment. On the Closing Date, the Facility Lessee shall pay the Undertaking Fee to the account of the Payment Undertaking Issuer, Account No. 802-6002-533, at Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A., New York Branch by wire transfer of immediately available funds. The Undertaking Fee shall be an absolute, unconditional, final and non-refundable payment of an amount due to the Payment Undertaking Issuer in consideration of its entering into this Agreement and shall not under any circumstances or for any reason whatsoever be refundable to, or recoverable by, the Facility Lessee. (b) Payment of Undertaking Fee Absolute. The Facility Lessee hereby acknowledges that payment of the Undertaking Fee by the Facility Lessee is absolute, unconditional and irrevocable and that no part of the Undertaking Fee shall be refundable to the Facility Lessee under any circumstance or for any reason. The Facility Lessee agrees that (i) it will not have any, right, title or interest in or to the Undertaking Fee paid to the Payment Undertaking Issuer upon the payment thereof and the amount so paid will thereupon cease to be an asset of the Facility Lessee and shall become an asset solely of the Payment Undertaking Issuer, (ii) such payment will be irrevocable once made and will not be subject to avoidance or recapture by the Facility Lessee or any Facility Lessee Creditor and (iii) none of the Facility Lessee or any Facility Lessee Creditor will be entitled to assert any Lien or claim or to exercise remedies, with respect to such payment. For purposes of the foregoing, a "Facility Lessee Creditor" is any creditor of the Facility Lessee, the Facility Lessee as a debtor in a Chapter 9 or other bankruptcy proceeding, or any trustee, receiver, liquidator, custodian or similar official of the Facility Lessee appointed as such in an involuntary case, voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to the Facility Lessee or its assets. (c) Obligation of Payment Undertaking Issuer Absolute. The obligation of the Payment Undertaking Issuer to pay Scheduled Amounts and the Full Termination Amount in accordance with the terms of this Agreement constitutes an absolute, irrevocable, and unconditional obligation of the Payment Undertaking Issuer itself, without regard to any circumstance, including without limitation, the application, or the effects of the application, of any bankruptcy law or regulation, the order of any court in any bankruptcy proceeding, the bankruptcy or insolvency of or any other matter affecting any party hereto or the Facility Lessee or any other Person, and such payments shall be made by the Payment Undertaking Issuer in accordance with the terms hereof. 3 (d) Waiver of Setoff. The Payment Undertaking Issuer hereby waives all rights it may have under Applicable Law, its general operating conditions or otherwise to offset or otherwise satisfy its obligations under this Agreement against any claims that it may have or have the ability to assert against the Facility Sublessee, the Facility Lessee or either Trustee or any other Person under the Loan Certificates or otherwise. Section 2.02. Payment of Scheduled Amounts. Unless the Payment Undertaking Issuer shall have paid the Full Termination Amount prior to such Scheduled Payment Date, the Payment Undertaking Issuer shall pay to the Owner Trustee, on each Scheduled Payment Date prior to the Release Event, the Scheduled Amount for such Scheduled Payment Date without further act or notice by any Person. After the Release Event, the Payment Undertaking Issuer shall pay each Scheduled Amount to the Owner Trustee or as otherwise designated by the Owner Trustee at least 5 Business Days in advance of the due date of such payment. Section 2.03. Payment of Full Termination Amount. (a) Subject to receipt from the Owner Trustee or the Lender of at least five Business Days' prior written notice of the occurrence of the Full Termination Date (which notice shall specify the event causing such Full Termination Date), the Payment Undertaking Issuer shall pay to the Owner Trustee on the Full Termination Date set forth in such notice the Full Termination Amount specified on Schedule B hereto with respect to such Full Termination Date. (b) If the Full Termination Date is a Scheduled Payment Date, the Payment Undertaking Issuer shall also pay to the Owner Trustee the Scheduled Amount payable on such Scheduled Payment Date. (c) After the Release Event, the Payment Undertaking Issuer shall pay the Full Termination Amount to the Owner Trustee or as otherwise designated by the Owner Trustee at least 5 Business Days in advance of the due date of such payment. Section 2.04. Release. Upon payment in full of the amounts specified in Section 2.03, the Payment Undertaking Issuer shall be released from the payment of any future Scheduled Amounts and Full Termination Amount. Except as expressly provided in this Article, the Payment Undertaking Issuer shall have no obligation to make any payment hereunder. Section 2.05. Overdue Interest. Any amount payable by the Payment Undertaking Issuer or the Facility Lessee hereunder not paid when due shall bear interest at the Overdue Rate from the date such amount was due to the date such amount is paid. 4 Section 2.06. Payments by the Payment Undertaking Issuer. (a) All payments required to be made hereunder by the Payment Undertaking Issuer shall be made in immediately available funds prior to 11:00 A.M., New York City time, on the due date therefor. If any payment hereunder is due on a date which is not a Business Day, then such payment shall be made on the next following Business Day without interest. (b) The Facility Lessee and the Payment Undertaking Issuer acknowledge that all right, title and interest, if any, of the Facility Lessee hereunder have been irrevocably assigned and pledged to the Trustees under the Payment Undertaking Pledge Agreement and assigned, pledged and repledged to the Lender under the Loan Agreement and that, prior to the Release Event, all right, title and interest of the Trustees hereunder have been irrevocably assigned to the Lender under the Loan Agreement and the Payment Undertaking Pledge Agreement and that, notwithstanding anything herein to the contrary, prior to the Release Event, all amounts payable by the Payment Undertaking Issuer hereunder shall be paid directly to the Lender as herein provided. (c) All payments payable (i) to the Lender shall be paid to the Lender to its account (No. 802-6002-533) with Cooperatieve Centrale Raiffeisen- Boerenleenbank B.A., New York Branch or to such other account in the United States as the Lender shall have specified in a notice to the Payment Undertaking Issuer at least 10 Business Days prior to the date on which such payment shall be due or (ii) to the Owner Trustee shall be paid to the Owner Trustee to its account at Fleet National Bank, ABA No. 011-900-445, Account No. 0067548290, or to such other account in the United States as the Owner Trustee shall have specified in a notice to the Payment Undertaking Issuer at least 10 Business Days prior to the date on which such payment shall be due. Section 2.07. Withholding Taxes. If any deduction or withholding of Tax is required to be made from any payment to be made by the Payment Undertaking Issuer to the Lender, the Payment Undertaking Issuer shall (i) (a) if the Release Event shall not have occurred at the time or (b) if the Release Event shall have occurred and the Payment Undertaking Issuer is neither a US Person (as defined in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended) nor the US branch of a foreign corporation at the time, increase the amount paid so that the net amount actually paid to the Lender equals the amount due and payable (and no increase shall be made in the amount paid in any other case), (ii) pay to the relevant taxation or other authorities within the period for payment permitted by Applicable Law the full amount of the deduction or withholding Tax and (iii) notify the Facility Lessee and the Owner Trustee as soon as practicable of the amount so deducted or withheld. The Facility Lessee will indemnify and hold harmless the Payment Undertaking Issuer on an After Tax Basis with respect to the assertion by any taxation authority that the Payment 5 Undertaking Issuer failed to deduct or withhold as required by Applicable Law, unless such a failure constitutes gross negligence or wilful misconduct of the Payment Undertaking Issuer. Section 2.08. Breakage Costs. If this Agreement remains in effect after the Release Event and the Payment Undertaking Issuer is required to make a payment hereunder either on a date other than a Scheduled Payment Date or on a Scheduled Payment Date but in an amount other than the Scheduled Amount due on such date, the Facility Lessee shall reimburse the Payment Undertaking Issuer on demand for any resulting loss, cost or expense incurred by it, including without limitation any loss incurred in obtaining, liquidating or employing deposits from third parties, provided that the Payment Undertaking Issuer shall have delivered to the Facility Lessee a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. Section 2.09. Increased Costs. (a) If this Agreement remains in effect after the Release Event, the Facility Lessee shall pay directly to the Payment Undertaking Issuer from time to time on request such amounts as the Payment Undertaking Issuer may determine to be necessary to compensate it for any costs thereafter incurred (other than increases pursuant to Section 2.07 hereof of amounts paid by the Payment Undertaking Issuer hereunder) which the Payment Undertaking Issuer reasonably determines are attributable to its making or maintaining the payment undertaking hereunder or the funding arrangements in respect thereof, or any reduction in the amount of the Undertaking Fee which the Payment Undertaking Issuer may retain, resulting from any change or proposed change in or any introduction of Applicable Law (including regulations, policies, directives and guidelines issued by any governmental body, central bank or other fiscal or monetary or accounting authority or other national, international, state or local organization which purport to regulate the treatment of rights and obligations similar to the payment undertaking of the Payment Undertaking Issuer hereunder and any interpretation of Applicable Law by any authority having jurisdiction) by the United States, The Netherlands or any other jurisdiction in which the Payment Undertaking Issuer or any other obligor under this Agreement is organized or has its principal office or lending office or interpretation or application of any Applicable Law, whether or not having the force of law, which is enacted or promulgated after the date hereof (a "Regulatory Change") and such Regulatory Change: (i) imposes or modifies any reserve, special deposit, deposit insurance or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, the Payment Undertaking Issuer; or 6 (ii) imposes any other condition affecting this Agreement or its payment undertaking hereunder; or (iii) requires the payment undertaking hereunder to be shown on the balance sheet of the Payment Undertaking Issuer. (b) The Payment Undertaking Issuer will notify the Facility Lessee of any event occurring after the date hereof that will entitle the Payment Undertaking Issuer to compensation under subsection (a) of this Section as promptly as practicable after the Payment Undertaking Issuer obtains Actual Knowledge thereof; provided that the Payment Undertaking Issuer will make reasonable efforts and will take reasonable actions if such efforts and/or actions will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of the Payment Undertaking Issuer, be disadvantageous to the Payment Undertaking Issuer. The Payment Undertaking Issuer will furnish to the Facility Lessee a certificate setting forth the basis and amount of each request by the Payment Undertaking Issuer for compensation under subsection (a) of this Section, and the Facility Lessee shall have no responsibility for the validity and accuracy of any such certificate and shall have no obligation to make any investigation relating thereto. Determinations and allocations by the Payment Undertaking Issuer for purposes of this Section of the effect of any Regulatory Change pursuant to subsection (a) hereof, and of the amounts required to compensate the Payment Undertaking Issuer under this Section, shall be conclusive absent manifest error. (c) No amounts shall be payable under subsection (a) of this Section to the Payment Undertaking Issuer that arise from the gross negligence or willful misconduct of the Payment Undertaking Issuer or from its failure to comply with any request from any central bank or other applicable governmental authority. If the Payment Undertaking Issuer transfers its obligations hereunder, the Facility Lessee shall not be obligated to pay to any subsequent obligor hereunder any amounts payable under this Section in excess of the amount that otherwise would have been payable to the Payment Undertaking Issuer if it had continued to be the obligor hereunder, unless such transfer is made with the Facility Lessee's consent or at a time when the circumstances giving rise to such greater payment did not exist. Section 2.10. Direct Obligations. The payment obligations of the Payment Undertaking Issuer hereunder constitute direct obligations to the Trustees and the Lender, as assignee of the Trustees' rights, enforceable by the Trustees and the Lender against the Payment Undertaking Issuer in accordance with the terms of this Agreement. The right of the Trustees and the Lender to receive payments hereunder represents a separate and independent right of each such Person. 7 ARTICLE 3 Representations, Warranties and Covenants Section 3.01. Representations and Warranties of the Payment Undertaking Issuer. The Payment Undertaking Issuer represents and warrants that: (a) Organization and Powers. The Payment Undertaking Issuer is duly organized and validly exists under the law of The Netherlands, has full power and authority to execute, deliver and perform this Agreement. (b) Due Authorization. The execution, delivery and performance of this Agreement by the Payment Undertaking Issuer have been duly authorized by all necessary action on its part. (c) No Conflict. Neither the execution, delivery or performance of this Agreement by the Payment Undertaking Issuer nor the consummation or performance by the Payment Undertaking Issuer of the transactions contemplated hereby will contravene any Applicable Law or conflict with, result in any violation of, or constitute a default under, any term of its constituent documents or any agreement, mortgage, contract, indenture, lease or other instrument to which it is a party or by which it is bound. (d) Governmental Consents. Neither the execution and the delivery by the Payment Undertaking Issuer of this Agreement nor the consummation by the Payment Undertaking Issuer of the transactions contemplated hereby will require the consent, authorization, order or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any governmental authority or agency, which has not been taken or obtained. (e) Legal, Valid and Binding Obligations. This Agreement has been duly executed and delivered by the Payment Undertaking Issuer and, assuming due authorization, execution and delivery of this Agreement by the other party hereto, constitutes the legal, valid and binding obligation of the Payment Undertaking Issuer enforceable against it in accordance with its terms except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally or by general principles of equity regardless of whether enforcement is pursuant to a proceeding in equity or at law. (f) The Payment Undertaking Issuer is actively engaged in the business of entering into payment undertakings and is entering into this Agreement for its own account in the ordinary course of its banking business and not for or on behalf of any other Person. All arrangements, agreements or understandings by 8 contract or by law with respect to this Agreement or the Payment Undertaking Issuer's rights and obligations under this Agreement between or among the Payment Undertaking Issuer and any party to any Operative Document are set forth in the Operative Documents. Section 3.02. Covenants of the Payment Undertaking Issuer. For so long as the Payment Undertaking Issuer's obligations hereunder shall not have been terminated in accordance with the terms hereof, the Payment Undertaking Issuer expressly acknowledges and agrees that it (i) shall not convey or transfer any obligation hereunder to any Lender without the Owner Trustee's and the Owner Participant's consent and (ii) shall maintain a distinct legal identity separate from any Lender which is an Affiliate of the Payment Undertaking Issuer. Section 3.03. Covenant of the Facility Lessee to Give Certain Notices. The Facility Lessee hereby covenants and agrees that it will deliver to the Payment Undertaking Issuer written notice at least five Business Days in advance of the Full Termination Date specifying the event which will cause the Full Termination Date and the date thereof. ARTICLE 4 Miscellaneous Section 4.01. Termination. This Agreement shall terminate (a) on or prior to the Release Event, upon the payment in full of the Full Termination Amount and all Scheduled Amounts required to be made simultaneously with or prior to such payment or (b) after the Release Event, on the earlier of the Expiration Date and the date set forth in Schedule B next following the date on which either the Owner Trustee or the Payment Undertaking Issuer delivers to the other a written notice of termination. Section 4.02. Assignment. (a) Any payment in accordance with the provisions hereof by the Payment Undertaking Issuer to the Trustees or their respective permitted assignee or permitted designee shall release the Payment Undertaking Issuer from any further liability to either Trustee and any other Person in respect of such payment. (b) Prior to the Release Event, the Facility Lessee may not assign or pledge its rights hereunder, if any, to any Person other than the Trustees (which shall be entitled to reassign, pledge or repledge such rights only to the Lender). The Payment Undertaking Issuer may assign its rights and obligations hereunder 9 to any of its Affiliates (other than the Lender) if the Payment Undertaking Issuer guarantees fully the obligations of such Affiliate hereunder. Section 4.03. Notices. (a) All notices, demands or other communications hereunder shall be given or made in the manner, and with the same effect, as provided in Section 18.4 of the Participation Agreement, at the respective addresses therefor set forth in the Participation Agreement or, in the case of the Payment Undertaking Issuer, at the end of this Agreement, or at such other address as may be designated by notice from such party to all other parties hereto. (b) The Payment Undertaking Issuer may rely upon any notice under Section 2.03, 2.04 or 3.03 hereof purported to be signed by a properly authorized officer or other representative of the appropriate signatory without inquiry as to whether the matters stated therein are true. Section 4.04. Waiver. Any forbearance, failure, or delay by any party hereto and any permitted assignee thereof in exercising any right or power shall not preclude the further exercise thereof, and all of such rights and powers shall continue in full force and effect until specifically waived by such party or such assignee, as the case may be. Section 4.05. Amendment and Waiver. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only by a writing signed by the Payment Undertaking Issuer, the Facility Lessee and each Trustee and consented to in writing by the Owner Participant and the Lender. Section 4.06. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Section 4.07. Interpretation. The headings of the articles and sections hereof are for convenience of reference only and shall not affect the meaning or construction of any provision hereof. Section 4.08. Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. To the extent, if any, that this Agreement constitutes chattel paper or an instrument (as such terms are defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), no security interest in this Agreement may be created through the transfer or possession of any counterpart hereof other than the original counterpart, which shall be 10 identified as the counterpart containing the receipt therefor executed by the Lender on or immediately following the signature page thereof. Section 4.09. Severability. If any provision of this Agreement is invalid, illegal or unenforceable under Applicable Law, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. Section 4.10. Service of Process and Jurisdiction. (a) Submission to Jurisdiction. Each of the parties hereto (i) hereby irrevocably submits to the nonexclusive jurisdiction of the Supreme Court of the State of New York, New York County (without prejudice to the right of any party to remove to the United States District Court for the Southern District of New York) and to the jurisdiction of the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or the subject matter hereof or any of the transactions contemplated hereby brought by any of the parties hereto or their successors or assigns, (ii) hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by Applicable Law, in such Federal court, and (iii) to the extent permitted by Applicable Law, hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding any claim that is not personally subject to the jurisdiction of the above-named courts, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court. A final judgment obtained in respect of any action, suit or proceeding referred to in this Section shall be conclusive and may be enforced in other jurisdictions by suit as the judgment or in any manner as provided by Applicable law. The Facility Lessee irrevocably appoints CT Corporation System, with an office at 1633 Broadway, New York, New York 10019, as its agent to receive on its behalf service of copies of the summons and complaint and any other process which may be served in any such action or proceeding (such agent, with respect to the Facility Lessee, being the "Process Agent"). (b) Service of Process. Each of the parties hereto hereby consents to service of process in connection with the subject matter specified in the first sentence of subsection (a) of this Section in connection with the above-mentioned courts in New York by registered mail, Federal Express, DHL or similar courier at the address to which notices to it are to be given, or to such party in the case of the Process Agent at the Process Agent's above address, it being agreed that service in such manner shall constitute valid service upon such party or its successors or assigns in connection with any such action or proceeding only; provided that nothing in this Section shall affect the right of any of such parties or its successors 11 or assigns to serve legal process in any other manner permitted by law or affect the right of such party or its successors or assigns to bring any action or proceeding against any other such party or its property in the courts of other jurisdictions. Section 4.11. Waiver of Jury Trial. EACH OF THE FACILITY LESSEE AND THE PAYMENT UNDERTAKING ISSUER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. Section 4.12. Judgment Currency. (a) This is an international financing transaction in accordance with which the specification of Dollars is of the essence, and Dollars shall be the currency of account in the case of all obligations under this Agreement. The payment obligations of the Payment Undertaking Issuer hereunder shall not be discharged by an amount paid in a currency or in a place other than that specified with respect to such obligations, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on prompt conversion to Dollars and transfer to the specified place of payment under normal banking procedures does not yield the amount of Dollars, in such place, due hereunder. To such extent, the obligee of such obligations shall have a separate cause of action against the party making payment thereof. If, for the purpose of obtaining a judgment in any court with respect to any obligation of the Payment Undertaking Issuer hereunder, it shall be necessary to convert to any other currency any amount in Dollars due hereunder and a change shall occur between the rate of exchange applied in making such conversion and the rate of exchange prevailing on the date of payment of such judgment, the Payment Undertaking Issuer agrees to pay such additional amounts (if any) as may be necessary to insure that the amount paid on the date of payment is the amount in such other currency which, when converted into Dollars and transferred to New York, New York in accordance with normal banking procedures will result in the amount then due hereunder in Dollars. (b) Any amount due from the Payment Undertaking Issuer shall be due as a separate debt and shall not be affected by or merged into any judgment being obtained from any other sum due hereunder or in respect of this Agreement. In no event, however, shall the Payment Undertaking Issuer be required to pay a larger amount in such other currency at the rate of exchange in effect on the date of payment than the amount of Dollars stated to be due hereunder, so that in any event the obligations of the Payment Undertaking Issuer hereunder will be effectively maintained as Dollar obligations. 12 Section 4.13. Further Assurances. The parties agree to execute promptly and duly deliver to each other such further documents and assurances and to take such further actions as are necessary or desirable, in each case at the sole cost and expense of the Facility Lessee, in order effectively to carry out the intent and purpose of this Agreement. Section 4.14. Third-Party Beneficiaries. The obligations of the Payment Undertaking Issuer hereunder are intended to be for the benefit of each Trustee, each of which shall be a third-party beneficiary hereof. 13 IN WITNESS WHEREOF, each of the Payment Undertaking Issuer and the Facility Lessee has executed this Agreement as of the date and year first above written. IN WITNESS WHEREOF, each of the Payment Undertaking Issuer and the Facility Lessee has executed this Agreement as of the date and year first above written. COOPERATIEVE CENTRALE RAIFFEISEN - BOERENLEENBANK B.A., NEW YORK BRANCH By: /s/ J. W. Den Baas --------------------------------- Name: J. W. Den Baas Title: Managing Director Address: 245 Park Avenue New York, New York 10167 ROCKY MOUNTAIN LEASING CORPORATION By: /s/ Eugen Heckl --------------------------------- Name: Eugen Heckl Title: Vice President Address: Acknowledged, as third party beneficiaries: FLEET NATIONAL BANK, not in its individual capacity but solely as Owner Trustee By: /s/ Frank McDonald ------------------------------ Name: Frank McDonald Title: Vice President SUNTRUST BANK, ATLANTA not in its individual capacity, 14 but solely as Co-Trustee By: /s/ Bryan Echols ------------------------------ Name: Bryan Echols Title: Vice President By: /s/ Sandra Thompson ------------------------------ Name: Sandra Thompson Title: Vice President 15 ALL OF THE RIGHT, TITLE AND INTEREST OF THE TRUSTEES IN RESPECT OF THIS AGREEMENT AND THE PAYMENT OBLIGATIONS OF THE PAYMENT UNDERTAKING ISSUER HEREUNDER HAVE BEEN ASSIGNED AND PLEDGED TO, AND ARE SUBJECT TO A FIRST PRIORITY SECURITY INTEREST IN FAVOR OF, THE UNDERSIGNED UNDER THE LOAN AND SECURITY AGREEMENT (P1) DATED AS OF DECEMBER 30, 1996 (THE "LOAN AND SECURITY AGREEMENT"). ALL OF THE RIGHT, TITLE AND INTEREST, IF ANY, OF THE FACILITY LESSEE IN RESPECT OF THIS AGREEMENT HAVE BEEN ASSIGNED AND PLEDGED TO AND ARE SUBJECT TO A FIRST PRIORITY SECURITY INTEREST IN FAVOR OF THE TRUSTEES UNDER THE PAYMENT UNDERTAKING PLEDGE AGREEMENT (P1) DATED AS OF DECEMBER 30, 1996, AND HAVE BEEN ASSIGNED, PLEDGED AND REPLEDGED TO THE LENDER UNDER THE LOAN AND SECURITY AGREEMENT. THIS AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE ORIGINAL COUNTERPART CONTAINS THIS RECEIPT THEREFOR EXECUTED BY THE UNDERSIGNED ON OR IMMEDIATELY FOLLOWING THE SIGNATURE PAGE HEREOF. SEE SECTION 4.08 HEREOF FOR INFORMATION CONCERNING THE RIGHTS OF THE HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF. Receipt of this original counterpart of this Agreement is hereby acknowledged as of December 30 , 1996. UTRECHT-AMERICA FINANCE CO. By: --------------------------- Name: Title: 16 Schedule to Exhibit 10.32.11 Payment Undertaking Agreement (P1) The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant ---------- ------------------- --------------------------------------- P1 December 30, 1996 Philip Morris Capital Corporation P2 January 3, 1997 Philip Morris Capital Corporation F3 December 30, 1996 First Chicago Leasing Corporation F4 December 30, 1996 First Chicago Leasing Corporation N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation The Exhibits and Schedules to the Payment Undertaking Agreement (P1) are not filed herewith; however, the registrant hereby agrees that such Exhibits and Schedules will be provided to the Commission upon request. 17 EX-10.32-12 29 EXHIBIT 10.32.12 EXHIBIT 10.32.12 ================================================================================ PAYMENT UNDERTAKING PLEDGE AGREEMENT (P1) dated as of December 30, 1996 among Rocky Mountain Leasing Corporation and FLEET NATIONAL BANK, not in its individual capacity but solely as Owner Trustee and SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee ----------------------------- Oglethorpe Power Corporation Rocky Mountain Pumped Storage Hydroelectric Project ================================================================================ PAGE ---- TABLE OF CONTENTS ---------------- PAGE ---- PRELIMINARY STATEMENTS.........................................................1 SECTION 1. Defined Terms......................................................1 SECTION 2. Grant of Security..................................................2 SECTION 3. Security for Obligations...........................................2 SECTION 4. The Facility Lessee Remains Liable.................................3 SECTION 5. Representations and Warranties.....................................3 SECTION 6. Further Assurances.................................................3 SECTION 7. Place of Perfection; Records.......................................4 SECTION 8. As to the Payment Undertaking......................................4 SECTION 9. Transfer and Other Liens...........................................5 SECTION 10. Each Trustee Appointed Attorney-in-fact...........................5 SECTION 11. Trustees May Perform..............................................6 SECTION 12. Trustees' Duties..................................................6 SECTION 13. Remedies..........................................................6 SECTION 14. Amendments; Waivers; Etc..........................................7 SECTION 15. Notices...........................................................7 SECTION 16. Continuing Security Interests; Assignments Under the Participation Agreement...............................................................7 SECTION 17. Governing Law.....................................................8 SECTION 18. WAIVER OF JURY TRIAL..............................................8 SECTION 19. Interpretation....................................................8 SECTION 20. Counterparts......................................................8 SECTION 21. Severability......................................................8 SECTION 22. Service of Process and Jurisdiction...............................8 SECTION 23. Limitation of Liability...........................................9 i PAYMENT UNDERTAKING PLEDGE AGREEMENT (P1) This PAYMENT UNDERTAKING PLEDGE AGREEMENT (P1), dated as of December 30, 1996 (this "Agreement"), among ROCKY MOUNTAIN LEASING CORPORATION (the "Facility Lessee"), FLEET NATIONAL BANK, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (the "Owner Trustee") and SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee under the Trust Agreement (the "Co-Trustee" and, together with the Owner Trustee, the "Trustees"). PRELIMINARY STATEMENTS Reference is hereby made to (A) the Participation Agreement (P1), dated as of December 30, 1996 (the "Participation Agreement"), among Oglethorpe Power Corporation (an Electric Membership Generation & Transmission Corporation), the Owner Trustee, the Co-Trustee, the Facility Lessee, Philip Morris Capital Corporation (the "Owner Participant") and Utrecht-America Finance Co. (the "Lender"); (B) the Facility Lease Agreement (P1) dated as of December 30, 1996 (the "Facility Lease") between the Co-Trustee and the Facility Lessee;. (C) the Loan and Security Agreement (P1) dated as of December 30, 1996 among the Trustees and the Lender; and (D) the Payment Undertaking Agreement (P1) dated as of December 30, 1996 (the "Payment Undertaking") between the Facility Lessee and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., New York Branch (the "Payment Undertaking Issuer"). It is a condition precedent to the Lender making available its Loan Commitment under the Participation Agreement that the Facility Lessee shall have granted the assignment and security interest contemplated by this Agreement and that each Trustee shall have assigned all of its rights hereunder to the Lender pursuant to the Loan Agreement. NOW, THEREFORE, in consideration of the premises and in order to induce the Lender to make available its Loan Commitment under the Participation Agreement, the Facility Lessee hereby agrees with each Trustee for its benefit and the benefit of the Lender as follows: SECTION 1. Defined Terms. Capitalized terms used herein without definition are used herein with the respective meanings given such terms in Appendix A to the Participation Agreement or, to the extent not defined therein, in the Payment Undertaking; provided that, unless otherwise defined herein or in the Participation Agreement, terms used in Article 9 of the New York Uniform Commercial Code are used herein as therein defined and, with respect to the perfection of the security interest created hereby, by Article 9 of the Uniform Commercial Code of the jurisdiction governing such perfection. SECTION 2. Grant of Security. The Facility Lessee hereby assigns and pledges to each Trustee for its benefit and the benefit of the Lender, and hereby grants to each Trustee for its benefit and the benefit of the Lender a security interest in, the following (collectively, the "Collateral"): (a) all of the Facility Lessee's right, title and interest, if any, in, to and under the Payment Undertaking, including without limitation (i) all rights, if any, of the Facility Lessee to any amounts payable by the Payment Undertaking Issuer under the Payment Undertaking and (ii) all claims of the Facility Lessee for damages arising out of or for breach of or default by the Payment Undertaking Issuer under the Payment Undertaking (all such Collateral being the "Agreement Collateral"); and (b) all proceeds of any and all of the Agreement Collateral and all property into which any Collateral may be exchanged or converted. To the extent that a court would hold that Netherlands law is applicable to the assignment and pledge of the Collateral and to the creation of another security right on the Collateral and that such assignment, pledge and other security right is invalid and/or unenforceable in The Netherlands, the Facility Lessee hereby creates a right of pledge ("vestigt een pandrecht") in favor of each Trustee, pursuant to articles 3:94, paragraph 1 and 3:236, paragraph 2, Netherlands Civil Code on the rights of the Facility Lessee against the Payment Undertaking Issuer, as such rights may exist or come to exist hereafter against the Payment Undertaking Issuer pursuant to or under the Collateral as security for the RMLC Secured Obligations, which right of pledge each Trustee hereby accepts. In accordance with article 3:242, Netherlands Civil Code, each Trustee is hereby irrevocably authorized to repledge ("herverpanden") the rights of Facility Lessee pursuant to or under the Collateral in favor of the Lender in order to secure the RMLC Secured Obligations as described in the granting clause of the Loan Agreement. SECTION 3. Security for Obligations. This Agreement secures the payment by the Facility Lessee to the Trustees of each of the Facility Lessee's payment obligations under the Facility Lease and the other Operative Documents and of the costs and expenses (including the reasonable fees and disbursements of counsel) of the Trustees in exercising its rights and enforcing its remedies hereunder (such obligations, costs and expenses being the "RMLC Secured Obligations"). Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts that constitute the RMLC Secured Obligations or any part thereof and would be owed by the Facility Lessee under the Facility Lease or any other Operative Document but for the fact that they are unenforceable or not allowable due to the existence of a 2 bankruptcy, reorganization or similar proceeding involving the Facility Lessee or any other Person. SECTION 4. The Facility Lessee Remains Liable. Anything herein to the contrary notwithstanding, (a) the Facility Lessee shall remain liable under the Payment Undertaking and the other Operative Documents to the extent set forth therein to perform all of its duties and obligations, if any, thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Trustees of any of the rights hereunder shall not release the Facility Lessee from any of its duties or obligations, if any, under the Payment Undertaking and (c) neither Trustee shall have any obligation or liability under the Payment Undertaking by reason of this Agreement nor shall either Trustee be obligated to perform any of the obligations or duties, if any, of the Facility Lessee thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. SECTION 5. Representations and Warranties. The Facility Lessee represents and warrants as follows: (a) The chief place of business and chief executive office of the Facility Lessee and the office where the Facility Lessee keeps its records and administers the Payment Undertaking are located at the address specified in Section 3.5 of the Participation Agreement. (b) The Facility Lessee's interest, if any, in the Collateral is free and clear of any Lien, except for the security interest created by this Agreement. No financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office, except such as may have been filed in favor of the Trustees, or either of them, or the Lender relating to this Agreement. (c) This Agreement creates a valid and perfected security interest in the Collateral securing the payment of the RMLC Secured Obligations. SECTION 6. Further Assurances. (a) The Facility Lessee agrees that it will, from time to time, at the expense of the Facility Lessee, promptly execute and deliver all further instruments and documents, and take all further action (including the giving of notice to the Payment Undertaking Issuer), that may be necessary or desirable, or that a Trustee may request, in order to perfect and protect any pledge, assignment or security interest granted or purported to be granted hereby or to enable the Trustees to exercise and enforce their rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, the Facility Lessee at the request of either Trustee will: (i) mark conspicuously each counterpart of the Payment Undertaking in its possession and each of its records pertaining to the Collateral with a legend, in form and substance satisfactory to such Trustee, indicating that the rights, if any, of the Facility Lessee in the Payment Undertaking or Collateral is subject to the security interest granted hereby; and (ii) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or 3 as such Trustee may request, in order to perfect and preserve the pledge, assignment and security interest granted or purported to be granted hereby. (b) The Facility Lessee hereby authorizes the Trustees to file one or more financing or continuation statements, and amendments thereto, relating to all or any part of the Collateral without the signature of the Facility Lessee where permitted by law. A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. SECTION 7. Place of Perfection; Records. (a) The Facility Lessee shall keep its chief place of business and chief executive office and the office where it keeps its records and the original copies of the Payment Undertaking at the location specified in Section 3.5 of the Participation Agreement or, upon 30 days' prior written notice to the Trustees and the Lender, at such other locations in a jurisdiction where all actions required by Section 5 hereof shall have been taken with respect to the Collateral. (b) The Facility Lessee has notified the Payment Undertaking Issuer of the assignment and pledge of the rights, if any, of the Facility Lessee in the Payment Undertaking to the Trustees and of the assignment, pledge and/or repledge, pursuant to the Loan Agreement, by the Trustees to the Lender of the Trustees' rights, if any, arising hereunder. All amounts and proceeds (including instruments), if any, received by the Facility Lessee in respect of the Payment Undertaking shall be received in trust for the benefit of the Trustees and, prior to the Release Event, shall be segregated from other funds and property of the Facility Lessee and shall be forthwith paid over to the Trustees or, prior to the Release Event, the Lender in the same form as so received. SECTION 8. As to the Payment Undertaking. (a) The Facility Lessee agrees that it shall at its expense: (i) perform and observe all the terms and provisions of the Payment Undertaking to be performed or observed by it, if any; maintain the Payment Undertaking in full force and effect to the extent of its interest, if any, therein; enforce the Payment Undertaking in accordance with its terms to the extent of its interest, if any, therein; and take all such action to such end as may be requested from time to time by either Trustee; and (ii) furnish to the Trustees and the Lender promptly upon issuance or receipt thereof copies of all notices, requests and other documents issued or received by the Facility Lessee under or pursuant to the Payment Undertaking; and from time to time (A) furnish to the Trustees and the Lender such information and reports regarding the Collateral as either Trustee or the Lender may reasonably request and (B) upon request to either Trustee or the Lender make to the Payment Undertaking Issuer such demands and requests for information and reports or for action, if any, as the Facility Lessee is entitled to make thereunder. 4 (b) The Facility Lessee agrees that (to the extent it would otherwise be able to) it will not without the prior written consent of either Trustee and, prior to the Release Event, the Lender: (i) cancel or terminate the Payment Undertaking or consent to or accept any cancellation or termination thereof; (ii) amend or otherwise modify the Payment Undertaking or give any consent, waiver or approval thereunder or adjust, settle or compromise the amount or payment of any receivable thereunder, release wholly or partly the Payment Undertaking Issuer or allow any credit or discount thereon; (iii) waive any default under or breach of the Payment Undertaking; or (iv) take any other action in connection with the Payment Undertaking that would impair the value of the interest or rights of the Facility Lessee thereunder, if any, or that would impair the interest or rights of the Trustees or the Lender therein. (c) The Facility Lessee and the Trustees agree that this Agreement and the security interest granted hereby and the appointment of the Trustees as attorneys-in-fact under Section 10 hereof and all other rights and powers given to the Trustees hereunder are not intended to, and shall not, derogate from the Trustees' rights as third party beneficiaries of the Payment Undertaking, including the right to receive payments thereunder directly and to otherwise enforce the Payment Undertaking in its own name and right independent of the rights and powers granted hereunder. SECTION 9. Transfer and Other Liens. Prior to the Release Event, the Facility Lessee shall not (i) sell, assign (by operation of law or otherwise), pledge or otherwise dispose of, or grant any option with respect to, any of the Collateral or any interest therein or in respect thereof or (ii) create or suffer to exist any Lien upon or with respect to any of the Collateral except for the pledge, repledge assignment and security interest created by this Agreement and the Loan Agreement. SECTION 10. Each Trustee Appointed Attorney-in-fact. In addition to the rights of each Trustee as a third party beneficiary of the Payment Undertaking, the Facility Lessee hereby irrevocably appoints (which appointment is coupled with an interest) each Trustee as the Facility Lessee's attorney-in-fact, with full authority after the occurrence and during the continuance of an Event of Default in the place and stead of the Facility Lessee and in the name of the Facility Lessee or otherwise, from time to time in such Trustee's discretion, to take any action and to execute any instrument that such Trustee may deem necessary or advisable to accomplish the purposes of this Agreement, including without limitation: 5 (a) to ask for, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; and (b) to file any claims or take any action or institute any proceedings that such Trustee may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce compliance with the terms and conditions of the Payment Undertaking or the rights of such Trustee with respect to any of the Collateral. SECTION 11. Trustees May Perform. If the Facility Lessee fails to perform any agreement contained herein, the Trustees may perform, or cause performance of, such agreement, and the expenses of such Trustees incurred in connection therewith shall be payable by the Facility Lessee under Section 5.03 of the Trust Agreement and shall constitute RMLC Secured Obligations hereunder. SECTION 12. Trustees' Duties. The powers conferred on each Trustee hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. SECTION 13. Remedies. If any Event of Default shall have occurred and be continuing: (a) The Trustees may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the Uniform Commercial Code in effect in the State of New York at such time (the "New York Uniform Commercial Code") (whether or not the New York Uniform Commercial Code applies to the affected Collateral) and also may, without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Owner Trustees' offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Trustees may deem commercially reasonable. The Facility Lessee agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to the Facility Lessee of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Trustees shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Trustees may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) Without limitation of the foregoing, the Trustees may exercise, in their own names or in the name and on behalf of the Facility Lessee, all of the Facility Lessee's rights, if any, under and in respect of the Payment Undertaking, including the enforcement of the Payment Undertaking Issuer's obligations thereunder. 6 (c) If any cash proceeds shall be received by the Trustees from the Payment Undertaking Issuer with respect to the Collateral or in respect of any sale of, collection from, or other realization upon all or any part of the Collateral, the Trustees may, in the discretion of the Trustees, hold such proceeds as collateral for payment of the RMLC Secured Obligations or may apply such proceeds to the payment of the RMLC Secured Obligations in such order as the Trustees shall elect. Any surplus of such cash or cash proceeds held by the Owner Trustee and remaining after payment in full of all the RMLC Secured Obligations shall be paid over to the Facility Lessee or to whomsoever may be lawfully entitled to receive such surplus. SECTION 14. Amendments; Waivers; Etc. No amendment or waiver of any provision of this Agreement, and no consent to any departure by the Facility Lessee herefrom, shall in any event be effective unless the same shall be in writing and signed by each Trustee, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure on the part of either Trustee to exercise, and no delay in exercising any right hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. SECTION 15. Notices. All notices, demand or other communications hereunder shall be given or made in the manner, and with the same effect, as provided in Section 18.4 of the Participation Agreement, at the respective addresses therefor set forth in the Participation Agreement, or at such other address as may be designated by notice from such party to all other parties hereto. SECTION 16. Continuing Security Interests; Assignments Under the Participation Agreement. This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the Release Event has occurred, (b) be binding upon the Facility Lessee, its successors and assigns and (c) inure, together with the rights and remedies of the Trustees hereunder, to the benefit of each Trustee and its successors, transferees and assigns (provided that, prior to the Release Event, the Trustees shall not assign, pledge, repledge or otherwise transfer or dispose of its rights under this Agreement or any interest in respect thereof to any Person, except to the Lender pursuant to the Loan Agreement or to a Person which shall succeed to all of the Trustees' right, title and interest in respect of the Operative Documents and the Facility Lessee's Rocky Mountain Interest as permitted by the Participation Agreement). If this Agreement shall terminate as provided for in clause (a), above, each Trustee will, at the Facility Lessee's request and expense, execute and deliver to the Facility Lessee such documents as the Facility Lessee shall reasonably request to evidence such termination. SECTION 17. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 18. WAIVER OF JURY TRIAL. EACH OF THE FACILITY LESSEE AND THE TRUSTEES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR 7 RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 19. Interpretation. The headings of the articles and sections hereof are for convenience of reference only and shall not affect the meaning or construction of any provision hereof. SECTION 20. Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 21. Severability. If any provision of this Agreement is invalid, illegal or unenforceable under Applicable Law, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. SECTION 22. Service of Process and Jurisdiction. (a) Submission to Jurisdiction. Each of the parties hereto (i) hereby irrevocably submits to the nonexclusive jurisdiction of the Supreme Court of the State of New York, New York County (without prejudice to the right of any party to remove to the United States District Court for the Southern District of New York) and to the jurisdiction of the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or the subject matter hereof or any of the transactions contemplated hereby brought by any of the parties hereto or their successors or assigns, (ii) hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by Applicable Law, in such Federal court, and (iii) to the extent permitted by Applicable Law, hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding any claim that is not personally subject to the jurisdiction of the above-named courts, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court. A final judgment obtained in respect of any action, suit or proceeding referred to in this Section 22 shall be conclusive and may be enforced in other jurisdictions by suit as the judgment or in any manner as provided by Applicable law. The Facility Lessee and each Trustee each irrevocably appoints CT Corporation System, with an office at 1633 Broadway, New York, New York 10019, as its agent to receive on its behalf service of copies of the summons and complaint and any other process which may be served in any such action or proceeding (such agent, with respect to its respective appointing party, being the "Process Agent"). (b) Service of Process. Each of the parties hereto hereby consents to service of process in connection with the subject matter specified in the first sentence of this Section in connection with the above-mentioned courts in New York by registered mail, Federal Express, DHL or similar courier at the address to which notices to it are to be given, or to such party in the case of the Process Agent at the Process Agent's above address, it being agreed that service in such manner shall constitute valid service upon such party or their respective successors or 8 assigns in connection with any such action or proceeding only; provided that nothing in this Section shall affect the right of any of such parties or their respective successors or assigns to serve legal process in any other manner permitted by law or affect the right of any such parties or its respective successors or assigns to bring any action or proceeding against any other one of such parties or its respective property in the courts of other jurisdictions. SECTION 23. Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by each Trustee, not individually or personally but solely in their capacity as a Trustee under the Trust Agreement, in the exercise of the powers and authority conferred and vested in them, (b) each of the representations, undertakings and agreements herein made on the part of each Trustee is made and intended not as personal representations, undertakings and agreements by each Trustee, but is made and intended for the purpose of binding only the Trustees, (c) nothing herein contained shall be construed as creating any liability on either Trustee, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the Facility Lessee or by any Person claiming by, through or under the Facility Lessee and (d) under no circumstances shall the Trustees be personally liable for the payment of any indebtedness or expenses of the Trustees or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trustees under this Agreement. In addition, each of the parties hereto acknowledges and agrees that the Co-Trustee has been appointed by the Owner Participant and Owner Trustee for the limited purpose of exercising those trust powers in the State of Georgia which may not be exercised by the Owner Trustee under applicable law, and that, except as otherwise required by applicable law, the Co-Trustee shall not be obligated to take any action hereunder unless expressly directed in writing by the Owner Trustee or the Owner Participant in accordance with the terms of the Trust Agreement. 9 IN WITNESS WHEREOF, the Facility Lessee and each Trustee have caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. ROCKY MOUNTAIN LEASING CORPORATION By:/s/ Eugen Heckl ----------------------------------- Name: Eugen Heckl Title: Vice President FLEET NATIONAL BANK, not in its individual capacity but solely as Owner Trustee By:/s/ Frank McDonald ----------------------------------- Name: Frank McDonald Title: Vice President SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee By:/s/ Bryan Echols ----------------------------------- Name: Bryan Echols Title: Vice President By:/s/ Sandra Thompson ----------------------------------- Name: Sandra Thompson Title: Vice President 10 SCHEDULE TO EXHIBIT 10.32.12 PAYMENT UNDERTAKING PLEDGE AGREEMENT (P1) The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant ---------- ------------------- ----------------------------------- P1 December 30, 1996 Philip Morris Capital Corporation P2 January 3, 1997 Philip Morris Capital Corporation F3 December 30, 1996 First Chicago Leasing Corporation F4 December 30, 1996 First Chicago Leasing Corporation N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation The Exhibits and Schedules to the Payment Undertaking Pledge Agreement (P1) are not filed herewith; however, the registrant hereby agrees that such Exhibits and Schedules will be provided to the Commission upon request. 11 EX-10.32-13 30 EXHIBIT 10.32.13 EXHIBIT 10.32.13 ================================================================================ EQUITY FUNDING AGREEMENT [P1] Dated as of December 30, 1996 among ROCKY MOUNTAIN LEASING CORPORATION, AIG MATCHED FUNDING CORP., PHILIP MORRIS CAPITAL CORPORATION, FLEET NATIONAL BANK, not in its individual capacity but solely as Owner Trustee and SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee ROCKY MOUNTAIN PUMPED STORAGE HYDROELECTRIC FACILITY ================================================================================ EQUITY FUNDING AGREEMENT This EQUITY FUNDING AGREEMENT, dated as of December 30, 1996 (this "Agreement"), among ROCKY MOUNTAIN LEASING CORPORATION, a corporation organized under the laws of the State of Delaware (herein together with its successors and permitted assigns, called "RMLC"), AIG MATCHED FUNDING CORP., a corporation organized under the laws of the State of Delaware (herein together with its successors and permitted assigns, called "AIGMFC"), FLEET NATIONAL BANK, not in its individual capacity but solely as Owner Trustee (herein together with its successors and permitted assigns, the "Owner Trustee"), SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee (herein together with its successors and permitted assigns, the "Co-Trustee") under a Trust Agreement dated as of December 30, 1996 with the Owner Participant (as hereinafter defined) and PHILIP MORRIS CAPITAL CORPORATION (herein together with its successors and permitted assigns, the "Owner Participant"). WITNESSETH: WHEREAS, RMLC has entered into the Participation Agreement referred to below with, among others, the Owner Trustee, the Co-Trustee and the Owner Participant; WHEREAS, the Co-Trustee, as Lessor, and RMLC, as Lessee, have entered into a lease as contemplated by the Participation Agreement (the "Facility Lease") under which RMLC has undertaken to make certain lease payments to the Co-Trustee; WHEREAS, RMLC has agreed to make certain payments to the Owner Participant pursuant to Section 16 of the Participation Agreement; and WHEREAS, in consideration for the payment by RMLC to AIGMFC of the Specified Sum (as hereinafter defined), AIGMFC is willing to make certain payments to the Co-Trustee or the Owner Participant on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is HEREBY AGREED: ARTICLE 1. DEFINITIONS. Capitalized terms used in this Agreement and not otherwise defined herein shall have the respective meanings specified in Appendix A to the Participation Agreement, dated as of December 30, 1996, among Oglethorpe Power Corporation, RMLC, Owner Participant, Co-Trustee, Owner Trustee and Utrecht-America Finance Co. The general provisions of Appendix A apply to terms used in this Agreement and specifically defined herein. 1 "Accreted Value" means an amount equal the discounted present value (computed using a discount rate equal to 6.745%) on any relevant date of calculation of the unpaid amounts of Scheduled Payments that would on such date or thereafter become payable under Section 3.1 hereof. "Collateral" means at any time the cash and Securities delivered to or held by the Collateral Agent pursuant to Article 4 hereof. "Collateral Agent" means an independent third party selected by AIGMFC, with the approval of the Owner Participant (such approval not to be unreasonably withheld), to act as agent hereunder to hold the Collateral. "Collateral Requirement" means (A) if the Collateral consists of Securities defined in clause (i) of the definition of Securities herein, an amount equal to 104% of the Accreted Value or (B) if the Collateral consists of Securities defined in clause (ii) of the definition of Securities herein, an amount equal to 105% of the Accreted Value. "Collateral Value" means, in the case of cash, the amount thereof, and, in the case of Securities, the Market Value thereof. "Early Termination Date" has the meaning set forth in Section 3.2(a) hereof. "Federal Funds Closing" means the closing of the Federal Funds wire in New York, New York. "Fee" means $26,585,263.03. "Formula Valuation Amount" means an amount, determined by AIGMFC and subject to verification by the Owner Participant, equal to the discounted present value (computed using a discount rate equal to the FVA Yield) to the Early Termination Date of the unpaid amounts of Scheduled Payments that would on the payment date hereunder or thereafter would have become payable under Section 3.1 hereof; provided, however, that in no event shall the Formula Valuation Amount on any date of calculation be greater than the Accreted Value on such date. "FVA Yield" means the weighted average rate, as calculated by AIGMFC and subject to verification by the Owner Participant, determined on the basis of three quotations from Reference Market-makers, of the yields on U.S. Treasury STRIPs maturing closest to the Payment Dates set forth on Schedule A hereto, plus the applicable STRIP spread set forth in the table below opposite the period during which the Early Termination Date occurs. The STRIP yields will be determined on the basis of the average of the offered rates quoted by at least three (3) Reference Market-makers. 2 Early Termination Date Occurring STRIP Spreads -------------------------------- ------------- January 1, 2004 - December 31, 2008: 95 basis points January 1, 2009 - December 31, 2013: 75 basis points January 1, 2014 - December 31, 2018: 65 basis points January 1, 2019 and thereafter: 50 basis points "Guarantee" means the guarantee of the Guarantor, dated the date hereof, substantially in the form attached hereto as Exhibit B. "Guarantor" means American International Group, Inc., the corporate parent of AIGMFC, together with its successors and assigns permitted by Section 8 of the Guarantee. "Guarantor Downgrading" means that the ratings issued by S&P and Moody's of the long-term unsecured, unsubordinated debt obligations issued by the Guarantor are withdrawn, suspended or reduced below "AA-", in the case of S&P, and below "Aa3", in the case of Moody's, during the term of this Agreement. "Market Amount" means an amount, determined by AIGMFC and subject to verification by the Owner Participant, on the basis of quotations from Reference Market-makers for the dollar amount that would be payable on the Early Termination Date to AIGMFC in consideration of an agreement between AIGMFC (taking into account the Guarantor's Guarantee, with respect to the obligations of AIGMFC) and the quoting Reference Market-maker, with the Early Termination Date as the date of commencement of such agreement, that would require AIGMFC to perform its payment and other obligations hereunder that would, but for the occurrence of the Early Termination Date, fall due on or after the Early Termination Date. AIGMFC (or its agent) will request each Reference Market-maker to provide its quotation as of 11:00 a.m., New York City time, on the Early Termination Date. If more than three (3) such quotations are provided, the Market Amount will be the arithmetic mean of the quotations without regard to the quotations having the highest and lowest values. If exactly three (3) such quotations are provided, the Market Amount will be the quotation remaining after disregarding the quotations having the highest and lowest values. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three (3) quotations are provided, the Market Amount will be determined in good faith by AIGMFC subject to acceptance by the Owner Participant. "Market Value" of any Securities means at any time the closing offer price for such Securities on the preceding Business Day as reported in The Wall Street Journal or such other third party pricing source selected in good faith by AIGMFC and consented to by the Owner Participant, such consent not to be unreasonably withheld (plus accrued and unpaid interest and principal to the extent not included therein). "Payment Date" means each of the dates listed on Schedule A hereto. 3 "Reference Market-makers" means leading financial institutions selected in good faith by AIGMFC and consented to by the Owner Participant, such consent not to be unreasonably withheld. "RMLC Creditor" means any creditor of RMLC, RMLC as debtor in possession, or any trustee, receiver, liquidator, custodian or other similar official of RMLC appointed as such in an involuntary case, voluntary case or other proceeding seeking liquidation, reorganization or other similar relief to RMLC or its assets. "Scheduled Payments" means at any time the amounts payable by AIGMFC pursuant to Section 3.1 by reference to Schedule A. "Securities" means (i) securities issued or guaranteed by the United States Government, including United States Treasury obligations and any other obligations the timely payment of principal and interest of which are guaranteed by the United States Government, and (ii) bonds, notes, debentures, obligations or other evidence of indebtedness issued and/or guaranteed by Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Government National Mortgage Association or any other agency or instrumentality of the United States of America, rated "AAA" by S&P or "Aaa" by Moody's or, if such securities are not then rated by S&P or Moody's, issued by an agency or instrumentality of the United States of America whose long-term unsecured debt is then rated "AAA" by S&P or "Aaa" by Moody's. "Termination Amount" means, with respect to the Early Termination Date, (A) the Market Amount if the Early Termination Date occurs (i) prior to January 1, 2004 or (ii) as a result of a termination of the Facility Lease pursuant to Section 13.1(ii) or Section 13.1(iii) where the Sublessee has elected to terminate the Facility Sublease pursuant to Sections 13.1(ii) or (iii) of the Facility Sublease, or (iii) based solely upon circumstances resulting from any amendment or modification to the Operative Documents to which the Co-Trustee, the Owner Trustee or the Owner Participant is a party entered into without the prior written consent of AIGMFC; or (B) the greater of the Market Amount and the Formula Valuation Amount if the Early Termination Date occurs on or after January 1, 2004 other than as a result of the circumstances specified in clause (A)(ii) above. ARTICLE 2. CONSIDERATION. Section 2.1. Payments by AIGMFC. AIGMFC hereby agrees that subject to and in consideration for the absolute and irrevocable payment by RMLC to AIGMFC on the Closing Date of the Fee in immediately available funds to the account specified by AIGMFC in Schedule B attached hereto, AIGMFC shall make to the Co-Trustee or the Owner Participant the payments required under Article 3 hereof. Section 2.2. Fee. RMLC hereby acknowledges that payment of the Fee is absolute, unconditional and irrevocable and shall not be refundable to RMLC under any circumstance or for any reason, including, without limitation, the bankruptcy or insolvency of, 4 or any other matter affecting, any party hereto, RMLC or any other Person, or any action under the Oglethorpe Mortgage. RMLC agrees that (i) it will not have any right, title or interest in or to any portion of the Fee and upon payment of the Fee to AIGMFC, the Fee will cease to be an asset of RMLC and will become an asset solely of AIGMFC, (ii) such payment of the Fee will be irrevocable once made and will not be subject to avoidance or recapture by RMLC or any RMLC Creditor and (iii) neither RMLC nor any RMLC Creditor will be entitled to assert any Lien or claim, or to exercise remedies, with respect to such payment. Section 2.3. Direct Obligations. The payment obligations of AIGMFC hereunder constitute direct obligations to the Co-Trustee and the Owner Participant, enforceable by the Co-Trustee and the Owner Participant against AIGMFC in accordance with the terms of this Agreement. The right of the Co-Trustee and the Owner Participant to receive payments hereunder represents a separate and independent right of each such Person. Section 2.4. Obligations Unconditional, Irrevocable and Absolute. AIGMFC acknowledges and agrees that its obligations to pay all Scheduled Payments and the Termination Amount in accordance with the terms of this Agreement constitute absolute, irrevocable and unconditional obligations of AIGMFC itself, without regard to any circumstance whatsoever, including, without limitation, (a) any setoff, counterclaim, recoupment or other right which AIGMFC or any Affiliate may have against the Co-Trustee, the Owner Trustee, the Owner Participant, RMLC, Oglethorpe or any other Person, (b) any insolvency, bankruptcy, reorganization or similar proceedings with respect to, or any other matter affecting, RMLC, any other party hereto, Oglethorpe or any other Person, or any obligation of RMLC under the Facility Lease or any Operative Document, or any application of Section 502(b)(6) or other provision under the Bankruptcy Code that purports to limit RMLC's obligations under the Facility Lease or any other Operative Document, (c) any invalidity, unenforceability or termination of, or amendment, modification, waiver or consent with respect to, the Facility Lease or any other Operative Document for any reason whatsoever, including any action taken pursuant to the Oglethorpe Mortgage, or (d) any other cause whether similar or dissimilar to the foregoing, it being the intention of the parties hereto that all Scheduled Payments and the Termination Amount shall be payable in all events in the manner and at the times provided for herein. ARTICLE 3. PAYMENTS. Section 3.1. Scheduled Payments. AIGMFC, in consideration for payment by RMLC of the Fee, shall make payments to the Co-Trustee (or as the Co-Trustee otherwise directs) in the amounts and on the dates specified on Schedule A hereto. Section 3.2. Special Payment. (a) Upon delivery to AIGMFC of a payment certificate in the form attached hereto as Exhibit A (the "Payment Certificate") (delivered to AIGMFC at the address specified in Schedule B attached hereto no later than three (3) Business Days prior to the payment date specified in the Payment Certificate) from either the Co-Trustee or the Owner Participant, 5 AIGMFC shall pay to the Co-Trustee or the Owner Participant (or as the Co-Trustee or Owner Participant otherwise directs), whichever is specified in the Payment Certificate, on the date specified in the Payment Certificate (the "Early Termination Date") an amount equal to the Termination Amount. (b) Upon payment in full of the Termination Amount pursuant to Section 3.2(a), AIGMFC shall be released from the payment of any future Scheduled Payments under Section 3.1, provided, however, that if the Early Termination Date is a Payment Date, AIGMFC shall also pay (but without duplication of payment) to the Co-Trustee the Scheduled Payment payable on such Payment Date. Section 3.3. Overdue Interest. Any amount payable by AIGMFC hereunder which shall not be paid when due shall bear interest at Prime Rate plus 2% from the due date of such amount until the date of its payment. Section 3.4. No Other Payments or Obligations. Except as expressly provided in this Article 3, AIGMFC shall have no obligation to make any payment hereunder and shall have no obligation in respect of any Operative Document or other document relevant to any transaction related hereto or contemplated by any Operative Document; provided that nothing in this Section 3.4. shall limit any remedies the Co-Trustee or the Owner Participant may have against AIGMFC or the Guarantor for any breach of its obligations under this Agreement or the Guarantee. In the event that any payment under this Agreement is rescinded or must otherwise be returned for any reason whatsoever, AIGMFC shall remain liable hereunder with respect to such amounts as if such payment had not been made. Section 3.5. Time, Place and Method of Making Payments. All payments required to be made hereunder shall be made to the Co-Trustee or the Owner Participant (or its designees) in immediately available funds. AIGMFC agrees (a) that it will instruct, prior to 10:00 A.M., New York City time, on the date on which a payment is due to be made by it hereunder, an appropriate bank to make such payment by FedWire transfer to the Co-Trustee's or the Owner Participant's respective address for payments specified on Schedule B hereto (or at such other place as the Co-Trustee or the Owner Participant may designate in writing to AIGMFC by two (2) Business Days' notice prior to the date on which such payment is due) and (b) that such payment will be effected by no later than Federal Funds Closing on such date. Section 3.6. Payment Upon Written Notice; Etc. (a) Scheduled Payments under Section 3.1 shall be made by AIGMFC without further act or notice by any Person. Payments specified in Section 3.2 hereof shall be made upon delivery of the Payment Certificate described in Section 3.2(a) hereof or as otherwise agreed by AIGMFC and the Owner Participant. (b) AIGMFC agrees that it shall pay each amount payable by it hereunder to the Co-Trustee or the Owner Participant (or its designees) in accordance with the provisions hereof without offset, deduction or withholding (other than deduction or withholding of tax, which shall be permitted) and without regard to any conflicting payment instruction delivered by any 6 Person. AIGMFC shall notify the Co-Trustee and the Owner Participant as soon as practicable of any amounts deducted or withheld from payments under this Agreement. (c) AIGMFC may rely, without inquiry, upon any notice or certificate under Section 3.2 hereof purported to be signed by a properly authorized officer or other representative of the appropriate signatory and its obligations pursuant to Section 3.2 to make payments described in Section 3.2 shall be conditioned only upon the delivery to it of a properly executed Payment Certificate and shall not be conditioned in any manner upon the correctness of matters stated in such Payment Certificate. (d) Each of the Co-Trustee, the Owner Trustee and the Owner Participant shall provide AIGMFC with a properly completed United States Internal Revenue Service Form W-9 upon the execution of this Agreement. The Co-Trustee and the Owner Participant shall cooperate with AIGMFC in determining AIGMFC's withholding obligations in respect of payments under this Agreement. Section 3.7. Use of Payments. It is understood and agreed that AIGMFC will have no responsibility or obligation with respect to the applications of monies upon their payment to the Person entitled thereto pursuant to the provisions hereof. Section 3.8. Business Day Convention. Unless otherwise specified herein, any relevant date for a payment to be made by AIGMFC that would otherwise fall on a day that is not a Business Day will be made on the first succeeding day that is a Business Day, without additional interest on such payment. ARTICLE 4. GUARANTEE AND RATINGS EVENT. Section 4.1. Guarantee. It is understood and agreed that each of the Co-Trustee, the Owner Trustee and the Owner Participant, in entering into this Agreement, is and will be relying on the Guarantee pursuant to which the Guarantor has, among other things, unconditionally guaranteed the full and prompt payment of any and all obligations of AIGMFC hereunder to the extent, on the terms and as provided in the Guarantee. Section 4.2. Ratings Event. Upon the occurrence and continuance of a Guarantor Downgrading and upon the written request of the Owner Participant, AIGMFC, within ten (10) Business Days of such written request, shall deliver Collateral to the Collateral Agent, the aggregate Collateral Value of which shall be equal to or greater than the then current Collateral Requirement. AIGMFC hereby agrees to grant to the Co-Trustee and the Owner Participant a first perfected security interest in all the Collateral delivered or transferred to the Collateral Agent hereunder and in any and all proceeds of and distributions on such Collateral all in a manner and pursuant to documentation in form and substance satisfactory to the Owner Participant. AIGMFC agrees to use its reasonable efforts to notify the Owner Participant upon a Guarantor Downgrading; provided, that AIGMFC shall not be liable to the Owner Participant for any failure to provide such notification. 7 Section 4.3. Collateral Valuation. The Collateral Agent shall, not later than 5:00 p.m. New York City time on each Tuesday, or if any such Tuesday is not a Business Day, on the next following Business Day, determine the aggregate Collateral Value (subject to verification by the Owner Participant) and shall notify AIGMFC by telephone on such date (such notice to be confirmed in writing) of such amount and provide to AIGMFC and the Owner Participant any information that AIGMFC and the Owner Participant may reasonably request regarding the Collateral Agent's determination thereof. If such amount is less than the Collateral Requirement on such day, AIGMFC shall, before the close of business on the second Business Day following the date of such determination, deliver to the Collateral Agent additional Collateral having an aggregate Collateral Value on such day not less than the amount of such deficiency and deliver written notification of such delivery to the Owner Participant on such date. ARTICLE 5. REPRESENTATIONS AND WARRANTIES. Each party hereto represents and warrants to the others on the date hereof that: (a) Organization. It has full power and authority to conduct its business as presently conducted, to own or hold under lease its properties and to execute, deliver and perform this Agreement. (b) Due Authorization. Its execution, delivery and performance of this Agreement have been duly authorized by all necessary action on its part and do not require any stockholder approval, or any approval or consent of, or notice to, any trustee or holder of any indebtedness or obligation of such party or any Governmental Entity. (c) Legal, Valid and Binding Obligations. This Agreement has been duly executed and delivered by it and constitutes its legal, valid and binding obligation enforceable against it in accordance with its terms except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting it or the rights of its creditors generally and by general principles of equity applicable to it or its creditors regardless whether enforcement is pursuant to a proceeding in equity or at law. ARTICLE 6. ASSIGNMENT. Section 6.1. Assignment. The Co-Trustee or the Owner Participant may transfer, assign, pledge, repledge or otherwise dispose of, or grant any option, participation or interest in, with respect to or measured by, or any proceeds with respect to the rights of the Co-Trustee or the Owner Participant, respectively, as a beneficiary under this Agreement to any Person or to any transferee of all or a part of the Co-Trustee's or the Owner Participant's respective right, title and interest in the Operative Documents or the Undivided Interest. Any transferee of any portion 8 of the Co-Trustee's or the Owner Participant's respective rights under this Agreement shall provide AIGMFC with an Internal Revenue Service Form W-9, or any successor form, and shall be subject to the provisions of Section 3.6 hereof in the same manner as the Co-Trustee and the Owner Participant. In no event may there be any transfer or assignment by the Co-Trustee or the Owner Participant to a person not a United States person as defined in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended, without the prior written consent of AIGMFC, which consent will not be unreasonably withheld. Any transfer or assignment by the Co-Trustee or the Owner Participant pursuant to the foregoing shall become effective upon the giving of written notice of such transfer or assignment to AIGMFC. Without limiting the generality of the foregoing, any payment in accordance with the provisions hereof by AIGMFC to the Co-Trustee or the Owner Participant or their respective assignees shall release AIGMFC from any further liability hereunder to the Co-Trustee, the Owner Participant and any other Person in respect of such payment. RMLC may not assign or pledge its rights, if any, hereunder to any Person other than the Co-Trustee and the Owner Participant (which shall be entitled to re-assign, pledge or repledge such rights only as set forth in the first sentence of this Section 6.1), without the prior written consent of AIGMFC. AIGMFC may not assign its rights or obligations hereunder to any United States corporation that is solvent without the consent of the Co-Trustee and the Owner Participant, except that AIGMFC may transfer this Agreement or any of its interests and obligations hereunder to any subsidiary of AIGMFC or any subsidiary of the Guarantor, provided that (i) the Co-Trustee and the Owner Participant receive thirty (30) days prior written notice of such proposed assignment, (ii) the assignee shall assume all the rights and obligations of AIGMFC hereunder in a manner that is not adverse to the Owner Participant's interest and pursuant to a written agreement satisfactory to the Owner Participant, (iii) prior to such transfer the Guarantor shall confirm in writing to AIGMFC, RMLC, the Co-Trustee and the Owner Participant that the Guarantee by the Guarantor relating to this Agreement shall remain in full force and effect after such assignment and (iv) RMLC, the Co-Trustee and the Owner Participant shall have received an opinion or opinions of counsel to such assignee and the Guarantor, substantially similar to those delivered in connection with the execution of this Agreement, as to the enforceability of this Agreement and the Guarantee and such other matters as the Owner Participant may reasonably request. ARTICLE 7. MISCELLANEOUS. Section 7.1. Release of AIGMFC. Any payment in accordance with the provisions hereof by AIGMFC to the Co-Trustee or the Owner Participant shall release AIGMFC from any further liability hereunder in respect of such payment to the Co-Trustee and the Owner Participant and any other Person in respect of such payment. Section 7.2. Notices. All notices, demand or other communications hereunder shall be given or made in writing and shall be delivered personally, or sent by certified or registered mail or overnight delivery service, return receipt requested, postage prepaid, or telecopy to the party to whom they are directed at the respective addresses therefor set forth in Schedule B hereto, or at such other address as may be designated by notice from such party to all 9 other parties hereto. Any notice, demand or other communication given in a manner prescribed in this Section 7.2 shall be deemed to have been delivered on receipt. Section 7.3. Waiver. Any forbearance, failure, or delay by the Co-Trustee or the Owner Participant in exercising any right or power shall not preclude the further exercise thereof, and all of such rights and powers shall continue in full force and effect until specifically waived by the Co-Trustee or the Owner Participant. Section 7.4. Amendment and Waiver. Neither this Agreement, or any provision hereof may be changed, waived, discharged or terminated, except by a writing signed by AIGMFC, RMLC, the Co-Trustee, the Owner Trustee and the Owner Participant. Section 7.5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Section 7.6. Interpretation. The headings of the sections hereof are for convenience of reference only and shall not affect the meaning or construction of any provision hereof. Section 7.7. Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 7.8. Chattel Paper. To the extent, if any, that this Agreement constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), no security interest in this Agreement may be created through the transfer or possession of any counterpart hereof other than the original counterpart, which shall be identified as the counterpart containing the receipt therefor executed by the Co-Trustee and the Owner Participant on the signature page thereof. Section 7.9. Severability. Any provision of this 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. Section 7.10. Integration of Terms. This Agreement contains the entire agreement between the parties relating to the subject matter hereof and supersedes all oral statements and prior writings with respect thereto and may not be terminated except as provided herein. Section 7.11. Survival. All warranties, representations, indemnities and covenants made by either party hereto, herein or in any certificate or other instrument delivered by either such party or on the behalf of such party under this Agreement, shall be considered to have been relied upon by the other party hereto and shall survive the consummation of the transactions 10 contemplated hereby and in the Operative Documents regardless of any investigation made by either party or on behalf of such party. Section 7.12. Further Assurances. Each party hereto will promptly and duly execute and deliver such further documents to make such further assurances for and take such further action reasonably requested by any party to whom such first party is obligated, all as may be reasonably necessary or appropriate to carry out more effectively the intent and purpose of this Agreement. Section 7.13. Consent to Jurisdiction and Service of Process. Each of the parties hereto (i) hereby irrevocably submits to the nonexclusive jurisdiction of the Supreme Court of the State of New York, New York County (without prejudice to the rights of any party to remove to the United States District Court for the Southern District of New York) and to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement, or the subject matter hereof or any of the transactions contemplated hereby or thereby brought by any of the parties hereto or their successors or assigns, (ii) hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by Applicable Law, in such Federal court, and (iii) to the extent permitted by Applicable Law, hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding any claim that it is not personally subject to the jurisdiction of the above-named courts, that the suit, action or proceeding is improper or that this Agreement, or the subject matter hereof may not be enforced in or by such court. A final judgment obtained in respect of any action, suit or proceeding referred to in this Section 7.13 shall be conclusive and may be enforced in other jurisdictions by suit or judgment or in any manner as provided by Applicable Law. Each of the parties hereto hereby consents to service of process by registered mail, Federal Express, UPS, DHL or similar courier at the address to which notices to it are to be given, it being agreed that service in such manner shall constitute valid service upon such party or its respective successors or assigns in connection with any such action or proceeding only; provided, however, that nothing in this Section 7.13 shall affect the right of any of such parties or their respective successors or assigns to serve legal process in any other manner permitted by Applicable Law or affect the right of any of such parties or its respective property in the courts of other jurisdictions. Section 7.14. Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by each Trust Company, not individually or personally but solely as owner trustee under the Trust Agreement, in the exercise of the powers and authority conferred and vested in each respective Trustee, (b) each of the representations, undertakings and agreements herein made on the part of each Trustee is made and intended not as personal representations, undertakings and agreements by each Trust Company but is made and intended for the purpose of binding only each Trust Company, (c) nothing herein contained shall be construed as creating any liability on each Trust Company, individually or personally, to perform any covenant either expressed or implied herein, all such liability, if any, being expressly waived by the parties hereto or by any Person claiming by, through or under the parties hereto and (d) under no circumstances shall each Trust Company be personally liable for 11 the payment of any indebtedness or expenses of each respective Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Co-Trustee under this Agreement. In addition, each of the parties hereto acknowledges and agrees that the Co-Trustee has been appointed by the Owner Participant and the Owner Trustee for the limited purpose of exercising those trust powers in the State of Georgia which may not be exercised by the Owner Trustee under applicable law, and that, except as otherwise required by applicable law, the Co-Trustee shall not be obligated to take any action hereunder unless expressly directed in writing by the Owner Trustee or the Owner Participant in accordance with the terms of the Trust Agreement. 12 IN WITNESS WHEREOF, each of RMLC, AIGMFC, the Co-Trustee, the Owner Trustee and the Owner Participant has caused this Agreement to be duly executed and delivered by their respective officers thereto duly authorized. ROCKY MOUNTAIN LEASING CORPORATION By:/s/ J. E. Kofron ----------------------------------- Name: Title: AIG MATCHED FUNDING CORP. By:/s/ Kathleen M. Furlong ----------------------------------- Name: Kathleen M. Furlong Title: Treasurer 13 FLEET NATIONAL BANK, not in its individual capacity but solely as Owner Trustee By:/s/ Frank McDonald ----------------------------------- Name: Frank McDonald Title: Vice President SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee By:/s/ Bryan Echols ----------------------------------- Name: Title: PHILIP MORRIS CAPITAL CORPORATION By:/s/ Steven P. Seagrift ----------------------------------- Name: Title: 14 CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS AGREEMENT AND THE PAYMENT OBLIGATIONS OF AIGMFC HAVE BEEN ASSIGNED, PLEDGED AND/OR REPLEDGED TO AND ARE SUBJECT TO A FIRST PRIORITY SECURITY INTEREST IN FAVOR OF THE UNDERSIGNED, UNDER THE EQUITY FUNDING PLEDGE AGREEMENT DATED AS OF DECEMBER 30, 1996. THIS AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE ORIGINAL COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY THE UNDERSIGNED ON THE SIGNATURE PAGE THEREOF. SEE SECTION 7.8 HEREOF FOR INFORMATION CONCERNING THE RIGHTS OF THE HOLDERS OF THE VARIOUS COUNTERPARTS THEREOF. Receipt of this original counterpart of this Agreement is hereby acknowledged on this 30th day of December, 1996. SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee, and PHILIP MORRIS CAPITAL CORPORATION, as Secured Parties By: ----------------------------------- Name: Title: By: ----------------------------------- Name: Title: 15 SCHEDULE TO EXHIBIT 10.32.13 EQUITY FUNDING AGREEMENT (P1) The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant ---------- ------------------ -------------------------------------- P1 December 30, 1996 Philip Morris Capital Corporation P2 January 3, 1997 Philip Morris Capital Corporation F3 December 30, 1996 First Chicago Leasing Corporation F4 December 30, 1996 First Chicago Leasing Corporation N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation The Exhibits and Schedules to the Equity Funding Agreement (P1) are not filed herewith; however, the registrant hereby agrees that such Exhibits and Schedules will be provided to the Commission upon request. 16 EX-10.32-14 31 EXHIBIT 10.32.14 EXHIBIT 10.32.14 ================================================================================ EQUITY FUNDING PLEDGE AGREEMENT (P1) Dated as of December 30, 1996 between ROCKY MOUNTAIN LEASING CORPORATION, as Pledgor and SUNTRUST BANK, ATLANTA, as Pledgee ROCKY MOUNTAIN PUMPED STORAGE HYDROELECTRIC FACILITY ================================================================================ TABLE OF CONTENTS Page ---- SECTION 1. DEFINED TERMS................................................. 1 SECTION 2. PLEDGE........................................................ 1 SECTION 3. SECURED CLAIMS................................................ 2 SECTION 4. REMEDIES...................................................... 2 Section 4.1. Rights of the Pledgee........................... 2 Section 4.2. Filings......................................... 2 Section 4.3. Attorney-in-Fact................................ 2 Section 4.4. The Pledgee's Duties............................ 3 SECTION 5. DISCHARGE..................................................... 3 SECTION 6. REPRESENTATIONS AND WARRANTIES................................ 3 Section 6.1. Unlimited Holder................................ 3 Section 6.2. Rights in the Equity Funding Agreement.......... 3 SECTION 7. COVENANT OF THE PLEDGOR....................................... 3 SECTION 8. MISCELLANEOUS................................................. 4 Section 8.1. Amendments and Waivers.......................... 4 Section 8.2. Notices......................................... 4 Section 8.3. Survival........................................ 5 Section 8.4. Successors and Assigns.......................... 5 Section 8.5. Business Day.................................... 5 Section 8.6. Governing Law................................... 5 Section 8.7. Severability.................................... 5 Section 8.8. Counterparts.................................... 5 Section 8.9. Headings........................................ 6 Section 8.10. Further Assurances.............................. 6 Section 8.11. Effectiveness of Agreement...................... 6 Section 8.12. Limitation of Liability......................... 6 ii EQUITY FUNDING PLEDGE AGREEMENT (P1) This EQUITY FUNDING PLEDGE AGREEMENT (P1), dated as of December 30, 1996 (this "Pledge Agreement" or this "Agreement"), between ROCKY MOUNTAIN LEASING CORPORATION, a corporation organized and existing under the laws of the State of Delaware, as pledgor (the "Pledgor"), and SUNTRUST BANK, ATLANTA, a state banking corporation organized under the laws of the State of Georgia, not in its individual capacity but solely as Co-Trustee under the Trust Agreement (P1) dated as of December 30, 1996 with the Owner Trustee and the Owner Participant as supplemented (the "Pledgee"). WHEREAS, the Pledgor, the Pledgee, Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation), an electric membership corporation organized under the laws of the State of Georgia ("Oglethorpe"), Philip Morris Capital Corporation, a Delaware corporation (the "Owner Participant"), Fleet National Bank, not in its individual capacity but solely as Owner Trustee under the Trust Agreement (the "Owner Trustee") and Utrecht-America Finance Co. (the "Lender"), have entered into a Participation Agreement (P1) dated as of December 30, 1996 (the "Participation Agreement"); WHEREAS, the Pledgor and the Pledgee have entered into the Facility Lease of even date herewith; and WHEREAS, the Pledgor has entered into an Equity Funding Agreement (P1) with AIG Matched Funding Corp., a Delaware corporation ("AIGMFC"), dated as of December 30, 1996 (the "Equity Funding Agreement"), the Pledgor's rights, if any, in which the Pledgor is willing to pledge to the Pledgee to secure its obligations under the Facility Lease. NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINED TERMS. Capitalized terms used in this Agreement, including the recitals, and not otherwise defined herein shall have the respective meanings specified in Appendix A to the Participation Agreement. The general provisions of Appendix A shall apply to terms used in this Agreement and specifically defined herein. SECTION 2. PLEDGE. The Pledgor hereby transfers, assigns, pledges and grants a first priority security interest in each and all of its right, title and interest, if any, in the Equity Funding Agreement (including, without limitation, the right, if any, of the Pledgor to receive all amounts payable under the Equity Funding Agreement in accordance therewith, to give and receive any notice, consent, waiver or approval or take any other action under the Equity Funding Agreement) and all instruments and certificates evidencing the Equity Funding Agreement and all interest, cash, instruments or other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Equity Funding Agreement and all proceeds of the Equity Funding Agreement to the Pledgee for its benefit, and the Pledgee hereby accepts such transfer, assignment, pledge and security interest. SECTION 3. SECURED CLAIMS. The purpose of this pledge is to secure the Pledgor's obligation (whether now or thereafter existing) under the Facility Lease to pay the Equity Portion of Basic Rent and the Equity Portion of Termination Value or amounts computed by reference to the Equity Portion of Termination Value. All of the foregoing obligations shall be referred to as "Secured Claims." Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts that constitute part of the Secured Claims and that would be payable to the Pledgee under the Facility Lease but for the fact that they are unenforceable or not allowable due to (a) the existence of a bankruptcy, insolvency, reorganization, arrangement or moratorium involving the Pledgor or (b) other laws relating to, or effecting the enforcement of, creditor's rights generally against the Pledgor. SECTION 4. REMEDIES. Section 4.1. Rights of the Pledgee. Upon the happening and during the occurrence of any Event of Default under the Facility Lease, the Pledgee may (in addition to any other actions permitted under the other Operative Documents or by statute or at law or in equity) exercise any rights or remedies granted hereunder. The Pledgee may enforce the right of pledge created hereby to the fullest extent possible in accordance with, and shall be entitled to all rights, remedies and benefits afforded to pledgees under, the laws of the State of New York. To the extent necessary to realize the benefit of the pledge of the rights, if any, of the Pledgor in the Equity Funding Agreement effected by Section 2, the Pledgor authorizes the Pledgee to exercise any of its rights under the Equity Funding Agreement. Section 4.2. Filings. The Pledgor agrees that it shall, at its own expense, execute and deliver all financing statements necessary to perfect the Pledgee's or any assignee's interest in the rights, if any, of the Pledgor in the Equity Funding Agreement or any assignment or other 2 document reasonably requested by the Pledgee or the Owner Participant to perfect, protect, enforce, or otherwise give effect to the Pledgee's rights and remedies hereunder. Section 4.3. Attorney-in-Fact. If the Pledgor is unable or unwilling to sign such assignments, financing statements or other documents and to file financing statements or other public notices or recording with the appropriate authorities, as and when reasonably requested by counsel to the Pledgee or by counsel to the Owner Participant, the Pledgor hereby authorizes the Pledgee to sign as the Pledgor's true and lawful agent and attorney-in-fact any such assignments, financing statement or other documents and to make any such filings. Section 4.4. The Pledgee's Duties. The powers conferred on the Pledgee hereunder are solely to protect its interest in the rights, if any, of the Pledgor in the Equity Funding Agreement and shall not impose any duty upon it to exercise any such powers. Except for the accounting for monies actually received by it hereunder, the Pledgee shall have no duty as to the Equity Funding Agreement or other matters relative to the Equity Funding Agreement, whether or not the Pledgee has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to the Equity Funding Agreement. SECTION 5. DISCHARGE. The Pledgee agrees that when the Secured Claims shall have been fully paid and discharged, the Pledgee, at the written request and cost of the Pledgor, shall immediately confirm the release of the rights, if any, of the Pledgor in the Equity Funding Agreement from any Lien created pursuant to this Agreement and of all claims that the Pledgee may have hereunder. SECTION 6. REPRESENTATIONS AND WARRANTIES. Section 6.1. Unlimited Holder. The Pledgor represents and warrants that it is the legal and beneficial owner of the rights, if any, of the Pledgor in the Equity Funding Agreement and that the rights, if any, of the Pledgor in the Equity Funding Agreement are not subject to any Lien or any other right of any third party, except as provided by the Operative Documents. Section 6.2. Rights in the Equity Funding Agreement. The Pledgor represents and warrants that the pledge of the rights, if any, of the Pledgor in the Equity Funding Agreement under this Agreement vest in the Pledgee a valid first priority security interest in the rights, if any, of the Pledgor in the Equity Funding Agreement, as contemplated by this Agreement, subject to the provisions, if applicable, of Section 9-306 of the Uniform Commercial Code as in effect in New York. 3 SECTION 7. COVENANT OF THE PLEDGOR. The Pledgor shall not, without the prior written consent of the Pledgee, (a) sell, assign or otherwise dispose of, or grant any option with respect to, the rights, if any, of the Pledgor in the Equity Funding Agreement, or (b) create or permit any Lien upon or with respect to the rights, if any, of the Pledgor in the Equity Funding Agreement, except for the pledge created hereby. SECTION 8. MISCELLANEOUS. Section 8.1. Amendments and Waivers. No term, covenant, agreement or condition of this Agreement may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by the party against whom enforcement of such change is sought. Section 8.2. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein to a party hereto shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to such party at its address set forth below or at such other address as such party may from time to time designate by written notice to the other parties hereto: If to the Pledgor: Rocky Mountain Leasing Corporation c/o Corporation Trust Center 1209 Orange Street, Room 123 Wilmington, Delaware 19801 Facsimile No.: (302) 658-5459 Telephone No.: (302) 777-0250 4 with copies to: Sutherland, Asbill & Brennan 999 Peachtree Street, N.E. Atlanta, Georgia 30309-3996 Facsimile No.: (404) 853-8806 Telephone No.: (404) 853-3000 Attention: Cada T. Kilgore, III If to the Pledgee: SunTrust Bank, Atlanta P.O. Box 4625 Mail Code 008 Atlanta, Georgia 30302 Facsimile No.: (404) 332-3966 Telephone No.: (404) 588-7813 Attention: Corporate Trust Department with copies to the Owner Participant: Philip Morris Capital Corporation 800 Westchester Avenue Rye Brook, New York 10573-1301 Facsimile No.: (914) 335-1297 Telephone No.: (914) 335-5000 Attention: Vice President, Leasing with a copy to Director, Portfolio Administration and to the Owner Trustee: Fleet National Bank 777 Main Street Hartford, Connecticut 06115 Facsimile No.: (860) 986-7920 Telephone No.: (860) 986-4540 Attention: Corporate Trust Administration 5 Section 8.3. Survival. Except as expressly set forth herein, the warranties and covenants made by each party hereto shall not survive the expiration or termination of this Agreement. Section 8.4. Successors and Assigns. (a) This Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and permitted assigns as permitted by and in accordance with the terms hereof. (b) Except as expressly provided herein or in any other Operative Document, the Pledgor may not assign its interests herein without the consent of the Pledgee and AIGMFC. Except as expressly provided in the Operative Documents, the Pledgee may not assign its interests herein during the Term of the Facility Lease without the consent of the Pledgor and AIGMFC. Section 8.5. Business Day. Notwithstanding anything herein to the contrary, if the date on which any payment is to be made pursuant to this Agreement is not a Business Day, the payment otherwise payable on such date shall be payable on the next succeeding Business Day with the same force and effect as if made on such scheduled date and (provided such payment is made on such succeeding Business Day) no interest shall accrue on the amount of such payment from and after such scheduled date to the time of such payment on such next succeeding Business Day. Section 8.6. Governing Law. This Agreement shall be in all respects governed by and construed in accordance with the laws of the State of New York including all matters of construction, validity and performance. Section 8.7. Severability. If any provision hereof shall be invalid, illegal or unenforceable under Applicable Law, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. Section 8.8. Counterparts. This Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one Agreement. Section 8.9. Headings. The headings of the sections of this Agreement are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. Section 8.10. Further Assurances. Each party hereto will promptly and duly execute and deliver such further documents to make such further assurances for and take such further action reasonably requested by any party to whom such first party is obligated, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Agreement. 6 Section 8.11. Effectiveness of Agreement. This Agreement has been dated as of the date first above written for convenience only. This Agreement shall be effective on the date of execution and delivery by each of the Pledgee and the Pledgor. Section 8.12. Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by SunTrust Bank, Atlanta, not individually or personally but solely as Co-Trustee under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the Co-Trustee is made and intended not as personal representations, undertakings and agreements by SunTrust Bank, Atlanta, but is made and intended for the purpose for binding only the Co-Trustee, (c) nothing herein contained shall be construed as creating any liability on SunTrust Bank, Atlanta, individually or personally, to perform any covenant either expressly or impliedly contained herein, all such liability, if any, being expressly waived by the parties hereto or by any Person claiming by, through or under the parties hereto and (d) under no circumstances shall SunTrust Bank, Atlanta, be personally liable for the payment of any indebtedness or expenses of the Co-Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Co-Trustee under this Agreement or any other Operative Documents. In addition, each of the parties hereto acknowledges and agrees that the Co-Trustee has been appointed by the Owner Participant and Owner Trustee for the purpose of exercising those trust powers in the State of Georgia which may not be exercised by the Owner Trustee under applicable law, and that, except as otherwise required by applicable law, the Co-Trustee shall not be obligated to take any action hereunder unless expressly directed in writing by the Owner Trustee or the Owner Participant in accordance with the terms of the Trust Agreement. 7 IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused this Pledge Agreement to be duly executed and delivered by their respective officers thereunto duly authorized. ROCKY MOUNTAIN LEASING CORPORATION, as Pledgor By:/s/ Eugen Heckl -------------------------------------- Name: Eugen Heckl Title: Vice President Date: December 30, 1996 SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee under the Trust Agreement, as Pledgee By:/s/ Bryan Echols -------------------------------------- Name: Bryan Echols Title: Vice President Date: December 30, 1996 By:/s/ Sandra Thompson -------------------------------------- Name: Sandra Thompson Title: Vice Presidsent Date: December 30, 1996 Acknowledged and consented to by: AIG MATCHED FUNDING CORP. By:/s/ Kathleen Furlong ------------------------------ Name: Kathleen M. Furlong Title: Treasurer Date: SCHEDULE TO EXHIBIT 10.32.14 EQUITY FUNDING PLEDGE AGREEMENT (P1) The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant ----------- ------------------ -------------------------------------- P1 December 30, 1996 Philip Morris Capital Corporation P2 January 3, 1997 Philip Morris Capital Corporation F3 December 30, 1996 First Chicago Leasing Corporation F4 December 30, 1996 First Chicago Leasing Corporation N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation EX-10.32-15 32 EXHIBIT 10.32.15 EXHIBIT 10.32.15 This instrument, when recorded, should be returned to: Robert N. Farrar Attorney at Law The Carnegie Building 607 Broad Street, Suite 141 Rome, Georgia 30161-3059 THE PURPOSE OF THIS INSTRUMENT IS TO MAKE TECHNICAL CORRECTIONS TO THAT CERTAIN DEED TO SECURE DEBT, ASSIGNMENT OF SURETY BOND AND SECURITY AGREEMENT (P1), DATED DECEMBER 30, 1996, RECORDED IN DEED BOOK ____, PAGE ____, OF THE RECORDS OF THE CLERK OF SUPERIOR COURT OF FLOYD COUNTY, GEORGIA. IT IS THE INTENTION OF THE PARTIES THAT THIS DOCUMENT SUPERCEDE SUCH OTHER DOCUMENT IN ITS ENTIRETY. ================================================================================ DEED TO SECURE DEBT, ASSIGNMENT OF SURETY BOND AND SECURITY AGREEMENT (P1) Dated as of December 30, 1996 from ROCKY MOUNTAIN LEASING CORPORATION, as Grantor to SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee ROCKY MOUNTAIN PUMPED STORAGE HYDROELECTRIC PROJECT ================================================================================ TABLE OF CONTENTS Page ---- SECTION 1. DEFINED TERMS................................................ 3 SECTION 2. SECURITY AGREEMENT........................................... 3 Section 2.1 Deed to Secure Debt............................ 3 Section 2.2 Security Agreement............................. 3 Section 2.3 Assignment of Subordinate Rights............... 3 SECTION 3. SECURED CLAIMS............................................... 4 SECTION 4. REMEDIES..................................................... 4 Section 4.1 Rights of the Secured Party.................... 4 Section 4.2 Delay or Omission Not a Waiver................. 6 Section 4.3 Restoration of Rights and Remedies............. 7 Section 4.4 Attorney-in-Fact............................... 7 Section 4.5 Security for Secured Party's Obligations To Lender..................................... 7 Section 4.6 Filings........................................ 7 Section 4.7 The Secured Party's Duties..................... 7 SECTION 5. DISCHARGE.................................................... 8 SECTION 6. REPRESENTATIONS AND WARRANTIES............................... 8 SECTION 7. COVENANT OF THE GRANTOR...................................... 8 SECTION 8. MISCELLANEOUS................................................ 9 Section 8.1 Amendments and Waivers......................... 9 Section 8.2 Notices........................................ 9 Section 8.3 Survival....................................... 10 Section 8.4 Successors and Assigns......................... 11 Section 8.5 Business Day................................... 11 Section 8.6 Governing Law.................................. 11 Section 8.7 Severability................................... 11 Section 8.8 Counterparts................................... 11 Section 8.9 Headings....................................... 11 Section 8.10 Further Assurances............................. 11 Section 8.11 Effectiveness of Surety Bond Deed to Secure Debt.................................. 11 Section 8.12 Limitation of Liability........................ 12 Section 8.13 WAIVER......................................... 12 LIST OF ATTACHMENTS: Appendix A Definitions................................................... 14 Schedule 1 Description of the Rocky Mountain Site........................ 15 Facility Description Schedule Exhibit A-2 - Project Boundary Exhibit A-3 - Powertunnel and Powerhouse General Plan and Profile of the Rocky Mountain Project No. RM-00-CL-0013 R1 Exhibit A-4 - Description of Equipment Schedule 2 Description of the Facility................................... 16 Exhibit A-1 - Description of the Entire Rocky Mountain Property Exhibit A-2 - Project Boundary Drawing Exhibit A-3 - Powertunnel and Powerhouse General Plan and Profile of the Rocky Mountain Project No. RM-00-CL-0013 R1 Exhibit A-4 - Description of Equipment ii DEED TO SECURE DEBT, ASSIGNMENT OF SURETY BOND AND SECURITY AGREEMENT This DEED TO SECURE DEBT, ASSIGNMENT OF SURETY BOND AND SECURITY AGREEMENT (P1), dated as of December 30, 1996 (this "Surety Bond Deed to Secure Debt"), from ROCKY MOUNTAIN LEASING CORPORATION, a corporation organized and existing under the laws of the State of Delaware (together with its successors and permitted assigns, the "Grantor"), to SUNTRUST BANK, ATLANTA, a state banking corporation organized under the laws of the State of Georgia, not in its individual capacity but solely as Co-Trustee under the Trust Agreement (as amended or supplemented, the "Trust Agreement") dated as of December 30, 1996 with the Owner Trustee and the Owner Participant (together with its successors and permitted assigns, the "Secured Party" or "Co-Trustee"), having an address of P.O. Box 4625, Mail Code 008, Atlanta, Georgia 30302. WHEREAS, the Grantor, Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation), an electric membership corporation organized under the laws of the State of Georgia ("Oglethorpe"), the Co-Trustee, the Owner Trustee, the Owner Participant and Utrecht-America Finance Co., have entered into a Participation Agreement dated as of December 30, 1996 (the "Participation Agreement"); WHEREAS, the Rocky Mountain Site and the Facility are more particularly described in Schedule 1 and Schedule 2 respectively hereto; WHEREAS, the Grantor and the Co-Trustee have entered into the Facility Lease of even date herewith; and WHEREAS, the Grantor and Oglethorpe have entered into the Facility Sublease of even date herewith; and WHEREAS, the Secured Party has requested that Grantor enter into this Surety Bond Deed to Secure Debt to grant and convey a lien, security interest and security title in favor of the Secured Party, in and to the Sublease Collateral described herein, to secure the RMLC Secured Obligations (as hereinafter defined). NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: GRANTING CLAUSE To secure the due and punctual payment, performance and observance by the Grantor of (a) all of its obligations under the Ground Sublease and the Facility Lease, including its obligation (whether now or hereafter existing) under the Facility Lease to pay Rent and Termination Value or amounts computed by reference to Termination Value, (b) all of its obligations under the Participation Agreement, including Section 16 thereof, and (c) all of its obligations under the other Operative Documents to which Grantor is a party or by which it is bound, including, without limitation, the Rocky Mountain Agreements Re-Assignment, (all such obligations under clauses (a), (b) and (c) being referred to herein collectively, the "RMLC Secured Obligations"; it being acknowledged and agreed that the obligations under clauses (a), (b) and (c) above are obligations such as rent, performance and payment obligations that are not indebtedness evidenced by a note or for the payment of borrowed money and are, therefore, exempt from the payment of intangible recording tax under the laws of the State of Georgia), the Grantor hereby grants, bargains, sells and conveys to the Secured Party and grants to the Secured Party security title to and a security interest in and lien upon each and all of the following described property, rights and privileges (such property, rights and privileges being hereinafter referred to collectively as the "Sublease Collateral"): 1. all right, title and interest now held or hereafter acquired by the Grantor in, to and under, the Rocky Mountain Site, the Facility, the Facility Sublease, the Rocky Mountain Agreements Second Re-assignment and the Ground Sub-sublease, (collectively, the "Sublease Documents"), including all amounts of Sublease Rent payable to Grantor under the Facility Sublease (including all Sublease Basic Rent and Sublease Supplemental Rent (including Sublease Termination Value and Sublease Purchase Option Price)) and insurance proceeds and condemnation, requisition and other awards and payments of any kind for or with respect to the Undivided Interest payable to Grantor (including, without limitation, proceeds and payments received pursuant to exercise of any of the remedies provided in Section 17 of the Facility Sublease, and insurance and proceeds under Sections 10, 13, 14, 15 and 18 of the Facility Sublease in respect of termination of the Facility Sublessor's Rocky Mountain Interest); 2. all moneys and property relating to or arising out of any Sublease Document that are now or hereafter required to be paid to, or deposited with, the Grantor pursuant to the terms of any such Sublease Document; 3. all right, title and interest now held and hereafter acquired by the Grantor in, to and under the Qualifying Sublease Surety Bond (or any Qualifying Letter of Credit in replacement thereof) and the Qualifying Additional Security, including, without limitation, all amounts payable thereunder; and 4. all proceeds, direct or indirect, of the foregoing of whatever kind or nature, in each case whether now owned or existing or hereafter acquired and wherever located, including all claims against third parties for destruction, loss or damage to any of the foregoing or otherwise. TO HAVE AND TO HOLD the Sublease Collateral unto the Secured Party for the uses and purposes and subject to the terms and provisions set forth in this Surety Bond Deed to Secure Debt. 2 Notwithstanding any other provision of the Surety Bond Deed to Secure Debt, any Released Property sold, leased or otherwise conveyed pursuant to the Ground Lessor's Release Rights under Section 4.2 of the Ground Lease shall automatically, without further act of any Person, be released from the Lien of this Surety Bond Deed to Secure Debt. All components that no longer constitute part of the Undivided Interest in accordance with Section 7.2 of the Facility Lease shall be automatically released from the Lien of this Surety Bond Deed to Secure Debt Secured Party, if requested by Grantor or the Facility Lessee, will at the expense of Grantor of the Facility Lessee, as the case may be, execute and deliver instruments without representation or warranty of any kind whatsoever in form and substance reasonably satisfactory to Grantor or Facility Lessee, as the case may be, and the Secured Party evidencing any such release. IT IS HEREBY FURTHER COVENANTED AND AGREED by and among the parties hereto as follows: SECTION 1. DEFINED TERMS. The recitals set forth above which are incorporated in this Article I as if set forth in this Article I in their entirety. Capitalized terms used in this Surety Bond Deed to Secure Debt and not otherwise defined herein shall have the respective meanings specified in Appendix A hereto. The general provisions of Appendix A shall apply to terms used in this Deed to Secure Debt and specifically defined herein. SECTION 2. SECURITY AGREEMENT. Section 2.1 Deed to Secure Debt. This Surety Bond Deed to Secure Debt is intended to operate and to be construed as a deed passing to the Secured Party title to the Sublease Collateral that is real property under Georgia law (the "Real Property") and is made under those provisions of the existing laws of the State of Georgia relating to deeds to secure debt, and not as a mortgage. In addition, this Deed to Secure Debt is intended to operate and be construed as a security agreement under, and in accordance with, the Uniform Commercial Code of Georgia (the "Georgia UCC") for the benefit of the Secured Party with respect to the Sublease Collateral that is personal property under Georgia law ("Personalty"). Section 2.2 Security Agreement. The Grantor grants to the Secured Party a security interest in the Sublease Collateral that is Personalty. This Surety Bond Deed to Secure Debt, in addition to conveying security title to the Sublease Collateral that is real estate, is a security agreement as to the Sublease Collateral that is Personalty and shall support any financing statement showing the Secured Party's interest with respect thereto. Section 2.3 Assignment of Certain Rights. (a) To secure further payment and performance of the RMLC Secured Obligations and all other obligations to Secured Party imposed upon Grantor by this Surety Bond Deed to Secure Debt, Grantor hereby assigns and transfers to Secured Party all of Grantor's rights under the Facility Sublease and the Ground Sub-sublease (the 3 "Assigned Rights") which is coupled with an interest and irrevocable so long as the RMLC Secured Obligations remain outstanding in whole or in part. Grantor irrevocably appoints Secured Party as Grantor's true and lawful attorney-in-fact, having the right, exercisable at Secured Party's option at any time and from time to time, to the exclusion of Grantor to exercise the Assigned Rights, exclusive of the Excepted Rights. This assignment of the Assigned Rights is intended to be an absolute, irrevocable and present assignment, coupled with an interest, from Grantor to Secured Party and not merely the granting of a security interest. Upon Secured Party's request, Grantor shall, at Grantor's expense, execute and cause to be recorded supplemental or additional assignments of the Assigned Rights; provided, however, that neither this assignment nor the acceptance of any such supplemental or additional assignments shall be construed as a consent by Secured Party to any additional lease of all or any part of the Property or to impose upon Secured Party any obligation with respect thereto. Except as provided in the Loan Agreement, without first obtaining on each occasion the prior written approval of Secured Party, Grantor shall not cancel or permit the modification of any Granting Clause Document (except with respect solely to Excepted Payments and Excepted Rights) or take any action that is inconsistent with the foregoing assignment of the Assigned Rights, or attempt to terminate any of the same or grant any assignment, authorization, power or direction inconsistent herewith, and any such action, attempted termination or inconsistent assignment, authorization, power or direction shall be void. (b) Notwithstanding anything contained in paragraph (a) of this Section 2.3, (i) the rights granted to the Secured Party under this Section 2.3 to exercise any rights or remedies of the Grantor is a non-exclusive grant and shall not remove from the Grantor the right also to exercise any such rights or remedies, provided, however, the Grantor shall not exercise such rights or remedies without first giving to the Secured Party 10 Business Days' notice of its intent to so exercise and shall not so exercise in any event if within 10 Business Days' of the giving of such notice the Secured Party notifies the Grantor that, in its sole discretion, it objects to the exercise thereof by the Grantor; and (ii) the rights granted to the Secured Party under this Section 2.3 shall not in any event permit the Secured Party to sell or otherwise dispose of the Grantor's interest as lessor or assignor under the Sublease Documents except pursuant to the remedies granted hereunder under any other Operative Document, at law or in equity. SECTION 3. SECURED CLAIMS. This Surety Bond Deed to Secure Debt, and the lien and security interest herein granted to the Secured Party, is made and given to secure RMLC Secured Obligations. Without limiting the generality of the foregoing, this Surety Bond Deed to Secure Debt secures the payment of all amounts that constitute part of the RMLC Secured Obligation and that would be payable to the Secured Party under the Facility Lease, the Ground Sublease or the Participation Agreement. 4 SECTION 4. REMEDIES. Section 4.1 Rights of the Secured Party. (A) Upon the happening and during the occurrence of any Event of Default under the Facility Lease, the Secured Party may, at its option and in addition to any other rights and remedies said Secured Party may have under any other Operative Document or at law or in equity, (i) direct the surety on the Qualifying Sublease Surety Bond (or any issuer of a Qualifying Letter of Credit issued in replacement of the Qualifying Sublease Surety Bond) or Qualifying Additional Security to make payment directly to the Secured Party and the Secured Party shall have the right to exercise any rights or remedies granted hereunder or thereunder, (ii) direct the Facility Sublessee under the Facility Sublease and the Ground Sub-sublessee under the Ground Sub-sublease to make all payments thereunder directly to the Secured Party (such payments to be held by the Secured Party as security for the RMLC Secured Obligations and applied in accordance with the following paragraph (B)) and exercise any rights or remedies granted hereunder or thereunder and (iii) exercise any rights available to the Grantor under the Rocky Mountain Agreements Second Re-Assignment. The foregoing directions and rights are coupled with an interest and irrevocable by dissolution or otherwise and are in addition to any and all other remedies that the Secured Party may have hereunder, under any other Operative Document, at law or in equity. (B) Upon the happening and during the occurrence of an Event of Default under the Facility Lease, Secured Party may direct the Facility Sublessee to pay all Rent due from time to time under the Facility Sublease directly to the Lender (or, if the Lien of the Loan Agreement and the Deed to Secure Debt have been fully released, to Facility Lessor or the then assignee of its rights hereunder). The foregoing directions and rights are coupled with an interest and irrevocable by dissolution or otherwise and are in addition to any and all other remedies that the Secured Party may have hereunder, under any other Operative Document, at law or in equity. (C) Upon the happening and during the occurrence of an Event of Default under the Facility Lease, Secured Party may, at its option and in addition to any other rights and remedies the Secured Party may have under any other Operative Document or at law or in equity: (i) if at the time such action is lawful and always subject to compliance with Applicable Law, either with or without taking possession, and either before or after taking possession, and without instituting any legal proceedings whatsoever, sell and dispose of the Sublease Collateral, or any part thereof, or interest therein, at auction at the usual place for conducting sales at the courthouse in the county in which the Sublease Collateral, or any part thereof, is located, to the highest bidder for cash, after advertising the time, terms and place of such sale once a week for four weeks immediately preceding such sale (but without regard to the number of days intervening between the date of publication of the first advertisement and the date of sale) in a newspaper published in such county, or in the paper in which the Sheriff's advertisements for such county are then being published, all other notice being hereby waived by Grantor. The Secured Party may thereupon execute and deliver to the purchaser at such sale a conveyance of the Sublease Collateral so sold, which conveyance shall contain recitals as to the Event of Default under 5 the Facility Lease upon which the execution of the power of sale herein granted depends, and Grantor hereby constitutes and appoints the Secured Party the true and lawful agent and attorney in fact of Grantor to make such recitals, sale and conveyance, and all of the acts of the Secured Party as such attorney in fact is hereby ratified and confirmed. Grantor agrees that such recitals shall be binding and conclusive upon Grantor and that the conveyance to be made by the Secured Party shall divest Grantor of all right, title, interest, equity and right of redemption, including any statutory redemption, in and to the Sublease Collateral. The Secured Party shall collect the proceeds of such sale, and after applying and paying the same, or reserving therefrom an amount sufficient, to pay and satisfy all of the RMLC Secured Obligations (and reasonable attorneys' fees) and all costs and expenses of such sale, shall pay any surplus to Grantor, all as provided by Applicable Law. The power and agency hereby granted are coupled with an interest and are irrevocable by dissolution or otherwise and are in addition to any and all other remedies that the Secured Party may have hereunder, under any other Operative Documents, at law or in equity. The Secured Party may bid and become the purchaser at any such sale, in which event the Secured Party will be entitled to a credit for the RMLC Secured Obligations against the purchase price payable at such sale; or (ii) proceed to protect and enforce this Surety Bond Deed to Secure Debt and the RMLC Secured Obligations held by it by suit or suits or proceedings in equity, at law or in bankruptcy, and for the specific performance of any covenant or agreement herein or therein contained or in execution or aid of any power herein granted, or for foreclosure hereunder or thereunder, or for the appointment of a receiver or receivers for the Sublease Collateral or any part thereof, or for the recovery of judgment for the RMLC Secured Obligations or for the enforcement of any other proper, legal or equitable remedy available under Applicable Law; or (iii) either in person, by agent or by a receiver appointed by a court, and without regard to the adequacy of any security for the RMLC Secured Obligations, subject in all cases to the provisions of Applicable Law, (a) to enter upon and take possession of all or any part of the Sublease Collateral that is real property (the "Real Property"), (b) in its own name to sue for or otherwise collect all rents comprising a part of the Sublease Collateral, including those past due and unpaid, and (c) to apply said rents so collected, less costs and expenses of operation and collection (including reasonable attorneys' fees actually incurred), upon any of the RMLC Secured Obligations. The collection of said rents, the entering upon and taking possession of the Real Property or the application of all or any portion of said rents shall not cure or waive any Event of Default under the Facility Lease or notice of any Event of Default under the Facility Lease or invalidate any act done in response to any Event of Default under the Facility Lease or pursuant to any notice of any Event of Default under the Facility Lease. Section 4.2 Delay or Omission Not a Waiver. No delay or omission by the Secured Party in the exercise of any right or remedy hereunder accruing upon any Event of Default under the Facility Lease will impair any such right or remedy or constitute a waiver of any Event of Default under the Facility Lease or be deemed to be in acquiescence therein. Every 6 right and remedy given by this Section 4 or by Applicable Law to the Secured Party may be exercised from time to time, and as often as may be deemed expedient, by the Secured Party. Section 4.3 Restoration of Rights and Remedies. If the Secured Party has instituted any proceeding to enforce any right, power or remedy under this Surety Bond Deed to Secure Debt and such proceeding has been discontinued or abandoned or for any reason has been determined adverse to the Secured Party, then Grantor and the Secured Party shall, subject to any determination in such proceeding, be restored to their former positions hereunder and all rights, remedies and powers of the Secured Party shall continue as if no such proceeding has been instituted. Section 4.4 Attorney-in-Fact. Grantor hereby appoints and constitutes the Secured Party as the true and lawful attorney-in-fact of Grantor for the purpose of taking any action permitted by this Surety Bond Deed to Secure Debt in connection with the enforcement of the Lien of this Surety Bond Deed to Secure Debt, with full power (in the name of Grantor or otherwise), at any time following an Event of Default under the Facility Lease and during the continuance thereof, to ask, require, demand and receive any and all amounts and claims for amounts due and to become due under or arising out of the Sublease Collateral, to endorse any check or other instrument or order in connection therewith and to file any claim or take any action or institute any proceeding to collect any portion of the Sublease Collateral. Upon the written instruction of the Secured Party, Grantor shall execute any financing statement (and any continuation statement with respect to any such financing statement), or any other document necessary for the Secured Party to obtain the full benefits of the Lien of this Surety Bond Deed to Secure Debt and as may be specified in such instructions. Section 4.5 Security for Secured Party's Obligations To Lender. In order to secure the RMLC Secured Obligations, the Secured Party will by the Loan Agreement assign and grant a Lien, and by the Deed to Secure Debt convey security title, to the Lender in and to all of the Secured Party's right, title and interest in, to and under this Surety Bond Deed to Secure Debt. The Grantor hereby consents to such assignment and to the creation of such Lien and security title and acknowledges receipt of copies of the Loan Agreement and the Deed to Secure Debt. Unless and until Grantor shall have received written notice from the Lender that the Lien of the Loan Agreement and the security title of the Deed to Secure Debt have been fully released, the Lender shall have the rights of the Secured Party under this Surety Bond Deed to Secure Debt to the extent set forth in and subject in each case to the exceptions set forth in the Loan Agreement or the Deed to Secure Debt. Section 4.6 Filings. The Grantor agrees that it shall, at its own expense, execute and deliver all financing statements necessary to perfect the Secured Party's interest in the Sublease Collateral or any other document reasonably requested by the Secured Party to perfect, protect, enforce, or otherwise give effect to the Secured Party's rights and remedies hereunder. Section 4.7 The Secured Party's Duties. The powers conferred on the Secured Party hereunder are solely to protect its interest in the Sublease Collateral and shall not impose any duty upon it to exercise any such powers. Except for the accounting for monies actually 7 received by it hereunder, the Secured Party shall have no duty as to the Sublease Collateral or other matters relative to the Sublease Collateral, whether or not the Secured Party has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to the Sublease Collateral. SECTION 5. DISCHARGE. This Surety Bond Deed to Secure Debt and the Lien created hereby shall remain in full force and effect until all of the RMLC Secured Obligations shall have been paid in full. The Secured Party agrees that when the RMLC Secured Obligations shall have been fully paid and discharged, the Secured Party at the written request and cost of the Grantor, will reconvey the Sublease Collateral in the manner provided by Applicable Law by an instrument of reconveyance without representation or warranty of any kind whatsoever in form and substance reasonably satisfactory to Grantor and the Secured Party. SECTION 6. REPRESENTATIONS AND WARRANTIES. The Grantor represents and warrants (a) that it is fully authorized to grant security title to and a security interest in the Sublease Collateral, (b) that it is the legal and beneficial owner of the Qualifying Sublease Surety Bond and the other Sublease Collateral, (c) that, except for the security title and security interest herein granted to the Secured Party, it has not made any conveyance, sale, assignment, pledge, hypothecation or other transfer of the Sublease Collateral, (d) that the Sublease Collateral is free and clear of all Liens other than the security title and security interest herein granted and (e) that the Secured Party has hereby acquired a security interest and security title in, on and to the Sublease Collateral. SECTION 7. COVENANT OF THE GRANTOR. The Grantor shall not, without the prior written consent of the Secured Party, as long as the Lien of the Loan Agreement or security title of the Deed to Secure Debt have not been fully released, the Lender and thereafter the prior written consent of the Owner Participant (a) sell, assign or otherwise dispose of, or grant any option with respect to the Sublease Collateral, (b) create or permit any Lien upon or with respect to the Sublease Collateral, except for the assignment created hereby, (c) terminate, amend or modify, or waive compliance with any term, covenant, agreement or condition of the Sublease Documents or the Qualifying Sublease Surety Bond (or any Qualifying Letter of Credit issued in replacement of the Qualifying Sublease Surety Bond) or Qualifying Additional Security or (d) exercise any rights under the Sublease Collateral, including, without limitation, options, elections, determinations, consents, approvals, waivers or giving of notices by Grantor, as Facility Sublessor or Ground Sub-sublessor under the Facility Sublease or Ground Sub-sublease, respectively. The Grantor shall immediately inform the Secured Party in the event that an attachment is levied upon the Sublease Collateral or if another 8 event occurs that might affect or purport to affect the Secured Party's interest in the Sublease Collateral. SECTION 8. MISCELLANEOUS. Section 8.1 Amendments and Waivers. No term, covenant, agreement or condition of this Surety Bond Deed to Secure Debt may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by the party against whom enforcement of such change is sought. Section 8.2 Notices. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein to a party hereto shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to such party and copy party at its address set forth below or at such other address as such party or copy party may from time to time designate by written notice to the other parties: If to the Grantor: Rocky Mountain Leasing Corporation c/o Corporation Trust Center 1209 Orange Street, Room 123 Wilmington, Delaware 19801 Facsimile No.: (302) 688-5459 Telephone No.: (302) 777-0250 with copies to: Sutherland, Asbill & Brennan 999 Peachtree Street, N.E. Atlanta, Georgia 30309-3996 Facsimile No.: (404) 853-8806 Telephone No.: (404) 853-3000 Attention: Officer and to: 9 Utrecht-America Finance Co., c/o Rabobank Nederland, New York Branch 245 Park Avenue New York, New York 10167-0062 Facsimile No.: (212) 916-7880 Telephone No.: (212) 916-7864 Attention: General Counsel's Office If to the Secured Party: SunTrust Bank, Atlanta P.O. Box 4625 Mail Code 008 Atlanta, Georgia 30302 Facsimile No.: (404) 332-3966 Telephone No.: (404) 588-7813 Attention: Corporate Trust Department with copies to the Owner Trustee: Fleet National Bank 777 Main Street Hartford, CT 06115 Facsimile No.: (860) 986-7920 Telephone No.: (860) 986-4540 Attention: Corporate Trust Administration to the Owner Participant: Philip Morris Capital Corporation 800 Westchester Avenue Rye Brook, NY 10573 Facsimile No.: (914) 335-1297 Telephone No.: (914) 335-5000 Attention: Vice President, Leasing with a copy to Director, Portfolio Administration and with a copy to Utrecht-America Finance Co. at the address set forth above. 10 Section 8.3 Survival. Except as expressly set forth herein, the warranties and covenants made by each party hereto, shall survive the expiration or termination of this Surety Bond Deed to Secure Debt. Section 8.4 Successors and Assigns. (a) This Surety Bond Deed to Secure Debt shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and assigns as permitted by and in accordance with the terms hereof. (b) Except as expressly provided herein or in any other Operative Document, the Grantor may not assign its interests herein without the consent of the Secured Party. Except as expressly provided in the Operative Documents, the Secured Party may not assign its interests herein during the Facility Sublease Term without the consent of the Grantor. Section 8.5 Business Day. Notwithstanding anything herein to the contrary, if the date on which any payment is to be made pursuant to this Surety Bond Deed to Secure Debt is not a Business Day, the payment otherwise payable on such date shall be payable on the next succeeding Business Day with the same force and effect as if made on such scheduled date and (provided such payment is made on such succeeding Business Day) no interest shall accrue on the amount of such payment from and after such scheduled date to the time of such payment on such next succeeding Business Day. Section 8.6 Governing Law. This Surety Bond Deed to Secure Debt shall be in all respects governed by and construed in accordance with the laws of the State of New York including all matters of construction, validity and performance except to the extent the law of the State of Georgia is mandatorily applicable. Section 8.7 Severability. If any provision hereof shall be invalid, illegal or unenforceable under Applicable Law the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. Section 8.8 Counterparts. This Surety Bond Deed to Secure Debt may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one Surety Bond Deed to Secure Debt. Section 8.9 Headings. The headings of the sections of this Surety Bond Deed to Secure Debt are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. Section 8.10 Further Assurances. Each party hereto will promptly and duly execute and deliver such further documents to make such further assurances for and take such further action reasonably requested by any party to whom such first party is obligated, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Surety Bond Deed to Secure Debt. 11 Section 8.11 Effectiveness of Surety Bond Deed to Secure Debt. This Surety Bond Deed to Secure Debt has been dated as of the date first above written for convenience only. This Surety Bond Deed to Secure Debt shall be effective on the date of execution and delivery by each of the Secured Party and the Grantor. Section 8.12 Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Surety Bond Deed to Secure Debt is executed and delivered by SunTrust Bank, Atlanta, not individually or personally but solely as Co-Trustee under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, and Fleet National Bank, not individually or personally but solely as Owner Trustee under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of each of the Co-Trustee and the Owner Trustee is made and intended not as personal representations, undertakings and agreements by SunTrust Bank, Atlanta and Fleet National Bank, respectively, but is made and intended for the purpose for binding only the Co-Trustee and the Owner Trustee, respectively, (c) nothing herein contained shall be construed as creating any liability on either SunTrust Bank, Atlanta or Fleet National Bank, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto or by any Person claiming by, through or under the parties hereto and (d) under no circumstances shall either SunTrust Bank, Atlanta or Fleet National Bank, be personally liable for the payment of any indebtedness or expenses of the Co-Trustee or the Owner Trustee, respectively, or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Co-Trustee or the Owner Trustee, respectively, under this Surety Bond Deed to Secure Debt. In addition, each of the parties hereto acknowledges and agrees that the Co-Trustee has been appointed by the Owner Participant and Owner Trustee for the limited purpose of exercising those trust powers in the State of Georgia which may not be exercised by the Owner Trustee under applicable law, and that, except as otherwise required by applicable law, the Co-Trustee shall not be obligated to take any action hereunder unless expressly directed in writing by the Owner Trustee or the Owner Participant in accordance with the terms of the Trust Agreement. Section 8.13 WAIVER. GRANTOR HEREBY WAIVES ANY RIGHT GRANTOR MAY HAVE UNDER THE CONSTITUTION OF THE STATE OF GEORGIA OR THE CONSTITUTION OF THE UNITED STATES OF AMERICA TO NOTICE OR TO A JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY PROVIDED BY THIS INSTRUMENT TO SECURED PARTY, AND GRANTOR WAIVES ANY RIGHTS, IF ANY, THAT GRANTOR MAY HAVE TO SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED IN ACCORDANCE WITH THE PROVISIONS OF THIS INSTRUMENT ON THE GROUND (IF SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT A PRIOR JUDICIAL HEARING. ALL WAIVERS BY GRANTOR IN THIS SECTION HAVE BEEN MADE VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY, AFTER GRANTOR HAS BEEN FIRST INFORMED BY COUNSEL OF GRANTOR'S OWN CHOOSING AS TO POSSIBLE ALTERNATIVE RIGHTS, AND HAVE BEEN MADE AS AN INTENTIONAL RELINQUISHMENT AND ABANDONMENT OF A KNOWN RIGHT AND PRIVILEGE. 12 IN WITNESS WHEREOF, the Grantor has caused this Surety Bond Deed to Secure Debt to be duly executed and delivered by its officer thereunto duly authorized. ROCKY MOUNTAIN LEASING CORPORATION By:/s/ Eugen Heckl ---------------------------------------- Name: Eugen Heckl Title: Vice President Date: 12/30/96 Signed and delivered in the presence of: /s/ Leonard Scott - ---------------------------- Unofficial Witness /s/ David M. Broehm - ---------------------------- Notary Public My Commission Expires: March 16, 1998 [Notary Seal] --------------- 13 SCHEDULE TO EXHIBIT 10.32.15 DEED TO SECURE DEBT, ASSIGNMENT OF SURETY BOND AND SECURITY AGREEMENT (P1) The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant ---------- ------------------- -------------------------------------- P1 December 30, 1996 Philip Morris Capital Corporation P2 January 3, 1997 Philip Morris Capital Corporation F3 December 30, 1996 First Chicago Leasing Corporation F4 December 30, 1996 First Chicago Leasing Corporation N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation Other than Appendix A, the Exhibits and Schedules to the Deed to Secure Debt, Assignment of Surety Bond and Security Agreement (P1) are not filed herewith; however, the registrant hereby agrees that such Exhibits and Schedules will be provided to the Commission upon request. 14 APPENDIX A Definitions Refer to Appendix A to Exhibit 10.32.1 of the Form 10-K. 15 EX-10.32-16 33 EXHIBIT 10.32.16 EXHIBIT 10.32.16 This instrument, when recorded, should be returned to: Robert N. Farrar Attorney at Law The Carnegie Building 607 Broad Street, Suite 141 Rome, Georgia 30161-3059 ================================================================================ SUBORDINATED DEED TO SECURE DEBT AND SECURITY AGREEMENT (P1) Dated as of December 30, 1996 from OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), AS GRANTOR TO AMBAC INDEMNITY CORPORATION, AND SUNTRUST BANK, ATLANTA, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS CO-TRUSTEE, ROCKY MOUNTAIN PUMPED STORAGE HYDROELECTRIC PROJECT ================================================================================ TABLE OF CONTENTS Page ---- SECTION 1. DEFINITIONS...................................................... 4 Section 1.1. Subordinated Deed to Secure Debt............. 4 Section 1.2. Security Agreement........................... 4 Section 1.3. Secured Claims............................... 4 SECTION 2. DISTRIBUTION OF PROCEEDS FROM SALE OF SUBORDINATED COLLATERAL....................................................... 5 SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF OGLETHORPE; SUBORDINATED DEED TO SECURE DEBT; EVENTS OF DEFAULT; REMEDIES...................................... 5 Section 3.1. Subordinated Deed to Secure Debt Event of Default...................................... 5 Section 3.2. Other Rights of Subordinated Secured Parties. 5 Section 3.3. Delay or Omission Not a Waiver............... 7 Section 3.4. Restoration of Rights and Remedies........... 7 SECTION 4. ATTORNEY-IN-FACT; FINANCING STATEMENTS........................... 7 SECTION 5. LIMITATION ON SUBORDINATE SECURED PARTIES' RIGHTS................ 7 SECTION 6. MISCELLANEOUS.................................................... 8 Section 6.1. Reconveyance; Release of Components.......... 8 Section 6.2. No Legal Title to Subordinated Collateral in Subordinated Secured Parties................. 8 Section 6.3. Notices...................................... 9 Section 6.4. Survival..................................... 11 Section 6.5. Successors and Assigns....................... 11 Section 6.6. Business Day................................. 11 Section 6.7. Governing Law................................ 11 Section 6.8. Severability................................. 11 Section 6.9. Counterparts................................. 11 Section 6.10. Headings and Table of Contents............... 11 Section 6.11. Further Assurances........................... 11 Section 6.12. No Oral Modifications or Continuing Waivers.. 12 Section 6.13. Effectiveness of this Subordinated Deed to Secure Debt.................................. 12 Section 6.14. Limitation of Liability...................... 12 Section 6.15. WAIVER....................................... 12 Section 6.16. Waiver of Marshaling......................... 13 i LIST OF ATTACHMENTS: Schedule 1 - Description of the Rocky Mountain Site Facility Description Schedule Exhibit A-2 - Project Boundary Drawing Exhibit A-3 - Powertunnel and Powerhouse General Plan and Profile of the Rocky Mountain Project No. RM-00-CL-0013 R1 Exhibit A-4 - Description of Equipment Schedule 2 - Description of the Facility Facility Description Schedule Exhibit A-1 - Description of the Entire Rocky Mountain Property Exhibit A-2 - Project Boundary Drawing Exhibit A-3 - Powertunnel and Powerhouse General Plan and Profile of the Rocky Mountain Project No. RM-00-CL-0013 R1 Exhibit A-4 - Description of Equipment ii SUBORDINATED DEED TO SECURE DEBT AND SECURITY AGREEMENT (P1) This SUBORDINATED DEED TO SECURE DEBT AND SECURITY AGREEMENT (P1), dated as of December 30, 1996 (this "Subordinated Deed to Secure Debt" or this "Agreement"), from OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATING & TRANSMISSION CORPORATION), an electric membership corporation organized under the laws of the State of Georgia (together with its successors and assigns, "Oglethorpe"), to AMBAC INDEMNITY CORPORATION, a Wisconsin-domiciled stock insurance corporation (together with its successors and assigns, "AMBAC") and SUNTRUST BANK, ATLANTA, a state banking corporation not in its individual capacity but solely as Co-Trustee under the Trust Agreement (together with its successors and assigns, sometimes referred to herein as the "Facility Lessor") (together with AMBAC). WHEREAS, Oglethorpe and Georgia Power Company, a corporation organized under the laws of the State of Georgia (together with its successors and assigns, "Georgia Power") own the Rocky Mountain Site and the Facility as tenants-in-common under Georgia law; WHEREAS, the Rocky Mountain Site and the Facility are more particularly described in Schedule 1 and Schedule 2 respectively hereto; WHEREAS, Oglethorpe, the Owner Participant, the Facility Lessor, the Owner Trustee, Rocky Mountain Leasing Corporation, a Delaware corporation (together with its successors and assigns, "RMLC"), and Utrecht-America Finance Co. have entered into the Participation Agreement (P1), dated as of December 30, 1996 (the "Participation Agreement"); WHEREAS, pursuant to the Participation Agreement, (i) Oglethorpe has leased an undivided interest in its interest as tenant in common in the Facility to the Facility Lessor pursuant to the Head Lease, (ii) the Facility Lessor has leased such Undivided Interest in the Facility to RMLC pursuant to the Facility Lease, (iii) RMLC has leased such Undivided Interest in the Facility to Oglethorpe pursuant to the Facility Sublease, (iv) Oglethorpe has leased an undivided interest in its interest as a tenant in common in the Rocky Mountain Site to the Facility Lessor pursuant to the Ground Lease, (v) the Facility Lessor has leased such Ground Interest in the Rocky Mountain Site to RMLC pursuant to the Ground Sublease, (vi) RMLC has leased such Ground Interest in the Rocky Mountain Site to Oglethorpe pursuant to the Ground Sub-sublease, (vii) Oglethorpe has assigned a portion of its rights and obligations under the Rocky Mountain Agreements to the Facility Lessor, and the Facility Lessor has assumed such portion of Oglethorpe's obligations, pursuant to the Rocky Mountain Agreements Assignment, (viii) the Facility Lessor has assigned such rights and obligations under the Rocky Mountain Agreements to RMLC, and RMLC has assumed such obligations, pursuant to the Rocky Mountains Agreements Re-assignment and (ix) RMLC has assigned such rights and obligations under the Rocky Mountain Agreements to Oglethorpe, and Oglethorpe has assumed such obligations pursuant to the Rocky Mountain Agreements Second Re-assignment; WHEREAS, Oglethorpe has agreed to secure its obligations to the Facility Lessor under the Overall Transaction, by providing a lien, security title and security interest in its remainder interest in the Undivided Interest, an undivided interest equal to the Facility Lessor's Percentage in the Rocky Mountain Site and its interest in the Rocky Mountain Agreements to the extent it relates to the Undivided Interest; WHEREAS, pursuant to the Participation Agreement, Oglethorpe has obtained from AMBAC the Qualifying Surety Bonds to support its Covered Obligations; WHEREAS, pursuant to the AMBAC Guaranty, Oglethorpe has agreed to reimburse AMBAC for any payments made under the Qualifying Surety Bonds and to secure such reimbursement obligation by providing a lien, security title and security interest identified in the fifth "WHEREAS" clause above; and NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: GRANTING CLAUSE To secure all of the due and punctual payment, performance and observance by Oglethorpe of all of (a) Oglethorpe's obligations to the Facility Lessor and the Owner Participant under the Operative Documents and (b) Oglethorpe's obligations to AMBAC under the AMBAC Guaranty (items (a) and (b) collectively referred to hereinafter as the "Secured Obligations"; it being acknowledged and agreed that the Secured Obligations are obligations such as reimbursement and indemnification obligations and are not indebtedness evidenced by a note or for the payment of borrowed money and are therefore exempt from the payment of intangible recording tax under the laws of the State of Georgia), Oglethorpe hereby grants, bargains, sells and conveys unto AMBAC and the Facility Lessor (for itself and for the benefit of the Owner Participant) (collectively, the "Subordinated Secured Parties") all rights, title and interests of Oglethorpe in, to and under, and grants to the Subordinated Secured Parties a security interest in, each and all of the following described property, rights and privileges (such property, rights and privileges being hereinafter referred collectively, the "Subordinated Collateral"): 1. all right, title and interest now held or hereafter acquired by Oglethorpe in and to the undivided interest in the Facility leased to the Facility Lessor under the Head 2 Lease, other than any such right, title or interest under or pursuant to the Head Lease or any other Senior Document (defined below and hereinafter so called); 2. all right, title and interest now held or hereafter acquired by Oglethorpe in and to the undivided interest in the Rocky Mountain Site leased to the Facility Lessor under the Ground Lease, other than any such right, title or interest under or pursuant to the Ground Lease or any other Senior Document; 3. all right, title and interest now held or hereafter acquired by Oglethorpe in and to the undivided interest in the Rocky Mountain Agreements assigned to the Facility Lessor under the Rocky Mountain Agreements Assignment, other than any such right, title or interest under or pursuant to the Rocky Mountain Agreements Assignment or any other Senior Document; 4. all of the rents, royalties, issues, profits, revenue, income and other benefits of the Undivided Interest for the Ground interest payable to Oglethorpe, arising from the use or enjoyment of all or any portion thereof or from any lease or agreement pertaining thereto, whether now due, past due, or to become due, other than any such rents, royalties, issues, profits, revenue, income and other benefits (including, without limitation, the Head Lease Rent) under or pursuant to the Head Lease or any other Senior Document; and 5. all proceeds of paragraphs 1, 2 and 3, above, of whatever kind or nature, in each case whether now owned or existing or hereafter acquired and wherever located, including all claims against third parties for destruction, loss or damage to any of the foregoing or otherwise. PROVIDED, HOWEVER, the foregoing conveyance and grant are, in all respects, subject, subordinate and inferior in priority, to the following: A. the Lien of the Oglethorpe Mortgage (including any amendment, supplement, future advance or issuance of additional indebtedness thereunder); B. the Rocky Mountain Agreements (including any extension, amendment, supplement, substitution or replacement thereto) and the rights of the parties thereto; and C. the Head Lease, the Facility Lease, the Facility Sublease, the Ground Lease, the Ground Sublease, the Ground Sub-sublease, the Rocky Mountain Agreements Assignment, the Rocky Mountain Agreements Re-Assignment, the Rocky Mountain Agreements Second Re-Assignment, the Loan Certificate, the Loan Agreement, the Deed to Secure Debt, the Participation Agreement and the other Operative Documents (including any extension, amendment, supplement, substitution or replacement of any 3 thereof now or hereafter in effect, whether or not made with or without the consent of the Subordinated Secured Parties, and any future advances or issuance of additional indebtedness under any thereof or under any such extension, amendment, supplement, substitution or replacement), other than this Subordinated Deed to Secure Debt; and D. all rights, titles, interests and liens of the parties to and secured by the documents referred to in the foregoing clauses A, B and C, other than this Subordinated Deed to Secure Debt (the documents referred to in the foregoing clauses A, B and C, other than this Subordinated Deed to Secure Debt, are herein referred to as the "Senior Documents"), including, without limitation, the respective rights of quiet enjoyment under certain of the Senior Documents (such rights, titles, interests and liens under the Senior Documents are herein referred to collectively as the "Senior Rights"; the obligees or any trustee under the Oglethorpe Mortgage, the Lender under the Loan Agreement and the other parties to the Senior Documents and holders of the Senior Rights (as such parties and holders only) are herein referred to collectively as the "Senior Parties"). TO HAVE AND TO HOLD the Subordinated Collateral unto the Subordinated Secured Parties, their successor and assigns, in fee simple forever. IT IS HEREBY FURTHER COVENANTED AND AGREED by and among the parties hereto as follows: SECTION 1. DEFINITIONS For purposes of this Subordinated Deed to Secure Debt, capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in Appendix A hereto. The general provisions of Appendix A shall apply to terms used in this Subordinated Deed to Secure Debt and specifically defined herein. Section 1.1. Subordinated Deed to Secure Debt. This Subordinated Deed to Secure Debt is intended to operate and to be construed as a deed passing title to the Subordinated Collateral which is real property under Georgia law (subject and subordinate as herein provided to the Senior Documents and Senior Rights) and so is made under those provisions of the existing laws of the State of Georgia relating to deeds to secure debt, and not as a mortgage. In addition this Subordinate Deed to Secure Debt is intended to operate as a security agreement under, and in accordance with the Uniform Commercial Code of Georgia for the benefit of the Subordinated Secured Parties. Section 1.2. Security Agreement. Oglethorpe grants to the Subordinated Secured Parties a security interest in the Subordinated Collateral (subject and subordinate as herein provided to the Senior Documents and Senior Rights). This Subordinated Deed to 4 Secure Debt, in addition to conveying security title to real estate, is a security agreement as to any portion of the Subordinated Collateral that is personal property under Georgia law (subject and subordinate as herein provided to the Senior Documents and Senior Rights) and shall support any financing statement showing the Subordinated Secured Parties' interest with respect thereto, and is intended to operate and to be construed as a deed passing title to the Subordinated Collateral which is real property under Georgia law and so is made under those provisions of the existing laws of the State of Georgia relating to deeds to secure debt, and not as a mortgage. Section 1.3. Secured Claims. This Subordinated Deed to Secure Debt, and the assignment and security interest herein granted to the Subordinated Secured Parties, is made and given to secure the Secured Obligations. Without limiting the generality of the foregoing, this Subordinated Deed to Secure Debt secures the payment of all amounts that would be payable by Oglethorpe to the Subordinated Secured Parties under the Operative Documents. SECTION 2. DISTRIBUTION OF PROCEEDS FROM SALE OF SUBORDINATED COLLATERAL Any amounts received in respect of a sale of any of the Subordinated Collateral after a Subordinated Deed to Secure Debt Event of Default (as defined herein) shall have occurred and be continuing shall be applied or distributed ratably among AMBAC, the Owner Participant and the Facility Lessor, pari passu, according to the Secured Obligations held by each. Upon payment in full of the Secured Obligations, the balance, if any, of such amounts remaining shall be distributed to Oglethorpe. SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF OGLETHORPE; SUBORDINATED DEED TO SECURE DEBT; EVENTS OF DEFAULT; REMEDIES Section 3.1. Subordinated Deed to Secure Debt Event of Default. The term "Subordinated Deed to Secure Debt Event of Default," wherever used herein, shall mean the occurrence of a Head Lessor Event of Default or the failure of Oglethorpe to promptly perform any of its obligations under this Subordinated Deed to Secure Debt or the AMBAC Guaranty. Section 3.2. Other Rights of Subordinated Secured Parties. Subject to Section 5 hereof, Oglethorpe agrees that when any Subordinated Deed to Secure Debt Event of Default has occurred and is continuing, the Subordinated Secured Parties may, subject to and only upon satisfaction of the conditions precedent described in Section 5 hereof, without limitation 5 of all other rights and remedies available at law or in equity in such event, exercise any one or more or all, and in any order, of the following remedies, it being expressly understood that no remedy herein conferred is intended to be exclusive of any other remedy or remedies, but that each and every remedy is cumulative and is in addition to every other remedy given herein or now or hereafter existing at law or in equity or by statute: (a) directly, or by agents or attorneys, and subject to compliance with Applicable Law, to take possession of all or any part of the Subordinated Collateral, and having and holding the same to use, operate, manage and control the Subordinated Collateral and to conduct the business thereof and collect and receive all earnings, revenues, rents, issues, proceeds and income of the Subordinated Collateral and every part thereof, all for the sole purpose of providing for the payment of amounts secured hereunder and, for such purpose, to maintain, repair and renew the Subordinated Collateral and make replacements, alterations, additions and improvements thereto and remove and dispose of any portion of the Subordinated Collateral and otherwise to exercise any and all of the rights and powers of Oglethorpe in respect thereof; (b) proceed to exercise all rights, privileges and remedies of Oglethorpe under the Head Lease, Ground Lease or other Operative Documents either in the name of the Subordinated Secured Parties or in the name of Oglethorpe for the use and benefit of the Subordinated Secured Parties; (c) if at the time such action is lawful and always subject to compliance with Applicable Law, either with or without taking possession, and either before or after taking possession, and without instituting any legal proceedings whatsoever, sell the Subordinated Collateral, or any part thereof, or interest therein, at auction at the usual place for conducting sales at the courthouse in the county in which the Subordinated Collateral, or any part thereof, is located, to the highest bidder for cash, after advertising the time, terms and place of such sale once a week for four weeks immediately preceding such sale (but without regard to the number of days intervening between the date of publication of the first advertisement and the date of sale) in a newspaper published in such county, or in the paper in which the sheriff's advertisements for such county are then being published, all other notice being hereby waived by Oglethorpe. The Subordinated Secured Parties may thereupon execute and deliver to the purchaser at such sale a conveyance of the Subordinated Collateral in fee simple, which conveyance shall contain recitals as to the Subordinated Deed to Secure Debt Event of Default upon which the execution of the power of sale herein granted depends, and Oglethorpe hereby constitutes and appoints the Subordinated Secured Parties the true and lawful agent and attorney in fact of Oglethorpe to make such recitals, sale and conveyance, and all of the acts of the Subordinated Secured Parties as such attorney in fact are hereby ratified and confirmed. Oglethorpe agrees that such recitals shall be binding and conclusive upon Oglethorpe and that the conveyance to be made by the Subordinated Secured Parties shall divest Oglethorpe of all right, title, 6 interest, equity and right of redemption, including any statutory redemption, in and to the Subordinated Collateral. The Subordinated Secured Parties shall collect the proceeds of such sale, and after reserving therefrom the entire debt secured hereby (and reasonable attorneys' fees actually incurred) and all costs and expenses of such sale, shall pay any surplus to Oglethorpe, all as provided by Applicable Law. The power and agency hereby granted are coupled with an interest and are irrevocable by dissolution, or otherwise, and are in addition to any and all other remedies that the Subordinated Secured Parties may have hereunder, at law or in equity. The Subordinated Secured Parties may bid and become the purchaser at any such sale in which event the Subordinated Secured Parties will be entitled to a credit for the Secured Obligations against the purchase price payable at such sale; and (d) proceed to protect and enforce this Subordinated Deed to Secure Debt and the Secured Obligations held by it by suit or suits or proceedings in equity, at law or in bankruptcy, and for the specific performance of any covenant or agreement herein or therein contained or in execution or aid of any power herein granted, or for foreclosure hereunder or thereunder, or for the appointment of a receiver or receivers for the Subordinated Collateral or any part thereof, or for the recovery of judgment for the Secured Obligations or for the enforcement of any other proper, legal or equitable remedy available under Applicable Law. Section 3.3. Delay or Omission Not a Waiver. No delay or omission by the Subordinated Secured Parties in the exercise of any right or remedy accruing upon any Subordinated Deed to Secure Debt Event of Default will impair any such right or remedy or constitute a waiver of any Subordinated Deed to Secure Debt Event of Default or be deemed to be an acquiescence therein. Every right and remedy given by this Section 3 or by law to the Subordinated Secured Parties may be exercised from time to time, and as often as may be deemed expedient, by the Subordinated Secured Parties. Section 3.4. Restoration of Rights and Remedies. If the Subordinated Secured Parties have instituted any proceeding to enforce any right, power or remedy under this Subordinated Deed to Secure Debt and such proceeding has been discontinued or abandoned or for any reason has been determined adverse to the Subordinated Secured Parties, then Oglethorpe and the Subordinated Secured Parties shall, subject to any determination in such proceeding, be restored to their former positions hereunder and all rights, remedies and powers of the Subordinated Secured Parties shall continue as if no such proceeding has been instituted. 7 SECTION 4. ATTORNEY-IN-FACT; FINANCING STATEMENTS Oglethorpe hereby appoints and constitutes the Subordinated Secured Parties as the true and lawful attorney-in-fact of Oglethorpe for the purpose of taking any action permitted by this Subordinated Deed to Secure Debt in connection with the enforcement of the Lien of this Subordinated Deed to Secure Debt, with full power (in the name of Oglethorpe or otherwise), at any time following a Subordinated Deed to Secure Debt Event of Default and during the continuance thereof, to ask, require, demand and receive any and all amounts and claims for amounts due and to become due under or arising out of the Operative Documents (to the extent that such moneys and claims constitute part of the Subordinated Collateral), to endorse any check or other instrument or order in connection therewith and to file any claim or take any action or institute any proceeding to collect any portion of the Subordinated Collateral. Upon the written instructions of the Subordinated Secured Parties, Oglethorpe shall execute any financing statement (and any continuation statement with respect to any such financing statement), or any other document necessary for the Subordinated Secured Parties to obtain the full benefits of the Lien of this Subordinated Deed to Secure Debt and as may be specified in such instructions. SECTION 5. LIMITATION ON SUBORDINATE SECURED PARTIES' RIGHTS Notwithstanding anything to the contrary in this Subordinated Deed to Secure Debt, until (a) all Subordinated Collateral is fully released from the Liens of the Oglethorpe Mortgage, (b) all Secured Indebtedness under the Loan Agreement and Deed to Secure Debt has been paid in full and the Lien on the Loan Agreement and security title of the Deed to Secure Debt have been fully released and (c) payment in full of all of the obligation of the Head Lessor under the Head Lease, the Facility Lessee under the Facility Lease and the Facility Sublessee under the Facility Sublease, (i) the Subordinated Secured Parties shall not (A) exercise any rights or enforce any remedies or assert any claim with respect to the Subordinated Collateral granted to the Subordinated Secured Parties under this Subordinated Deed to Secure Debt, (B) seek to foreclose the Liens granted pursuant to this Subordinated Deed to Secure Debt or sell the Subordinated Collateral, or (C) take any action, directly or indirectly, or institute any proceedings, directly or indirectly, with respect to any of the foregoing; (ii) in the event any right, remedy or provision of or with respect to this Subordinated Deed to Secure Debt conflicts with any right, remedy or provision of or with respect to any Senior Document or Senior Right, as between the Senior Parties and the Subordinated Secured Parties, the right, remedy or provision of or with respect to the Senior Document or Senior Right shall govern to the extent of any inconsistency and that extent only; (iii) neither this Section 5 nor any other provision of this Subordinated Deed to Secure Debt shall be terminated, amended or otherwise modified without the prior written consent of each of the Senior Parties, which consent may be granted or withheld by each Senior Party in its sole, subjective discretion; and (iv) this Section 5, and any other provisions of this Subordinated Deed to Secure Debt that benefit the Senior Parties, shall inure directly to the 8 benefit of the Senior Parties and their respective successors and assigns under the Senior Documents or as holders of the Senior Rights. SECTION 6. MISCELLANEOUS Section 6.1. Reconveyance; Release of Components. (a) Upon payment in full by Oglethorpe of the Secured Obligations, the Subordinated Secured Parties will, at the expense of Oglethorpe, reconvey the Subordinated Collateral in the manner provided by Applicable Law by an instrument of reconveyance without representation or warranty of any kind whatsoever in form and substance reasonably satisfactory to Oglethorpe and the Subordinated Secured Parties. (b) Notwithstanding any other provision of this Subordinated Deed to Secure Debt, any Released Property sold, leased or otherwise conveyed pursuant to the Ground Lessor's Release Rights shall automatically, without the further act of any Person, be released from the lien, security title and security interest of this Subordinated Deed to Secure Debt. All Components that no longer constitute part of the Facility in accordance with Section 7.2 of the Facility Lease, shall be automatically released from the lien, security title and security interest of this Subordinated Deed to Secure Debt. The Subordinated Secured Parties, if requested by Oglethorpe and at Oglethorpe's expense, shall execute and deliver such instruments in form and substance satisfactory to Oglethorpe evidencing such release. Section 6.2. No Legal Title to Subordinated Collateral in Subordinated Secured Parties. (a) The Subordinated Secured Parties shall not, except as may result from its exercise of remedies hereunder, or under the other Operative Documents, have legal title to any part of the Subordinated Collateral. No transfer, by operation of law or otherwise, of any Secured Obligations or other right, title and interest of the Subordinated Secured Parties in and to the Subordinated Collateral or hereunder shall operate to terminate this Subordinated Deed to Secure Debt or entitle the Subordinated Secured Parties to an accounting or to the transfer to it of any legal title to any part of the Subordinated Collateral. (b) Each Subordinated Secured Party shall have no further interest in, or right with respect to, the Subordinated Collateral under this Subordinated Deed to Secure Debt when and if the principal and interest on all Secured Obligations held by such Subordinated Secured Party and all sums payable to such Subordinated Secured Party hereunder and under such Secured Obligations shall have been paid in full. Section 6.3. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, without limitation, by overnight mail or courier service, (b) in the case of notice by United States mail, certified or 9 registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed to each party hereto at its address set forth below or, in the case of any such party hereto, at such other address as such party may from time to time designate by written notice to the other parties hereto: If to AMBAC: AMBAC Indemnity Corporation One State Street Plaza New York, New York 10004 Facsimile No.: (212) 344-5297 Telephone No.: (212) 668-0340 Attention: General Counsel If to Oglethorpe: Oglethorpe Power Corporation 2100 East Exchange Place Tucker, Georgia 30085-1349 Facsimile No.: (770) 270-7325 Telephone No.: (7700-270-7940 Attention: Vice President - Finance If to the Facility Lessor: SunTrust Bank, Atlanta P.O. Box 4625 Mail Code 008 Atlanta, Georgia 30302 Facsimile No.: (404) 332-3966 Telephone No.: (404) 588-7813 Attention: Corporate Trust Department with copies to the Owner Participant: 10 Philip Morris Capital Corporation 800 Westchester Avenue Rye Brook, New York 10573-1301 Facsimile No.: (914) 335-1297 Telephone No.: (914) 335-5000 Attention: Vice President, Leasing with a copy to Director, Portfolio Administration to the Owner Trustee: Fleet National Bank 777 Main Street Hartford, Connecticut 06115 Facsimile No.: (860) 986-7920 Telephone No.: (860) 986-4540 Attention: Corporate Trust Administration and to: Utrecht-America Finance Co., c/o Rabobank Nederland, New York Branch 245 Park Avenue New York, New York 10167-0062 Facsimile No.: (212) 916-7880 Telephone No.: (212) 916-7864 Attention: General Counsel's Office Section 6.4. Survival. Except as expressly set forth herein, the warranties and covenants made by each party hereto shall not survive the expiration or termination of this Subordinated Deed to Secure Debt. Section 6.5. Successors and Assigns. This Subordinated Deed to Secure Debt shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and assigns as permitted by and in accordance with the terms hereof. Except as expressly provided herein or in the other Operative Documents, no party hereto may assign its interests herein without the consent of the other parties hereto. Section 6.6. Business Day. Notwithstanding anything herein or in any other Operative Document to the contrary, if the date on which any payment is to be made pursuant 11 to this Subordinated Deed to Secure Debt or any other Operative Document is not a Business Day, the payment otherwise payable on such date shall be payable on the next succeeding Business Day with the same force and effect as if made on such scheduled date and (provided such payment is made on such succeeding Business Day) no interest shall accrue on the amount of such payment from and after such scheduled date to the time of such payment on such next succeeding Business Day. Section 6.7. Governing Law. This Subordinated Deed to Secure Debt shall be in all respects governed by and construed in accordance with the laws of the State of New York including all matters of construction, validity and performance, except to the extent the law of the State of Georgia is mandatorily applicable. Section 6.8. Severability. If any provision hereof shall be invalid, illegal or unenforceable under Applicable Law, the validity, legality or enforceability of the remaining provisions hereof shall not be affected or impaired thereby. Section 6.9. Counterparts. This Subordinated Deed to Secure Debt may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one Agreement. Section 6.10. Headings and Table of Contents. The headings of the sections of this Subordinated Deed to Secure Debt and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. Section 6.11. Further Assurances. Each party hereto shall promptly and duly execute and deliver such documents and provide such further assurances for and take such further action reasonably requested by any party to whom such first party is obligated, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Subordinated Deed to Secure Debt. Section 6.12. No Oral Modifications or Continuing Waivers. No term or provision of this Subordinated Deed to Secure Debt may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or the Person against whom enforcement of the change, waiver, discharge or termination is sought. Section 6.13. Effectiveness of this Subordinated Deed to Secure Debt. This Subordinated Deed to Secure Debt has been dated as of the date first above written for convenience only. This Subordinated Deed to Secure Debt shall be effective on the date of execution and delivery by each of the parties hereto. Section 6.14. Limitation of Liability. It is expressly understood and agreed by the parties hereto that nothing herein contained shall be construed as creating any liability on 12 SunTrust Bank, Atlanta, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto or by any Person claiming by, through or under the parties hereto and under no circumstances shall SunTrust Bank, Atlanta be personally liable for the payment of any indebtedness or expenses of the Trust or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Co-Trustee under this Subordinated Deed to Secure Debt. In addition, each of the parties hereto acknowledges and agrees that the Co-Trustee has been appointed by the Owner Participant and the Owner Trustee for the purpose of exercising those trust powers in the State of Georgia which may not be exercised by the Owner Trustee under applicable law, and that, except as otherwise required by applicable law, the Co-Trustee shall not be obligated to take any action hereunder unless expressly directed in writing by the Owner Trustee or the Owner Participant in accordance with the terms of the Trust Agreement. Section 6.15. WAIVER. OGLETHORPE HEREBY WAIVES ANY RIGHT OGLETHORPE MAY HAVE UNDER THE CONSTITUTION OF THE STATE OF GEORGIA OR THE CONSTITUTION OF THE UNITED STATES OF AMERICA TO NOTICE OR TO A JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY PROVIDED BY THIS INSTRUMENT TO THE SUBORDINATED SECURED PARTIES, AND OGLETHORPE WAIVES ANY RIGHTS, IF ANY, THAT OGLETHORPE MAY HAVE TO SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED IN ACCORDANCE WITH THE PROVISIONS OF THIS INSTRUMENT ON THE GROUND (IF SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT A PRIOR JUDICIAL HEARING. ALL WAIVERS BY OGLETHORPE IN THIS PARAGRAPH HAVE BEEN MADE VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY, AFTER OGLETHORPE HAS BEEN FIRST INFORMED BY COUNSEL OF OGLETHORPE'S OWN CHOOSING AS TO POSSIBLE ALTERNATIVE RIGHTS, AND HAVE BEEN MADE AS AN INTENTIONAL RELINQUISHMENT AND ABANDONMENT OF A KNOWN RIGHT AND PRIVILEGE. Section 6.16. Waiver of Marshaling. Oglethorpe, for itself and for all persons hereafter claiming through or under it or who may at any time hereafter become holders of liens junior to the lien of this Subordinated Deed to Secure Debt, hereby expressly waives and releases all rights to direct the order in which any of the Subordinated Collateral shall be sold in the event of any sale or sales pursuant hereto and to have any of the Subordinated Collateral and/or any other property now or hereafter constituting security for any of the Secured Obligations marshaled upon any foreclosure of this Subordinated Deed to Secure Debt. 13 IN WITNESS WHEREOF, Oglethorpe has caused this Subordinated Deed to Secure Debt to be duly executed and delivered by its officer thereunto duly authorized, as of the day and year first above written. OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), AS GRANTOR By: /s/ T. D. Kilgore --------------------------------------------- Name: T. D. Kilgore Title: President and Chief Executive Officer Date: December 30, 1996 Signed, sealed and delivered in the presence of: /s/ Gary M. Bullock - --------------------------------- Unofficial Witness /s/ David M. Boehm - --------------------------------- Notary Public My commission expires: March 16, 1998 [Notary Seal] 14 SCHEDULE TO EXHIBIT 10.32.16 SUBORDINATED DEED TO SECURE DEBT AND SECURITY AGREEMENT (P1) The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant ---------- ------------------ -------------------------------------- P1 December 30, 1996 Philip Morris Capital Corporation P2 January 3, 1997 Philip Morris Capital Corporation F3 December 30, 1996 First Chicago Leasing Corporation F4 December 30, 1996 First Chicago Leasing Corporation N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation The Exhibits and Schedules to the Subordinated Deed to Secure Debt and Security Agreement (P1) are not filed herewith; however, the registrant hereby agrees that such Exhibits and Schedules will be provided to the Commission upon request. EX-10.32-17 34 EXHIBIT 10.32.17 C Exhibit 10.32.17 TAX INDEMNIFICATION AGREEMENT (P1) TAX INDEMNIFICATION AGREEMENT (P1), dated as of December 30, 1996 (as amended, supplemented or otherwise modified from time to time and in accordance with the provision hereof, this "Agreement") between OGLETHORPE POWER CORPORATION, as Facility Sublessee, and PHILIP MORRIS CAPITAL CORPORATION, as Owner Participant. WHEREAS, the Owner Participant and the Georgia Trust Company and Non-Georgia Trust Company have entered into the Trust Agreement, dated as of December 30, 1996 for the purpose of creating the Trust Estate and entering into the transactions contemplated by the Participation Agreement; WHEREAS, the Owner Participant desires to cause the Co-Trustee to purchase the Undivided Interest from the Facility Sublessee and to cause the Co-Trustee to lease the Undivided Interest to the Facility Lessee by entering into the Facility Lease; WHEREAS, the Facility Lessee desires to further sublease the Undivided Interest to the Facility Sublessee by entering into the Facility Sublease and the other transactions contemplated by the Operative Documents; NOW THEREFORE, in consideration of the premises and of the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. DEFINITIONS. For purposes of this Agreement, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in Appendix A to the Participation Agreement. Any term defined by reference to an agreement, instrument or other document shall have the meaning so assigned to it whether or not such document is in effect. Unless otherwise indicated, references in this Agreement to articles, Sections, paragraphs, clauses, appendices, schedules and exhibits are to the same contained in or attached to this Agreement. For purposes of this Agreement, the following terms shall apply: (a) The term "Facility Sublessee Person" shall mean the Facility Sublessee, the Facility Lessee, and any sub-lessee of the Facility, or any Affiliate, transferee, agent, sublessee, employee, successor, licensee, concessionaire or assignee of any of the foregoing, or any user of the Facility or any person in possession of the Facility with or without color or right (including any trustee, receiver, liquidator, debtor in possession or Affiliate of any of the foregoing). The term "Facility Sublessee Person" shall not include the Co-Trustee, the Owner Trustee or the Owner Participant. (b) The term "Final Determination" shall mean (i) a decision, judgment, decree or other order by any court of competent jurisdiction, which decision, judgment, decree 1 or other order has become final after all allowable appeals by either party to the action have been exhausted or the time for filing such appeal has expired, or in any case where judicial review shall at the time be unavailable because the proposed adjustment involves a decrease in net operating loss carryforward or a business credit carryforward, a decision, judgment, decree or other order of an administrative official or agency of competent jurisdiction, which decision, judgment, decree or other order has become final I.E., where all administrative appeals have been exhausted by all parties thereto), (ii) a closing agreement entered into under Section 7121 of the Code, or any other settlement agreement entered into in connection with an administrative or judicial proceeding or (iii) the expiration of the time for instituting a claim for refund, or if such a claim was filed, the expiration of the time for instituting suit with respect thereto. (c) The term "Permitted Act" shall mean (i) the exercise by the Facility Lessee of its rights under Section 3.4(c) of the Facility lease to verify any adjustment pursuant to Section 3.4, (ii) the assertion or enforcement by the Facility Lessee as agent and attorney-in-fact of whatever claims and rights the Facility Lessor may have in respect of the Undivided Interest pursuant to and in accordance with Section 4.1(b) of the Facility Lease, (iii) the operation and maintenance of the Facility by the Facility Sublessee pursuant to, and in accordance with, Section 7. 1 of the Facility Sublease, (iv) the return of the Undivided Interest by the Facility Lessee to the Facility Lessor in accordance with and pursuant to Section 5 of the Facility Lease, (v) keeping copies of records pursuant to Section 7.3 of the Facility Lease, (vi) the termination of the Facility Lease pursuant to and in accordance with Section 10.2 of the Facility Lease, (vii) the receipt and retention of the sums contemplated to be payable in Section 10.4 of the Facility Lease, (viii) the Facility Lessee's exercise of its right to purchase the Facility Lessor's Rocky Mountain Interest and terminate the Facility Lease pursuant to and in accordance with Section 13.1 of the Facility Lease, (ix) the Facility Lessee's exercise of its option to terminate the Facility Lease pursuant to and in accordance with Section 14.1 of the Facility Lease, (x) the revocation by the Facility Lessee of its notice of termination pursuant to and in accordance with Section 14.4 of the Facility Lease, (xi) the exercise by the Facility Lessee of any of its options pursuant to and in accordance with Section 15.1 of the Facility Lease, (xii) the exercise by the Facility Lessee of its option pursuant to and in accordance with Section 15.4(d) of the Facility Lease, (xiii) the exercise by the Facility Lessee of its option to terminate the Facility Lease pursuant to and in accordance with Section 18.1 of the Facility Lease, (xiv) the act of subleasing of the Undivided Interest by the Facility Lessee to Oglethorpe pursuant to and in accordance with the Facility Sublease, (xv) comparable acts to those described in clauses (i) through (xiii) by Oglethorpe under comparable provisions of the Facility Sublease, (xvi) the exercise by Oglethorpe of its rights pursuant to and in accordance with Section 11.1(e) and paragraphs (c), (d), (g) or (i) of Section 11.2 of the Participation Agreement, (xvii) the exercise by RMLC of its rights pursuant to and in accordance with Sections 12.1(e) and 12.2(c) of the Participant Agreement, (xviii) the Head Lessor's carrying insurance pursuant to Section 16 of the Head Lease, and (xix) the entering into of (1) any supplement, modification, amendment, renewal, extension or consolidation to or of the Oglethorpe Mortgage and (2) any other mortgage, deed to secure debt, deed of trust, trust indenture or other security instrument in substitution or replacement for the Oglethorpe Mortgage; PROVIDED, however, that any of the foregoing shall, in all respects relevant to the federal tax position of the Owner Participant, be of substantially similar impact as would the Proposed Indenture. 2 (d) The term "Tax Affiliate" shall mean any member of the "lessee group" of RMLC or Oglethorpe, as the case may be, as such term is defined in Rev. Proc. 7521, 1975-1 C.B. 715. (e) The term "Code" shall mean the Internal Revenue Code of 1986, as amended and in effect on the Closing Date. Section 2. CERTAIN TAX ASSUMPTIONS. In entering into the transactions contemplated by the Operative Documents, the Owner Participant and the Facility Sublessee have made assumptions regarding the characterization of the transactions for federal, state and local income tax purposes (the below-listed assumptions being herein referred to as the "U.S. Tax Assumptions") including the following: (a) The Head Lease will be treated as a cur-rent sale of the Undivided Interest in the Facility by Oglethorpe to the Facility Lessor and the prepaid rent thereunder will be treated as proceeds of such sale; (b) The Facility Lease will be treated as a "true lease" for U.S. federal income tax purposes, and the Facility Lessor will be treated as the owner and the lessor of the Undivided Interest in the Facility and RMLC will be treated as the lessee thereof and the Facility Sublease will be treated as a "true lease" for U.S. federal income tax purposes, and the Facility Sublessor will be treated as the sublessor of the Undivided Interest and the Facility Sublessee will be treated as the Sublessee thereof; (c) The Owner Participant's marginal U.S. federal income tax rate is and will be 35 % and the state and local income tax rate applicable to the Owner Participant will be 1 % for an effective combined federal, state and local income tax rate of 35.65 % (the "Pricing Rate") in the taxable year ending December 31, 1996 and thereafter, and the Owner Participant will always have sufficient taxable income to utilize the Interest Deductions, Amortization Deductions and the Depreciation Deductions (each as defined below) and will always have sufficient state and local taxable income to benefit from the State Deductions (as defined below); (d) The obligations evidenced by the Loan will constitute indebtedness of the Facility Lessor, and the Owner Participant will be entitled to current deductions for interest paid or accrued on the Loan in accordance with the terms thereof (the "Interest Deductions"); (e) The Owner Participant will have a taxable year that is the calendar year and will compute its taxable income resulting from its participant in the contemplated transactions of the Operative Documents under the accrual method of accounting; (f) For U.S. federal income tax purposes (i) the initial tax basis of the Facility Lessor in the Undivided Interest will be an amount equal to the Undivided Interest Cost and (ii) the owner participant will be entitled to deductions under 168(a) of the Code beginning in the taxable year of the Owner Participant in which the Closing Date occurs with respect to (x) 99.6142% of Undivided Interest Cost using the 150% declining balance method of depreciation, switching to the straight-line method of depreciation for the first taxable year of the Owner 3 Participant for which such method yields a Larger allowance, assuming a zero salvage value, computed on the basis of a 20-year recovery period within the meaning of Section 168(b) of the Code and using the half year convention and (y) .3858 % of Undivided Interest Cost using the 150% declining balance method of depreciation, switching to the straight-line method of depreciation for the first taxable year of the Owner Participant for which such method yields a larger allowance, assuming a zero salvage value, computed on the basis of a 15-year recovery period within the meaning of Section 168(b) of the Code using a the half year convention (the benefits described in clauses (i) and (ii) of this paragraph (f), the "Depreciation Deductions"); (g) The Owner Participant will be entitled to amortize 50% of the Transaction Costs on a straight-line basis over the Basic Term; (h) The Owner Participant will be entitled to amortize 50% of the Transaction Costs on a straight-line basis over the term of the Loan (the "Loan Expenses"), (the benefits described in this Section 2(g) and (h) referred to as the "Amortization Deductions"); (i) Neither the Facility Lease nor the Facility Sublease will be a "disqualified leaseback or long-term agreement" within the meaning of section 467(b)(4) of the Code and the Owner Participant will not accrue the Basic Rent by reference to section 467(b)(2) of the Code; (j) Basic Rent and all other gains, losses, income, deductions and credits under the Facility Lease and the Facility Sublease or the contemplated transactions of the Operative Documents will be treated as U.S. source pursuant to sections 861, ET SEQ. of the Code; (k) The Undivided Interest will be "placed in service" by the Facility Lessor on the Closing Date; (l) The Owner Trust created for the benefit of the Owner Participant will be treated as a grantor trust under sections 671 ET SEQ. of the code or otherwise disregarded, and the Owner Participant, as owner of the Trust Estate, will be entitled and required to take into account, in computing its taxable income, all items of income, gain, loss or deduction with respect to the Undivided Interest; (m) As a result of entering into the transactions contemplated by the Participation Agreement, the Owner Participant will not be required to include in gross income for federal, state and local income tax purposes, any amount other than (i) payments of Basic Rent in the amounts and at the times such payments are accrued pursuant to the terms of the Facility Lease, (ii) gain upon the receipt of Termination Value (or other amounts based on Termination Value) in the amount and at the time such payment is required to be made, (iii) gain upon the receipt of the Purchase Option Price at the time such payment is required to be made, (iv) payments made on an After-Tax Basis, (v) any other amounts to the extent such items of income result in an equal and offsetting deduction of the same character in the same taxable year as the inclusion (other than the Depreciation Deductions, Interest Deductions or Amortization Deductions) and (vi) amounts expressly identified as interest under the Operative Documents; 4 (n) The Owner Participant will be required to include in its gross income for state and local income tax purposes for any taxable year during the Facility Lease Term, with respect to the Undivided Interest in the Facility or any portion or Component thereof or the contemplated transactions of the Operative Documents, amounts equal to such amounts as are required to be included in its gross income for U.S. federal income tax purposes; (o) For state and local income tax purposes, the Owner Participant will be entitled to depreciation, interest and amortization deductions at the same times and in the same amounts as the Owner Participant will be allowed the Depreciation Deductions, Interest Deductions and Amortization Deductions, respectively, for U.S. federal income tax purposes (the "State Deductions"); and (p) No portion of the Depreciation Deductions will be recaptured under Section 1245 or 1250 of the Code or otherwise disallowed during the Facility Lease Term or the Facility Sublease Term. If the Owner Participant shall suffer a Loss or there shall occur an adjustment pursuant to Section 3.4 of the Facility Lease or Facility Sublease, then the U.S. Tax Assumptions set forth above, without further act of the parties hereto, shall thereupon be and be deemed to be amended, if and to the extent appropriate at the time of such Loss or adjustment, to reflect such Loss or adjustment. Except as expressly set forth in this Agreement, the Facility Sublessee makes no covenant, representation or warranty and except as expressly set forth in Section 4 of this Agreement, provides no indemnity and shall have no liability with respect to the accuracy of any of the U.S. Tax Assumptions. Section 3. CERTAIN COVENANTS, REPRESENTATIONS AND WARRANTIES. For purposes of this Agreement only, the Facility Sublessee covenants, represents and warrants to the Owner Participant that: (a) All information supplied by or on behalf of Oglethorpe to the Appraiser and identified in an appendix to the Appraisal as relied upon by the Appraiser, or the Independent Engineer and attached hereto as relied upon by the Independent Engineer, as the case may be, was accurate and complete as of the date provided and as of the Closing Date and did not omit or fail to supply any other information available to Oglethorpe which, in light of the circumstances in which the supplied information was provided, reasonably could render such supplied information misleading in any material respect; (b) Neither Oglethorpe, RMLC nor any Affiliate or Tax Affiliate of the foregoing (any such party is referred to as an "Oglethorpe Person" and collectively shall be the "Oglethorpe Group") has taken or will take any position in any filing by it for federal, state or local income tax purposes or in connection with the examination of such filing, or in connection with the contest (administrative or judicial) of any adjustment with respect to federal, state or local income taxes or otherwise with respect to any action taken before any governmental or judicial authority that is inconsistent with the U.S. Tax Assumptions (unless consistent with a contrary 5 Final Determination with respect to the issue governing the U.S. Tax Assumption with respect to which the inconsistent position is taken); (c) On the Closing Date, there will not be any agreements, side letters or other arrangements not disclosed in writing (each Operative Document being deemed to have been so disclosed) to the Owner Participant prior to Closing between any member of the Oglethorpe Group and any Person pertaining to the exercise or non-exercise by the Facility Lessee or Oglethorpe of any Purchase Option, Return Option or a renewal of the Facility Lease under the Facility Lease or the Facility Sublease or the provision of financing to the Facility Lessee or Facility Sublessee, if the Purchase Option under the Facility Lease is exercised; (d) As of the Closing Date, (i) neither the organizational or governing documents or the rules, regulations or policies of any Oglethorpe Person (or any pending or proposed changes therein) nor, to the Facility Sublessee's knowledge, the laws, rules, regulations or policies of the State of Georgia or any other governmental or quasi-governmental entity or other authority thereof or therein (or any pending or proposed changes therein) or the accounting rules, policies or principles applicable to any Oglethorpe Person (or any pending or proposed changes therein) compels (or would compel if adopted in the form proposed or pending) the Facility Lessee or Facility Sublessee (or any Person in a position to control the decisions of the Facility Lessee or Facility Sublessee to cause the Facility Lessee or Facility Sublessee) to exercise the purchase option under Section 15.1 of the Facility Lease or Facility Sublease, as the case may be, rather than its other end of term option under Section 15 of the Facility Lease, or Facility Sublease, (ii) neither the terms of the Oglethorpe Mortgage or the RUS Loan Contract, or any documents or agreements between or among Oglethorpe or Georgia Power Company nor any requirement of FERC (or any pending or proposed changes therein) compels (or would compel if adopted in the form proposed or pending as of the Closing Date) the Facility Lessee or Facility Sublessee (or any Person in a position to control the decisions of the Facility Lessee or Facility Sublessee to cause the Facility Lessee or Facility Sublessee) to exercise the purchase option under Section 15.1 of the Facility Lease or Facility Sublease, rather than its other end of term option under Section 15 of the Facility Lease or Facility Sublease. (e) As of the Closing Date, the Facility will not require any improvement, modification or addition (other than ancillary items of removable equipment of a kind that are customarily selected and furnished by purchasers and lessees of similar facilities) in order for the Undivided Interest in the Facility to be rendered complete for its intended use by any Oglethorpe Person; (f) After payment of the Undivided Interest Cost, each Oglethorpe Person will have been fully reimbursed for the cost of its investment in the Undivided Interest; (g) The Undivided Interest will have been placed in service by the Owner Participant no later than the Closing Date; (h) The Facility Lessor shall be entitled to allocate its depreciable basis in the Undivided Interest in accordance with the percentage of Undivided Interest Cost set forth in Section 2(f)(ii) of this Agreement (it being understood that this is not a representation as to the 6 "true-lease" status of the Facility Lease or the dollar amounts includible in the Facility Lessor's aggregate depreciable basis); (i) As of the Closing Date and at all times throughout the Facility Lease Term and the Facility Sublease Term, neither the Facility nor the Undivided Interest will be treated as (i) "tax-exempt use property" within the meaning of section 168(h) of the Code, or (ii) "tax-exempt bond financed property" within the meaning of section 168(g) of the Code; (j) On the Closing Date, no Facility Sublessee Person will have any present intention of making non-severable improvements to the Facility (as such term is defined in Revenue Procedure 79-48, 1979-2 C.B. 529) during the Facility Lease Term or the Facility Sublease Term, except as disclosed in writing to the Owner Participant and the Appraiser prior to the Closing Date; (k) No Facility Sublessee Person owns any controlling interest, directly or indirectly, in any Lender, and no such Lender owns any interest, directly or indirectly, in any Facility Sublessee Person; (l) No Oglethorpe Person will acquire (directly or indirectly) any interest in the Loan Certificates (other than as provided under Section 15.5 of the Facility Lease or Section 15.3 of the Facility Sublease); (m) As of the Closing Date, the Oglethorpe Mortgage and the RUS Loan Contract are the only agreements (oral or written) with respect to the financing of the Facility and the other transactions contemplated thereby and Oglethorpe has provided the Owner Participant with true and complete copies of the Oglethorpe Mortgage and the RUS Loan Contract; (n) As of the Closing Date, there are no documents, agreements (oral or written) or side letters that modify or alter any of the Operative Documents or the transactions thereby contemplated, other than the Oglethorpe Mortgage, the Resources Management Agreement and the Rocky Mountain Agreements, each as in effect on the Closing Date and Oglethorpe has provided the Owner Participant with a true and complete copy of each of such agreements; (o) As of the Closing Date and during the terms of the Facility Lease and the Facility Sublease, no Facility Sublessee Person has made or will make any loan to, or deposit or other investment or arrangement with, the Lender or any Affiliate thereof or any other Person that effects a shifting away from the Lender of the risk of loss or changes the effective rate of interest on the Loan, other than arrangements expressly set forth in the Operative Documents as in effect on the Closing Date; (p) Neither the Facility Sublessee nor any Facility Sublessee Person has entered into or during the Facility Lease Term or the Facility Sublease Term will enter into any agreement (oral or written) with the Lender or any Affiliate of the Lender or any other Person specifically relating to the Loan, the Qualifying Head Lease Surety Bond, the Loan Certificates, the Payment Undertaking Agreement, the Equity Funding Agreement or any collateral 7 arrangements with respect to any payments due under the Loan Certificates or the Rent due under the Facility Lease or the Facility Sublease in each case other than the arrangements expressly set forth in the Operative Documents; (q) As of the Closing Date, (i) none of the Oglethorpe Mortgage Bonds has a maturity date that extends beyond the Basic Term and (ii) it is the intention of Oglethorpe to enter into an agreement to replace the Oglethorpe Mortgage which would allow Oglethorpe to remove the Undivided Interest from the lien of such agreement by pledging cash collateral in an amount equal to the then fair market value of the Undivided Interest; and (r) Oglethorpe and Georgia Power have effectively elected to be excluded from the provisions of Subchapter K of the Code with respect to the Facility pursuant to Section 761(a) of the Code and such election is in full force and effect as of the Closing Date. Section 4. INDEMNIFIED LOSSES. Oglethorpe will indemnify the Owner Participant in accordance with Section 5 below if any of the following events (each referred to as a "Loss") shall occur: (a) as a result of (i) any act or failure to act by a Facility Sublessee Person (other than (x) the execution or the delivery of the Operative Documents, (y) any act or failure to act expressly required by the Operative Documents, or taken at the express written request of the Owner Participant (other than any act or failure to act taken at the express written request of the Owner Participant that is required by the Operative Documents or any act or failure to act in connection with a Default or Event of Default under the Facility Lease or any Sublease Default or Sublease Event of Default), or (z) any Permitted Act), (ii) the breach, inaccuracy or incorrectness of any of Oglethorpe's covenants, representations or warranties contained in Section 3 of this Agreement, or the covenants, representations or warranties of Oglethorpe or RMLC in Sections 3.4(a), (b), (c), (d), (e), (h), (j), (k), (l), (m), (n), (o), (s), (w), (x), (y), (z), (hh), (ii) and (jj), and 3.5(a), (b), (c), (d), (e) and (h), respectively, of the Participation Agreement, and Sections 2.01(a) and (b) of the Rocky Mountain Ownership Agreement, (iii) any loss, damage, destruction, casualty, non-use, replacement, substitution, rebuild, theft, taking, confiscation, requisition, seizure or condemnation of all or any portion of or Component of the Undivided Interest or Facility, (iv) any warranty, damage, refund, insurance, indemnity or similar payments not retained by the Owner Participant or the Facility Lessor or (v) any foreclosure or pursuit of remedies (whether by the Owner Participant or otherwise) resulting from an Event of Default under the Facility Lease or a Sublease Event of Default, the Owner Participant shall either (x) suffer a delay in claiming, shall not have the right to claim or shall not claim (in each case, after receiving a written opinion of independent tax counsel selected by the Owner Participant and reasonably acceptable to the Facility Sublessee to the effect that there is no Reasonable Basis to make such claim), or shall lose, shall suffer a disallowance of or shall be required to recapture all or any portion of the Interest Deductions, Amortization Deductions or Depreciation Deductions, or (y) shall lose any ability to claim foreign tax credits (a "Foreign Tax Credit Loss"); or (b) as a result of (i) any repair, replacement, rebuild or substitution of, or any alteration, modification, addition or improvement to, the Facility or any portion or Component thereof, (ii) any warranty, damage, refund, insurance, indemnity or similar payments 8 not retained by the Facility Lessor or Owner Participant, (iii) any loss, damage, destruction, casualty, non-use, replacement, substitution, theft, taking, confiscation, requisition, seizure or condemnation of all or any portion of or Component of the Undivided Interest or Facility, (iv) a change, adjustment or modification of the schedule of Basic Rent in connection with an Event of Default under the Facility Lease or a Sublease Event of Default, (v) the payment by the Facility Lessee of Basic Rent, Termination Value or Purchase Option Price prior to the date required under the Facility Lease (other than (x) any such payment attributable to the execution or delivery of the Operative Documents or (y) any such payment expressly required by the Operative Documents or at the express written request of the Owner Participant), (vi) the Facility Lessee's taking of a deduction for Basic Rent with respect to a period that is inconsistent with the allocation of Basic Rent under the Facility Lease (unless consistent with a contrary Final Determination with respect to the issue governing the U.S. Tax Assumption with respect to which the inconsistent position is taken), (vii) the payment by the Facility Sublessee of Sublease Basic Rent prior to the date required under the Facility Sublease, (viii) the Facility Sublessee's taking of a deduction for Sublease Basic Rent with respect to a period that is inconsistent with the allocation of Sublease Basic Rent under the Facility Sublease (unless consistent with a contrary Final Determination with respect to the issue governing the U.S. Tax Assumption with respect to which the inconsistent position is taken), (ix) the payment of Supplemental Rent, Sublease Supplemental Rent or any other costs and expenses under the Operative documents, (x) any foreclosure or pursuit or remedies (whether by the Owner Participant or otherwise) resulting from an Event of Default under the Facility Lease or a Sublease Event of Default, (xi) the receipt of earnings on any investment of amounts held by the Facility Lessor or the Owner Participant as security for the obligations of the Facility Lessee or Facility Sublessee under or in accordance with the Operative Documents, (xii) any refinancing of the Loan Certificates, or (xiii) the inaccuracy of any tax representation set forth in Section 3 hereof, the Owner Participant shall be required for U.S. federal income tax purposes to include in its gross income an amount not described in Section 2(m)(i) through (vi) of this Agreement (an "Inclusion"). Section 5. AMOUNT OF INDEMNIFICATION. The Facility Sublessee shall pay to the Owner Participant an indemnity with respect to any Loss pursuant to Section 4 of this Agreement in the amount determined in accordance with this Section 5. (a) In the case of any Loss pursuant to Section 4 of this Agreement, the Owner Participant shall give the Facility Sublessee notice of such Loss. Such notice will be accompanied by a written statement (the "Notice") setting forth in reasonable detail (i) the computation of the amount of such Loss and (ii) the computation of such amount or amounts that shall equal, on an After-Tax Basis, the aggregate additional federal, state and local income taxes (including any interest, penalties, fines or other additions thereto) payable or deemed to be payable by the Owner Participant from time to time as a result of such Loss (computed in accordance with Section 5(b) of this Agreement). Any such computation will take into account all deductions, credits or other tax benefits available to the Owner Participant as a result of such Loss and any payment due hereunder (computed in accordance with this Section 5 and Section 8 of this Agreement). The Facility Sublessee shall pay the Owner Participant such amount or amounts in accordance with Section 5(b) of this Agreement. If the Facility Sublessee shall disagree with such computation and so requests in a written notice delivered to the Owner Participant within 30 days following the Facility Sublessee's receipt of the Notice, such amount shall be reviewed and 9 determined, within 15 days of receipt of such request by the Facility Sublessee, by an independent public accounting firm of national recognition selected by the Owner Participant and reasonably acceptable to the Facility Sublessee. The costs of such verification shall be borne by the Facility Sublessee, unless such verification shall result in an adjustment in the Facility Sublessee's favor of 5% or more of the payment as computed by the Owner Participant, in which case such costs shall be borne by the Owner Participant. The Owner Participant agrees to cooperate with such independent accounting firm and to supply it with all information reasonably necessary to permit it to accomplish such review and determination; PROVIDED, HOWEVER, that the Owner Participant shall not be required to supply the independent accounting firm with its U.S. federal tax returns or books. Such information shall be for the confidential use of such independent accounting firm and shall not be disclosed to the Facility Sublessee or any other Person. The Facility Sublessee and the Owner Participant agree that the sole responsibility of the independent public accounting firm shall be to verify the amount of a payment pursuant to this Agreement and that matters of interpretation of this Agreement or any other Operative Document are not within the scope of the independent accounting firm's responsibilities. The Facility Sublessee shall have no right to inspect the tax returns or books and records of the Owner Participant or any Affiliate thereof. (b) If any indemnity is due pursuant to Section 4, the Facility Sublessee may elect, at its option, to make such payment on an After-Tax Basis in accordance with Section 5(a) hereof in any of the following ways: (i) The indemnity payment hereunder shall be a lump sum amount which, on an After-Tax Basis, shall be sufficient to preserve the Owner Participant's Net Economic Return as if such Loss had not occurred. The computation of such lump sum amount shall be made by the Owner Participant utilizing the methodology and assumptions, including the U.S. Tax Assumptions utilized by the Owner Participant in determining Rent and Termination Value, except as such assumptions shall be varied to take into account such Loss and any prior Loss in a manner consistent with the intent of the parties as expressed herein. The computation of such lump sum amount under this Section 5(b)(i) also shall take into account any past, current and anticipated interest, penalties and additions to tax payable by the Owner Participant as a result of such Loss and any federal income tax detriments and benefits reasonably expected to be by the Owner Participant by reason of the circumstances or adjustments giving rise to such Loss. Further, such lump sum amount shall be calculated assuming that at all times (A) the Owner Participant has sufficient federal, state and local taxable income to make full use of the tax benefits that are subject to such Loss (or result from the Loss or the events giving rise thereto) in the current year in which all of such tax benefits were assumed (or, in the case of tax benefits that result from the Loss or the events giving rise thereto, are reasonably anticipated) to be available, (B) the highest combined marginal statutory rate applicable to corporations for federal, state and local income tax purposes is the Pricing Rate (other than for purposes of calculating payments necessary to make the lump sum payment on an After-Tax Basis, which calculation shall be governed by the calculation of After-Tax Basis as provided in the Operative Documents and other than for purposes of calculating a lump sum amount in the case of a Foreign Tax Credit Loss or a Loss described in Section 4(b) above, in which case such calculation shall be made using the highest marginal U.S. federal rate applicable to corporations generally for the relevant period or periods and, in the case of a Loss described in Section 4(b), the highest state and local income tax rates applicable to corporations generally for the relevant period or periods, taking into account 10 the deductibility of state and local taxes for U.S. federal income tax purposes), and (C) the Owner Participant shall be deemed to have state and local income tax consequences that mirror the Owner Participant's U.S. federal income tax consequences, (ii) So long as no Payment Default, Bankruptcy Default or Event of Default under the Facility Lease, or a Sublease Payment Default, Sublease Bankruptcy Default or Sublease Event of Default has occurred and is continuing, and provided that the long term unsecured obligations of the Facility Sublessee are rated at least A- by Standard & Poor's and Baa1 by Moody's or better, the Facility Sublessee may elect to pay to the Owner Participant as an indemnity from time to time on an After-Tax Basis such amount or amounts as shall be equal to the aggregate additional federal, state and local income taxes payable or deemed payable by the Owner Participant as a result of such Loss and any interest, penalties or additions to tax actually imposed as a result of such Loss. Such computation shall be made assuming that at all times (A) the Owner Participant has sufficient federal, state and local taxable income to make full use of the tax benefits that are subject to such Loss (or result from the Loss or the events giving rise thereto) in the current year in which all of such tax benefits were assumed (or, in the case of tax benefits that result from the Loss or the events giving rise thereto, are reasonably anticipated) to be available, (B) the highest combined marginal statutory rate applicable to corporations for federal, state and local income tax purposes is the Pricing Rate (other than for purposes of calculating payments necessary to make such payment on an After-Tax Basis, which calculation shall be governed by the calculation of After-Tax Basis as provided in the Operative documents and other than for purposes of calculating an amount or amounts in the case of a Foreign Tax Credit Loss or a Loss described in Section 4(b) above, in which case such calculation shall be made using the highest marginal U.S. federal rate applicable to corporations generally for the relevant period or periods and, in the case of a Loss described in Section 4(b), the highest state and local income tax rates applicable to corporations generally for the relevant period or periods taking into account the deductibility of state and local taxes for U.S. federal income tax purposes), and (C) the Owner Participant shall be deemed to have state and local income tax consequences that mirror the Owner Participant's U.S. federal income tax consequences. Upon the occurrence of a Payment Default, Bankruptcy Default or Event of Default under the Facility Lease, or a Sublease Payment Default, Sublease Bankruptcy Default or Sublease Event of Default or of a termination of the Facility Lease or Facility Sublease prior to the expiration of the Facility Lease Term or Facility Sublease Term, as the case may be, or if the long term unsecured obligations of the Facility Sublessee are no longer rated at least A- by Standard & Poor's and Baa1 by Moody's, there shall thereupon be immediately due and payable by the Facility Sublessee to the Owner Participant a lump sum amount equal to the amount that, after taking into account all amounts theretofore paid with respect to such Loss pursuant to this clause (ii), preserves, on an After-Tax Basis, the Owner Participant's Net Economic Return; PROVIDED, HOWEVER, that if the schedules of Termination Value have been adjusted to include the lump sum amount contemplated by this sentence and if the Facility Sublessee is required to pay, and shall have paid in full, Termination Value for the Undivided Interest in the Facility, any portion or Component thereof or an amount determined by reference thereto, then no lump sum amount shall be due or payable pursuant to this sentence to the extent such amount already has been collected through the collection of such amount, it being the intent of the parties that the Owner Participant only be paid once for such Loss. 11 (c) Any amount payable by the Facility Sublessee to the Owner Participant shall be paid within 30 days after the date of the Notice to the Facility Sublessee pursuant to Section 5(a) of this Agreement; PROVIDED that, except in the case of a lump sum payment, no payment will be required prior to the date the additional taxes indemnified hereunder are payable or deemed to be payable in accordance with the U.S. Tax Assumptions by the Owner Participant. Section 6. EXCLUSIONS. Consistent with the foregoing, the Facility Sublessee shall not have any liability for indemnification under this Agreement for any Loss if such Loss results from one or more of the following: (a) any voluntary sale, transfer or other disposition by the Facility Lessor or the Owner Participant or an Affiliate of either (each a "member of the Facility Lessor Group"), or any involuntary sale, transfer or other disposition resulting from any bankruptcy of a member of the Facility Lessor Group or the foreclosure by a creditor of a member of the Facility Lessor Group, of any interest in or arising under the Operative documents, of the Undivided Interest or of any interest therein (it being understood that any substitution, rebuild, replacement or removal or modification, alteration, improvement or addition of or to the Facility by the Facility Sublessee or any other Facility Sublessee Person shall not be treated as a voluntary action of the Facility Lessor Group or any Affiliate of any of the foregoing) or of any interest in the Owner Participant, the Facility Lessor or any Affiliate of the Owner Participant (unless, in each case, such sale, transfer or other disposition is in connection with a Payment Default, Bankruptcy Default or Event of Default under the Facility Lease, or a Sublease Payment Default, Sublease Bankruptcy Default or Sublease Event of Default that shall theretofore have occurred and be continuing); (b) any Event of Loss with respect to the Facility or any other event whereby Oglethorpe is required to pay, and shall have paid in full, Termination Value and any other amounts owing under the Operative Documents (except to the extent that the calculation of Termination Value does not properly take into account the timing of such event); (c) solely due to the failure of a member of the Facility Lessor Group to have sufficient taxable income to benefit from any of the tax benefits described in Section 2 of this Agreement, (it being agreed that this exclusion shall not affect the calculation of the amount of any indemnity pursuant to Section 5 of this Agreement or the amount necessary to pay indemnities on an After-Tax Basis); (d) any amendment to or change in the Code, any Treasury Regulations, administrative pronouncements, executive order or judicial decision that is enacted or adopted after the Closing Date (except that this exclusion shall not apply to (i) a Loss resulting from any merger or consolidation of any Facility Sublessee Person or any assignment by any Facility Sublessee Person of its interest in the Facility or any Facility Sublessee Person or from any voluntary modification, improvement, substitution, rebuild, sublease, addition, alteration or replacement of or with respect to the Facility or any portion or Component thereof or interest therein, (h) any Loss described in Section 4(b), (iii) the calculation of amounts payable on an 12 After-Tax Basis, or (iv) a loss resulting from a breach of the representation described in Section 3(i)); (e) the failure of (i) the Head Lease to be treated as a sale or the prepaid rent thereunder to be treated as proceeds of a sale of the Undivided Interest, (ii) the Facility Lease to be treated as "true-lease", or (iii) the Facility Lessor to be considered the borrower under the Loan, or be treated as the owner of the Undivided Interest for U.S. federal income tax purposes, unless the Loss arising from any such failure is a result of any event described in Section 4(a) of this Agreement; (f) any fraud, willful misconduct or gross negligence of a member of the Facility Lessor Group; (g) the failure of a member of the Facility Lessor Group to timely file any tax return in accordance with the appropriate filing procedures unless (i) caused by a failure of the Facility Lessee or Facility Sublessee to timely take any action or to timely provide the Owner Participant with any information or document that the Facility Lessee or Facility Sublessee is required to take or provide, as the case may be, pursuant to any Operative Document, (ii) based on an opinion of independent tax counsel selected by the Owner Participant, to the effect that there is no Reasonable Basis to file such return or (iii) the filing of such a return would be inconsistent with a Final Determination of a contest under Section 7 of this Agreement (unless the Facility Sublessee has provided the Owner Participant with an opinion of independent tax counsel selected by the Owner Participant and reasonably acceptable to the Facility Sublessee, to the effect that based on a change in law after such Final Determination it is more likely than not that the Owner Participant will prevail in such contest); (h) the failure by the appropriate member of the Facility Lessor Group to timely contest a tax claim made by the Internal Revenue Service (the "IRS") in accordance with, and to the extent required by, Section 7 of this Agreement, if such contest is effectively precluded by such failure; (i) any member of the Facility Lessor Group being or becoming for U.S. federal income tax purposes a charitable organization, a tax-exempt entity within the meaning of Section 168(h) of the Code, an agency or instrumentality of the United States, a state or political subdivision thereof or an international organization or the special status of a member of the Facility Lessor Group which status causes such member to be subject to the provisions of Sections 55, 56, 57, 58, 59, 168(f)(2), 465, 469, 501, 542, 552, 851, 856 or 1361 of the Code; (j) the application of Sections 59A, 168(d)(3), 291 or 467 of the Code except, (i) in the case of Section 467, as a result of (A) a debt or rent restructuring in connection with an Event of Default under the Facility Lease or a Sublease Event of Default, (B) a violation of the covenant in Section 3(b) or (C) the incorrectness of the representation set forth in Section 3(g) and (ii) in the case of Section 168(d)(3), as a result of a breach of the representation set forth in Section 3(a) or 3(g); 13 (k) the application of Sections 861 and 862 of the Code except if caused by any of the events described in Section 4(a); (l) a change in the Owner Participant's taxable year from the calendar year to a fiscal year or the Owner Participant having a short taxable year for U.S. federal income tax purposes; (m) the inclusion in income by the Owner Participant upon termination of the Facility Lease of amounts attributable to improvements, modifications or additions to the Facility; (n) the failure of the Owner Participant to have an initial basis in the Undivided Interest equal to the Undivided Interest cost (except as a result of an event described in Section 4(a) of this Agreement); (o) an amendment, supplement, modification or waiver (the "Amendment") to any Operative document to which any member of the Facility Lessor Group is a party and to which Oglethorpe is not a party which Amendment is not requested by or consented to by Oglethorpe in writing (other than any Amendment, (i) that may be necessary or appropriate to, and is in conformity with, any Amendment to any Operative Document requested by or consented to by Oglethorpe in writing, (ii) that is required by the terms of the Operative Documents or by Applicable Law or (iii) if at the time of such Amendment an Event of Default under the Facility Lease or a Sublease Event of Default shall have occurred and be continuing); (p) penalties or additions to tax under Sections 6662 or 6663 of the Code or relating to estimated tax, in either case, to the extent resulting from or measured by matters unrelated to the transaction contemplated by the Operative Documents; (q) a determination that (i) the Facility Lessor is not holding the Undivided Interest in the ordinary course of a trade or business, or (ii) the Owner Participant did not enter into the transaction contemplated by the Operative Documents for profit under the Code, unless such determination is a result of an event described in Section 4(a) of this Agreement; (r) the failure of the Facility Lessor to be treated as a pass-through entity or otherwise be disregarded for U.S. federal income tax purposes; and (s) based on facts existing as of the Closing Date, the failure of the Loan to qualify as "qualified non-recourse indebtedness" within the meaning of Section 1.861-10T of the Treasury Regulations. Section 7. CONTESTS. (a) In the event a claim shall be made by the IRS in writing that, if successful, would result in a Loss for which the Facility Sublessee could be required to indemnify the Owner Participant, the Owner Participant hereby agrees promptly to notify the Facility Sublessee in writing of such claim and (except as otherwise provided below) agrees to contest such 14 claim (or cause the Facility Lessor to contest such claim) (including, without limitation, the appeal of any judicial determination in respect of such claim); PROVIDED, HOWEVER, that: (i) within 30 days after notice of such claim by the Owner Participant to the Facility Sublessee, the Facility Sublessee shall deliver in writing a request that such claim be contested; (ii) Oglethorpe shall, at the commencement of the contest and before each level of judicial proceedings, have delivered to the Owner Participant, at the Facility Sublessee's sole expense, a written opinion of independent tax counsel selected by the Owner Participant and reasonably satisfactory to Oglethorpe to the effect that there is a Reasonable Basis for contesting such action, or proposed action, by the IRS (or in the case of an appeal of an adverse judicial decision, the Facility Sublessee shall have furnished the Owner Participant with an opinion from such independent tax counsel, at Facility Sublessee's sole expense, to the effect that it is more likely than not that such determination will be reversed or substantially modified upon appeal in a manner favorable to the Owner Participant); (iii) the anticipated amount of indemnification payments that would be payable with respect to all claims raised in the same audit (together with the amount of all similar and logically related claims that have been or could be raised in any other current or potential future audit of the Owner Participant with respect to the Undivided Interest) equals or exceeds $100,000 (or $250,000 in the case of an appeal of a judicial decision) in the aggregate; (iv) the Facility Sublessee shall have agreed in writing to pay (and shall pay on demand) to the Owner Participant all reasonable costs and expenses that the Owner Participant shall incur in connection with contesting such claim, including attorneys', accountants' and other professional fees and disbursements; (v) the Owner Participant may, at its sole option, either pay the tax claimed and sue for a refund or contest the claim in any permissible forum considering, however, in good faith such requests as the Facility Sublessee and its counsel shall make concerning the most appropriate forum in which to proceed and other related matters; (vi) if the Owner Participant shall choose to pay the tax claimed and sue for a refund, the Facility Sublessee shall advance to the Owner Participant on an interest-free basis and with no additional net after-tax cost to the Owner Participant sufficient funds to pay the tax and interest, penalties and additions to tax payable with respect thereto (to the extent such amount is indemnified against pursuant to Section 4 of this Agreement); (vii) no Payment Default, Bankruptcy Default or Event of Default under the Facility Lease, or Sublease Payment Default, Sublease Bankruptcy Default or Sublease Event of Default shall have occurred and be continuing; (viii) the Facility Sublessee shall acknowledge in writing its liability to indemnify the Owner Participant under this Agreement in respect of such claim if the contest is not successful; PROVIDED that such acknowledgment of liability will not be binding if the contest 15 is resolved by the final decision of a court of competent jurisdiction on a clearly articulated basis which establishes that the Facility Sublessee would not be responsible to indemnify the Owner Participant under Section 4 of this Agreement in the absence of such acknowledgment; and (ix) the Owner Participant shall not be required to pursue any contest to the United States Supreme Court. (b) The Owner Participant shall not settle any such claim described in this Section 7(a) without the Facility Sublessee's consent; provided that the Owner Participant shall not be required to contest any proposed adjustment and may settle any such proposed adjustment if the Owner Participant shall waive its right to indemnity under this Agreement with respect to such adjustment and shall pay to the Facility Sublessee any amount previously paid or advanced by the Facility pursuant to this Agreement with respect to such adjustment or the contest of such adjustment (other than amounts paid or advanced pursuant to this Section 7(a)(iv)). (c) The Owner Participant (i) shall not make payment of any claim for at least 30 days after the giving of written notice of such claim to the Facility Sublessee if such forbearance is permitted by law and shall inform the Facility Sublessee in reasonable detail of the nature and extent of and purported basis (to the extent of the Owner Participant's knowledge thereof) for such claim, (ii) shall consult with and consider in good faith the Facility Sublessee's suggestions regarding the conduct of such contest (but the manner in which such contest is conducted shall be determined in all respects by the Owner Participant in its sole discretion) and shall keep the Facility Sublessee reasonably informed as to the progress of such contest, and (iii) shall at the request of the Facility Sublessee permit the Facility Sublessee and its counsel to review and make suggestions on all submissions to the IRS and any court to the extent such submissions relate to the Loss (it being understood that the Facility Sublessee shall not be permitted to review any portions of such submissions that relate to issues unrelated to the transactions contemplated by the Operative Documents). The Facility Sublessee and its counsel shall maintain confidentiality with respect to all such information. (d) If the Facility Sublessee shall have requested the Owner Participant to contest such claim as above provided and shall have duly complied with all the terms of this Section 7, the Facility Sublessee's liability for indemnification under Section 5 of this Agreement shall, at the Facility Sublessee's election, be deferred until a Final Determination of the liability of the Owner Participant. At such time, the Facility Sublessee shall become obligated for the payment of any indemnification hereunder not theretofore paid resulting from the outcome of such contest, and the Owner Participant shall become obligated to repay to the Facility Sublessee the amount of any interest-free advance made pursuant to this Section 7(a)(vi) together with any interest received by or credited to the Owner Participant that is attributable to such advance. Such obligations of the Owner Participant and the Facility Sublessee will first be set off against each other, and any difference owing by any party shall be paid within 30 days after such Final Determination. (e) The Owner Participant shall also not be required to contest any proposed adjustment if the subject matter thereof shall be of a continuing nature and there shall 16 have been a Final Determination with respect thereto, unless with respect to any Loss that the Facility Sublessee has elected to pay and is paying under Section 5(b)(ii) of this Agreement there shall have been a change in the law (including, without limitation, amendments to statues or Regulations, administrative rulings and court decisions), and the facility Sublessee shall have provided the Owner Participant, at the Facility Sublessee's sole cost, with an opinion of independent tax counsel selected by the Owner Participant and reasonably satisfactory to the Facility Sublessee, to the effect that as a result of such change in law the prior authorities are no longer determinative as to the outcome of a future contest and that it is more likely than not that the Owner Participant will prevail in such cost. Section 8. TAX SAVINGS. (a) In the event the Facility Sublessee makes an indemnity payment with respect to a Loss, if the Owner Participant, as the result of such Loss, realizes with respect to such year or any subsequent year U.S. federal income tax savings (and in the case of an Inclusion, any state and local income tax savings) attributable to such Loss or events giving rise thereto (such savings to be determined by reference to the timing and amount of income and deductions as set forth in the U.S. Tax Assumptions in effect immediately prior to the occurrence of such Loss as compared with the U.S. Tax Assumptions as adjusted to reflect the Loss) and such tax savings were not taken into account in calculating any indemnity hereunder, and provided that no Payment Default, Bankruptcy Default or Event of Default under the Facility Lease, or Sublease Payment Default, Sublease Bankruptcy Default or Sublease Event of Default shall have occurred and be continuing, the Owner Participant shall pay to the Facility Sublessee an amount equal to the sum of (i) such U.S. federal income tax savings, (ii) in the case of an Inclusion, the amount of any state and local income tax savings and (iii) any net tax benefit by the Owner Participant from the payment contemplated by the preceding clauses (i) and (ii); PROVIDED, HOWEVER, that such sum shall not be payable before such time as the Facility Sublessee shall have made all payments then due and owing to the Owner Participant pursuant to the Operative Documents including this Agreement; and PROVIDED, further, that the amount payable by the Owner Participant to the Facility Sublessee pursuant to clauses (i) and (ii) of this Section 8(a) shall not exceed the excess of the amount of all prior payments made to the Owner Participant by the Facility Sublessee pursuant to Section 4 hereof with respect to the Loss that gave rise to such tax savings over the amounts previously paid by the Owner Participant to the Facility Sublessee pursuant to clauses (i) and (ii) of this Section 8(a) with respect to such Loss, calculated for this purpose as if all indemnity payments made pursuant to Section 4 had been made without being grossed up to compensate the Owner Participant on an After-Tax Basis; and PROVIDED FURTHER, HOWEVER, that any such excess shall be carried forward and shall offset, to the extent thereof, any future liability of the Facility Sublessee under Section 4. The loss, recapture, disallowance or reduction of any tax savings subsequent to the year of realization by the Owner Participant shall be treated as a Loss that is indemnifiable pursuant to the provisions of this Agreement, without regard to the exclusions set forth in Section 6. (b) Any payment due to the Facility Sublessee pursuant to this Section 8 shall be paid promptly and in any event within 30 days after the Owner Participant shall realize the tax savings or would have the tax savings if the Owner Participant were at all times subject to U.S. federal income tax, and able to utilize deductions and losses for U.S. federal income tax 17 purposes. The tax rate used to calculate any tax savings hereunder shall be the same rate used to calculate the indemnities payable by the Facility Sublessee under Section 5(a)(ii) of this Agreement with respect to which the tax savings relate. Section 9. RECOMPUTATION OF TERMINATION VALUES. If any amount is required to be paid hereunder by the Facility Sublessee to the Owner Participant and shall actually be so paid, if and to the extent appropriate, Termination Values shall be recomputed so as to preserve the Owner Participant's Net Economic Return. If an event giving rise to the payment of an amount determined by reference to a schedule of Termination Values shall occur and the date as of which the Owner Participant shall be affected for tax purposes or the date of the payments of the applicable value shall be different than the date taken into account in computing such schedule, such values shall be appropriately adjusted based otherwise on the same assumptions previously used by the Owner Participant in calculating such schedule. Section 10. AFFILIATED GROUP. For purposes of this Agreement, the term "Owner Participant" shall include any affiliated group of corporations (and any member thereof) of which the Owner Participant is or shall become a member, if consolidated returns are or shall be filed for such affiliated group for U.S. federal income tax purposes. Section 11. RECORDS. The Facility Sublessee will keep or cause to be maintained such written information and records with respect to the Facility ("Records") as were provided to the Appraiser and Records comparable to information and records as are regularly maintained by the Facility Sublessee in the ordinary course of its business with respect to property owned by the Facility Sublessee and similar to the Facility and will make available for inspection and copying during normal business hours at its principal place of business such records as the Owner Participant shall reasonably request upon written notice in order to enable the Owner Participant to fulfill its federal, state and local return filing obligations or audit requirements and to participate effectively in a tax contest. The Facility Sublessee shall, upon the reasonable request of the Owner Participant, provide or cause to be provided to the Owner Participant a copy of such records which shall be certified to be a true copy by an affidavit attached thereto and executed by an officer of the party providing such records. Section 12. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Section 13. NOTICES. All notices, demands, declarations, consents, directions, approvals, instructions, requests and other communications required or permitted by the terms hereof shall be given in the manner described in Section 18.4 of the Participation Agreement. Section 14. DURATION. The obligations and liabilities of the Owner Participant, the Facility Sublessee, and any sub-sublessee, assignee, or successor arising under this Agreement shall continue in full force and effect, notwithstanding the expiration or early termination of the Facility Sublease, until all such obligations have been met and such liabilities have been paid in full, and shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 18 Section 15. INTEREST. Interest at the Overdue Rate shall be payable on any amount not paid when due hereunder until such amount shall be paid. Section 16. NO-SET-OFF. No payment required to be made by the Facility Sublessee or the Owner Participant pursuant to this Agreement shall be subject to any right to set-off, counterclaims, defense, abatement, suspension, deferment or reduction for any reason whatsoever other than as expressly provided herein, and neither the Facility Sublessee nor the Owner Participant shall have any right to terminate this Agreement, or to be released, relived or discharged from any obligation or liability under this Agreement for any reason whatsoever other than as expressly provided herein. Section 17. SUCCESSORS AND ASSIGNS. The terms of this Agreement shall be binding upon, and inure to the benefit of, the Owner Participant and its successors and assigns as permitted pursuant to the Operative Documents. Section 18. MISCELLANEOUS. This Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one Agreement. Any provision of this Agreement which is prohibited and 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. Neither this Agreement nor any of the terms hereof may be terminated, amended, supplemented, waived or modified orally, but only by an instrument in writing signed by the party against which the enforcement of the termination, amendment, supplement, waiver or modification is sought. The headings of the various Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof. Section 19. MANNER OF PAYMENTS. All payments shall be paid by Oglethorpe or the Owner Participant in lawful currency of the United States of America in immediately available funds to the recipient not later than 11: 00 a.m. (New York City time) on the date due. All payments to the Indemnitee shall be paid by Oglethorpe to the Indemnitee at its account at Citibank N.A., 399 Park Avenue, New York, NY 10043 (ABA Account No. 021-000-089) Credit - (Account No. 3024-1278), or to such other place as the Indemnitee shall notify Oglethorpe in writing. 19 IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered by the respective officers thereto duly authorized. OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) By: /S/ T.D. KILGORE ---------------------------------------------- Name: T.D. KILGORE -------------------------------------------- Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER ------------------------------------------- OWNER PARTICIPANT By: /s/ Steven P. Seagriff ---------------------------------------------- Name: Steven P. Seagriff -------------------------------------------- Title: Vice President Leasing ------------------------------------------- 20 SCHEDULE TO EXHIBIT 10.32.17 TAX INDEMNIFICATION AGREEMENT (P1) The following table indicates for each transaction the name of the corresponding Owner Participant: AGREEMENT DATE OWNER PARTICIPANT - ------------- ----------------------- --------------------------------------- P1 December 30, 1996 Philip Morris Capital Corporation P2 January 3, 1997 Philip Morris Capital Corporation F3 December 30, 1996 First Chicago Leasing Corporation F4 December 30, 1996 First Chicago Leasing Corporation N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation The Attachment to the Tax Indemnification Agreement is not filed herewith; however, the registrant hereby agrees that such Attachment will be provided to the Commission upon request. 21 EX-10.32-18 35 EXHIBIT 10.32.18 EXHIBIT 10.32.18 This instrument, when recorded, should be returned to: Robert N. Farrar Attorney at Law The Carnegie Building 607 Broad Street, Suite 141 Rome, Georgia 30161-3059 THE PURPOSE OF THIS INSTRUMENT IS TO MAKE TECHNICAL CORRECTIONS TO THAT CERTAIN CONSENT NO. 1, DATED DECEMBER 30, 1996, RECORDED IN DEED BOOK ____, PAGE ____, OF THE RECORDS OF THE CLERK OF SUPERIOR COURT OF FLOYD COUNTY, GEORGIA. IT IS THE INTENTION OF THE PARTIES THAT THIS DOCUMENT SUPERCEDE SUCH OTHER DOCUMENT IN ITS ENTIRETY. ================================================================================ CONSENT NO. 1 Dated as of December 30, 1996 among GEORGIA POWER COMPANY and OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) and SUNTRUST BANK, ATLANTA, not in its personal capacity but solely in its capacity as Co-Trustee and FLEET NATIONAL BANK, not in its personal capacity but solely in its capacity as Owner Trustee and ROCKY MOUNTAIN LEASING CORPORATION ================================================================================ Undivided Interest in Rocky Mountain Pumped Storage Hydroelectric Project TABLE OF CONTENTS Page ---- SECTION 1. DEFINITIONS....................................................... 3 SECTION 2. CONSENTS.......................................................... 3 Section 2.1 Transfers by Oglethorpe................................ 3 Section 2.2 Transfers by the Co-Trustee............................ 4 Section 2.3 Transfers by RMLC...................................... 5 Section 2.4 Certain Matters Pertaining to Rights of Oglethorpe, the Co-Trustee and RMLC................................ 6 Section 2.5 Oglethorpe Mortgage.................................... 7 SECTION 3. FURTHER AGREEMENTS................................................ 8 SECTION 4. EFFECT OF CONSENT; AMENDMENT OF OPERATIVE DOCUMENTS......................................................... 8 Section 4.1 Effect of Consent...................................... 8 Section 4.2 Amendments to Documents................................ 8 SECTION 5. CERTAIN RIGHTS OF GEORGIA POWER................................... 9 Section 5.1 Right of First Refusal in Georgia Power................ 9 Section 5.2 Right of Georgia Power to Exercise Purchase Option..... 9 Section 5.3 Restrictions on Transfer of Beneficial Interests....... 10 Section 5.4 Oglethorpe Mortgage.................................... 10 SECTION 6. MUTUAL REPRESENTATIONS AND WARRANTIES.................. 11 Section 6.1 Power and Authority.................................... 11 Section 6.2 Execution, Delivery, Enforceability.................... 11 SECTION 7. CO-OWNERS' REPRESENTATIONS, WARRANTIES AND COVENANTS......................................................... 11 Section 7.1 No Default............................................. 11 Section 7.2 Ownership.............................................. 11 Section 7.3 Enforceability......................................... 11 Section 7.4 FERC License........................................... 11 SECTION 8. MISCELLANEOUS..................................................... 12 Section 8.1 Governing Law.......................................... 12 Section 8.2 Severability........................................... 12 Section 8.3 Headings and Table of Contents......................... 12 Section 8.4 Successors and Assigns................................. 12 Section 8.5 Amendments and Waivers................................. 12 Section 8.6 Counterparts........................................... 12 Section 8.7 Effectiveness........................................ 12 Section 8.8 Limitation of Liability................................ 12 Page ---- Appendix A - Definitions 2 THIS CONSENT, bearing the number specified on the cover page hereof, dated as of December 30, 1996 (this "Consent"), among GEORGIA POWER COMPANY, a corporation organized and existing under the laws of the State of Georgia (together with its successors and assigns, "Georgia Power"), OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION), an electric membership corporation organized and existing under the laws of the State of Georgia (together with its successors and assigns, "Oglethorpe"), and FLEET NATIONAL BANK, a national banking association organized and existing under the laws of the State of Georgia (the "Trustee"), and SUNTRUST BANK, ATLANTA, a state banking corporation, organized and existing under the laws of the United States (the "Co-Trustee") not in their respective individual capacities, but solely in their respective trust capacities (collectively, the "Trustees") under the Trust Agreement (P1) dated as of the date hereof between Philip Morris Capital Corporation (the "Owner Participant") and the Trustees, as supplemented (the "Trust Agreement"), and ROCKY MOUNTAIN LEASING CORPORATION, a corporation organized under the laws of the State of Delaware (together with its successors and assigns, "RMLC"). RECITALS: WHEREAS, Georgia Power and Oglethorpe (collectively, the "Co-Owners") are owners of undivided interests in certain real and personal property located in Floyd County, Georgia, commonly known as the Rocky Mountain Pumped Storage Hydroelectric Project (as more particularly described in Appendix A, the "Facility"), and are parties to that certain Rocky Mountain Pumped Storage Hydroelectric Project Ownership Participation Agreement by and between Oglethorpe and Georgia Power, dated as of November 18, 1988 (the same as supplemented, modified or amended is referred to herein as the "Rocky Mountain Ownership Agreement"), which establishes rights and obligations of the parties thereto as owners of undivided ownership interests in the Facility; WHEREAS, Georgia Power and Oglethorpe also are parties to that certain Rocky Mountain Pumped Storage Hydroelectric Project Rocky Mountain Operating Agreement by and between Oglethorpe and Georgia Power, dated as of November 18, 1988 (the same as supplemented, modified or amended is referred to herein as the "Rocky Mountain Operating Agreement"), which establishes the respective rights and obligations of the parties thereto with respect to the management, control, operation and maintenance of the Facility; WHEREAS, Sections 7.01, 7.02 and 7.03 of the Rocky Mountain Ownership Agreement grant the parties thereto certain rights in connection with a proposed sale, lease, assignment or other transfer of an undivided ownership interest in the Facility or any portion thereof, or any rights under the Rocky Mountain Ownership Agreement, and sets forth additional conditions respecting transfers of such interests, and Section 10.01 of the Rocky Mountain Operating Agreement imposes certain conditions upon a sale, transfer or assignment of an undivided ownership interest in the Facility or any portion thereof; 1 WHEREAS, Oglethorpe wishes inter alia to (i) lease an undivided interest in its undivided interest in the Facility and the Rocky Mountain Site to the Co-Trustee pursuant to the Head Lease and the Ground Lease, respectively, (ii) assign its rights under the Rocky Mountain Ownership Agreement and Rocky Mountain Operating Agreement to the extent they relate to the undivided interest referred to in clause (i) hereinabove to the Co-Trustee pursuant to the Rocky Mountain Agreements Assignment, and (iii) engage in other related transactions as set forth herein; WHEREAS, Co-Trustee wishes inter alia to (i) lease the undivided interest leased to it by Oglethorpe in the Facility and the Rocky Mountain Site to RMLC pursuant to the Facility Lease and the Ground Sublease, respectively, (ii) assign the rights assigned to it by Oglethorpe under the Rocky Mountain Agreements Assignment to RMLC pursuant to the Rocky Mountain Agreements Reassignment, and (iii) engage in other related transactions as set forth herein; WHEREAS, the Facility Lease provides that (i) RMLC may purchase the Co-Trustee's interest in the Facility at the end of the term of the Facility Lease and (ii) if RMLC does not elect to exercise its purchase option, the Co-Trustee may either extend the term of the Facility Lease or require RMLC to return possession and control of the undivided interest to the Co-Trustee or a substitute lessee. WHEREAS, RMLC wishes inter alia to (i) lease the undivided interest leased to it by the Co-Trustee in the Facility and the Rocky Mountain Site to Oglethorpe pursuant to the Facility Sublease and the Ground Sub-sublease, respectively, (ii) assign the rights assigned to it by the Co-Trustee under the Rocky Mountain Agreements Re-Assignment to Oglethorpe pursuant to the Rocky Mountain Agreements Second Re-Assignment, and (iii) engage in other related transactions as set forth herein; WHEREAS, the Facility Sublease provides that (i) Oglethorpe may purchase RMLC's interest in the Facility at the end of the term of the Facility Sublease and (ii) if Oglethorpe does not elect to exercise its purchase option, RMLC may either extend the term of the Facility Sublease or require Oglethorpe to return possession and control of the undivided interest to RMLC or a substitute lessee. WHEREAS, Oglethorpe has asked Georgia Power, and Georgia Power is willing, to consent to the transfers and to the related assignments and assumptions described herein, and to waive its rights of first refusal, but only on the terms and conditions set forth in this Consent. AGREEMENT NOW, THEREFORE, for good and valuable consideration, each of the undersigned hereby consents and agrees as follows: 2 SECTION 1. DEFINITIONS Unless the context otherwise requires, the capitalized terms used and not otherwise defined herein shall have the respective meanings assigned thereto in the Rocky Mountain Ownership Agreement, the Rocky Mountain Operating Agreement, and in Appendix A attached hereto and incorporated herein by reference. The general provisions of Appendix A shall apply to the terms used in this Consent (including the introduction and recitals hereof) and specifically defined herein. SECTION 2. CONSENTS Section 2.1 Transfers by Oglethorpe. Pursuant to Sections 7.01, 7.02 and 7.03 of the Rocky Mountain Ownership Agreement and Section 10.01 of the Rocky Mountain Operating Agreement, and subject to the terms and conditions of this Consent, Georgia Power hereby (i) consents to, and (ii) waives the right of first refusal granted it pursuant to Section 7.01 of the Rocky Mountain Ownership Agreement with respect to, each of the following: (a) The lease of the Undivided Interest from Oglethorpe to the Co-Trustee under the Head Lease and the transactions provided for or contemplated therein and the exercise by each of the parties thereto of their respective rights and obligations thereunder, including, without limitation, the exercise of remedies thereunder; (b) The lease of the Ground Interest from Oglethorpe to the Co-Trustee under the Ground Lease and the transactions provided for or contemplated therein and the exercise by each of the parties thereto of their respective rights and obligations thereunder, including, without limitation, the exercise of remedies thereunder; (c) The assignment by Oglethorpe to the Co-Trustee pursuant to the Rocky Mountain Agreements Assignment of the Assigned Rocky Mountain Interests and the transactions provided for or contemplated therein and the exercise by each of the parties thereto of their respective rights and obligations; (d) Any renewal or extension of the Head Lease or the Ground Lease by the Co-Trustee pursuant to the terms thereof; and (e) The grant by Oglethorpe of a security interest in Oglethorpe's interest in the Undivided Interest, the Ground Interest, the Rocky Mountain Ownership Agreement and the Rocky Mountain Operating Agreement pursuant to the Subordinated Deed to Secure Debt and the transactions provided for or contemplated therein and the exercise by each of the parties thereto of their respective rights and obligations thereunder, including, without limitation, the exercise of remedies thereunder. Notwithstanding anything in this Section 2 to the contrary, and except as otherwise set forth in Section 5.1, any proposed sale, lease, assignment or other transfer to any Person other than a 3 party to the Operative Documents of the Undivided Interest, the Rocky Mountain Site or the Rocky Mountain Agreements pursuant to the agreements referred to above shall be subject to a right of first refusal identical to that set forth in Section 5.1. Section 2.2 Transfers by the Co-Trustee. Pursuant to Sections 7.01, 7.02 and 7.03 of the Rocky Mountain Ownership Agreement and Section 10.01 of the Rocky Mountain Operating Agreement, and subject to the terms and conditions of this Consent, each Co-Owner hereby (i) consents to, and (ii) waives the right of first refusal granted it pursuant to Section 7.01 of the Rocky Mountain Ownership Agreement with respect to, each of the following: (a) The lease of the Undivided Interest from the Co-Trustee to RMLC under the Facility Lease and the transactions provided for therein and the exercise by each of the parties thereto of their respective rights and obligations thereunder, including the exercise of remedies thereunder; (b) The lease of the Ground Interest from the Co-Trustee to RMLC under the Ground Sublease and the transactions provided for therein and the exercise by each of the parties thereto of their respective rights and obligations thereunder, including the exercise of remedies thereunder; (c) The assignment by the Co-Trustee to RMLC pursuant to the Rocky Mountain Agreements Re-assignment of the Assigned Rocky Mountain Interests and the transactions provided for therein; (d) The subsequent transfer, if any, by the Co-Trustee to RMLC of the Undivided Interest and the Ground Interest in accordance with the terms of the Facility Lease and the Ground Sublease; (e) Any renewal or extension of the Facility Lease or the Ground Sublease by the Co-Trustee in accordance with the terms of the Facility Lease and the Ground Sublease; and (f) The pledge and mortgage by the Co-Trustee to the Lender of, and the grant of a security interest pursuant to the Loan Agreement and the Deed to Secure Debt and the transactions provided for therein and the exercise by each of the parties thereto of their respective rights and obligations thereunder, including the exercise of remedies thereunder in favor of the Lender in, (i) the Co-Trustee's interest in the Undivided Interest under the Head Lease, (ii) the Co-Trustee's interest in the Ground Interest under the Ground Lease, (iii) the Co-Trustee's interest in the Assigned Rocky Mountain Interests under the Rocky Mountain Agreements Assignment and (iv) the Co-Trustee's interest in the Facility Sublease, the Ground Sub-sublease and the Rocky Mountain Agreements Second Re-assignment to the extent assigned to the Co-Trustee pursuant to the Assignment of Facility Sublease. Notwithstanding anything in this Section 2 to the contrary, and except as otherwise set forth in Section 5.1, any proposed sale, lease, assignment or other transfer to any Person other than a 4 party to the Operative Documents of the Undivided Interest, the Rocky Mountain Site or the Rocky Mountain Agreements pursuant to the agreements referred to above shall be subject to a right of first refusal identical to that set forth in Section 5.1. Section 2.3 Transfers by RMLC. Pursuant to Sections 7.01, 7.02 and 7.03 of the Rocky Mountain Ownership Agreement and Section 10.01 of the Rocky Mountain Operating Agreement, and subject to the terms and conditions of this Consent, each Co-Owner and the Co-Trustee hereby (i) consents to, and (ii) waives the right of first refusal granted it pursuant to Section 7.01 of the Rocky Mountain Ownership Agreement with respect to, each of the following: (a) The lease of the Undivided Interest from RMLC to Oglethorpe under the Facility Sublease and the transactions provided for therein and the exercise by each of the parties thereto of their respective rights and obligations thereunder, including the exercise of remedies thereunder; (b) The lease of the Ground Interest from RMLC to Oglethorpe under the Ground Sub-sublease and the transactions provided for therein and the exercise by each of the parties thereto of their respective rights and obligations thereunder, including the exercise of remedies thereunder; (c) The assignment by RMLC to Oglethorpe pursuant to the Rocky Mountain Agreements Second Re-Assignment of the Assigned Rocky Mountain Interests and the transactions provided for therein; (d) The subsequent transfer, if any, by RMLC to Oglethorpe of the Undivided Interest or the Ground Interest in accordance with the Facility Sublease and the Ground Sub-sublease; (e) Any renewal or extension of the Facility Sublease or Ground Sub-sublease by RMLC or Oglethorpe in accordance with the terms of the Facility Sublease and the Ground Sub-sublease; and (f) The pledge and mortgage by RMLC to the Co-Trustee of, and the grant of a security interest in favor of the Co-Trustee in, the Facility Sublease, the Ground Sub-sublease and the Rocky Mountain Agreements Second Re-assignment and the transactions provided for therein, including the exercise of remedies thereunder. Notwithstanding anything in this Section 2 to the contrary, and except as otherwise set forth in Section 5.1, any proposed sale, lease, assignment or other transfer to any Person other than a party to the Operative Documents of the Undivided Interest, the Rocky Mountain Site or the Rocky Mountain Agreements pursuant to the agreements referred to above shall be subject to a right of first refusal identical to that set forth in Section 5.1. 5 Section 2.4 Certain Matters Pertaining to Rights of Oglethorpe, the Co-Trustee and RMLC. Each of the undersigned agrees that: (a) Rights of Oglethorpe, RMLC and the Co-Trustee as Participants. The Rocky Mountain Agreements Assignment provides for Oglethorpe to assign to the Co-Trustee, for a period commencing on the Closing Date and terminating at the end of the Head Lease Term, all right, title, estate and interest of Oglethorpe, as a Participant (as such term is defined in the Rocky Mountain Ownership Agreement) in, to and under each of the Rocky Mountain Ownership Agreement and the Rocky Mountain Operating Agreement to the extent of the Assigned Rocky Mountain Interests. The Rocky Mountain Agreements Re-assignment provides for the Co-Trustee to assign to RMLC, for a period commencing on the Closing Date and terminating at the end of the Facility Lease Term, all right, title, estate and interest of the Co-Trustee as a Participant in, to and under each of the Rocky Mountain Ownership Agreement and the Rocky Mountain Operating Agreement to the extent of the Assigned Rocky Mountain Interests. The Rocky Mountain Agreements Second Re-assignment further provides for RMLC to assign to Oglethorpe, for a period commencing on the Closing Date and terminating at the end of the Facility Sublease Term, all right, title, estate and interest of RMLC as a Participant in, to and under each of the Rocky Mountain Ownership Agreement and the Rocky Mountain Operating Agreement to the extent of the Assigned Rocky Mountain Interests. From and after delivery of the Rocky Mountain Agreements Second Re-assignment and continuing until the earlier of (x) exercise of any remedy under Section 17 of the Facility Sublease and (y) termination of the Facility Sublease, Oglethorpe shall, for all purposes under the Rocky Mountain Ownership Agreement and the Rocky Mountain Operating Agreement, possess all of the rights and obligations of a "Participant" (as defined in the Rocky Mountain Agreements) with respect to the Undivided Interest and the Ground Interest, including, without limitation, all rights to give consents or approvals or otherwise to vote as a Participant with respect to the Undivided Interest and the Ground Interest in accordance with the provisions of the Rocky Mountain Ownership Agreement and the Rocky Mountain Operating Agreement and the Operative Documents. Notwithstanding the provisions of the preceding sentence, after the Closing Date, the Co-Trustee and RMLC shall have the right, upon reasonable notice to Oglethorpe, to inspect the Facility in accordance with the provisions of the Facility Lease and Ground Sublease, and Facility Sublease and Ground Sub-sublease, respectively. Until the end of the Facility Sublease Term, unless otherwise provided in the Operative Documents, any amounts payable to the Participants pursuant to the Rocky Mountain Ownership Agreement in respect of the Undivided Interest or the Ground Interest in connection with the loss, damage, destruction, transfer or other disposition of the Facility or the Rocky Mountain Site shall be payable to Oglethorpe to the extent of Oglethorpe's percentage undivided interest in each thereof, subject to and in accordance with the terms of the Rocky Mountain Ownership Agreement and the Rocky Mountain Operating Agreement. (b) Obligations of Oglethorpe, RMLC and the Co-Trustee as Participants. Georgia Power will look solely to Oglethorpe and any permitted successor or assignee of Oglethorpe's interest under the Facility Sublease for payment and performance of all indebtedness, obligations and liabilities arising under the Rocky Mountain Ownership Agreement, the Rocky Mountain Operating Agreement and the FERC License or otherwise 6 prior to the end of the Facility Lease or the Facility Sublease with respect to the Facility, the Rocky Mountain Site, the Undivided Interest and the Ground Interest, including, without being limited to, Operating Costs arising in connection with operation of the Facility and obligations under the FERC License; and RMLC, the Trustees, the Owner Participant and the Lender shall have no responsibility or liability for any of the foregoing. The parties hereto agree, however, that should Oglethorpe default in any payment required to be made under the Rocky Mountain Ownership Agreement or the Rocky Mountain Operating Agreement, any right of RMLC or the Co-Trustee, or their successors and assigns, to the capacity and energy allocable to the Undivided Interest is subject to the rights of Georgia Power under the provisions of Article VI of the Rocky Mountain Ownership Agreement and Article VI of the Rocky Mountain Operating Agreement until all defaults properly allocable to the Undivided Interest in accordance with Article VI of the Rocky Mountain Ownership Agreement, Article VI of the Rocky Mountain Operating Agreement, or both, as the case may be, together with interest at the rate provided for therein (compounded as set forth therein) have been paid in full. (c) Rights of RMLC Upon Sublease Event of Default. Upon the exercise of any remedy under Section 17 of the Facility Sublease in which the Facility Sublessor terminates the Facility Sublessee's rights in the Rocky Mountain Agreements, RMLC shall have the Facility Lessor's Percentage in all right, title, estate, interest, duties and obligations in, to and under each of the Rocky Mountain Ownership Agreement and Rocky Mountain Operating Agreement, to the extent and only to the extent of the Facility Lessor's Percentage in Assigned Rocky Mountain Interests and the right to give consents or approvals or otherwise to vote. Any action taken by any "Participant" to meet, or consider decisions, with respect to the Undivided Interest from and after the exercise of any remedy under Section 17 of the Facility Sublease in which the Facility Sublessor terminates the Facility Sublessee's rights in the Rocky Mountain Agreements, shall at all times be subject to the rights and obligations of RMLC as a "Participant" under and subject to the provisions of the Rocky Mountain Ownership Agreement and the Rocky Mountain Operating Agreement. (d) Rights of Co-Trustee after Facility Lease Event of Default. Upon the exercise of any remedy under Section 17 of the Facility Lease in which the Facility Lessor terminates the Facility Lessee's rights in the Rocky Mountain Agreements, the Co-Trustee shall have the Facility Lessor's Percentage in all right, title, estate, interest, duties and obligations in, to and under each of the Rocky Mountain Ownership Agreement and Rocky Mountain Operating Agreement, to the extent and only to the extent of the Facility Lessor's Percentage in the Assigned Rocky Mountain Interests and the right to give consents or approvals or otherwise to vote. Any action taken by any "Participant" to meet, or consider decisions, with respect to the Undivided Interest from and after the exercise of any remedy under Section 17 of the Facility Lease in which the Facility Lessor terminates the Facility Lessee's rights in the Rocky Mountain Agreements shall at all times be subject to the rights and obligations of the Co-Trustee as a "Participant" under and subject to the provisions of the Rocky Mountain Ownership Agreement and the Rocky Mountain Operating Agreement. Section 2.5 Oglethorpe Mortgage. Notwithstanding the foregoing, any rights that Oglethorpe, the Co-Trustee, RMLC, the Lender and AMBAC have with respect to the Rocky 7 Mountain Agreements shall be and are expressly subject and subordinate to the lien of the Oglethorpe Mortgage. SECTION 3. FURTHER AGREEMENTS. Oglethorpe agrees to indemnify and hold harmless and defend Georgia Power from and against any and all claims, judgments, loss, damage, cost or expense, including without limitation, attorney's fees, arising out of or alleged to arise out of any act done by, or any failure of performance of any act by, Georgia Power which is required of Georgia Power under this Consent, irrespective of the fault of Georgia Power with respect thereto, and irrespective of whether such claims arise in tort, contract, strict liability or otherwise. The foregoing indemnity shall not have any adverse affect on Georgia Power's obligations to the Co-Trustee or RMLC under this Consent. SECTION 4. EFFECT OF CONSENT; AMENDMENT OF OPERATIVE DOCUMENTS. Section 4.1 Effect of Consent. Except as specifically provided herein, nothing contained in this Consent shall be construed as modifying the Rocky Mountain Ownership Agreement or the Rocky Mountain Operating Agreement or as modifying in any way the rights or obligations of the parties thereto. By executing this Consent, Georgia Power does not become a party to and shall not be bound by any term, provision, covenant, agreement, recital or definition of terms set forth in any of the Transaction Documents other than the Rocky Mountain Ownership Agreement, the Rocky Mountain Operating Agreement and this Consent. In the event of any conflict between the definitions, terms or provisions of any of the documents entered into by Oglethorpe and others or the Co-Trustee and others relating to the transactions contemplated by this Consent, including, without limitation, the Operative Documents, and the definitions, terms and provisions of the Rocky Mountain Ownership Agreement, the Rocky Mountain Operating Agreement, or both, the Rocky Mountain Ownership Agreement and the Rocky Mountain Operating Agreement shall control, with respect to the subjects addressed therein, except as specifically otherwise provided elsewhere in this Consent. Section 4.2 Amendments to Documents. Oglethorpe, RMLC and the Co-Trustee each agrees that it will not agree to any amendment to the Operative Documents or any other documents executed in connection therewith which would materially adversely affect the rights of Georgia Power under this Consent, the Rocky Mountain Ownership Agreement or the Rocky Mountain Operating Agreement, without Georgia Power's further consent which consent shall not be unreasonably withheld. 8 SECTION 5. CERTAIN RIGHTS OF GEORGIA POWER. Section 5.1 Right of First Refusal in Georgia Power. If at any time during the Head Lease Term the Co-Trustee shall seek to sell, lease, convey, transfer, assign, encumber or alienate in any manner its interest in the Facility Lessor's Rocky Mountain Interest or any portion or portions thereof, to any Person other than RMLC, Oglethorpe or to a Replacement Lessee pursuant to Section 15.2 of the Facility Lease if neither RMLC nor Georgia Power elects to exercise the Purchase Option under Section 15.1 of the Facility Lease or Section 5.2 hereof, respectively, such sale, lease, conveyance or other transfer, shall be subject to Georgia Power's right of first refusal on the terms and conditions set forth in this Section 5.1. Georgia Power's exercise of such right shall be made by accepting or rejecting a contract proposed by the Co-Trustee which contract shall be open for acceptance by Georgia Power for a period of thirty (30) days after receipt and in the event such offer is accepted by Georgia Power, the Co-Trustee and Georgia Power shall proceed to a closing pursuant to the terms of the aforesaid contract in an expeditious manner but in any event no later than fifteen days after such contract is accepted; provided, however, that Co-Trustee shall have the right to convey a security interest in the Facility Lessor's Rocky Mountain Interest pursuant to the Loan Agreement and the Deed to Secure Debt or any successor Loan Agreement entered into pursuant to Section 15.5 of the Facility Lease as well as enter into the Facility Lease and permit RMLC to enter into the Facility Sublease. If Georgia Power does not give such notice to the Co-Trustee within such thirty (30) day period and proceed to a closing pursuant to the terms of such contract in an expeditious manner but in any event no later than fifteen days after such notice is given, the Co-Trustee will be free to proceed to effect a transaction on terms and conditions that are not materially different from those offered to Georgia Power for a period of one year following such offer, after which any such sale, lease, conveyance, transfer, assignment or encumbrance shall be subject to Georgia Power's right of first refusal set forth in this Section 5.1. Following a sale to a Person other than Georgia Power in accordance with this Section 5.2, Georgia Power's rights with respect to any subsequent sales, leases, conveyances or other transfers hereunder shall be governed by the Rocky Mountain Agreements. Notwithstanding any provision to the contrary, it is agreed and understood that any transfer of its interest in the Undivided Interest under the Head Lease by the Co-Trustee to any successor Trustee pursuant to Section 9 of the Trust Agreement shall not be subject to the provisions of this Section 5.1. In connection with Georgia Power's exercise of the right of first refusal pursuant to this Section 5.1 with respect to the Undivided Interest, the Ground Interest and the Assigned Rocky Mountain Interests shall be conveyed to Georgia Power. Section 5.2 Right of Georgia Power to Exercise Purchase Option. If RMLC shall not elect the Purchase Option pursuant to Section 15.1 of the Facility Lease, Georgia Power shall have the right to purchase the Undivided Interest on the Expiration Date on the terms and conditions set forth in this Section 5.2. Georgia Power shall give RMLC, the Owner Participant and the Co-Trustee written notice of its irrevocable election to exercise the purchase option provided by this Section 5.2 by the date no later than the earlier of (i) the date 60 days following the date eighteen months prior to the Expiration Date and (ii) the date 60 days following receipt by Georgia Power from the RMLC of notice of its election not to exercise the Purchase Option. If Georgia Power shall not give the notice contemplated by the 9 preceding sentence, it will have no right to purchase the Undivided Interest pursuant to this Section 5.2. If Georgia Power shall give notice of its election to purchase the Undivided Interest pursuant to this Section 5.2, it shall become unconditionally obligated to pay in immediately available funds on the Expiration Date all amounts of the Purchase Option Price and, without duplication of its covenant set forth in the succeeding sentence, RMLC shall be obligated to pay on the Expiration Date the amounts set forth in clauses (a)(ii) and (a)(iii) of Section 15.1 of the Facility Lease. If Georgia Power elects to purchase the Undivided Interest in accordance with this Section 5.2 and RMLC and Oglethorpe have complied with all of their obligations under the Operative Documents as of the Expiration Date, the Co-Trustee and the RMLC each agree to comply with their respective covenants set forth in Section 15.1 of the Facility Lease (other than, in the case of RMLC, the covenant to pay any amounts of the Purchase Option Price) in order to permit Georgia Power to purchase the Undivided Interest in accordance with such Section 15.1 of the Facility Lease. Other than as set forth in the preceding sentence and Section 15.4 of the Facility Lease, RMLC shall have no obligations in connection with Georgia Power's exercise of the election set forth in this Section 5.2. In connection with Georgia Power's exercise of the purchase option provided by this Section 5.2, the Ground Interest and the Assigned Rocky Mountain Interest shall be conveyed to Georgia Power. Section 5.3 Restrictions on Transfer of Beneficial Interests. In addition to the criteria set forth in Section 5.1 of the Participation Agreement relating to an assignment, conveyance or transfer of all or a portion of its interests in the Beneficial Interest, any such Transferee of such interest will not be a direct competitor of Georgia Power, unless such limitation is waived by Georgia Power. For purposes of this Section, a "direct competitor of Georgia Power" shall mean an entity which, or an Affiliate of which, is significantly involved as a seller of capacity and energy at wholesale or retail within the service territory of Georgia Power. Section 5.4 Oglethorpe Mortgage. Georgia Power acknowledges and agrees that any transfer to it of any or all of the Facility Lessor's Rocky Mountain Interest pursuant to Section 5.1 hereof or any purchase by it of the Undivided Interest, Ground Interest and the Assigned Rocky Mountain Interest pursuant to Section 5.2 hereof shall be subject and subordinate to the lien of the Oglethorpe Mortgage (unless the lien of the Oglethorpe Mortgage shall have been released with respect to the Undivided Interest, the Ground Interest and the Assigned Rocky Mountain Agreements) and that in connection with any such transfer or purchase, Georgia Power shall execute and deliver any documents or instruments (including, without limitation, UCC-1s) that the secured parties under the Oglethorpe Mortgage may reasonably request in order to establish and maintain such secured parties' security interest (and the priority thereof) with respect to the Undivided Interest, the Ground Interest and the Assigned Rocky Mountain Agreements. 10 SECTION 6. MUTUAL REPRESENTATIONS AND WARRANTIES. Each of Georgia Power and Oglethorpe represents and warrants to RMLC, the Owner Participant and the Co-Trustee, and RMLC and the Co-Trustee represents to each of Georgia Power and Oglethorpe that: Section 6.1 Power and Authority. It has the corporate power and authority to execute this Consent. Section 6.2 Execution, Delivery, Enforceability. This Consent has been duly authorized, executed and delivered by it or on its behalf and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 7. CO-OWNERS' REPRESENTATIONS, WARRANTIES AND COVENANTS. Each of Georgia Power and Oglethorpe represents, warrants and covenants to RMLC, the Owner Participant and the Co-Trustee that: Section 7.1 No Default. To the best of its knowledge, no default under the Rocky Mountain Ownership Agreement or the Rocky Mountain Operating Agreement has occurred and is continuing; provided, however, that the parties to the Rocky Mountain Ownership Agreement, the Rocky Mountain Operating Agreement or both may be performing their respective rights and obligations under such agreements other than in accordance with the strict terms thereof. Section 7.2 Ownership. It is the owner of an undivided interest in the Facility and the Rocky Mountain Site and has not sold, leased or otherwise transferred an interest therein to any Person other than another Co-Owner. Section 7.3 Enforceability. Each of the Rocky Mountain Ownership Agreement and the Rocky Mountain Operating Agreement constitutes valid and binding obligations of Oglethorpe and Georgia Power enforceable in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, fraudulent, conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity. It will fully perform its obligations under the Rocky Mountain Agreement in accordance with its terms. Section 7.4 FERC License. It has fully performed all of the obligations under the FERC License. During the Facility Sublease Term, it will fully perform the obligations with respect to the FERC License in Section 10.05 of the Rocky Mountain Ownership Agreement and not look to the Co-Trustee or RMLC for any contribution or other responsibility for such obligations. It will perform the obligations set forth in Section 10.05 of the Rocky Mountain Ownership Agreement assuming that such provision includes a reference to the Co-Trustee and 11 RMLC as well as Oglethorpe and Georgia Power and cooperate in all respects with the efforts of the Co-Trustee, RMLC and Oglethorpe to obtain a renewal of the FERC License. SECTION 8. MISCELLANEOUS. Section 8.1 Governing Law. This Consent shall be in all respects governed by and construed in accordance with the laws of the State of Georgia including all matters of construction, validity and performance. Section 8.2 Severability. If any provision hereof shall be invalid, illegal or unenforceable under Applicable Law, the validity, legality and enforceability of the remaining provisions hereof shall not be affected or impaired thereby. Section 8.3 Headings and Table of Contents. The headings of the sections of this Consent and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. Section 8.4 Successors and Assigns. This Consent shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and assigns as permitted by and in accordance with the terms hereof, the Operative Documents and the Rocky Mountain Agreements. Section 8.5 Amendments and Waivers. No term, covenant, agreement or condition of this Consent may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto. Section 8.6 Counterparts. This Consent may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 8.7 Effectiveness. This Consent has been dated as of the date first above written for convenience only. This Consent shall be effective on the date of execution and delivery by all of the parties hereto. Section 8.8 Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Consent is executed and delivered by SunTrust Bank and Fleet National Bank, not individually but solely as a Trustee under the Trust Agreement bearing the number on the cover page hereto, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the Co-Trustee or the Non-Georgia Trustee in their respective trust capacities only is made and intended not as personal representations, undertakings and agreements by SunTrust Bank or Fleet National Bank but is made and intended for the purpose for binding only the Co-Trustee or the Non-Georgia Trustee in their respective trust capacities only, (c) nothing 12 herein contained shall be construed as creating any liability on SunTrust Bank or Fleet National Bank, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto or by any Person claiming by, through or under the parties hereto, (d) under no circumstances shall SunTrust Bank or Fleet National Bank be personally liable for the payment of any indebtedness or expenses of the Co-Trustee or the Non-Georgia Trustee in their respective trust capacities only or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Co-Trustee under this Consent or (e) the Owner Participant shall have no liability to Georgia Power under this Consent or any other Transaction Document during the term of the Facility Lease. 13 IN WITNESS WHEREOF, the undersigned have executed this Consent under seal as of the day and year first hereinabove written. Signed and delivered in the presence of: GEORGIA POWER COMPANY /s/ Scott A. Hudson By:/s/ Fred D. Williams - --------------------------------------- ------------------------------ Unofficial Witness Name: Fred D. Williams --------------------------- Title: Senior Vice President -------------------------- s/s Earnestine J. Hendrix - --------------------------------------- Notary Public My Commission Expires: August 11, 1998 --------------- [NOTARY SEAL] Signed and delivered in the presence of: OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION /s/ Gary M. Bullock CORPORATION) - ---------------------------------------- Unofficial Witness By:/s/ T. D. Kilgore ------------------------------ /s/ Maija Braunfelds Name: T. D. Kilgore - ---------------------------------------- --------------------------- Notary Public Title: President and CEO -------------------------- My Commission Expires:January 19, 1998 [NOTARY SEAL] Signed and delivered in the presence of: SUNTRUST BANK, ATLANTA, not in its individual capacity, but solely as Co-Trustee under the Trust Agreement /s/ E. M. Schadru - -------------------------------------- Unofficial Witness /s/ Maija Braunfelds By:/s/ Bryan Echols - -------------------------------------- --------------------------------- Notary Public Name: Bryan Echols ------------------------------ Title: Vice President ----------------------------- My Commission Expires: Jan 19, 1998 By:/s/ Sandra Thompson Notary Public ------------ --------------------------------- Name: Sandra Thompson ------------------------------ Title: Vice President [NOTARY SEAL] ----------------------------- Signed and delivered in the presence of: ROCKY MOUNTAIN LEASING CORPORATION /s/ Leonard Scott By:/s/ Eugen Heckl - -------------------------------------- --------------------------------- Unofficial Witness Name: Eugen Heckl ------------------------------ Title: Vice President ----------------------------- /s/ Maija Braunfelds - -------------------------------------- Notary Public My Commission Expires:Jan 19, 1998 [NOTARY SEAL] Signed and delivered in the presence of: FLEET NATIONAL BANK, not in its individual capacity, but solely as Trustee under the Trust Agreement /s/ D. E. McGrum By:/s/ Frank McDonald - -------------------------------------- --------------------------------- Unofficial Witness Name: Frank McDonald ------------------------------ Title: Vice President ----------------------------- /s/ Maija Braunfelds - -------------------------------------- Notary Public My Commission Expires: 1/19/98 --------- [NOTARY SEAL] SCHEDULE TO EXHIBIT 10.32.18 CONSENT NO.1 The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant --------- ------------------- -------------------------------------- 1 December 30, 1996 Philip Morris Capital Corporation 2 January 3, 1997 Philip Morris Capital Corporation 3 December 30, 1996 First Chicago Leasing Corporation 4 December 30, 1996 First Chicago Leasing Corporation 5 December 30, 1996 NationsBanc Leasing & R.E. Corporation 6 January 3, 1997 NationsBanc Leasing & R.E. Corporation Other than Appendix A, the Exhibits and Schedules to the Consent No.1 are not filed herewith; however, the registrant hereby agrees that such Exhibits and Schedules will be provided to the Commission upon request. Appendix A to Consent No. 1 Definitions Refer to Appendix A to Exhibit 10.32.1 of the Form 10-K. EX-10.32-19 36 EXHIBIT 10.32.19 EXHIBIT 10.32.19 Cross Reference This Instrument when David H. Schmidt Deed Book: ____ recorded should be Coudert Brothers Pages: _______ returned to: 1114 Avenue of the Americas New York, NY 10036 OPC INTERCREDITOR AND SECURITY AGREEMENT NO. 1 This OPC Intercreditor and Security Agreement No. 1, dated as of December 30, 1996 (this "Agreement") among The United States of America (the "Government") acting through the Administrator of the Rural Utilities Services, as successor to the Rural Electrification Administration, SunTrust Bank, Atlanta, a banking corporation organized under the laws of Georgia which it is anticipated will be the grantee and act as secured party under the Indenture referred to below (the "New Mortgagee"), Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation), an electric membership corporation organized under the laws of Georgia ("OPC"), Rocky Mountain Leasing Corporation, a Delaware corporation ("RMLC"), SunTrust Bank, Atlanta, a banking corporation organized under the laws of Georgia, not in its individual capacity, but solely as Co-Trustee under the Trust Agreement (the "Co-Trustee"), Fleet National Bank, a national banking association, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement (the "Owner Trustee"), Utrecht-America Finance Co., a Delaware corporation (the "Lender") and AMBAC Indemnity Corporation, a Wisconsin domiciled stock insurance corporation ("AMBAC"; each of OPC, RMLC, the Co- Trustee, the Owner Trustee, the Lender and AMBAC, together with their respective successors and assigns being also referred to herein as a "Transaction Party" and collectively, the "Transaction Parties"). Capitalized terms used herein and not defined in Section 19 or elsewhere in this Agreement are used with the meaning set forth in Appendix A hereto. RECITALS A. The Government and OPC are parties to that certain Consolidated Mortgage and Security Agreement, dated as of September 1, 1994 (as heretofore or hereafter amended, supplemented, modified or restated, the "OPC Mortgage"; and together with the OPC Indenture (as hereinafter defined) and any other mortgage or security agreement hereinafter entered into in substitution or replacement for the OPC Mortgage or the OPC Indenture (either in connection with the refinancing or restructuring of the indebtedness currently or hereafter secured by the OPC Mortgage or the OPC Indenture or otherwise) the "Senior Mortgage and Security Agreement") pursuant to which OPC has granted to the Government and certain other Mortgagees (collectively, the "Original Mortgagees"), a first priority security interest in, and security title to, substantially all of OPC's property, including, without limitation, OPC's interest in the Rocky Mountain Site and the Facility which, in turn, includes OPC's ownership interest in the Undivided Interest and the Ground Interest and OPC's rights in respect of the Rocky Mountain Agreements; B. In connection with the restructuring of OPC (which is currently expected to be consummated in 1997), OPC proposes to enter into that certain Indenture, to be dated as of January 1, 1997 (as the same may be amended, supplemented or modified following the execution and delivery thereof, the "OPC Indenture"), pursuant to which OPC intends to grant to the New Mortgagee a perfected security interest in, and security title to, substantially all of OPC's property, including, without limitation, OPC's ownership interest in the Undivided Interest and the Ground Interest and OPC's rights in respect of the Rocky Mountain Agreements; C. Following the filing and recordation of the OPC Indenture in all appropriate filing offices, it is anticipated that the security title of the OPC Mortgage will be released, at which time the security title of the OPC Indenture will constitute a first perfected security interest in, and security title to, substantially all of OPC's property, including, without limitation, the Undivided Interest and the Ground Interest and the Rocky Mountain Agreements; D. The Participation Agreement contemplates, among other things, that OPC will lease the Undivided Interest to the Co-Trustee pursuant to the terms of the Head Lease (which for federal income tax purposes will be treated as a sale by OPC of the Undivided Interest); that the Co-Trustee will lease the Undivided Interest to RMLC pursuant to the terms of the Facility Lease (which for federal income tax purposes will be treated as a "true lease" by the Co-Trustee of the Undivided Interest); that RMLC will lease the Undivided Interest to OPC pursuant to the terms of the Facility Sublease (which for federal income tax purposes will be treated as a "true lease" by RMLC of the Undivided Interest); that OPC will assign its rights under the Rocky Mountain Agreements (to the extent the same relate to the Undivided Interest) to the Co-Trustee, the Co-Trustee will assign its rights under the Rocky Mountain Agreements to RMLC and RMLC will assign its rights under the Rocky Mountain Agreements to OPC pursuant to the terms of the Rocky Mountain Agreements Assignment, the Rocky Mountain Agreements Re-assignment and the Rocky Mountain Agreements Second Re-assignment, respectively; that OPC will lease the Ground Interest to the Co-Trustee, the Co-Trustee will sublease the Ground Interest to RMLC and RMLC will, in turn, sublease the Ground Interest to OPC pursuant to the terms of the Ground Lease, the Ground Sublease and the Ground Sub-sublease, respectively; that the Co-Trustee will assign, among other things, all of its rights, title and interest in the Head Lease, the Facility Lease, the Facility Sublease Assignment Agreement, the Ground Lease, the Ground Sublease, the Rocky Mountain Agreements Assignment and the Rocky Mountain Agreements Re-assignment to the Lender as security for the payment and performance by, among others, the Co-Trustee of the Secured Indebtedness; and that OPC will grant a security interest in the Undivided Interest, the Ground Interest and the Rocky Mountain Agreements ( to the extent the same relate to the Undivided Interest) to the Subordinated Secured Parties pursuant to the terms of the Subordinated Deed to Secure Debt and Security Agreement as security for the payment and performance by OPC of the Secured Obligations (the transactions referred to in this clause D and more fully described in the Operative Documents being hereinafter referred to as the "Transactions"). -2- NOW THEREFORE, the parties hereto hereby agree as follows: Section 1. Priority of Security Interest and Mortgage in Favor of the Senior Secured Parties. (a) Each Transaction Party acknowledges and agrees that the security title and security interest of the Original Mortgagees in the Undivided Interest, the Ground Interest and the Rocky Mountain Agreements created by the OPC Mortgage is a first and prior security title and security interest that is not being released by the Original Mortgagees in connection with the consummation of the Transactions and that the interest (if any) of each Transaction Party in the Undivided Interest (including, without limitation, all Components and Modifications), the Ground Interest, and the Rocky Mountain Agreements (whether such interest arises by virtue of the Head Lease, the Facility Lease, the Facility Sublease, the Facility Sublease Assignment Agreement, the Ground Lease, the Ground Sublease, the Ground Sub-sublease, the Rocky Mountain Agreements Assignment, the Rocky Mountain Agreements Re-assignment, the Rocky Mountain Agreements Second Re-assignment, the Deed to Secure Debt, the Subordinated Deed to Secure Debt and Security Agreement or otherwise), shall be subject and subordinate in all respects to the security title and security interest of the Senior Mortgage and Security Agreement. As between the Transaction Parties and the Senior Secured Parties, the foregoing priority shall govern irrespective of (a) any statement contained in any of the Operative Documents to the contrary, (b) the time, order or method of attachment or perfection of the mortgage and security interests granted thereby, (c) the time or order of filing or recording of financing statements, (d) any applicable provision of the Uniform Commercial Code or any applicable law or (e) the occurrence of any other event or any contingency whatsoever. (b) In furtherance, but not in limitation, of the foregoing, each of the Owner Trustee and the Co-Trustee hereby acknowledges and agrees that a security title and security interest exists in the Undivided Interest (including, without limitation, all Components and Modifications), the Ground Interest and the Rocky Mountain Agreements in favor of the Original Mortgagees and any other Senior Secured Party as security for the performance and payment in full of the OPC Secured Obligations and that upon the occurrence and continuance of one or more "Events of Default", as defined in the Senior Mortgage and Security Agreement, the Senior Secured Parties shall be entitled to exercise any and all remedies against the Undivided Interest (including, without limitation, all Components and Modifications), the Ground Interest and the Rocky Mountain Agreements available to it under the Senior Financing Agreements, at law or otherwise. The Government agrees to use reasonable efforts to notify the Trustees and the Lender at least 10 days in advance of the consummation of any foreclosure of its security interest in the Undivided Interest, the Ground Interest and the Rocky Mountain Agreements; provided, however, that the Government's failure to do so shall not give rise to any liability on the part of the Government. Each of the Owner Trustee and the Co-Trustee hereby authorizes the Government and any other Senior Secured Party to file any financing statements, fixture filings and continuation statements indicating the Owner Trustee and the Co-Trustee as "Debtor" or "Lessee" and the Senior Secured Parties as "Secured Party" or "Lessor" under the UCC which the Government or such other Senior Secured Party believes is necessary or desirable in order to confirm perfection of the security interest referred to above. Such security interest is senior and -3- prior to any interest of any Transaction Party in the Undivided Interest, the Ground Interest, and the Rocky Mountain Agreements. As between the Transaction Parties and the Senior Secured Parties, the foregoing priority shall govern irrespective of (a) any statement contained in any of the Operative Documents to the contrary, (b) the time, order or method of attachment or perfection of the mortgage and security interests granted thereby, (c) the time or order of filing or recording of financing statements, (d) any applicable provision of the Uniform Commercial Code or any applicable law or (e) the occurrence of any other event or any contingency whatsoever. (c) For the avoidance of doubt, each Transaction Party acknowledges and agrees that a disposition of the Undivided Interest, the Ground Interest or the Rocky Mountain Agreements by any Senior Secured Party pursuant to an exercise of remedies under the Senior Mortgage and Security Agreement shall, without further act, divest such Transaction Party of its interest (if any) in the property so disposed of (whether such interest arises by virtue of the Head Lease, the Facility Lease, the Facility Sublease, the Ground Lease, the Ground Sublease, the Ground Sub-sublease, the Rocky Mountain Agreements Assignment, the Rocky Mountain Agreements Re-assignment, the Rocky Mountain Agreements Second Re-assignment, the Deed to Secure Debt, the Subordinated Deed to Secure Debt and Security Agreement or otherwise) subject to the Transaction Parties' continuing interest in the proceeds (if any) of such disposition in excess of the OPC Secured Obligations. Notwithstanding the foregoing provisions of this Section 1(c), a divestiture of any Transaction Party's interest in the Undivided Interest (including, without limitation, all Components and Modifications), the Ground Interest or the Rocky Mountain Agreements shall not affect any Transaction Party's or the Owner Participant's claims against any other Transaction Party (or the Owner Participant) for rents, principal, interest and other sums payable under any Operative Document in accordance with its terms or for damages as a result of such other Transaction Party's (or the Owner Participant) breach of its obligations under any of the Operative Documents. (d) By its execution and delivery of this Agreement, the Government consents, to the extent such consent is required by law or agreement or necessary to prevent any default or "Event of Default" from occurring under the Senior Financing Agreements (and each of them) solely as a result of the Transactions, to the execution and delivery by OPC of the Operative Documents to which it is a party, the consummation of the Transactions contemplated thereby and the exercise by the Transaction Parties of their rights thereunder (consistent with the terms of this Agreement). For the avoidance of doubt, notwithstanding the consummation of the Transactions, OPC shall remain bound by its covenants in the Senior Mortgage and Security Agreement including, without limitation, covenants as to maintenance, insurance, inspection, lien lifting and loss or damage involving the Facility (it being understood that OPC's lien lifting covenant shall not extend to the liens or encumbrances expressly permitted hereby). -4- (e) Notwithstanding any other provision hereof to the contrary, the Government acknowledges and agrees that the property released from the lien of the OPC Mortgage pursuant to the Partial Release has been released from the lien of the OPC Mortgage contemporaneously with the effectiveness of this Agreement and all recitals and agreements as to the existence or priority of the lien of the Senior Mortgage and Security Agreement shall be understood to apply to property of OPC other than such released property. Section 2. Limitation on Exercise of Remedies by Subordinated Secured Parties. So long as any of the OPC Secured Obligations remain outstanding and are secured by a security title on the Undivided Interest, the Ground Interest and the Rocky Mountain Agreements, neither AMBAC, nor the Co-Trustee shall, so long as any Subordinated Deed to Secure Debt and Security Agreement Event of Default shall have occurred and be continuing, exercise its rights under the Subordinated Deed to Secure Debt and Security Agreement to foreclose upon the collateral covered thereby without the prior written consent of the Government (which consent may be given or withheld in its sole and absolute discretion). Section 3. Waivers by Transaction Parties. Each Transaction Party waives to the fullest extent permitted by applicable law any requirement regarding, and agrees not to demand, request, plead or otherwise claim the benefit of, any marshaling, appraisal, valuation or other similar right that may otherwise be available under applicable law or any other similar rights a creditor or secured creditor may have under applicable law; any right under Section 9-504(l)(c) of the Uniform Commercial Code as in effect in the State of New York (the "UCC") to application of the proceeds of disposition; any right to notice and objection under Section 9-505(2) of the UCC and promptness, diligence, notice of acceptance and any other notice with respect to this Agreement; and any requirement that the Senior Secured Parties or any Senior Creditor protect, secure, perfect or insure any security title or security interest on the Undivided Interest, the Ground Interest or the Rocky Mountain Agreements or any other collateral subject to any Senior Mortgage and Security Agreement (the "Senior Collateral") or any other property subject to any other mortgage or security agreement benefiting the Senior Secured Parties or exhaust any right or take any action against OPC, or any other person or entity or any Senior Collateral, or any other collateral; and any other right relating to the exercise by the Senior Secured Parties or any Senior Creditor of any right or remedy provided in the Senior Mortgage and Security Agreement, hereunder or at law, including, without limitation, the provisions of Article 9 of the Uniform Commercial Code as in effect in any applicable jurisdiction; provided, that the foregoing waivers shall not include a waiver by such Transaction Party of its rights under any mandatorily non- waivable provision of applicable law. No Transaction Party shall contest, or bring (or join in) any action or proceeding for the purpose of contesting, the validity, perfection or priority of, or seeking to avoid, this Agreement, any Senior Mortgage and Security Agreement or any rights of the Senior Secured Parties hereunder or thereunder in or with respect to the Undivided Interest, the Ground Interest or the Rocky Mountain Agreements or the validity or reasonableness of any action or failure to act in respect of the Undivided Interest, the Ground Interest or the Rocky Mountain Agreements by such -5- Senior Secured Parties, including, without limitation, the timing, method or manner of disposing of or liquidating any or all of the Undivided Interest, the Ground Interest or the Rocky Mountain Agreements, including, without limitation, the price and percentage of consideration received in cash, of any such disposition or liquidation or any failure to dispose of or liquidate any or all of the Undivided Interest, the Ground Interest or the Rocky Mountain Agreements. Section 4. Workouts and Restructurings Relating to the Facility and Rocky Mountain Site. If the Senior Secured Parties (or their nominee or designee) shall accept a conveyance or transfer of the Undivided Interest, the Ground Interest or the Rocky Mountain Agreements or any portion thereof from OPC by deed in lieu of foreclosure, or shall agree to the sale, auction or transfer of the Undivided Interest, the Ground Interest or the Rocky Mountain Agreements or any portion thereof as part of a settlement of an action relating to a default under the Senior Financing Agreements or otherwise as part of a so-called "workout" with OPC and the Senior Secured Parties or the Senior Creditors, such conveyance, sale or transfer shall be made free and clear of the interests of any of the Transaction Parties in and to the Undivided Interest, the Ground Interest, and the Rocky Mountain Agreements. The Government agrees to use reasonable efforts to notify the Trustees and the Lender at least 10 days in advance of the consummation of any sale, auction, conveyance or transfer referred to in this Section 4; provided, however, that the Government's failure to do so shall not give rise to any liability on the part of the Government. Without limiting the generality of Section 8, each Transaction Party agrees to execute and deliver to the Government such instruments and/or releases or terminations of security titles or interest, without warranty, as reasonably requested by the Government to give effect to the foregoing provisions of this Section 4. Section 5. Concerning the Operative Documents. (a) All Loan Certificates, all Additional Loan Certificates and any loan certificates issued in connection with a refinancing of the Loan Certificates shall contain language substantially similar to that contained in the Loan Certificate issued on the Closing Date to the effect that the security interest and security title of the Lender in the Undivided Interest, the Ground Interest and the Rocky Mountain Agreements is subject and subordinate to the security title in favor of the Senior Secured Parties, as more fully set out in this Agreement. (b) Each Transaction Party hereby agrees that all property insurance proceeds relating to insurance policies purchased by OPC received by such Transaction Party from insurers, and all proceeds received by such Transaction Party from any governmental entity in connection with the condemnation, confiscation or any other taking, in either case involving the Undivided Interest or the Ground Interest, shall be held by such Transaction Party in trust for the benefit of the Senior Secured Parties and promptly paid over to the Government, as long as the OPC Mortgage remains in effect and thereafter to the trustee under the OPC Indenture in each case for distribution or application as required by the Senior Financing Agreements. Any such proceeds which are required to be disbursed to OPC by the Senior Secured Parties pursuant to the Senior Financing Agreements shall to the extent required by the Operative Documents be paid to the Lender for distribution pursuant to the Loan Agreement. For purposes of the preceding sentence, -6- the Senior Secured Parties shall be entitled to rely on a statement from the Lender as to whether or not such proceeds are required to be paid to the Lender pursuant to the Operative Documents. Section 6. No Agency Relationship. This Agreement shall not create an agency relationship between the Senior Secured Parties and the Transaction Parties. The Senior Secured Parties and their respective officers, directors, employees and agents shall not be responsible, directly or indirectly, to the Transaction Parties for any action taken or omitted by the Senior Secured Parties hereunder or under any Senior Mortgage and Security Agreement or any other agreement or instrument relating thereto or otherwise, nor shall it be liable or responsible for any loss, cost or expense suffered or incurred by the Transaction Parties. The Senior Secured Parties may each rely and shall be protected in acting or refraining from acting upon any written notice, instrument or request furnished to it hereunder and believed by it to be genuine and to have been signed or presented by the proper party. Each Senior Secured Party may consult with counsel of its own choice and shall have full and complete authorization and protection for any action taken or suffered by it hereunder in good faith and in accordance with the advice of such counsel. Section 7. Further Assurances. Each Transaction Party will, at the expense of OPC, at any time and from time to time, promptly execute and deliver all such other instruments and documents, without warranty, and take all further action, that the Senior Secured Parties or any Senior Creditor through the Senior Secured Parties may reasonably request, in order to protect or confirm any right or interest granted or purported to be granted hereby or to enable the Senior Secured Parties to exercise and enforce their rights and remedies hereunder. OPC, at its own cost and expense, will cause any financing statements and fixture filings (and continuation statements with respect thereto) referred to in Section 1(b) to be recorded or filed at such places and times in such manner, and will take all such other actions or cause such actions to be taken, as may be required by the Senior Mortgage and Security Agreement to establish, preserve, protect and perfect the Senior Secured Parties' first priority security title and security interest in and to the Undivided Interest, the Ground Interest and the Rocky Mountain Agreements. Without limiting the generality of the foregoing, upon execution and delivery of the OPC Indenture each Transaction Party agrees, at the cost and expense of OPC, to execute and deliver and file and record such further documents or instruments as the Government may reasonably request to order to confirm the rights of the Senior Secured Parties hereunder. Section 8. Specific Performance. The Senior Secured Parties are hereby authorized, to the maximum extent permitted by applicable law, to demand specific performance of this Agreement at any time when any Transaction Party shall have failed to comply with any of the provisions of this Agreement applicable to it. Each Transaction Party hereby irrevocably waives, to the maximum extent permitted by applicable law, any defense based on the adequacy of a remedy at law that might be asserted as a bar to such remedy of specific performance. Section 9. Non-Impairment. Nothing in this Agreement shall impair, as between OPC on the one hand and the Senior Creditors on the other, the OPC Secured Obligations or impair, as between OPC on the one hand and the other Transaction Parties and the Owner -7- Participant on the other, the obligations of OPC under the Operative Documents. For the avoidance of doubt, the parties hereto expressly agree that the exercise by the Senior Secured Parties and/or the Senior Creditors of their respective rights and remedies hereunder and under the Senior Financing Agreements, including, without limitation, foreclosure on the Undivided Interest, the Ground Interest and the Rocky Mountain Agreements, shall in no way affect any claims that any Transaction Party or the Owner Participant may have against any other Transaction Party or the Owner Participant for rents, principal, interest and other sums payable under any Operative Document in accordance with its terms or as a result of the latter's breach of its obligations under any of the Operative Documents. Section 10. Inconsistent Provisions. By executing this Intercreditor Agreement neither the Government or any other Senior Secured Party or Senior Creditor becomes a party to nor shall be bound by any term, provision, covenant, agreement, recital or definition of terms set forth in any of the Operative Documents. Notwithstanding any other provision hereof to the contrary (including without limitation, Section 1(d)), as between the Senior Secured Parties and the Senior Creditors on the one hand and the Transaction Parties on the other, in the event of any conflict between the definitions, terms or provisions of any of the Operative Documents and the definitions, terms and provisions of this Agreement, this Agreement shall control, with respect to the subjects addressed herein. Section 11. Effectiveness of Agreement. Each party hereto represents and warrants as to itself that this Agreement constitutes the legal, valid and binding agreement of such party enforceable against it in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or other similar laws relating to or affecting the rights of creditors generally and by general principles of equity. This Agreement has been dated as of the date first above written for convenience only and shall become effective upon execution and delivery hereof by the parties hereto. This Agreement shall remain in full force and effect ,subject to termination by written agreement of the parties hereto, unless and until (x) the OPC Secured Obligations are paid in full or (y) all obligations owing to any Transaction Party, other than OPC, pursuant to the Operative Documents (or any of them) shall have been paid in full and the Operative Documents terminated (whether by expiration of time or otherwise) or (z) the Senior Mortgage and Security Agreement shall have been released in accordance with its terms. Subject to the preceding sentence, all rights, interest, agreements and obligations of the Senior Secured Parties and the Transaction Parties under this Agreement, shall remain in full force and effect irrespective of: (i) any lack of validity or enforceability of the Senior Financing Agreements; (ii) any change in the time, manner or place of payment of, the security for, or in any other term of, all or any of the OPC Secured Obligations or any other extension, renewal, amendment (including, without limitation, in the maximum amount of indebtedness which can be secured by the Senior Mortgage and Security Agreement), waiver, refinancing or restructuring of or any consent to departure from the Senior Financing Agreements; -8- (iii) any exchange, release or non-perfection of the Senior Collateral or any other collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the OPC Secured Obligations; or (iv) any other circumstance that might otherwise constitute a defense available to, or a discharge of, OPC or a debtor. This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the OPC Secured Obligations is rescinded or must otherwise be returned by the Senior Secured Parties or any Senior Creditor upon the insolvency, bankruptcy or reorganization of OPC, or otherwise, all as though such payment had not been made. Section 12. Amendments to this Agreement. No amendment of this Agreement shall be effective unless in writing and signed by the party against whom enforcement is sought. No waiver of any provision of this Agreement nor consent to any departure, therefrom shall in any event be effective unless the same shall be in writing and signed by the affected party, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 13. Expenses. OPC shall pay, upon demand, to the Senior Secured Parties and the Transaction Parties the amount of any and all reasonable expenses, including, without limitation, the reasonable fees and expenses of counsel, that the Senior Secured Parties or any other Senior Creditor and the Transaction Parties may incur in connection with the exercise or enforcement of any of the rights or interest of the Senior Secured Parties and the Transaction Parties hereunder. Section 14. Notices. All demands, notices and other communications provided for hereunder shall be in writing, (including telecopier communication) and, if to any Transaction Parties, mailed or communicated or delivered to it as provided in the Participation Agreement and if to the Government or AMBAC, mailed or communicated or delivered to it as follows: if to the Government: Administrator Rural Utilities Service United States Department of Agriculture 1400 Independence Avenue S.W. Washington, D.C. 20250-1400 Fax: if to AMBAC: Ambac Indemnity Corporation -9- One State Street Plaza New York, New York 10004 Attn: President Fax: 212-509-9190 or at such other address as shall be designated by a party hereto in a written notice to each other party complying with the terms of this subparagraph. All such demand, notices and other communications shall be effective when received. Section 15. Waiver. No failure on the part of any party hereto to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof or of any right under any Senior Financing Agreement or Operative Document or any other document related thereto; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right hereunder or under any Senior Financing Agreement or Operative Document. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 16. Assignment. This Agreement is a continuing agreement and shall (i) be binding upon the parties hereto and their successors and permitted assigns and (ii) inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. Without limiting the generality of the foregoing clause (ii), any Senior Secured Party or Senior Creditor may assign or otherwise transfer all or any part or portion of its rights and obligations under the Senior Financing Agreements to any other Person, and such other Person shall thereupon become vested with all the rights in respect thereof granted to such Senior Secured Party or Senior Creditor herein or otherwise. So long as the Undivided Interest and the Ground Interest remain subject to any security title in favor of the Senior Secured Parties, each Transaction Party (other than the Lender) agrees that it will not assign or otherwise transfer any of its interest in the Undivided Interest, the Ground Interest, the Rocky Mountain Agreements or the Operative Documents unless the Person to whom such disposition is made shall have delivered to the Senior Secured Parties on or before the date such assignment or transfer is consummated a written agreement to be bound by the terms of this Agreement. Section 17. Invalidity. If any provisions of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired. Section 18. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws (excluding conflict of law rules) of the State of New York. Section 19. Definitions. As used herein, the following capitalized terms are used with the meanings set forth below: -10- "OPC Indenture" shall have the meaning set forth in Recital B. "OPC Mortgage" shall have the meaning set forth in Recital A. "OPC Secured Obligations" shall mean all obligations, whether now existing or hereafter incurred, of OPC secured by any Senior Mortgage and Security Agreement. "Partial Release" shall mean that certain Partial Release of Security Interest dated as of December 30, 1996 made by the Original Mortgagees. "Senior Creditor" shall mean any creditor holding claims against OPC which are secured by the security title or security interest of any Senior Mortgage and Security Agreement. "Senior Collateral" shall have the meaning specified in Section 3. "Senior Financing Agreements" shall mean the Senior Mortgage and Security Agreement and any other agreement, indenture or instrument relating thereto and shall include, without limitation, in the case of the OPC Mortgage, the notes secured by the security title of the OPC Mortgage and the "REA Loan Contract", the "CoBank Loan Agreements", the "Credit Agreement" and the "Pollution Control Loan Agreement", as such terms are defined in the OPC Mortgage, and in the case of the OPC Indenture, the "Obligations" secured by the security title of the OPC Indenture. "Senior Mortgage and Security Agreement" shall have the meaning set forth in Recital A. "Senior Secured Party" shall mean with respect to the OPC Mortgage, each of the Original Mortgagees (or any successor thereto), and with respect to the OPC Indenture, the New Mortgagee (or any successor thereto). "UCC" shall have the meaning set forth in Section 3. Section 20. Closing Conditions. The obligation of the Government to execute and deliver this Agreement shall be subject to: (a) receipt by the Government of a copy of all Operative Documents and all certificates, instruments, documents and opinions of counsel related thereto and delivered on the Closing Date (and in the case of opinions of counsel, each such opinion shall, except as otherwise agreed to by the Government, also be addressed to the Senior Secured Parties or delivered together with a reliance letter from such counsel); (b) receipt by the Government of opinions of counsel to each of the Transaction Parties as to the validity and enforceability of this Agreement, such opinions to be in form and substance reasonably acceptable to the Senior Secured Parties; -11- (c) receipt by the Government of one or more opinions of OPC's counsel as to the existence of a perfected security title and the security interest in favor of the Senior Secured Parties in the Undivided Interest, the Ground Interest and the Rocky Mountain Agreements and as to the continuity of such security title and security interest after giving effect to the consummation of the Transactions, such opinions to be in form and substance reasonably acceptable to the Senior Secured Parties; and (d) receipt by Rabobank of an amount (as agreed to between the Government and OPC), which amount is to be held in escrow pursuant to an Escrow Agreement among the Government, OPC and Rabobank. Section 21. Security Agreement. This Agreement constitutes a security agreement under, and in accordance with, the UCC for the benefit of the Secured Parties as secured parties and shall support any financing statements showing the Co-Trustee's interest as "debtor" or "lessee" and the Senior Secured Parties interest as "secured parties" or "lessors" with respect to the Undivided Interest, the Ground Interest and the Rocky Mountain Agreements (to the extent assigned to the Co-Trustee). Section 22. Limitation on Liability. (a) It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by SunTrust Bank, Atlanta, not individually or personally but solely as Co-Trustee, under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it and at the express direction of the Owner Trustee, (b) each of the representations, undertakings and agreements herein made on the part of the Co-Trustee is made and intended not as personal representations, undertakings and agreements by SunTrust Bank, Atlanta, but is made and intended for the purpose of binding only the Co-Trustee, (c) nothing herein contained shall be construed as creating any liability on Sun Trust Bank, Atlanta, individually or personally, to perform any covenant either express or implied contained herein, all such liability, if any, being expressly waived by each of the Transaction Parties or by any Person claiming by, through or under any of the Transaction Parties and (d) under no circumstances shall SunTrust Bank, Atlanta be personally liable for the payment of any indebtedness or expenses of the Co-Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Co-Trustee under this Agreement. In addition, each of the parties hereto acknowledges and agrees that the Co-Trustee has been appointed by the Owner Participant and Owner Trustee for the purpose of exercising those trust powers in the State of Georgia which may not be exercised by the Owner Trustee under applicable law, and that, except as otherwise required by applicable law, the Co-Trustee shall not be obligated to take any action hereunder or undertake any other duty with respect to this Agreement unless expressly directed in writing by the Owner Trustee or the Owner Participant in accordance with the terms of the Trust Agreement. -12- (b) It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by Fleet National Bank not individually or personally but solely as Owner Trustee, under the Trust Agreement, (b) each of the representations, undertakings and agreements herein made on the part of the Owner Trustee is made and intended not as personal representations, undertakings and agreements by Fleet National Bank, but is made and intended for the purpose of binding only the Owner Trustee, (c) nothing herein contained shall be construed as creating any liability on Fleet National Bank, individually or personally, to perform any covenant either express or implied contained herein, all such liability, if any, being expressly waived by each of the Transaction Parties or by any Person claiming by, through or under any of the Transaction Parties and (d) under no circumstances shall Fleet National Bank be personally liable for the payment of any indebtedness or expenses of the Owner Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Owner Trustee under this Agreement. In addition, each of the parties hereto acknowledges and agrees that except as otherwise required by applicable law, the Owner Trustee shall not be obligated to take any action hereunder or undertake any other duty with respect to this Agreement unless expressly directed in writing by the Owner Participant in accordance with the terms of the Trust Agreement. -13- IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date hereof. UNITED STATES OF AMERICA acting by and through the Administrator of the Rural Utilities Service By: /s/ Wally Beyer -------------------------------------- Name: /s/ Wally Beyer Title: Administrator - RUS Signed and delivered in the presence of /s/ Frances J. Schmit - ------------------------------- Unofficial Witness /s/ Geralyn M. Jacob - ------------------------------- Notary Public My Commission Expires: April 25, 2002 [Notary Seal] -------------- -14- SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as the New Mortgagee By: /s/ Bryan Echols ------------------------------------------ Name: Bryan Echols ---------------------------------------- Title: Vice President --------------------------------------- Signed and delivered in the By: /s/ Sandra Tyompson presence of ------------------------------------------ Name: Sandra Thompson ---------------------------------------- Title: Vice President --------------------------------------- /s/ E. M. Schandru - ------------------------------- Unofficial Witness /s/ David M. Boehm - ------------------------------- Notary Public My Commission Expires: March 16, 1998 [Notary Seal] -------------- -15- SUNTRUST BANK, ATLANTA, not in its individual capacity but solely as Co-Trustee under the Trust Agreement By: /s/ Bryan Echols ------------------------------------------ Name: Bryan Echols ---------------------------------------- Title: Vice President --------------------------------------- Signed and delivered in the By: /s/ Sandra Tyompson presence of ------------------------------------------ Name: Sandra Thompson ---------------------------------------- Title: Vice President --------------------------------------- /s/ E. M. Schandru - ------------------------------- Unofficial Witness /s/ David M. Boehm - ------------------------------- Notary Public My Commission Expires: March 16, 1998 [Notary Seal] -------------- -16- OGLETHORPE POWER CORPORATION (AN ELECTRIC GENERATION AND TRANSMISSION CORPORATION) By: /s/ T. D. Kilgore ----------------------------------------- Name: T. D. Kilgore --------------------------------------- Title: President and CEO -------------------------------------- Signed and delivered in the Attest: /s/ Gary M. Bullock presence of ------------------------------------- Name: Gary M. Bullock --------------------------------------- Title: Secretary-Treasurer -------------------------------------- /s/ J. E. Kofron - ------------------------------ Unofficial Witness /s/ David M. Boehm - ------------------------------ Notary Public My Commission Expires: March 16, 1998 [Notary Seal] --------------- -17- ROCKY MOUNTAIN LEASING CORPORATION By: /s/ Eugen Heckl ----------------------------------------- Name: Eugen Heckl --------------------------------------- Title: Vice President -------------------------------------- Signed and delivered in the Attest: /s/ J. E. Kofron presence of --------------------------------------- Name: James E. Kofron --------------------------------------- Title: Secretary-Treasurer -------------------------------------- /s/ Leonard Scott - ------------------------------ Unofficial Witness /s/ David M. Boehm - ------------------------------ Notary Public My Commission Expires: March 16, 1998 [Notary Seal] -------------- -18- FLEET NATIONAL BANK, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement By: /s/ Frank McDonald ------------------------------------------ Name: Frank McDonald ---------------------------------------- Title: Vice President --------------------------------------- Signed and delivered in the presence of /s/ D. E. McGru - -------------------------------- Unofficial Witness /s/ David M. Boehm - -------------------------------- Notary Public My Commission Expires: March 16, 1998 [Notary Seal] --------------- -19- UTRECHT-AMERICA FINANCE CO. By: /s/ J. W. den Baas /s/ David I. Dietz ------------------------------------------ Name: J. W. den Baas David I. Dietz ---------------------------------------- Title: Vice President Asst. Treasurer --------------------------------------- Signed and delivered in the presence of /s/ Jose DeJesus - ------------------------------- Unofficial Witness /s/ Milagros C. Padilla - ------------------------------- Notary Public My Commission Expires: November 30, 1998 [Notary Seal] ----------------- -20- AMBAC INDEMNITY CORPORATION By: /s/ T. S. Travers ---------------------------------------- Name: T. S. Travers -------------------------------------- Title: First Vice President ------------------------------------- Signed and delivered in the presence of /s/ D. E. McGru - ----------------------------- Unofficial Witness /s/ David M. Boehm - ----------------------------- Notary Public My Commission Expires: March 16, 1998 [Notary Seal] -------------- -21- Schedule to Exhibit 10.32.19 OPC Intercreditor and Security Agreement The following table indicates for each transaction the name of the corresponding Owner Participant: Agreement Date Owner Participant ---------- ------------------ ---------------------------------------- 1 December 30, 1996 Philip Morris Capital Corporation 2 January 3, 1997 Philip Morris Capital Corporation 3 December 30, 1996 First Chicago Leasing Corporation 4 December 30, 1996 First Chicago Leasing Corporation 5 December 30, 1996 NationsBanc Leasing & R.E. Corporation 6 January 3, 1997 NationsBanc Leasing & R.E. Corporation -22- EX-10.33-1 37 EXHIBIT 10.33.1 Exhibit 10.33.1 MEMBER TRANSMISSION SERVICE AGREEMENT between GEORGIA TRANSMISSION CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION) and OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION) dated as of March 1, 1997 TABLE OF CONTENTS Page ---- RECITALS...............................................................1 1. DEFINED TERMS; SERVICES................................................2 1.1 Definitions.....................................................2 1.2 Purchase and Sale of Network Transmission Service...............2 1.2.1 Purchase and Sale........................................2 1.2.2 Initial Term.............................................3 1.2.3 Reduction in Service.....................................3 1.3 Purchase and Sale of Point-To-Point Transmission Service........3 1.3.1 Purchase and Sale........................................3 1.3.3 After Initial Term.......................................4 1.4 Comparability...................................................4 2. RECEIPT AND DELIVERY POINTS; DIRECT ASSIGNMENT FACILITIES....................................4 2.1 Receipt and Delivery Points.....................................4 2.2 New Transmission Customer-Owned Facilities......................4 3. REPRESENTATIONS, WARRANTIES, AND COVENANTS.............................4 3.1 Mutual Representations..........................................4 3.2 Covenants of the Transmission Customer..........................5 3.3 Covenants of GTC................................................5 3.3.1 Prudent Utility Practice.................................5 3.3.2 Non-Discrimination.......................................5 4. RATES AND PAYMENT......................................................5 4.1 Rates...........................................................5 4.1.1 General; Periodic Review.................................5 4.1.2 Transmission Customer's Unconditional Obligation to Pay...................................................6 4.1.3 Minimum Rates............................................6 4.1.4 Allocation of Payment Defaults...........................6 4.1.5 Rate Design..............................................7 4.1.6 Functional Unbundling....................................7 4.1.7 Budget...................................................7 4.2 Reasonableness of Rates.........................................7 4.2.1 Fixed Rate Contract......................................7 4.2.2 Formulaic Rate...........................................7 4.2.3 Regulatory Review........................................7 4.2.4 Conforming Amendments....................................8 4.2.5 Fixed Network Rates......................................8 - i - 5. RIGHTS OF ACCESS, RECORDS AND ACCOUNTS.................................8 5.1 Right of Access.................................................8 5.2 Records and Accounts............................................8 5.2.1 Accounting Records.......................................8 5.2.2 Access to Books and Records..............................9 6. DEFAULTS AND REMEDIES..................................................9 6.1 Events of Default and Remedies..................................9 6.1.1 Payment Default..........................................9 6.1.2 Suspension of Service....................................9 6.1.3 Termination..............................................9 6.1.4 Transmission Customer's Obligations.....................10 6.1.5 GTC's Failure to Deliver................................10 6.1.6 Performance Default.....................................10 6.1.7 Remedies................................................10 7. TRANSFER AND ASSIGNMENT...............................................10 7.1 Reorganizations, Transfers and Sales of Assets by the Transmission Customer..........................................10 7.1.1 Dissolution or Liquidation..............................10 7.1.2 Permitted Transactions..................................11 7.1.3 Service Territory and Distribution System...............12 7.1.4 Specific Performance....................................12 7.2 Assignments....................................................12 7.2.1 General.................................................12 7.2.2 Assignment for Security.................................13 7.2.3 Corporate Reorganization................................13 7.2.4 Receiver or Trustee in Bankruptcy.......................14 7.2.5 Express Rejection of Implied Limitations................14 8. EFFECTIVENESS AND TERM................................................14 8.1 Effective Date and Term........................................14 8.1.1 Effective Date..........................................14 8.1.2 Term....................................................14 8.1.3 Reduction in Term.......................................15 9. INDEMNIFICATION AND LIABILITY.........................................15 9.1 Force Majeure..................................................15 9.2 Indemnification................................................15 9.3 Consequential and Indirect Damages.............................15 10. MISCELLANEOUS.........................................................15 - ii - 10.1 Title and Risk of Loss................................................15 10.2 Notices...............................................................15 10.3 Communications Regarding Emergencies..................................16 10.4 Governing Law.........................................................17 10.5 Waivers and Exercise of Rights........................................17 10.5.1 Waiver.........................................................17 10.5.2 Subsequent Default.............................................17 10.5.3 Exercise of Rights.............................................17 10.6 Counterparts..........................................................17 10.7 Compliance with Legal Requirements....................................17 10.8 Severability..........................................................17 10.9 Third-Party Beneficiaries.............................................17 10.9.1 No Third-Party Beneficiaries...................................17 10.9.2 Enforcement....................................................18 10.9.3 Responsibility of Parties......................................18 10.10 No Dedication of Facilities...........................................18 10.11 Action by Affiliates..................................................18 10.12 Independent Contractors...............................................18 10.13 Rules of Construction.................................................18 10.13.1 Headings..............................................18 10.13.2 Including.............................................18 10.13.3 Singular and Plural...................................18 10.13.4 Time of the Essence...................................19 10.14 Survival..............................................................19 10.15 Amendments............................................................19 10.16 Relationship of GTC to Transmission Customer..........................19 10.17 Transmission Customer's Information Obligations.......................19 10.18 Entire Agreement......................................................19 10.19 Retail Distribution...................................................20 10.20 Periodic Review of Scheduling Procedures..............................20 Exhibit A - Definitions......................................................A-1 Exhibit B - Service Specifications...........................................B-1 - iii - MEMBER TRANSMISSION SERVICE AGREEMENT THIS MEMBER TRANSMISSION SERVICE AGREEMENT, dated as of March 1, 1997 (together with permitted amendments hereto, this "Agreement"), is entered into by and between Georgia Transmission Corporation (An Electric Membership Corporation), an electric membership corporation organized and existing under the laws of the State of Georgia ("GTC"), and Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation), an electric membership corporation organized and existing under the laws of the State of Georgia (the "Transmission Customer" or "OPC"). R E C I T A L S : WHEREAS, the other GTC Members joined together, beginning in 1974, to form OPC in order to share the benefits and costs of ownership of an entity that would engage in providing electric capacity and energy for the benefit of its members; and WHEREAS, GTC was formed to separate the transmission business from the generation business of OPC but in all other respects to retain and share the costs and benefits of ownership of an entity that would deliver Transmission Service for the benefit of the GTC Members; and WHEREAS, GTC has agreed to purchase the transmission assets and business of OPC and thus will own and operate electric transmission facilities and in the future will construct additional electric transmission facilities or purchase or otherwise obtain Transmission Service for the purpose, among others, of supplying Transmission Service to the GTC Members, several of which are borrowers from the Rural Utilities Service, as successor to the Rural Electrification Administration (the "RUS"), and others; and WHEREAS, GTC has adopted a Transmission Service Tariff (as amended, supplemented or replaced from time to time, the "GTC Tariff") under which it will provide transmission and ancillary services to all customers, including GTC Members; and WHEREAS, GTC has agreed to assume a portion of the secured obligations of OPC, including a portion of the loans evidenced by mortgage notes (collectively, the "Notes") made or guaranteed by the United States of America ( the "Government"), acting through the Administrator of the RUS (the "Administrator") and certain loans made by, or securities issued to, or obligations undertaken to, others (the "Assumed Obligations"); and WHEREAS, GTC may in the future finance construction of additional transmission facilities in whole or in part through loans made or guaranteed by the Government, acting through the Administrator, and loans made by, or securities issued to, or obligations undertaken to, others, and - 1 - may in the future obtain additional loans or issue additional securities or obligations (the "Future Obligations"); and WHEREAS, the Assumed Obligations and certain of the Future Obligations (collectively, with the Assumed Obligations, the "Secured Obligations") are to be secured by a Trust Indenture, dated as of March 1, 1997, from GTC, as Grantor, to SunTrust Bank, Atlanta, as it may hereafter be amended, supplemented, restated or replaced or substituted for from time to time (the "Trust Indenture"); and WHEREAS, this Agreement and payments due to GTC under this Agreement will be pledged and assigned to secure the Secured Obligations to the extent provided in the Trust Indenture; and WHEREAS, the Government and certain other lenders are relying on this Agreement and other transmission service agreements between GTC and the other GTC Members to assure that the Secured Obligations are repaid and the purposes of the Rural Electrification Act of 1936, as amended (the "RE Act"), are carried out, and GTC and the Transmission Customer, by executing this Agreement, acknowledge that reliance; and WHEREAS, the Transmission Customer has determined that its interests and the interests of its consumers will be best served by purchasing Transmission Service from GTC on the terms and conditions of this Agreement; WHEREAS, the Transmission Customer is undertaking to purchase from GTC, and GTC is undertaking to sell to the Transmission Customer, Transmission Service in accordance with and pursuant to the terms and conditions herein set forth; and WHEREAS, notwithstanding the foregoing, as the result of GTC and OPC each having the same members, GTC and OPC have determined that it is necessary and appropriate for GTC to impose financial obligations on such common members directly through their individual service agreements with GTC, rather than indirectly through OPC, thereby requiring certain changes in the form of this Member Transmission Service Agreement to reflect OPC's special status; NOW, THEREFORE, in consideration of the premises and the mutual undertakings herein contained, GTC and the Transmission Customer hereby agree as follows: 1. DEFINED TERMS; SERVICES. 1.1 Definitions. All capitalized terms used herein shall have the respective meanings set forth in Exhibit A attached hereto or, if not set forth in Exhibit A, the meanings set forth in the GTC Tariff, unless the context in which such term is used clearly requires otherwise. - 2 - 1.2 Purchase and Sale of Network Transmission Service. 1.2.1 Purchase and Sale. GTC shall provide, and the Transmission Customer shall purchase, Network Transmission Service under the GTC Tariff, as now in effect or as it may hereafter be amended, in accordance with the terms of this Agreement. 1.2.2 Initial Term. During the Initial Term, GTC shall be the sole provider of Transmission Service to deliver the capacity and energy required to serve the Transmission Customer's Native Load Customers located within the Georgia Territory. 1.2.3 Reduction in Service. After the end of the Initial Term or the end of the First Additional Term, the Transmission Customer may reduce its obligation to purchase Network Transmission Service from GTC to 1553 kilowatts (1553 kW) or any greater amount of Network Load. The Transmission Customer shall provide GTC with written notice of its intent to reduce its obligation to purchase Network Transmission Service (and the amount of Network Load) no later than December 31, 2005 if it wishes to implement such reduction at the expiration of the Initial Term and December 31, 2015 if it wishes to implement such reduction at the end of the First Additional Term. Upon receiving such notice, the Board of Directors of GTC shall determine the estimated cost to GTC of the reduction in the Transmission Customer's obligation. Such amount shall be determined based on the net investment in transmission facilities which has been made (or is expected to be made) by GTC, including construction work in progress, from the commencement of the Initial Term until the effective date of such reduction (i.e., at the end of the Initial Term or at the end of the First Additional Term), excluding Direct Assignment Facilities. Upon receipt of such estimate, the Transmission Customer shall be entitled to withdraw its notice. If the Transmission Customer reduces its obligation, to the extent that responsibility for the annual expense, including margins, determined by the Board of Directors from time to time to be associated with such transmission facility net investment will be shifted to other Transmission Customers after the effective date of any such notice, the Transmission Customer shall remain responsible for those expenses to the extent that those expenses exceed any payments received by GTC pursuant to the ITSA resulting from the reduced Network Load. To the extent that the net growth of Network Load by all other Transmission Customers after the effective date of such notice offsets a reduction in Network Load by the Transmission Customer (and any other Transmission Customers that elect to reduce their obligations to purchase Network Transmission Service), such other Transmission Customers shall thereafter assume responsibility for such expenses. GTC shall at all times maintain written policies for the orderly receipt and administration of the notices, estimates and obligations to pay that are provided for in this Section 1.2.3. 1.3 Purchase and Sale of Point-To-Point Transmission Service. 1.3.1 Purchase and Sale. GTC shall provide, and the Transmission Customer shall purchase, Point-To-Point Transmission Service under the GTC Tariff in accordance with the terms of and at the rates provided for in this Agreement. - 3 - 1.3.2 Initial Term. During the Initial Term, GTC shall be the sole provider of Point-To-Point Transmission Service for the Transmission Customer, and GTC shall be the sole provider of Transmission Service to deliver or receive capacity and energy using the Transfer Capability. 1.3.3 After Initial Term. After the Initial Term, the Transmission Customer shall have no obligation to purchase Point-To-Point Transmission Service from GTC. 1.4 Comparability. Notwithstanding any change in the GTC Tariff, GTC shall provide Transmission Service to the Transmission Customer on a basis that is comparable to the use of the Transmission System by other GTC Members. Comparable basis refers to the utilization of the legal standard developed by the FERC in determining that there has been no undue discrimination as between the owner of a facility and others that have the right to use the facility. GTC shall ensure that the Transmission Customer's Network Transmission Service for the delivery on a firm basis of power from Network Resources to Network Loads and the Transmission Customer's Firm Point-To-Point Transmission Service (other than at secondary Receipt Points and Delivery Points) will have priority over all non-firm uses of the Transmission System. 2. RECEIPT AND DELIVERY POINTS; DIRECT ASSIGNMENT FACILITIES. 2.1 Receipt and Delivery Points. Network Resources, Network Loads, Receipt Points, Delivery Points and all Direct Assignment Facilities for GTC's service to the Transmission Customer pursuant to this Agreement are set forth in Exhibit B to this Agreement, as such Exhibit may be supplemented from time to time in accordance with the GTC Tariff. 2.2 New Transmission Customer-Owned Facilities. To the extent that the Transmission Customer desires to add with its own funds a newly constructed interconnection point with the ITS or to provide newly constructed substations or other facilities that would otherwise be Direct Assignment Facilities, the Transmission Customer shall provide GTC with as much advance notice as reasonably practicable. GTC shall interconnect such new point as requested by the Transmission Customer unless GTC reasonably determines that the Transmission System cannot reliably accommodate such new interconnection point or facilities. GTC shall promptly provide the engineering and technical specifications that are required by NERC, SERC or the ITSA, or that are otherwise required to reliably accommodate such interconnection point or facilities. GTC or its Designated Agent shall be the sole operator of the transmission portion of such Facilities, regardless of their ownership. 3. REPRESENTATIONS, WARRANTIES, AND COVENANTS. 3.1 Mutual Representations. As of the Effective Date, each Party represents and warrants to the other Party that: (i) it is duly organized, validly existing and in good standing under the laws of the state of its incorporation; (ii) it has all requisite power and authority to own, operate, - 4 - and lease its properties and to carry on its business as now conducted; (iii) it has all regulatory authorizations, including any required authorization from the RUS, necessary for it to legally perform its obligations under this Agreement; (iv) the execution, delivery and performance of this Agreement is within its power, has been duly authorized by all necessary action and does not violate any of the terms or conditions of its governing documents, any contract or any other agreement to which it is a party or any law applicable to it; (v) this Agreement constitutes a legal, valid and binding obligation enforceable against it in accordance with its terms, subject to any Equitable Defenses; (vi) there are no Bankruptcy Proceedings pending or being contemplated by it or, to its knowledge, threatened against it; and (vii) there are no Legal Proceedings that would be reasonably likely to materially affect its ability to perform this Agreement. Each Party covenants that it will cause the representations and warranties in clauses (i) through (v) to be true and correct throughout the term of this Agreement, and each Party shall promptly inform the other Party of any Legal Proceedings that would cause the representations and warranties in clause (vii) to be not true and correct after the Effective Date. 3.2 Covenants of the Transmission Customer. The Transmission Customer covenants and agrees to establish, maintain and collect rates and charges for the service of its electric system, and to conduct its business, in a manner that shall produce revenues and receipts at least sufficient to enable the Transmission Customer to pay to GTC, when due, all amounts payable by the Transmission Customer under this Agreement and to pay any and all other amounts payable from, or that might constitute a charge and a lien upon, the revenues and receipts derived from its electric system, including all operation and maintenance expenses and the principal of, premium, if any, and interest on all indebtedness related to the Transmission Customer's electric system. 3.3 Covenants of GTC. 3.3.1 Prudent Utility Practice. GTC covenants and agrees that it will plan, construct, operate and maintain the Transmission System or cause the same to be planned, constructed, operated and maintained in accordance with Prudent Utility Practice. 3.3.2 Non-Discrimination. GTC covenants and agrees that there shall be no undue discrimination in carrying out its obligations under this Agreement relating to the Transmission Customer as compared to other GTC Members or to other customers under the GTC Tariff. 4. RATES AND PAYMENT. 4.1 Rates. 4.1.1 General; Periodic Review. The Transmission Customer shall pay GTC for Transmission Service and, if applicable, Ancillary Services at the rates and on the terms and conditions set forth herein and in the applicable tariffs, as in effect from time to time. GTC at such intervals as it shall deem appropriate, but in any event not less frequently than once in each Contract - 5 - Year, shall review the rates for Transmission Service and Ancillary Services furnished hereunder and under similar Transmission Service Agreements with the other GTC Members, and, if necessary shall revise such rates so that such rates shall produce revenues that shall be sufficient, but only sufficient, with the revenues of GTC from all other sources, to meet all of GTC's costs, to cover all payments on account of indebtedness of GTC, to provide for the establishment and maintenance of reasonable reserves, and to comply with all financial requirements contained in the Trust Indenture or in any indenture, mortgage, or contract relating to any indebtedness or other financial obligations of GTC as they may exist from time to time. 4.1.2 Transmission Customer's Unconditional Obligation to Pay. The Transmission Customer shall make all payments for Transmission Service and Ancillary Services that are required pursuant to this Agreement in a timely manner, whether or not (i) Transmission Service or Ancillary Services have been or are being delivered to the Transmission Customer hereunder, (ii) GTC's facilities or any part thereof are completed, delayed, terminated, available, operable, operating, retired, sold, leased, transferred, or otherwise disposed of, (iii) the construction or operation of GTC's facilities or any part thereof is suspended, interrupted, interfered with, reduced, curtailed or terminated, (iv) GTC is able to purchase or otherwise obtain Transmission Service or Ancillary Services from any source, or (v) any similar contract with any other GTC Member is invalid, in each such case for any reason whatsoever and whether or not due to the conduct, acts or omissions of GTC. Such payments by the Transmission Customer shall not be subject to any reduction, whether by offset, recoupment or otherwise, and shall not be conditioned upon performance by the other GTC Members or GTC under this Agreement or any other agreement or instrument. This Section 4.1.2 shall not be construed to release GTC from the performance of any of its obligations expressed in this Agreement or, except to the extent expressly provided in this Agreement, prevent or restrict the Transmission Customer from asserting any rights that it may have against GTC or any other person under this Agreement or any other agreement or under any provision of law or prevent or restrict the Transmission Customer, at its own cost and expense, from prosecuting or defending any action or proceeding against or by third parties or taking any other action to secure or protect its rights under this Agreement. 4.1.3 Minimum Rates. Notwithstanding any other provision of this Agreement, the rate, including any budget related thereto, shall be set at all times at a level that will enable GTC to comply with the Trust Indenture and other financial requirements contained in any other indenture, mortgage or contract relating to any indebtedness or financial obligations of GTC as they may exist from time to time. 4.1.4 Allocation of Payment Defaults. The Transmission Customer and GTC expressly acknowledge the right of GTC to increase the rates of all GTC Members except OPC pro rata as necessary to recover revenue shortfalls resulting from a Payment Default by the Transmission Customer or any other GTC Member or Members or any other customer of GTC. OPC is excluded from such increase because its members are already directly obligated to GTC. GTC shall at all times provide in the applicable service schedule for Network Integration Transmission Service a mechanism by which GTC shall allocate any unrecovered costs resulting - 6 - from a Payment Default by the Transmission Customer or a Payment Default of any other GTC Member or any other customer of GTC and a mechanism for recovering the otherwise unrecovered costs resulting from such default from each such non-defaulting GTC Member, other than OPC, in the proportion of its Network Load at the time of such Payment Default to the aggregate Network Load of all non-defaulting GTC Members, other than OPC, at such time. 4.1.5 Rate Design. The rates and terms and conditions of service provided by GTC hereunder, including changes from time to time in the applicable tariffs, shall be just and reasonable and not unduly discriminatory, but shall at all times be sufficient to comply with the requirements of Section 4.1.3. Notwithstanding the foregoing, it is the intent of the Parties that the commitment of GTC herein not be construed as an acceptance by GTC of a standard for its treatment of non-GTC Members higher than that required by Sections 211 and 212 of the Federal Power Act. 4.1.6 Functional Unbundling. GTC shall account for its direct and indirect costs so that the charge for each service GTC provides to one or more GTC Members recovers all direct costs and a share of indirect costs for each service, including administrative and general expenses and margins, allocated in accordance with Accounting Requirements. 4.1.7 Budget. GTC shall prepare or cause to be prepared and deliver to the Transmission Customer each Contract Year an annual system budget for Transmission Service during the following Contract Year. GTC shall also prepare each year a five (5) year capital expenditure projection describing the transmission facilities, including Direct Assignment Facilities, that are to be constructed or acquired during such five (5) year period. 4.2 Reasonableness of Rates. 4.2.1 Fixed Rate Contract. GTC was organized by the Transmission Customer and the other electric membership corporations in Georgia to provide collectively for transmission service for their electric capacity and requirements. This Agreement was established between the Parties, taking into account the present and projected needs for Transmission Service and Ancillary Services of the GTC Members, the costs of the services subject to and contemplated by this Agreement and the alternatives thereto. The Parties agree that the rates established hereunder are just and reasonable under the current circumstances and reflect their determination of what would be just and reasonable under future conditions reasonably contemplated by them. The rates take into account specific benefits achieved by the Parties through this Agreement and not otherwise available to the Parties, and reflect the sharing of those benefits without undue discrimination against any current or future customer of GTC. 4.2.2 Formulaic Rate. The charges to be paid by the Transmission Customer to GTC for services provided under this Agreement are intended to be adjusted only pursuant to and in accordance with the formulaic rates specified in the GTC Tariff, as such formulae may be revised from time to time. If GTC's rates are not established pursuant to such a formulaic rate mechanism - 7 - as changed from time to time, the Transmission Customer shall have the right to file any applications relating to rates as may be permitted by law. 4.2.3 Regulatory Review. Nothing contained in this Agreement shall be construed as affecting in any way the right of GTC unilaterally to file an application for a change in any part of the GTC Tariff to any Governmental Authority having jurisdiction, including the FERC under Section 205 of the Federal Power Act and pursuant to the FERC's rules and regulations promulgated thereunder, upon approval of the change by GTC in a manner consistent with Section 4 herein. The Transmission Customer shall not protest or contest (i) an initial declaratory order petition filed with the FERC by GTC seeking confirmation that the GTC Tariff meets the FERC's reciprocity requirement, (ii) an initial application filed by GTC with the FERC pursuant to Section 205 of the Federal Power Act to provide service pursuant to the GTC Tariff, or (iii) any filing to conform GTC's documents to a FERC pro forma tariff. The Transmission Customer may protest or contest any other filings referred to in this Section 4.2.3 or any filings made by any other GTC Member to change the formulatory rate mechanism contained in the GTC Tariff and the Member does not waive any rights it may have with respect to such filings. 4.2.4 Conforming Amendments. Certain provisions of this Agreement, including without limitation Section 3.3 and Articles 9 and 10, and certain definitions set forth in Exhibit A, are commercial terms substantially similar to provisions contained in the GTC Tariff and standard form of Non-Member Transmission Service Agreement (Attachment B to the GTC Tariff). A change made by GTC to any provision of the GTC Tariff, including the standard forms of agreements, shall automatically result in the same or substantially similar change to any corresponding provision of this Agreement, provided that such changed provision of the GTC Tariff, including the standard form of service agreement, is applicable to both GTC Members and non-GTC Members and has been accepted for filing and permitted to go into effect by the FERC or otherwise declared by the FERC to be just and reasonable and not unduly discriminatory in a proceeding in which the Transmission Customer is given actual notice and the opportunity to intervene or protest. The GTC Member shall not contest any change that conforms to a provision in a FERC pro forma tariff. 4.2.5 Fixed Network Rates. It is the intent of the Parties hereto that any such Governmental Authority having jurisdiction shall not, on its own motion or after petition by any person other than GTC, replace the rates contained in the applicable Service Schedule for Network Transmission Service with any other rate except upon finding that such Service Schedule is contrary to the public interest. 5. RIGHTS OF ACCESS, RECORDS AND ACCOUNTS. 5.1 Right of Access. Duly authorized representatives of either Party shall be permitted to enter the premises of the other Party at all reasonable times in order to carry out the provisions hereof. - 8 - 5.2 Records and Accounts. 5.2.1 Accounting Records. GTC shall keep accurate records and accounts in accordance with Accounting Requirements. Promptly after the close of each fiscal year (and not later than one hundred twenty (120) days after the end of each fiscal year), GTC shall cause such records and accounts and all transactions of GTC with respect to such fiscal year to be subject to an annual audit by a firm of independent certified public accountants experienced in electric utility accounting and possessing a national reputation in accounting and auditing. GTC shall without delay provide a copy of each such annual audit, including all written comments and recommendations of such accountants to the Transmission Customer. 5.2.2 Access to Books and Records. The Transmission Customer shall at all times have reasonable access during business hours to examine any and all of the books, records and supporting worksheets and data of GTC as may be appropriate to determine the accuracy of any charges or payments required to be made by the Transmission Customer to GTC. If such books, records and supporting worksheets and data of GTC contain information about another GTC Member, GTC shall excise any identification of a specific member or members or provide such information to an independent certified public accountant or other independent representative of the Transmission Customer under a confidentiality agreement. In the event that after an examination of GTC's records, there is still a dispute as to the accuracy of any charge and the Transmission Customer proceeds with mediation, arbitration or litigation, only requirements of confidentiality imposed by a mediator, arbitrator or court shall be applied. 6. DEFAULTS AND REMEDIES. 6.1 Events of Default and Remedies. 6.1.1 Payment Default. If the Transmission Customer fails to make full payment to GTC when required to be made under the provisions of this Agreement, and such failure continues for a period of ten (10) business days, GTC shall give or cause to be given written notice to the Transmission Customer. If the Transmission Customer does not, within ten (10) business days from the date of the mailing of such notice, pay the full amount then due to GTC, together with interest thereon, at the Interest Rate, from the date it became due, then such failure shall constitute a "Payment Default" on the part of the Transmission Customer. GTC shall promptly provide written notice to the other GTC Members of the Payment Default. 6.1.2 Suspension of Service. Upon a Payment Default, GTC may suspend service to the Transmission Customer for all or any part of the period of continuing default. GTC's right to suspend service shall not be exclusive, but in addition to all other remedies available to GTC at law or in equity. No suspension of service or termination of this Agreement or recovery of additional revenues from other Transmission Customers shall relieve the Transmission Customer of its obligations hereunder, which are absolute and unconditional. GTC shall credit the obligations of the Transmission Customer during any suspension of service with the monies actually received - 9 - by GTC from sales of Transmission Service and Ancillary Services that would have been available to serve the Transmission Customer, but GTC shall not be responsible for failure to mitigate the consequences of the Transmission Customer's failure to pay in absence of gross negligence or willful misconduct. 6.1.3 Termination. GTC may terminate this Agreement if (i) a Payment Default shall have occurred and be continuing and (ii) such termination is approved by seventy-five percent (75%) of GTC's Board of Directors and seventy-five percent (75%) of the non-defaulting GTC Members. 6.1.4 Transmission Customer's Obligations. The fact that other Transmission Customers have paid increased rates and charges shall not relieve the Transmission Customer of its liability for the amount owed by it to GTC, and any other GTC Member, either individually or as a member of a group, shall have such a right of recovery from the Transmission Customer as may be provided by law. GTC or any GTC Member as their interests may appear, jointly or severally, may commence such suits, actions or proceedings, at law or in equity, including suits for specific performance, as may be necessary or appropriate to enforce the obligations of the Transmission Customer under this Agreement. 6.1.5 GTC's Failure to Deliver. If GTC fails to provide Transmission Service or Ancillary Services as a result of the breach of the duties imposed on it under Section 3.3, GTC shall be liable to the Transmission Customer for the cost of transmission service or ancillary services required to replace such Transmission Service or Ancillary Services, if such transmission service is available, but the Transmission Customer shall not be entitled to terminate this Agreement or withhold payments required to be made pursuant to this Agreement. 6.1.6 Performance Default. If either Party fails to comply with any of the other terms, conditions and covenants of this Agreement (and such failure does not constitute a Payment Default by the Transmission Customer), the non-defaulting Party shall give the defaulting Party written notice of the default (a "Performance Default"), the defaulting Party shall have a period of thirty (30) days after receipt of such notice to commence reasonable efforts to cure such Performance Default, and it shall have an additional thirty (30) days to cure such Performance Default. Thereafter, if the Performance Default is continuing, the non-defaulting Party, subject to Section 6.1.7, shall have all of the rights and remedies provided at law and in equity, other than termination of this Agreement. 6.1.7 Remedies. No remedy conferred upon or reserved to GTC or the Transmission Customer under this Agreement is intended to be exclusive of any other remedy or remedies available hereunder or now or hereafter existing and every such remedy shall be cumulative and shall be in addition to every other such remedy, provided that no Performance Default by GTC shall permit the Transmission Customer to terminate this Agreement or relieve the Transmission Customer of its obligation to make payments pursuant to this Agreement, which obligation shall be absolute and unconditional. - 10 - 7. TRANSFER AND ASSIGNMENT. 7.1 Reorganizations, Transfers and Sales of Assets by the Transmission Customer. 7.1.1 Dissolution or Liquidation. The Transmission Customer shall not dissolve, liquidate or otherwise wind up its affairs without the approval in writing of GTC. 7.1.2 Permitted Transactions. The Transmission Customer shall not consolidate or merge with any other Person or reorganize or change the form of its business organization from an electric membership corporation or sell, transfer, lease or otherwise dispose of all or substantially all of its assets (each, a "Member Transaction") to any Person (or make any agreement therefor), whether in a single transaction or series of transactions unless either: (a) Such Member Transaction is expressly approved in writing by GTC; or (b) All of the following conditions are satisfied: (i) The Transferee shall be an entity organized and existing under the laws of the United States of America or any State or the District of Columbia; and (ii) No default or breach of this Agreement shall have occurred or be continuing; and (iii) If the Transferee is not the Transmission Customer, the Transferee shall execute and deliver to GTC an instrument supplemental hereto in form reasonably satisfactory to GTC containing an assumption by the Transferee of the performance and observance of every covenant and condition of this Agreement required to be performed or observed by the Transmission Customer; and (iv) A firm of independent certified public accountants shall prepare for the two calendar years immediately preceding the Member Transaction a set of pro forma financial statements that assume the consummation of the Member Transaction throughout the applicable determination period and that are prepared in accordance with generally accepted accounting principles. Based on such pro forma financial statements, such accountants must certify that: (A) the Transferee's Debt Service Coverage Ratio is at least 1.25 and Times Interest Earned Ratio is at least 1.50 for each of the two - 11 - immediately preceding calendar years (assuming such Member Transaction had been consummated at the beginning of such two-year period); (B) the Transferee's Equity equals at least 27% of its Total Assets after giving effect to such Member Transaction; and (C) the ratio of the Transferee's Net Utility Plant to its Long-Term Debt is at least 1.0 after giving effect to such Member Transaction. The specification of conditions in Section 7.1.2 shall not be construed to establish minimum standards under which the Transmission Customer may effect a Member Transaction, the purpose of such conditions being to establish when GTC's approval need not be obtained. In the event the Transmission Customer seeks GTC's approval of a Member Transaction, GTC may withhold such approval only upon a determination by the GTC Board of Directors that the Member Transaction could reasonably be expected to have a material adverse effect on the Transmission Customer's ability to perform its obligations under this Agreement. 7.1.3 Service Territory and Distribution System. The Transmission Customer shall not convey, transfer, lease, or otherwise dispose of any part of its electric distribution system (if any), or assigned service territory (if any) or voluntarily transfer or assign to another Person any customer of the Transmission Customer (each, a "Conveyance") if such Conveyance, considered together with (i) all prior Conveyances, and (ii) all prior additions (by construction, conveyance, transfer or lease to the Transmission Customer) to its electric distribution system, assigned service territory, or customers could reasonably be expected to have a material adverse affect on the Transmission Customer's ability to perform its obligations under this Agreement. 7.1.4 Specific Performance. The Transmission Customer and GTC agree that the failure or threatened failure of the Transmission Customer to comply with the terms of this Article 7 will cause irreparable injury to GTC, which cannot properly or adequately be compensated by the mere payment of money. The Transmission Customer agrees, therefore, that in the event of a breach or threatened breach of this Article 7 by the Transmission Customer, GTC, in addition to any other remedies that may be available to GTC, shall have the right to obtain from any competent court a decree enjoining such breach or threatened breach of this Article 7 or providing that the terms of this Article 7 be specifically enforced. 7.2 Assignments. 7.2.1 General. (a) This Agreement shall be binding upon and inure to the benefit of the permitted successors and permitted assigns of each Party, except that this Agreement may not be assigned by either Party unless prior consent to such assignment is given in writing by the other Party and, if either Party is then an RUS borrower, the Administrator. - 12 - Any assignment made without a consent required hereunder shall be void and of no force or effect as against the non-consenting Party. (b) No sale, assignment, transfer or other disposition permitted by this Agreement shall affect, release or discharge either Party from its rights or obligations under this Agreement, except as may be expressly provided by this Agreement. 7.2.2 Assignment for Security. (a) Notwithstanding any other provision of this Agreement, a Party, without the other Party's consent but, if such assigning Party is then a borrower of the RUS, only with the consent of the Administrator, may assign, transfer, mortgage or pledge its interest in this Agreement as security (an "Assignment for Security") for any obligation secured by any indenture, mortgage or similar lien on its system assets without limitation on the right of the secured party to further assign this Agreement, including, without limitation, the assignment by the Transmission Customer or GTC to create a security interest for the benefit of the Government, acting through the Administrator, or for the benefit of any third party. (b) After any Assignment for Security to the Administrator or other secured party (including any indenture trustee under any indenture securing the obligations of GTC), the Administrator, or other such other secured party, without the approval of the other Party to this Agreement, may (i) cause this Agreement to be sold, assigned, transferred or otherwise disposed of to a third party pursuant to the terms governing such Assignment for Security, or (ii) if the Administrator or other secured party first acquires this Agreement, sell, assign, transfer or otherwise dispose of this Agreement to a third party; provided, however, that in either case the Party who made the Assignment for Security is in default of its obligations to the Administrator or other secured party that are secured by such security interest. 7.2.3 Corporate Reorganization. (a) GTC may assign any or all of its rights and delegate any or all of its duties under this Agreement in connection with any reorganization, merger or consolidation of GTC with another entity in which GTC is not the surviving entity if (i) such merger or consolidation is (A) approved by seventy-five percent (75%) of the Board of Directors of GTC and seventy-five percent (75%) of the GTC Members, or (B) approved by a majority of the Board of Directors of GTC and a majority of the GTC Members if a payment default under the Indenture shall have occurred and be continuing and (ii) the surviving entity shall expressly assume by written agreement executed and delivered to the Transmission Customer the performance and observance of the provisions of this Agreement required to be performed or observed by GTC. - 13 - (b) GTC may, in its sole discretion, at any time and from time to time, retire, sell, transfer, lease, terminate or otherwise dispose of any transmission facility; provided, that GTC shall not sell, transfer, lease or otherwise dispose of all or substantially all of its transmission facilities (each a "GTC Transaction") to any Person (or make any agreement therefor), whether in a single transaction or a series of transactions, unless such GTC Transaction is either: (a) approved by seventy-five percent (75%) of GTC's Board of Directors and seventy-five percent (75%) of the GTC Members, or (b) approved by a majority of the Board of Directors of GTC and a majority of the GTC Members if a payment default under the Indenture shall have occurred and be continuing. 7.2.4 Receiver or Trustee in Bankruptcy. The Parties intend that the obligations of the Transmission Customer under this Agreement shall not be affected by a receiver, a trustee in bankruptcy, a mortgagee or an indenture trustee taking charge of the assets or business of GTC, and that such receiver, trustee, mortgagee or indenture trustee may exercise all of the rights of, and make all of the determinations provided to be made in this Agreement by, the Board of the Directors of GTC. 7.2.5 Express Rejection of Implied Limitations. The Parties intend that this Agreement shall be assignable in accordance with the provisions of this Article 7 without regard to any other provisions of this Agreement, the nature of the Person to which this Agreement is assigned, or the issues raised in the case, In the Matter of Wabash Valley Power Ass'n, Inc., 72 F.3d 1305 (7th Cir. 1995). Consequently, the Parties agree that this Agreement may be assigned to any Person (including any receiver or trustee in bankruptcy) pursuant to this Article 7 without regard to the fact that (i) such Person is not a cooperative; (ii) the Board of Directors of such Person, if any, is not chosen by a vote in which the Transmission Customer participates; or (iii) such Person is not operated on a not-for-profit basis. Further, no other provision of this Agreement shall restrict the assignment of this Agreement pursuant to this Article 7. In the event an assignment is made to a Person that is not an electric membership corporation (or other form of electric cooperative), all provisions of this Agreement requiring approval of the GTC Members or the Board of Directors of GTC shall cease to be applicable, and in such instances such assignee may act in its discretion. References in this Agreement to an assignment of this Agreement shall mean and include either or both of an assignment of rights or a delegation of duties. 8. EFFECTIVENESS AND TERM. 8.1 Effective Date and Term. 8.1.1 Effective Date. This Agreement is dated as of the date specified in the introductory paragraph and shall become effective upon: (i) execution and delivery hereof by GTC and the Transmission Customer, (ii) approval in writing by the Administrator and (iii) the acquisition by GTC of OPC's transmission and distribution assets substantially as an entirety. The date this Agreement becomes effective shall be the "Effective Date." - 14 - 8.1.2 Term. The initial term of this Agreement shall begin on the Effective Date and end on December 31, 2006 (the "Initial Term"). Thereafter, this Agreement shall automatically be extended for two additional terms, the first ending December 31, 2016 (the "First Additional Term"), and the second ending December 31, 2025 (the "Second Additional Term"). Thereafter, this Agreement shall continue from year to year unless terminated by either Party after giving not less than two (2) years' prior written notice of its intention to terminate. 8.1.3 Reduction in Term. In the event GTC prepays all of its obligations to the United States of America, the term of this Agreement will be shortened to coincide with the latest maturity of any then outstanding indebtedness, including any indebtedness issued to finance the amount of the prepayment, if such latest maturity occurs prior to December 31, 2025; provided, however, that in no event shall the term of this Agreement be shortened to a date prior to the expiration of any sale-leaseback, lease-leaseback or similar Transaction, the performance of which depends upon the continued existence of this Agreement. 9. INDEMNIFICATION AND LIABILITY. 9.1 Force Majeure. Neither GTC nor the Transmission Customer will be considered in default as to any obligation under the GTC Tariff if prevented from fulfilling the obligation due to an event of Force Majeure. However, a Party whose performance under the GTC Tariff is hindered by an event of Force Majeure shall make all reasonable efforts to perform its obligations under the GTC Tariff. 9.2 Indemnification. The Transmission Customer shall at all times indemnify, defend, and save GTC harmless from, any and all damages, losses, claims, including claims and actions relating to injury to or death of any person or damage to property, demands, suits, recoveries, costs and expenses, court costs, attorney fees, and all other obligations by or to third parties, arising out of or resulting from GTC's performance of its obligations under the GTC Tariff on behalf of the Transmission Customer, except in cases of negligence or intentional wrongdoing by GTC. 9.3 Consequential and Indirect Damages. To the fullest extent permitted by law, neither Party shall have liability to the other Party for any indirect, consequential, multiple or punitive damages unless such damages are the result of the Party's bad faith, gross negligence, or willful misconduct. 10. MISCELLANEOUS. 10.1 Title and Risk of Loss. As between the Parties, GTC shall be deemed to be in exclusive control (and responsible for any injury and damage caused thereby) of the transmission of capacity and energy, and of the transmission and distribution facilities, after the Receipt Point and prior to the Delivery Point, and Transmission Customer shall be deemed to be in exclusive control (and responsible for any damages or injury caused thereby) of the transmission or distribution of - 15 - capacity and energy, and of the transmission and distribution facilities, at and to the Receipt Point and at and from the Delivery Point. 10.2 Notices. All notices, requests, statements or payments provided for, required or permitted by this Agreement shall be sufficient for any and all purposes under this Agreement when transmitted by facsimile, first class United States Mail, hand delivery, or a private express delivery service to the facsimile numbers or addresses provided below or as otherwise designated in writing by the applicable Party: GTC: Georgia Transmission Corporation 2100 East Exchange Place P. O. Box 2088 Tucker, GA 30085-2088 Attention: Chief Operating Officer FAX: (770) 270-7872 Transmission Customer: Oglethorpe Power Corporation 2100 East Exchange Place P.O. Box 1349 Tucker, GA 30085-1349 Attention: President and CEO FAX: (770) 270-7872 10.3 Communications Regarding Emergencies. Any communications regarding operational emergencies or other operational problems may be made orally or in any other manner reasonable under the circumstances and should be directed to the persons specified below, or to such other person or address as may have been designated in a written notice given to the other persons by or on behalf of the person entitled to receive notice. In the event the person entitled to receive notice cannot be found, notice may be given to any other responsible person. If to GTC: Georgia Transmission Corporation 2100 East Exchange Place P.O. Box 2088 Tucker, GA 30085-2088 Attention: System Operator (Georgia System Operations Corporation) FAX: (770) 270-7320 - 16 - If to Transmission Customer: Oglethorpe Power Corporation 2100 East Exchange Place P.O. Box 1349 Tucker, GA 30085-1349 Attention: Preference Power Coordinator FAX: (770) 270-7590 10.4 Governing Law. The validity, interpretation and performance of the GTC Tariff and this Agreement and each of their respective provisions shall be governed by the laws of the State of Georgia. 10.5 Waivers and Exercise of Rights. 10.5.1 Waiver. GTC may waive any provision of the GTC Tariff when it determines that doing so is in the best interests of the GTC Members. 10.5.2 Subsequent Default. Any waiver at any time by GTC of its rights with respect to any matter arising in connection with the GTC Tariff or this Agreement shall not be considered a waiver with respect to any subsequent default or matter. 10.5.3 Exercise of Rights. No failure or delay on the part of either Party in exercising any right, power or privilege under the GTC Tariff or this Agreement and any related agreement, and no course of dealing between the Parties, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 10.6 Counterparts. This Agreement may be executed in as many counterparts as may be required, and it shall not be necessary that the signatures of or on behalf of each Party appear on each counterpart, but it shall be sufficient that the signature of or on behalf of each Party appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. Each executed counterpart shall have the same force and effect as an original instrument, and it shall not be necessary in any proof of the Agreement to produce or account for more than the number of counterparts containing the respective signatures of or on behalf of each of the Parties. 10.7 Compliance with Legal Requirements. Each Party shall cooperate in taking whatever action may be required to comply with all Legal Requirements of any Governmental Authority having jurisdiction over the GTC Tariff in accordance with Prudent Utility Practice. 10.8 Severability. If any part of any provision of the GTC Tariff, this Agreement, and any other agreement, document, or writing given pursuant to or in connection with such tariffs, agreements and schedules shall be invalid or unenforceable under applicable law, said part shall be - 17 - ineffective to the extent of such invalidity only, without in any way affecting the remaining parts of said provision or the remaining provisions. 10.9 Third-Party Beneficiaries. 10.9.1 No Third-Party Beneficiaries. This Agreement is intended solely for the benefit of the Parties, and nothing in the GTC Tariff or this Agreement will be construed to create any duty to, or standard of care with reference to, or any liability to, any person not a Party hereto. 10.9.2 Enforcement. It is the intention of the Parties that no person or entity other than the Parties shall have any right to bring any action to enforce any provision of the GTC Tariff, this Agreement, and related agreements against either of the Parties, and that the covenants, undertakings and agreements set forth in the aforementioned documents shall be solely for the benefit of, and shall be enforceable only by, the Parties or their respective permitted successors and assigns. 10.9.3 Responsibility of Parties. Each of the Parties will be responsible for its own conduct and neither will be responsible for the conduct of the other. The GTC Tariff and this Agreement do not create a contractual relationship or duty of GTC with or to the customers of the Transmission Customer. 10.10 No Dedication of Facilities. GTC's agreement to provide service under the provisions of the GTC Tariff or this Agreement shall not constitute the dedication of GTC's electric system or the ITS, or any portion thereof, to the Transmission Customer or the public. GTC's obligations to the Transmission Customer under any provisions of the GTC Tariff or this Agreement will cease upon termination of the GTC Tariff or the Agreement. GTC's provision of service under the GTC Tariff or this Agreement does not constitute a sale, lease, rental, transfer, or conveyance of an ownership interest in or to any facilities of any kind. 10.11 Action by Affiliates. Failure by either Party to perform fully any obligation required by the GTC Tariff, this Agreement, and any related agreements, shall not be excused by reason of the fact that such performance was prevented by any action or inaction of an Affiliate unless such Affiliate's actions or inactions are the result of a Force Majeure or are taken pursuant to the GTC Tariff and are not unduly discriminatory. 10.12 Independent Contractors. The Parties to this Agreement are independent contractors, and nothing contained in the GTC Tariff, the Service Schedules, or the Agreement will be deemed to create an association, joint venture, partnership, principal-agent or any other kind of fiduciary relationship between the Parties. 10.13 Rules of Construction. - 18 - 10.13.1 Headings. The descriptive headings of the various articles, sections and subsections of the GTC Tariff have been inserted for convenience of reference only and should not be construed as to define, expand, or restrict the rights and obligations of the Parties. 10.13.2 Including. Wherever the term "including" is used in the GTC Tariff or the Service Schedules, such term shall not be construed as limiting the generality of any statement, clause, phrase or term. 10.13.3 Singular and Plural. The terms defined in the GTC Tariff and this Agreement shall be applicable to the plural as well as the singular and the singular as well as the plural. 10.13.4 Time of the Essence. Time is of the essence in the performance of the obligations set forth in the GTC Tariff, the Service Schedules and this Agreement. 10.14 Survival. The applicable provisions of the GTC Tariff and this Agreement will continue in effect after termination or cancellation of the GTC Tariff or this Agreement to the extent necessary to provide for final billing, billing adjustments and payments, and with respect to liability and indemnification from acts or events that occurred while the GTC Tariff and this Agreement were in effect. 10.15 Amendments. No amendment to this Agreement shall be effective unless it is in writing, executed by both Parties, and has been approved or accepted for filing and permitted to go into effect by any Governmental Authority having jurisdiction. Changes to the GTC Tariff shall be effective as to the Transmission Customer when approved by GTC and not prohibited by the express provisions of this Agreement. 10.16 Relationship of GTC to Transmission Customer. GTC and the Transmission Customer shall each furnish to the other promptly upon request any and all information about itself, its financial condition, business and properties which may be necessary or desirable to facilitate any financing undertaken by the requesting Party or any continuing disclosure obligation incurred by the requesting Party in connection with any such financing. The supplying Party shall be responsible only to the requesting Party for the accuracy and completeness of the information furnished and shall have no responsibility or liability for the manner in which such information is used or its appropriateness for such use. The supplying Party shall have no liability to any third party to which the requesting Party may furnish this information or any excerpt therefrom or summary thereof, and shall be entitled to receive appropriate assurances and indemnities from the requesting Party to that effect as a condition to providing such information, provided that no such assurance or indemnity shall relieve the supplying Party of liability to the requesting Party for the accuracy and completeness of the information supplied. 10.17 Transmission Customer's Information Obligations. The Transmission Customer is obligated to provide GTC or its agent information concerning all transmissions of - 19 - energy into, out of or across the Transmission System by or on behalf of the Transmission Customer in a manner consistent with all NERC and SERC guidelines, and in such detail and upon such frequency as GTC or its agent reasonably requests in connection with those services furnished by GTC to the Transmission Customer pursuant to the GTC Tariff. 10.18 Entire Agreement. This Agreement constitutes the entire agreement between the Parties hereto relating to the subject matter contemplated by this Agreement and supersedes all prior agreements, whether oral or written. The GTC Tariff is incorporated herein by reference. All exhibits attached hereto are incorporated herein by reference. 10.19 Retail Distribution. GTC shall not, without the consent of the Transmission Customer, voluntarily provide transmission service directly to retail customers within the Transmission Customer's assigned geographic area (if any) established in accordance with the Georgia Territorial Electric Service Act, as such statute may be amended or replaced (i) if such service is to deliver capacity or energy for the retail customer's own use and (ii) if FERC could not order such service as the result of Section 212(b)(2) of the Federal Power Act. GTC may, however, provide such service if it is otherwise required by state or federal law or is provided to an electric utility, as defined in the Federal Power Act, for such utility's own use. GTC shall be deemed in compliance with this Section 10.19 if it acts in reliance upon an opinion of its counsel to the effect that GTC is required by law to provide the service in question or the service in question is not a violation of this Section 10.19. 10.20 Periodic Review of Scheduling Procedures. GTC shall periodically review the times for scheduling set forth in the GTC Tariff and shall amend the GTC Tariff if necessary to keep such times consistent with times for scheduling that are generally accepted in the region and with Prudent Utility Practice. (Signatures on next page.) - 20 - IN WITNESS WHEREOF, GTC and the Transmission Customer have caused this Agreement to be executed, attested, sealed and delivered by their respective duly authorized officers as of the day and year first written above. GTC: GEORGIA TRANSMISSION CORPORATION (An Electric Membership Corporation) [CORPORATE SEAL] By: /s/ G. Stanley Hill --------------------------------------- G. Stanley Hill Interim Chief Operating Officer ATTEST: By: /s/ Patricia N. Nash ----------------------------- Patricia N. Nash Assistant Secretary Transmission Customer: OGLETHORPE POWER CORPORATION (An Electric Membership Generation & Transmission Corporation) [CORPORATE SEAL] By: /s/ T. D. Kilgore --------------------------------------- T. D. Kilgore President and Chief Executive Officer ATTEST: By: /s/ Patricia N. Nash ----------------------------- Patricia N. Nash Assistant Secretary - 21 - Exhibit A Definitions "Accounting Requirements" shall mean the requirements of any system of accounts prescribed by the RUS as long as the Government is the holder, insurer or guarantor of any indebtedness of the Transmission Customer or, in the absence thereof, the requirements of generally accepted accounting principles applicable from time to time to companies similar to the Transmission Customer. "Additional Term" is either the First Additional Term or the Second Additional Term. "Administrator" shall be as defined in the fifth Recital. "Affiliate" shall mean (1) for any exempt wholesale generator, as defined under Section 32(a) of the Public Utility Holding Company Act of 1935, as amended, the same as provided in Section 214 of the Federal Power Act; and (2) for any other entity, the same as provided in 18 CFR ss. 161.2(a), not including a GTC Member. "Agreement" shall be as defined in the first sentence of this Agreement. "Ancillary Services" means those ancillary services that are necessary to support the transmission of energy from resources to loads while maintaining reliable operation of the Transmission System in accordance with Prudent Utility Practice. "Assignment for Security" shall be as defined in Section 7.2.2. "Assumed Obligations" shall be as defined in the fifth Recital. "Bankruptcy Proceeding" means, with respect to a Party, that such Party (i) makes any general assignment or any general arrangement for the benefit of creditors, (ii) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy or similar law for the protection of creditors, or has such a petition involuntarily filed against it and such petition is not withdrawn or dismissed within 30 days after such filing, (iii) otherwise becomes bankrupt or insolvent (however evidenced), or (iv) is unable to pay its debts as they fall due. "Contract Year" means January 1 through December 31 of each calendar year. "Conveyance" shall be as defined in Section 7.1.3. "Debt Service Coverage Ratio" shall mean the ratio determined as follows: for each calendar year add (i) Patronage Capital or Margins, (ii) Interest Expense, and (iii) Depreciation and Amortization Expense and divide the total so obtained by an amount equal to the sum of all - A-1 - payments of principal and interest required to be made on account of Long-Term Debt during such calendar year; provided, however, that in the event that any Long-Term Debt has been refinanced during such year, the payments of principal and interest required to be made during such year on account of such Long-Term Debt shall be based (in lieu of actual payments required to be made on such refinanced debt) upon the larger of (y) an annualization of the payments required to be made with respect to the refinancing debt during the portion of such year such refinancing debt is outstanding, or (z) the payment of principal and interest required to be made during the following year on account of such refinancing debt, all as computed in accordance with Accounting Requirements. "Depreciation and Amortization Expense" shall mean an amount constituting the depreciation and amortization, as computed pursuant to Accounting Requirements. "Delivery Point" means the interconnection between the Transmission System or the ITS and the transmission, sub-transmission, or distribution system of an adjoining utility or entity (whether the Transmission Customer or its designee) at which GTC is to deliver capacity or energy pursuant to the GTC Tariff and which shall be specified in a Service Agreement. "Designated Agent" means any entity that performs actions or functions on behalf of GTC or the Transmission Customer required under the GTC Tariff. "Direct Assignment Facilities" means facilities that are constructed by GTC to facilitate a specific request for service under the GTC Tariff, with costs that are directly assigned to the Transmission Customer requesting the service. Direct Assignment Facilities shall be specified in the Service Agreement that governs service to the Transmission Customer. "Effective Date" shall be as defined in Section 8.1.1. "Equitable Defenses" means bankruptcy, insolvency, reorganization and other laws affecting creditors' rights generally, and with regard to equitable remedies, the discretion of the court before which proceedings to obtain the same may be pending. "Equity" shall mean the total equities and margins (or, if not a cooperative, equity), excluding Regulatory Assets, as computed pursuant to Accounting Requirements. "Facilities Study" means an engineering study conducted by GTC to determine the required modifications to GTC's Transmission System, including the cost and scheduled completion date for such modifications, that will be required to provide a requested Transmission Service, to add a new Transmission Customer of Network Transmission Service, to add a new Member System, or to add a Network Resource in accordance with the results of a System Impact Study. "FERC" means the Federal Energy Regulatory Commission or any Governmental Authority preceding or succeeding to the power and functions thereof under the Federal Power Act. - A-2 - "Firm Transmission Service" means any class of transmission service provided to the Transmission Customer under the GTC Tariff under Service Schedule A: Long-Term Firm Transmission Service, Service Schedule B: Short-Term Firm Transmission Service, Service Schedule C: Peak Period Firm Transmission Service, or any similar service schedule subsequently incorporated into the GTC Tariff. Firm Network Integration Transmission Service is also a form of Firm Transmission Service. "First Additional Term" is defined in Section 8.1.2 of this Agreement. "Force Majeure" means the occurrence or non-occurrence of any act or event that could not reasonably have been expected and avoided by exercise of due diligence and foresight and such act or event is beyond the reasonable control of the Party relying thereon as justification for not performing an obligation or complying with any condition required of such Party (or such Party's contractors, subcontractors, or agents) pursuant to the GTC Tariff and Service Agreement. "Future Obligations" shall be as defined in the sixth Recital. "Georgia Territory" means the area within (i) the State of Georgia (other than in Chatham, Effingham, Fannin, Towns and Union Counties), or (ii) such other counties inside or outside the State of Georgia if approved by the Joint Committee for Planning and Operations of the Integrated Transmission System. "Government" shall be as defined in the fifth Recital. "Governmental Authority" means any local, state, regional, federal, or national administrative, legal, judicial, or executive agency, commission, department, or other governmental entity. "GTC" shall be as defined in the first sentence of this Agreement. "GTC Member" means OPC and any electric membership corporation that is presently a member of GTC and was a member of OPC as of January 1, 1996. "GTC Tariff" shall be as defined in the fourth Recital. "GTC Transaction" shall be as defined in Section 7.2.3. "Indebtedness" shall mean (1) debt incurred or assumed by GTC for borrowed money or for the acquisition, construction or improvement of property other than goods or services that are acquired in the ordinary course of business of GTC; - A-3 - (2) lease obligations of GTC that, in accordance with generally accepted accounting principles are shown on the liability side of a balance sheet; (3) all debt (other than indebtedness otherwise treated as Indebtedness hereunder) for borrowed money or the acquisition, construction or improvement of property or capitalized lease obligations guaranteed, directly or indirectly, in any manner by GTC, or in effect guaranteed, directly or indirectly, by GTC through an agreement, contingent or otherwise, to purchase any such indebtedness or to advance or supply funds for the payment or purchase of any such indebtedness or to purchase property or services primarily for the purpose of enabling the debtor or seller to make payment of such indebtedness, or to insure the owner of the indebtedness against loss, or to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether or not such property is delivered or such services are rendered), or otherwise; or (4) any agreement by GTC to purchase or lease power, supplies, property or services primarily for the purpose of enabling a debtor or seller to make payment of debt service on indebtedness, pursuant to which GTC agrees to pay for power, supplies, property or services irrespective of whether or not such power, supplies or property are delivered or such services are rendered. "Initial Term" is defined in Section 8.1.2 of this Agreement. "Integrated Transmission System" or "ITS" means the aggregate transmission facilities as defined in the Integrated Transmission System Agreement. "Integrated Transmission System Agreement" or "ITSA" means the Revised and Restated Integrated Transmission System Agreement between GTC (as assignee of Oglethorpe Power Corporation) and Georgia Power Company, dated as of November 12, 1990, and accepted for filing by FERC in Georgia Power Company Docket No. ER91-171-000, 57 FERC P. 61,087, order on reh'g, 57 FERC P. 61,353 (1991), as the same may be hereafter amended, supplemented or substituted by the parties to such agreement from time to time. "Interest Expense" shall mean an amount constituting the interest expense on Long-Term Debt, as computed in accordance with Accounting Requirements. "Interest Rate" means that rate calculated in accordance with the methodology specified for interest on refunds in FERC's regulations at 18 C.F.R. ss. 35.19a(a)(2)(iii). "Legal Proceeding" means any suit, proceeding, judgment, ruling or order by or before any court or any governmental authority. "Long-Term Debt" shall mean an amount constituting long-term debt, as computed in accordance with Accounting Requirements. - A-4 - "Member System" means an Eligible Customer operating as part of a lawful combination, partnership, association or joint action agency composed exclusively of Eligible Customers. "Member Transaction" shall be as defined in Section 7.1.2. "Native Load Customers" means for GTC the GTC Members and their wholesale and retail customers and means for the Transmission Customer those wholesale and retail customers (if any), in either case, on whose behalf the Transmission Customer, by statute, franchise, regulatory requirement or contract, has an obligation to construct and operate its system reliably to meet the electric needs of such customers, namely, the Rocky Mountain Power Plant, the OPC headquarters buildings and any other facility that may be added in the future. "NERC" means the North American Electric Reliability Council or any organization succeeding to the function thereof. "Net Utility Plant" shall mean the amount constituting the Total Utility Plant of the Transferee, less depreciation and amortization, computed in accordance with Accounting Requirements. "Network Integration Transmission Service" or "Network Transmission Service" means that service that allows a Transmission Customer to integrate, plan, economically dispatch and regulate its Network Resources to serve its Network Load in a manner comparable to that in which GTC utilizes its Transmission System to serve its Native Load Customers; it also may be used by a Transmission Customer to deliver non-firm energy purchases to its Network Load without additional charge. "Network Load" means the designated load of a Transmission Customer, including the entire load of all Member Systems designated pursuant to Section 29 of the GTC Tariff, as measured at the Delivery Points. A Transmission Customer's Network Load shall not be reduced to reflect any portion of such load served by the output of any generating facilities owned, or generation purchased, by the Transmission Customer or its Member Systems. "Network Resource" means any owned or purchased generating resource or load management device controlled or operated by GTC or its Designated Agent that is located in the Georgia Territory or connected to the electric system of any Transmission Customer or any Member System, with the exception of any resource, or any portion thereof, that is committed for sale to third parties or otherwise cannot be called upon by GTC to meet a Transmission Customer's Network Load on a non-interruptible basis. A Transmission Customer also may designate as a Network Resource a generating resource (or portion thereof) located in another Control Area or power purchased by a Transmission Customer from generation located in another Control Area, to the extent that such generating resource or purchased power is available and may be called on to meet a Transmission Customer's Network Load on a non-interruptible basis. - A-5 - "Non-Firm Transmission Service" means transmission service set forth and described in Service Schedule D attached to the GTC Tariff. "Notes" shall be as defined in the fifth Recital. "Off-System Transaction" means any single energy transaction between the Transmission Customer and another person or entity, pursuant to which the Transmission Customer either: (a) delivers energy, or causes or allows energy to be delivered, to a destination that is (i) not served by the ITS or (ii) is located outside of the Southern Control Area; (b) takes energy, or causes or allows energy to be taken into the ITS, from a generation facility or other resources that is (i) not interconnected with the ITS or (ii) located outside of the Southern Control Area; or (c) provides, or causes or allows to be provided, transmission service into, out of or across the ITS. "OPC" shall be as defined in the first sentence of this Agreement. "Party" shall mean GTC or the Transmission Customer, individually; "Parties" shall mean GTC and the Transmission Customer, collectively. "Patronage Capital or Margins" shall mean the amount of net patronage capital and margins (or, if not a cooperative, net income), as computed in accordance with Accounting Requirements. "Payment Default" shall be as defined in Section 6.1.1 or where the context requires similar payment default by another of the GTC Members or other customers of GTC. "Performance Default" shall be as defined in Section 6.1.6 of this Agreement. "Person" shall mean an individual, partnership, limited liability company, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature. "Point-To-Point Transmission Service" shall mean the reservation and transmission of capacity and energy on either a firm or non-firm basis from the Point(s) of Receipt to the Point(s) of Delivery under Part II of the GTC Tariff. "Prudent Utility Practice" shall mean at a particular time any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry prior to such time, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the - A-6 - desired result at reasonable cost consistent with good business practices, reliability, safety, and expedition. Prudent Utility Practice is not intended to be limited to the optimum practice, method, or act, to the exclusion of all others, but rather to be a spectrum of possible practices, methods, or acts expected to accomplish the desired results, having due regard for, among other things, manufacturers' warranties and the requirements of Governmental Authorities of competent jurisdiction and the requirements of the GTC Tariff. "RE Act" shall be as defined in the ninth Recital. "RUS" shall be as defined in the third Recital. "Receipt Point" means the interconnection between the Transmission System or the ITS and the transmission, sub-transmission, or distribution system of an adjoining utility or entity (whether the Transmission Customer or its designee) at which GTC is to receive capacity or energy pursuant to the GTC Tariff and which shall be specified in this Agreement. "Regulatory Asset" shall mean the sum of any amounts properly recordable as unrecovered plant and regulatory study costs or as other regulatory assets, as computed in accordance with Accounting Requirements. "SERC" means the Southeastern Electric Reliability Council or any regional organization succeeding to the function thereof in which GTC participates. "Second Additional Term" is defined in Section 8.1.2 of this Agreement. "Secured Obligations" shall be as defined in the seventh Recital. "Service" means service provided by GTC to the Transmission Customer pursuant to the GTC Tariff. "Service Agreement" means the initial agreement and any supplements thereto entered into by the Transmission Customer and GTC for Services under the GTC Tariff. "Service Schedules" means the schedules attached to the GTC Tariff and incorporated herein, which schedules set forth the Services available under the GTC Tariff. "Times Interest Earned Ratio" shall mean the ratio determined as follows: For each calendar year add (i) Patronage Capital or Margins and (ii) Interest Expense on Long-Term Debt, and divide the total so obtained by Interest Expense on Long-Term Debt, all as computed in accordance with Accounting Requirements. "Total Assets" shall mean an amount constituting the total assets, but excluding any Regulatory Assets, as computed in accordance with Accounting Requirements. - A-7 - "Total Utility Plant" shall mean the amount constituting the total utility plant (gross) of the Transferee computed in accordance with Accounting Requirements. "Transfer Capability" means the amount of capacity or energy that can be delivered from the ITS to the transmission system of an interconnected utility or transferred from the transmission system of an interconnected utility to the ITS, as determined in accordance with the ITSA. "Transferee" shall mean the Person formed by any consolidation or that is the survivor of any merger or reorganization or the Person that acquires or leases all or substantially all of the electric assets of the Transmission Customer. "Transmission Customer" shall be as defined in the first sentence of this Agreement. "Transmission Power Delivery Capacity Requirement" means the Transmission Customer's average demand under this Agreement coincident with GTC's five (5) highest non-holiday, weekday demands occurring during the preceding twelve (12) months ending September 30. "Transmission Service" means Network Transmission Service or Point-To-Point Transmission Service provided by GTC to the Transmission Customer under the GTC Tariff. "Transmission System" means the facilities owned, controlled, operated, or supported by GTC and, if applicable, the Transmission Customer (including control arising through contractual rights to obtain service) that are used to provide transmission service under the GTC Tariff. "Trust Indenture" shall be as defined in the seventh Recital. - A-8 - Exhibit B Service Specifications Network Integration Transmission Service Specifications I. The Transmission Customer agrees to purchase, and GTC agrees to provide, Network Integration Transmission Service in accordance with the GTC Tariff and the Agreement. II. The Transmission Customer shall provide the following information for Network Integration Transmission Service: A. Network Resources Resource Capacity Capacity Designated as Network Resource See Exhibit B-1A, Existing Resources - Applicable to Sales to Members, for a complete listing of all resources and capacities. All capacities, at this time, are designated as Network Resource. B. Network Loads Load Transmission Voltage Level Meter See Exhibit B-2 for a complete listing of all (distribution) loads. Substations with the designation for that Transmission Customer will constitute the list of loads for that Transmission Customer. At this time, all Network loads are limited to metering points on the attached Exhibit B- 2. C. Point(s) of Receipt and Delivering Party The Points of Receipt are the high side of the step-up transformers of each Network Resource listed in Exhibit B-1A that is owned or purchased by the Transmission Customer. D. Point(s) of Delivery and Receiving Party The Points of Delivery are the substations and/or feeder(s) for that Transmission Customer listed in Exhibit B-2 for that Customer. The Receiving Party for each Point of Delivery is the Transmission Customer. E. Reserved Capacity There is no reserved capacity, at this time, for the Transmission Customer. - B-1 - F. Direct Assignment Facilities There are no Direct Assignment Facilities, at this time, for the Transmission Customer. The Distribution Substation Charge will be determined as an allocated portion of the cost of all distribution substation facilities, serving a Transmission Customer's system load and not owned by the Transmission Customer. G. Name(s) of Intervening Systems Providing Transmission Service There are no intervening systems, at this time, providing any Transmission Service for the Transmission Customer. III. Other material terms: Service shall begin as of the Effective Date. The Transmission Customer may modify this list to reflect changes in accordance with this Agreement. Errors in the above listings are assumed to be corrected and will neither increase nor decrease the true and correct network resource rights or responsibilities of the Transmission Customer. The Transmission Customer should provide to GTC the correct data for these Exhibits if errors are discovered. GTC: GEORGIA TRANSMISSION CORPORATION (An Electric Membership Corporation) By: /s/ G. Stanley Hill ------------------------------------------ Name: G. Stanley Hill ------------------------------------- Title: Interim Chief Operating Officer ------------------------------------ Transmission Customer: Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) By: /s/ T. D. Kilgore -------------------------------------------- Name: T. D. Kilgore ------------------------------------- Title: President and Chief Executive Officer ------------------------------------- - B-2 - Exhibit B-1A Existing Resources - Applicable to Sales to Members Original Scheduled Year Nameplate Original of Retirement Name Type Capacity Useful Life or Expiration - ---- ---- -------- ----------- ------------- Owned Resources - --------------- Harrison Dam Hydro 2 50 2023 Hatch 1 Nuclear 243 40 2014 Hatch 2 Nuclear 246 40 2018 Rocky Mountain 1 PS Hydro 211 50 2027 Rocky Mountain 2 PS Hydro 211 50 2027 Rocky Mountain 3 PS Hydro 211 50 2027 Scherer 1 Coal 491 55 2022 Scherer 2 Coal 491 55 2024 Vogtle 1 Nuclear 348 40 2026 Vogtle 2 Nuclear 348 40 2028 Wansley 1 Coal 260 55 2016 Wansley 2 Coal 260 55 2018 Wansley CT Oil 15 38 2009 Purchased Resources - ------------------- Entergy 100 10 2002 Big Rivers 100 10 2002 Georgia Power BPSA Block 1 250 12 2003 Block 2 250 12 2003 Block 3 250 5 1996 Block 4 250 6 1997 Block 5 125 12 2003 Block 6 125 12 2003 Hartwell 1 150 25 2019 Hartwell 2 150 25 2019 1997 Bridge Capacity Purchase 50 1 1997 1998 Bridge Capacity Purchase 275 1 1998 Other Independent Power Producers (1) 27 Various Various Sales - ----- AEC Capacity Sale (100) 7 2005 Colquitt Member/Sterling Chemical(2) (1) 10 2006 Notes: (1) Other Independent Power Producers are: Southeast Paper, Weyerhaeuser, Southwire, Spartan Mills, Bio-Energy Partners, and Herschel Webster (2) Capacity represents firm demand. Total demand is limited to 100 MW. - B-3 - Exhibit B-2 Power XFMR Capacity Transmission Voltage (MVA) Customer Meter No. Metering Point Name kV) (Base/Max.) - -------- --------- ------------------- --- ----------- Oglethorpe N/A OPC Headquarters Bldg. 25 kV N/A Oglethorpe N/A Rocky Mountain HQ 12 kV ` N/A - B-4 - Point-To-Point Transmission Service Specifications I. The Transmission Customer agrees to purchase, and GTC agrees to provide, the following Point-To-Point Transmission Services in accordance with the GTC Tariff and the Agreement (check all that apply): A. Long-Term Firm Point-To-Point Transmission Service _____ B. Short-Term Firm Point-To-Point Transmission Service _____ C. Peak Period Point-To-Point Transmission Service _____ D. Non-Firm Point-To-Point Transmission Service _____ II. The Transmission Customer shall provide the following information for the Point-To-Point Transmission Services identified above: A. Point(s) of Receipt and Delivering Party B. Point(s) of Delivery and Receiving Party C. Reserved Capacity D. Direct Assignment Facilities E. Name(s) of Intervening Systems Providing Transmission Service III. Other material terms: - B-5 - IV. Terms of individual transactions to be confirmed on the attached Confirmation. GTC: GEORGIA TRANSMISSION CORPORATION (An Electric Membership Corporation) By: ----------------------------------------------- Transmission Customer: Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) By: ----------------------------------------------- - B-6 - Ancillary Service Specifications I. The Transmission Customer agrees to purchase, and GTC agrees to provide, the following Ancillary Services in accordance with the GTC Tariff and the Agreement (check all that apply): A. Scheduling, System Control and Dispatch Service ----- B. Reactive Supply and Voltage Control from Generation Sources Service ----- C. Regulation and Frequency Response Service ----- D. Energy Imbalance Service E. Operating Reserve - Spinning Reserve Service ----- F. Operating Reserve - Supplemental Reserve Service ----- II. Other material terms: III. Terms of individual transactions to be confirmed on the attached Confirmation. GTC: GEORGIA TRANSMISSION CORPORATION (An Electric Membership Corporation) By: ----------------------------------------------- Name: -------------------------------------- Title: -------------------------------------- Transmission Customer: Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) By: ----------------------------------------------- Name: -------------------------------------- Title: -------------------------------------- - B-7 - CONFIRMATION OF TRANSMISSION TRANSACTION Dated______________, 199___ Pursuant to the Member Transmission Service Agreement, dated March 1, 1997, between Georgia Transmission Corporation (An Elictric Membership Corporation) ("GTC") and Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) ("Transmission Customer"), this Confirmation sets forth the specific terms of the individual transaction agreed to by representatives of the parties on __________________, 199___. GTC Transmission Customer Attn.: ------------- Attn.: ------------- Tel.: ------------- Tel.: ------------- Fax: ------------- Fax: ------------- Type of Service: --------------------------------- Duration: [date/time] through [date/time] ----------- ------------- Hours: --------------------------------- Quantity: Capacity: --------------------------------- Energy: --------------------------------- Rates: --------------------------------- Delivery Point(s): --------------------------------- Receiving Party(ies): --------------------------------- Receipt Point(s): --------------------------------- Delivering Party(ies): --------------------------------- Special Terms: AGREED: GTC Transmission Customer By: By: --------------------------- ---------------------------- NOTICE: IF THE PARTY RECEIVING THIS CONFIRMATION DISAGREES WITH ANY OF THE TERMS SUMMARIZED HEREIN, IT SHALL PROMPTLY NOTIFY THE SENDING PARTY BY TELEPHONE AND FACSIMILE TRANSMISSION. FAILURE BY THE RECIPIENT TO EXECUTE AND RETURN THIS CONFIRMATION OR TO NOTIFY SENDER OF ITS DISAGREEMENT WITHIN ONE BUSINESS DAY OF RECEIVING THIS CONFIRMATION CONSTITUTES THE RECIPIENT'S AGREEMENT TO THE TERMS SET FORTH HEREIN. - B-8 - EX-10.33-2 38 EXHIBIT 10.33.2 Exhibit 10.33.2 GENERATION SERVICES AGREEMENT between OGLETHORPE POWER CORPORATION (An Electric Membership Generation & Transmission Corporation) and GEORGIA SYSTEM OPERATIONS CORPORATION dated as of March 1, 1997 GENERATION SERVICES AGREEMENT between OGLETHORPE POWER CORPORATION (An Electric Membership Generation & Transmission Corporation) and GEORGIA SYSTEM OPERATIONS CORPORATION dated as of March 1, 1997 This GENERATION SERVICES AGREEMENT ("Agreement"), dated as of March 1, 1997, is entered into by and between OGLETHORPE POWER CORPORATION (An Electric Membership Generation & Transmission Corporation), an electric membership corporation organized and existing under Title 46 of the Official Code of Georgia Annotated ("OPC"), and GEORGIA SYSTEM OPERATIONS CORPORATION, a non-profit corporation organized and existing under the laws of the State of Georgia ("GSOC") (each a "Party" and collectively "Parties"). WHEREAS, OPC was formed by 39 electric membership corporations doing business in the State of Georgia (the "OPC Members"), each of which joined with the others, beginning in 1974, to form OPC in order to share the benefits and costs of ownership of an entity that would engage in providing electric capacity and energy for the benefit of its members; and WHEREAS, OPC currently owns and operates electric generation plants and in the future may construct additional electric generation plants or purchase or otherwise obtain electric capacity and energy for the purpose, among others, of supplying electric capacity and energy to the OPC Members; and WHEREAS, GSOC provides, pursuant to its Operation Services Tariff, dated as of January 1, 1997, as such tariff may be amended from time to time (the "GSOC Tariff"), coordination and ancillary control area services that are necessary to support the transmission of energy from resources to loads while maintaining continued reliable operation of the transmission system into, across, or from which such energy is transmitted, in accordance with Prudent Utility Practice (the foregoing services, "Operation Services"); and WHEREAS, OPC has sold and transferred to GSOC and GSOC has purchased and received from OPC the assets and expertise for GSOC (i) to provide Operation Services to OPC, to OPC Members desiring to purchase such services independently, and to others under the GSOC Tariff, and (ii) to conduct Single System Dispatch of generating capacity; and WHEREAS, GSOC requires Generation Services in order to provide generation-related Operation Services for the reliable transmission of electric capacity and energy; and WHEREAS, the Parties hereto desire to enter into this Agreement to establish and define the Generation Services and other services that OPC may provide to GSOC under OPC's Generation Service Schedules, dated as of January 1, 1997, as such schedules may be amended from time to time (the "Generation Service Schedules"), and this Agreement, and the terms and conditions (including, but not limited to, type(s) and duration(s) of Generation Service(s)) therefor; NOW, THEREFORE, in consideration of the premises and the mutual undertakings herein contained, OPC and GSOC hereby agree as follows: ARTICLE I DEFINED TERMS; GENERATION AND OTHER SERVICES 1.1 Definitions. All capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Generation Service Schedules, unless the context in which a term is used clearly requires otherwise. 1.2 Generation Services. The Generation Service Schedules, as such schedules are in effect from time to time, shall govern the rates and certain terms and conditions of the Generation Services that OPC agrees to provide to GSOC and GSOC agrees to take from OPC. To the extent that GSOC requires services to schedule capacity and energy transactions properly, GSOC shall obtain such services from OPC, provided that they are available. Those Generation Services listed in Exhibit 1 attached hereto and incorporated herein by reference, as such exhibit may be amended from time to time, are the Generation Services that OPC shall make available to GSOC. The availability of such Generation Services is contingent upon a variety of factors, including, but not limited to, the ability of OPC to sell such services to others at more favorable rates or on more favorable terms and conditions. Exhibit 1 sets forth, in addition to the Generation Services to be provided pursuant to this Agreement, any other material terms applicable to such Generation Services. Any Generation Services provided by OPC at the request or on behalf of GSOC shall be provided at the rates and on the terms and conditions set forth in the Generation Service Schedules, as such schedules are in effect from time to time. 1.3 GSOC's Obligations. GSOC shall maintain and provide to OPC, routinely and on demand, the data necessary for OPC to determine the utilization and performance of its facilities, report to regulatory agencies and prepare invoices for its products and services to its members and customers, as may be determined from time to time by the Parties. 1.4 Standard of Service. OPC shall provide Generation Services hereunder in accordance with Prudent Utility Practice. 1.5 Third Parties. OPC may obtain from another party certain of the Generation Services provided hereunder to GSOC. GSOC may purchase Generation Services provided hereunder for resale to others and may purchase services similar to the Generation Services provided hereunder from others only if such Generation Services are not available from OPC. - 2 - 1.6 Regulatory Filings. 1.6.1 Approval. This Agreement is subject to the approval of the Administrator of the RUS. OPC shall be under no obligation to provide Generation Services to GSOC until this Agreement has received such approval and any other necessary approval by the appropriate Governmental Authority. OPC shall file this Agreement as necessary to comply with the requirements of the appropriate Governmental Authority. 1.6.2 Other Filings. Nothing contained in this Agreement shall be construed as affecting in any way the right of OPC unilaterally to make application to the Commission to accept an initial filing or for change in rates, terms and conditions, charges, classifications of service, this Agreement, rule or regulation under Section 205 of the Federal Power Act and pursuant to the Commission's rules and regulations promulgated thereunder. 1.6.3 Exercise of Rights. Nothing contained herein shall be construed as affecting in any way the right of GSOC to exercise its rights under the Federal Power Act and pursuant to the Commission's rules and regulations promulgated thereunder. ARTICLE II TERM 2.1 Effective Date. This Agreement shall become effective upon the occurrence of the following two (2) events: (a) approval in writing by the Administrator of the RUS, and (b) acquisition by Georgia Transmission Corporation (An Electric Membership Corporation) of the transmission assets and business of OPC. The date this Agreement becomes effective shall be the "Effective Date." 2.2 Term. This Agreement shall begin on the Effective Date and, unless terminated as provided in Section 2.3 below, end on December 31, 2001, provided that one Party has given the other Party not less than one (1) year's written notice of its intent to terminate this Agreement as of December 31, 2001. If not otherwise terminated, after December 31, 2001, this Agreement shall continue from year to year unless terminated by a Party giving the other Party not less than six (6) months' prior written notice of its intent to terminate. 2.3 Early Termination. This Agreement may be terminated at any time prior to the end of the initial term or any extension under any of the following provisions: 2.3.1 Mutual Consent. The Parties may terminate this Agreement at any time upon mutual written consent. 2.3.2 Failure to Comply with OPC Legal Requirements. OPC may terminate this Agreement if seventy-five percent (75%) of the Board of Directors of OPC determines that continued performance hereunder by GSOC can reasonably be expected to result in OPC being - 3 - unable to comply with an OPC Legal Requirement. Prior to any such determination, OPC shall have notified GSOC in writing of its concerns and given GSOC thirty (30) days to correct its performance, or such shorter period as the Board of Directors of OPC determines is necessary to avoid a System Emergency. For purposes of this Agreement, an "OPC Legal Requirement" shall mean (i) all laws, codes, ordinances, orders, judgments, decrees, injunctions, licenses, rules, permits, approvals, agreements, regulations and requirements of every governmental authority having jurisdiction over the matter in question, whether federal, state or local, which may be applicable to OPC, (ii) obligations of OPC to an OPC Member, or (iii) obligations of OPC under the Amended and Restated Wholesale Power Contract between OPC and each of the OPC Members, dated as of August 1, 1996. 2.3.3 Loss of Control of GSOC. OPC may terminate this Agreement at any time upon thirty (30) days' prior written notice, to be effective on or after a change in control of GSOC such that the OPC Members that have control of OPC at that time no longer have control of GSOC. For purposes of this Section 2.3.3, "control" shall mean the power to direct the management and policies of GSOC, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. ARTICLE III INDEMNIFICATION AND LIABILITY 3.1 Force Majeure. Neither OPC nor GSOC will be considered in default as to any obligation under the Generation Service Schedules if prevented from fulfilling the obligation due to an event of Force Majeure. However, a Party whose performance under the Generation Service Schedules is hindered by an event of Force Majeure shall make all reasonable efforts to perform its obligations under the Generation Service Schedules. 3.2 Indemnification. GSOC shall at all times indemnify, defend, and save OPC harmless from, any and all damages, losses, claims, including claims and actions relating to injury to or death of any person or damage to property, demands, suits, recoveries, costs and expenses, court costs, attorney fees, and all other obligations by or to third parties, arising out of or resulting from OPC's performance of its obligations under the Generation Service Schedules, except in cases of negligence or intentional wrongdoing by OPC. 3.3 Consequential and Indirect Damages. Notwithstanding any other provision to the contrary contained in the Generation Service Schedules or this Agreement, to the fullest extent permitted by law, neither Party shall have liability to the other Party for any indirect, consequential, multiple or punitive damages unless such damages are the result of the Party's bad faith, gross negligence, or willful misconduct. - 4 - ARTICLE IV MISCELLANEOUS 4.1 Operating Representatives. By letter dated as of even date herewith, GSOC and OPC have each appointed operating representatives to act for the respective Parties in matters pertaining to service under this Agreement. Either Party may designate a successor operating representative in its discretion by providing the other Party with written notice thereof. 4.2 Notices. All notices, requests, statements or payments provided for, required or permitted by this Agreement shall be sufficient for any and all purposes under this Agreement when transmitted by facsimile, first class United States Mail, hand delivery, or a private express delivery service to the facsimile numbers or addresses provided below or as otherwise designated in writing by the applicable Party: If to OPC: Oglethorpe Power Corporation 2100 East Exchange Place P.O. Box 1349 Tucker, GA 30085-1349 Attention: Preference Power Coordinator Telephone: 770-270-7765 FAX: 770-270-7590 If to GSOC: Georgia System Operations Corporation 2100 East Exchange Place P.O. Box 1349 Tucker, GA 30085-1349 Attention: Chief Operating Officer Telephone: 770-270-7955 FAX: 770-270-7908 4.3 Communications Regarding Emergencies. Any communications regarding operational emergencies or other operational problems may be made orally or in any other manner reasonable under the circumstances and should be directed to the persons specified below, or to such other person or address as may have been designated in a written notice given to the other persons by or on behalf of the person entitled to receive notice. In the event the person entitled to receive notice cannot be found, notice may be given to any other responsible person. - 5 - If to OPC: Oglethorpe Power Corporation 2100 East Exchange Place P.O. Box 1349 Tucker, GA 30085-1349 Attention: Preference Power Coordinator Telephone: 770-270-7765 FAX: 770-270-7590 If to GSOC: Georgia System Operations Corporation 2100 East Exchange Place P.O. Box 1349 Tucker, GA 30085-1349 Attention: Manager, Control Room Operations Telephone: 770-270-7740 FAX: 770-270-7320 4.4 Governing Law. The validity, interpretation and performance of the Generation Service Schedules and this Agreement and each of their respective provisions shall be governed by the laws of the State of Georgia. 4.5 Waivers and Exercise of Rights. 4.5.1 Waiver. OPC may waive its rights under any provision of the Generation Service Schedules or this Agreement when it determines that doing so is in the best interests of the OPC Members. 4.5.2 Subsequent Default. Any waiver at any time by OPC of its rights with respect to any matter arising in connection with the Generation Service Schedules or this Agreement shall not be considered a waiver with respect to any subsequent default or matter. 4.5.3 Exercise of Rights. No failure or delay on the part of either Party in exercising any right, power or privilege under the Generation Service Schedules or this Agreement and any related agreement, and no course of dealing between the Parties, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. - 6 - 4.6 Counterparts. This Agreement may be executed in as many counterparts as may be required, and it shall not be necessary that the signatures of or on behalf of each Party appear on each counterpart, but it shall be sufficient that the signature of or on behalf of each Party appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. Each executed counterpart shall have the same force and effect as an original instrument, and it shall not be necessary in any proof of this Agreement to produce or account for more than the number of counterparts containing the respective signatures of or on behalf of each of the Parties. 4.7 Compliance with Legal Requirements. Each Party shall cooperate in taking whatever action may be required to comply with all Legal Requirements of any Governmental Authority having jurisdiction over the Generation Service Schedules in accordance with Prudent Utility Practice. 4.8 Severability. If any part of any provision of the Generation Service Schedules, this Agreement, and any other agreement, document, or writing given pursuant to or in connection with such tariffs, agreements and schedules shall be invalid or unenforceable under applicable law, said part shall be ineffective to the extent of such invalidity only, without in any way affecting the remaining parts of said provision or the remaining provisions. 4.9 Third-Party Beneficiaries. 4.9.1 No Third-Party Beneficiaries. This Agreement is intended solely for the benefit of the Parties, and nothing in the Generation Service Schedules or this Agreement will be construed to create any duty to, or standard of care with reference to, or any liability to, any person not a Party hereto. 4.9.2 Enforcement. It is the intention of the Parties that no person or entity other than the Parties shall have any right to bring any action to enforce any provision of the Generation Service Schedules, this Agreement, and related agreements against either of the Parties, and that the covenants, undertakings and agreements set forth in the aforementioned documents shall be solely for the benefit of, and shall be enforceable only by, the Parties or their respective successors or permitted assigns. 4.9.3 Responsibility of Parties. Each of the Parties will be responsible for its own conduct and neither will be responsible for the conduct of the other. The Generation Service Schedules and this Agreement do not create a contractual relationship or duty of one Party with or to the customers of the other Party. 4.10 No Dedication of Facilities. OPC's agreement to provide service under the provisions of the Generation Service Schedules or this Agreement shall not constitute the dedication of OPC's resources or facilities, or any portion thereof, to GSOC or the public. OPC's service obligations to GSOC under any provisions of the Generation Service Schedules or this Agreement will cease - 7 - upon termination of the Generation Service Schedules or this Agreement. OPC's provision of service under the Generation Service Schedules or this Agreement does not constitute a sale, lease, rental, transfer, or conveyance of an ownership interest in or to any facilities of any kind. 4.11 Action by Affiliates. Failure by either Party to perform fully any obligation required by the Generation Service Schedules, this Agreement, and any related agreements, shall not be excused by reason of the fact that such performance was prevented by any action or inaction of an Affiliate unless such Affiliate's actions or inactions are the result of a Force Majeure or are taken pursuant to the Generation Service Schedules and are not unduly discriminatory. 4.12 Independent Contractors. The Parties to this Agreement are independent contractors, and nothing contained in the Generation Service Schedules or this Agreement will be deemed to create an association, joint venture, partnership, principal-agent or any other kind of fiduciary relationship between the Parties. 4.13 Rules of Construction. 4.13.1 Headings. The descriptive headings of the various articles, sections and subsections of the Generation Service Schedules have been inserted for convenience of reference only and should not be construed as to define, expand, or restrict the rights and obligations of the Parties. 4.13.2 Including. Wherever the term "including" is used in the Generation Service Schedules, such term shall not be construed as limiting the generality of any statement, clause, phrase or term. 4.13.3 Singular and Plural. The terms defined in the Generation Service Schedules and this Agreement shall be applicable to the plural as well as the singular and the singular as well as the plural. 4.13.4 Time of the Essence. Time is of the essence in the performance of the obligations set forth in the Generation Service Schedules and this Agreement. 4.14 Survival. The applicable provisions of the Generation Service Schedules and this Agreement will continue in effect after termination or cancellation of the Generation Service Schedules or this Agreement to the extent necessary to provide for final billing, billing adjustments and payments, and with respect to liability and indemnification from acts or events that occurred while the Generation Service Schedules and Agreement were in effect. 4.15 Amendments. No amendment to this Agreement shall be effective unless it is in writing, executed by both Parties, and has been approved or accepted for filing and permitted to go into effect by any Governmental Authority having jurisdiction. Changes to the Generation Service - 8 - Schedules shall be effective as to GSOC when approved by OPC and not prohibited by the express provisions of this Agreement. 4.16 Relationship of OPC to GSOC. GSOC shall furnish to OPC promptly upon request any and all information about itself, its financial condition, business and properties that may be necessary or desirable to facilitate any financing undertaken by OPC or any continuing disclosure obligation incurred by OPC in connection with any such financing. GSOC shall be responsible only to OPC for the accuracy and completeness of the information furnished and shall have no responsibility or liability for the manner in which such information is used or its appropriateness for such use. GSOC shall have no liability to any third party to which OPC may furnish this information or any excerpt therefrom or summary thereof, and shall be entitled to receive appropriate assurances and indemnities from OPC to that effect as a condition to providing such information, provided that no such assurance or indemnity shall relieve GSOC of liability to OPC for the accuracy and completeness of the information supplied. 4.17 GSOC's Information Obligations. GSOC is obligated to provide OPC or its agent information concerning all services provided hereunder, and in such detail and upon such frequency as OPC or its agent reasonably requests in connection with those services furnished by OPC to GSOC pursuant to the Generation Service Schedules. 4.18 Entire Agreement. This Agreement constitutes the entire agreement between the Parties hereto relating to the subject matter contemplated by this Agreement and supersedes all prior agreements, whether oral or written. The Generation Service Schedules are incorporated herein by reference. All exhibits attached hereto are incorporated herein by reference. [The next page is the signature page.] - 9 - IN WITNESS WHEREOF, the Parties hereto have caused this Generation Services Agreement to be executed, attested, sealed and delivered by their respective duly authorized officers as of the day and year first set forth above. OPC: OGLETHORPE POWER CORPORATION (An Electric Membership Generation & Transmission Corporation) [CORPORATE SEAL] By: /s/ J. Calvin Earwood --------------------------------------------- J. Calvin Earwood Chairman of the Board ATTEST: By: /s/ Gary M. Bullock ------------------------- Gary M. Bullock Secretary-Treasurer GSOC: GEORGIA SYSTEM OPERATIONS CORPORATION [CORPORATE SEAL] By: /s/ James E. Estes --------------------------------------------- James E. Estes Chairman of the Board ATTEST: By: /s/ Patricia N. Nash ------------------------- Patricia N. Nash Assistant Secretary - 10 - EXHIBIT 1 GENERATION SERVICES TO BE PROVIDED UNDER GENERATION SERVICES AGREEMENT 1. OPC will provide the following Generation Services to GSOC, to the extent that such Generation Services are available, pursuant to the Generation Services Agreement and the Generation Service Schedules: 1. Loss Compensation Service 2. Reactive Power and Voltage Control from Generation Sources Service 3. Regulation and Frequency Response Service 4. Energy Imbalance Service 5. Operating Reserve - Spinning Reserve Service 6. Operating Reserve - Supplemental Reserve Service 2. GSOC will specify to OPC, on a transactional basis as confirmed in a writing in a form mutually acceptable to the Parties, which of the above Generation Services it requires and whether the service is required on an ongoing basis or only for the duration of the transaction. GSOC recognizes that such Generation Services may or may not be available for the duration requested. 3. Other material terms: None. [Signatures appear on following page] OPC: OGLETHORPE POWER CORPORATION (An Electric Membership Generation & Transmission Corporation) By: /s/ J. Calvin Earwood ------------------------------------------------ J. Calvin Earwood Chairman of the Board GSOC: GEORGIA SYSTEM OPERATIONS CORPORATION By: /s/ James E. Estes ------------------------------------------------ James E. Estes Chairman of the Board - 1-2 - EX-10.33-3 39 EXHIBIT 10.33.3 Exhibit 10.33.3 OPERATION SERVICES AGREEMENT between GEORGIA SYSTEM OPERATIONS CORPORATION and OGLETHORPE POWER CORPORATION (An Electric Membership Generation & Transmission Corporation) dated as of March 1, 1997 OPERATION SERVICES AGREEMENT between GEORGIA SYSTEM OPERATIONS CORPORATION and OGLETHORPE POWER CORPORATION (An Electric Membership Generation & Transmission Corporation) dated as of March 1, 1997 This OPERATION SERVICES AGREEMENT ("Agreement"), dated as of March 1, 1997, is entered into by and between GEORGIA SYSTEM OPERATIONS CORPORATION, a non-profit corporation organized and existing under the laws of the State of Georgia ("GSOC"), and OGLETHORPE POWER CORPORATION (An Electric Membership Generation & Transmission Corporation), an electric membership corporation organized and existing under Title 46 of the Official Code of Georgia Annotated ("OPC") (each a "Party" and collectively "Parties"). WHEREAS, OPC was formed by 39 electric membership corporations doing business in the State of Georgia (the "OPC Members"), each of which joined with the others, beginning in 1974, to form OPC in order to share the benefits and costs of ownership of an entity that would engage in providing electric capacity and energy for the benefit of its members; and WHEREAS, OPC currently owns and operates electric generation plants and in the future may construct additional electric generation plants or purchase or otherwise obtain electric capacity and energy for the purpose, among others, of supplying electric capacity and energy to the OPC Members; and WHEREAS, GSOC provides, pursuant to its Operation Services Tariff, dated as of January 1, 1997, as such tariff may be amended from time to time (the "GSOC Tariff"), coordination and ancillary control area services that are necessary to support the transmission of energy from resources to loads while maintaining continued reliable operation of the transmission system into, across, or from which such energy is transmitted, in accordance with Prudent Utility Practice (the foregoing services, "Operation Services"); and WHEREAS, OPC has sold and transferred to GSOC and GSOC has purchased and received from OPC the assets and expertise for GSOC (i) to provide Operation Services to OPC, to OPC Members desiring to purchase such services independently, and to others under the GSOC Tariff, and (ii) to conduct Single System Dispatch of generating capacity; and WHEREAS, OPC on behalf of OPC Members desiring to participate will commit such OPC Members' system capacity and associated energy to pooled operations (the "OPC Pool") and for OPC Members choosing not to participate in the OPC Pool, OPC will make system capacity and associated energy available under separate scheduling by such OPC Members, if any; and WHEREAS, OPC requires such service as to schedule, administer and account properly for its capacity and energy transactions and other services for the implementation and administration of the OPC Pool and separate scheduling ("Dispatch Service"); and WHEREAS, GSOC offers to provide Dispatch Service pursuant to this Agreement and to make available to OPC and the OPC Members Operation Services pursuant to the GSOC Tariff and other services as they may request from time to time; and WHEREAS, the Parties hereto desire to enter into this Agreement to establish and define the Operation Services and other services that GSOC may provide to OPC under the GSOC Tariff and this Agreement, and the terms and conditions (including, but not limited to, type(s) and duration(s) of Service) therefor; NOW, THEREFORE, in consideration of the premises and the mutual undertakings herein contained, GSOC and OPC hereby agree as follows: ARTICLE I DEFINED TERMS; OPERATION AND OTHER SERVICES 1.1 Definitions. All capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the GSOC Tariff, unless the context in which a term is used clearly requires otherwise. 1.2 Operation Services. The GSOC Tariff and the Service Schedules attached thereto, as such tariff and schedules are in effect from time to time, shall govern the rates and certain terms and conditions of the Operation Services that GSOC agrees to provide to OPC and OPC agrees to take from GSOC. Those Operation Services listed in Exhibit 1 attached hereto and incorporated herein by reference, as such exhibit may be amended from time to time, are the Operation Services OPC intends to take from GSOC. Exhibit 1 sets forth, in addition to the Operation Services to be provided pursuant to this Agreement, any other material terms applicable to such Services. Any Operation Services provided by GSOC at the request or on behalf of OPC shall be provided at the rates and on the terms and conditions set forth in the GSOC Tariff and the Service Schedules attached thereto, as such tariff and schedules are in effect from time to time. 1.3 Administration of OPC's Pool. OPC shall on the Effective Date (as defined in Section 2.1 below) commit to GSOC and GSOC agrees to accept responsibility for the administration and operation of the OPC Pool pursuant to OPC's Rate Schedule A to the Amended and Restated Wholesale Power Contract between OPC and each of the OPC Members, dated as of August 1, 1996 (the "Wholesale Power Contract"), and consistent with the GSOC Policies, Functions and Responsibilities, attached as Appendix D to the GSOC Tariff, as in effect from time to time. All OPC Pool resources and load of OPC Members other than Scheduling Members (as that term is defined in Section 1.5 of this Agreement) shall be operated in Single - 2 - System Dispatch. GSOC shall charge and OPC shall pay for administration of the OPC Pool in accordance with the formulas set forth in Exhibit 2. Notwithstanding any change or alteration that may occur in the purpose of, administration of, or participants in the OPC Pool, unless this Agreement shall have been terminated pursuant to Section 2.3 below, OPC shall be obligated to pay GSOC throughout the original term of this Agreement its share of services provided by GSOC, unless GSOC otherwise agrees. 1.4 Member Bilateral Transactions. Any OPC Member desiring to implement Bilateral Transactions shall enter into separate agreements with GSOC. For purposes of this Agreement, a "Bilateral Transaction" shall mean any transaction involving an OPC Member (i) selling its OPC system capacity or associated energy to any wholesale entity that is not Network Load of such OPC Member, or (ii) purchasing capacity or energy that is not OPC system capacity or associated energy, whether for delivery to Network Load or to a third party. Costs of services to implement Bilateral Transactions shall be recovered by GSOC directly from the OPC Member using such services. 1.5 Separate Scheduling by OPC Members. For each OPC Member that elects to withdraw its system capacity and associated energy from the OPC Pool as provided in Section 4.1 of the Wholesale Power Contract (a "Scheduling Member"), OPC shall promptly provide GSOC with information concerning such elections as they are in effect from time to time and GSOC shall thereafter accept and implement the separate schedules of such OPC Member. OPC shall pay for administration of the separate scheduling in accordance with the formulas set forth in Exhibit 2. 1.6 Economic Dispatch of the OPC System. OPC shall on the Effective Date commit all of its resources and the resources, if any, of OPC Members participating in the OPC Pool, to GSOC for unit commitment, scheduling and dispatching in Single System Dispatch on an economic basis, notwithstanding that one or more OPC Members are Scheduling Members. GSOC shall at all times maintain in effect written policies and procedures for system operations, energy settlements, reserve sharing and settlements, scheduling and dispatching of resources, implementation of sales of excess capacity and energy by OPC or the OPC Members, load following and related matters, all of which policies and procedures at all times shall treat on a comparable basis OPC Pool resources and OPC system capacity and associated energy an OPC Member elects to schedule separately. Such procedures shall be reviewed with OPC prior to their implementation and shall include provisions to the following effect: 1.6.1 Resale by Pool Participants. If an OPC Member is a participant in the OPC Pool, the OPC Member shall be entitled to resell for its own account all or any part of the capacity and associated energy purchased under the Wholesale Power Contract between OPC and each of the OPC Members to any person or entity in accordance with applicable operating policies and procedures in effect from time to time. - 3 - 1.6.2 Resale by Scheduling Members. If an OPC Member is a Scheduling Member, the OPC Member shall be entitled to resell for its own account all or any part of the capacity and associated energy purchased under the Wholesale Power Contract between OPC and each of the OPC Members to any person or entity and to schedule its capacity and energy in accordance with applicable operating policies and procedures in effect from time to time. 1.6.3 Resale by OPC. OPC shall be entitled to resell for its own account (with crediting under appropriate provisions of OPC's Rate Schedule A to the Wholesale Power Contract between OPC and each of the OPC Members) all or any part of its system capacity and associated energy and any purchased capacity or energy in accordance with applicable operating policies and procedures in effect from time to time. 1.6.4 Obligations to OPC and OPC Members. GSOC shall, upon the written request of OPC or any OPC Member, provide information, schedules, notice or the like to, or take direction from, OPC, its agent or both, or the OPC Member, its agent or both, to the extent that OPC or the OPC Member is otherwise permitted to direct such action from time to time pursuant to rights under the Wholesale Power Contract between OPC and each of the OPC Members or an agreement with GSOC. 1.7 OPC's Obligations and Delegation of Rights. 1.7.1 Obligations. OPC shall provide or cause to be provided to GSOC information concerning the availability, heat rates, fuel costs, operational status of all units, instant loads of all OPC Members participating in the OPC Pool and any other information requested by GSOC that is necessary to provide Operation Services, Dispatch Service and other Services pursuant to this Agreement, in such detail and upon such frequency as GSOC reasonably requests. 1.7.2 Delegation of Rights. OPC hereby provides to GSOC the authorization for GSOC to dispatch OPC's generation facilities, provided that OPC shall retain control over its facilities in order to ensure the safety and integrity of its facilities and to maintain operations within plant constraints. 1.8 GSOC's Obligations. GSOC shall maintain and provide to OPC, routinely and on demand, the data necessary for OPC to determine the utilization and performance of its facilities, report to regulatory agencies and prepare invoices for its products and services to its members and customers, as may be determined from time to time by the Parties. 1.9 Standards of Conduct and Service. GSOC shall adhere to the standards of conduct applicable to transmission providers under 18 C.F.R. Part 37 (as adopted by the Commission in its Order No. 889, 1991-1996 FERC Stats. & Regs. P. 31,036 (1996)) (the "Standards of Conduct"), and GSOC shall comply with any filing, reporting or auditing requirements of such Standards of Conduct by filing with, reporting to, or being audited by the applicable - 4 - Governmental Authority. GSOC's adherence to such Standards of Conduct shall not be construed as a voluntary submission to the Commission's jurisdiction. GSOC shall provide to OPC copies of all filings and reports made pursuant to this Section 1.9. GSOC shall make no adverse distinctions between the OPC Members participating in the OPC Pool, the Scheduling Members, and other Purchasers. GSOC shall provide Operation Services hereunder in accordance with Prudent Utility Practice, any instructions from OPC, and GSOC's duty to provide service efficiently and at a reasonable cost. 1.10 Third Parties. GSOC may obtain from another party certain of the Operation Services provided hereunder to OPC. OPC may purchase Operation Services provided hereunder for resale to others and is free not to purchase Operation Services hereunder if it has obtained such services elsewhere; provided, however, that the designation of GSOC as OPC's system operator in accordance with Section 1.3 shall be exclusive during the term of this Agreement. 1.11 Regulatory Filings. 1.11.1 Approval. This Agreement is subject to the approval of the Administrator of the RUS. GSOC shall be under no obligation to provide Service to OPC until this Agreement has received such approval and any other necessary approval by the appropriate Governmental Authority. GSOC shall file this Agreement as necessary to comply with the requirements of the appropriate Governmental Authority. 1.11.2 Other Filings. Nothing contained in this Agreement shall be construed as affecting in any way the right of GSOC unilaterally to make application to the Commission to accept an initial filing or for change in rates, terms and conditions, charges, classifications of service, this Agreement, rule or regulation under Section 205 of the Federal Power Act and pursuant to the Commission's rules and regulations promulgated thereunder. 1.11.3 Exercise of Rights. Nothing contained herein shall be construed as affecting in any way the right of OPC to exercise its rights under the Federal Power Act and pursuant to the Commission's rules and regulations promulgated thereunder. ARTICLE II TERM 2.1 Effective Date. This Agreement shall become effective upon the occurrence of the following two (2) events: (a) approval in writing by the Administrator of the RUS, and (b) acquisition by Georgia Transmission Corporation (An Electric Membership Corporation) of the transmission assets and business of OPC. The date this Agreement becomes effective shall be the "Effective Date." 2.2 Term. This Agreement shall begin on the Effective Date and, unless terminated as provided in Section 2.3 below, end on December 31, 2001, provided that one Party has given - 5 - the other Party not less than one (1) year's written notice of its intent to terminate this Agreement as of December 31, 2001. If not otherwise terminated, after December 31, 2001, this Agreement shall continue from year to year unless terminated by a Party giving the other Party not less than six (6) months' prior written notice of its intent to terminate. 2.3 Early Termination. This Agreement may be terminated at any time prior to the end of the initial term or any extension under any of the following provisions: 2.3.1 Mutual Consent. The Parties may terminate this Agreement at any time upon mutual written consent. 2.3.2 Failure to Comply with OPC Legal Requirements. OPC may terminate this Agreement if seventy-five percent (75%) of the Board of Directors of OPC determines that continued performance hereunder by GSOC can reasonably be expected to result in OPC being unable to comply with an OPC Legal Requirement. Prior to any such determination, OPC shall have notified GSOC in writing of its concerns and given GSOC thirty (30) days to correct its performance, or such shorter period as the Board of Directors of OPC determines is necessary to avoid a System Emergency. For purposes of this Agreement, an "OPC Legal Requirement" shall mean (i) all laws, codes, ordinances, orders, judgments, decrees, injunctions, licenses, rules, permits, approvals, agreements, regulations and requirements of every governmental authority having jurisdiction over the matter in question, whether federal, state or local, which may be applicable to OPC, (ii) obligations of OPC to an OPC Member, or (iii) obligations of OPC under the Wholesale Power Contract between OPC and each of the OPC Members. 2.3.3 Loss of Control of GSOC. OPC may terminate this Agreement at any time upon thirty (30) days' prior written notice, to be effective on or after a change in control of GSOC such that the OPC Members that have control of OPC at that time no longer have control of GSOC. For purposes of this Section 2.3.3, "control" shall mean the power to direct the management and policies of GSOC, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. ARTICLE III INDEMNIFICATION AND LIABILITY 3.1 Force Majeure. Neither GSOC nor OPC will be considered in default as to any obligation under the GSOC Tariff if prevented from fulfilling the obligation due to an event of Force Majeure. However, a Party whose performance under the GSOC Tariff is hindered by an event of Force Majeure shall make all reasonable efforts to perform its obligations under the GSOC Tariff. 3.2 Indemnification. OPC shall at all times indemnify, defend, and save GSOC harmless from, any and all damages, losses, claims, including claims and actions relating to injury to or - 6 - death of any person or damage to property, demands, suits, recoveries, costs and expenses, court costs, attorney fees, and all other obligations by or to third parties, arising out of or resulting from GSOC's performance of its obligations under the GSOC Tariff on behalf of OPC, except in cases of negligence or intentional wrongdoing by GSOC. 3.3 Consequential and Indirect Damages. Notwithstanding any other provision to the contrary contained in the GSOC Tariff or this Agreement, to the fullest extent permitted by law, neither Party shall have liability to the other Party for any indirect, consequential, multiple or punitive damages unless such damages are the result of the Party's bad faith, gross negligence, or willful misconduct. ARTICLE IV MISCELLANEOUS 4.1 Operating Representatives. Pursuant to the GSOC Tariff and by letter dated as of even date herewith, OPC and GSOC have each appointed operating representatives to act for the respective Parties in matters pertaining to service under this Agreement. Either Party may designate a successor operating representative in its discretion by providing the other Party with written notice thereof. 4.2 Notices. All notices, requests, statements or payments provided for, required or permitted by this Agreement shall be sufficient for any and all purposes under this Agreement when transmitted by facsimile, first class United States Mail, hand delivery, or a private express delivery service to the facsimile numbers or addresses provided below or as otherwise designated in writing by the applicable Party: If to GSOC: Georgia System Operations Corporation 2100 East Exchange Place P.O. Box 1349 Tucker, GA 30085-1349 Attention: Chief Operating Officer Telephone: 770-270-7955 FAX: 770-270-7908 - 7 - If to OPC: Oglethorpe Power Corporation 2100 East Exchange Place P.O. Box 1349 Tucker, GA 30085-1349 Attention: Preference Power Coordinator Telephone: 770-270-7765 FAX: 770-270-7590 4.3 Communications Regarding Emergencies. Any communications regarding operational emergencies or other operational problems may be made orally or in any other manner reasonable under the circumstances and should be directed to the persons specified below, or to such other person or address as may have been designated in a written notice given to the other persons by or on behalf of the person entitled to receive notice. In the event the person entitled to receive notice cannot be found, notice may be given to any other responsible person. If to GSOC: Georgia System Operations Corporation 2100 East Exchange Place P.O. Box 1349 Tucker, GA 30085-1349 Attention: Manager, Control Room Operations Telephone: 770-270-7740 FAX: 770-270-7320 If to OPC: Oglethorpe Power Corporation 2100 East Exchange Place P.O. Box 1349 Tucker, GA Attention: Preference Power Coordinator Telephone: 770-270-7765 FAX: 770-270-7590 4.4 Governing Law. The validity, interpretation and performance of the GSOC Tariff and this Agreement and each of their respective provisions shall be governed by the laws of the State of Georgia. - 8 - 4.5 Waivers and Exercise of Rights. 4.5.1 Waiver. GSOC may waive its rights under any provision of the GSOC Tariff or this Agreement when it determines that doing so is in the best interests of the members of GSOC. 4.5.2 Subsequent Default. Any waiver at any time by GSOC of its rights with respect to any matter arising in connection with the GSOC Tariff or this Agreement shall not be considered a waiver with respect to any subsequent default or matter. 4.5.3 Exercise of Rights. No failure or delay on the part of either Party in exercising any right, power or privilege under the GSOC Tariff or this Agreement and any related agreement, and no course of dealing between the Parties, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 4.6 Counterparts. This Agreement may be executed in as many counterparts as may be required, and it shall not be necessary that the signatures of or on behalf of each Party appear on each counterpart, but it shall be sufficient that the signature of or on behalf of each Party appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. Each executed counterpart shall have the same force and effect as an original instrument, and it shall not be necessary in any proof of this Agreement to produce or account for more than the number of counterparts containing the respective signatures of or on behalf of each of the Parties. 4.7 Compliance with Legal Requirements. Each Party shall cooperate in taking whatever action may be required to comply with all Legal Requirements of any Governmental Authority having jurisdiction over the GSOC Tariff in accordance with Prudent Utility Practice. 4.8 Severability. If any part of any provision of the GSOC Tariff, this Agreement, and any other agreement, document, or writing given pursuant to or in connection with such tariffs, agreements and schedules shall be invalid or unenforceable under applicable law, said part shall be ineffective to the extent of such invalidity only, without in any way affecting the remaining parts of said provision or the remaining provisions. 4.9 Third-Party Beneficiaries. 4.9.1 No Third-Party Beneficiaries. This Agreement is intended solely for the benefit of the Parties, and nothing in the GSOC Tariff or this Agreement will be construed to create any duty to, or standard of care with reference to, or any liability to, any person not a Party hereto. - 9 - 4.9.2 Enforcement. It is the intention of the Parties that no person or entity other than the Parties shall have any right to bring any action to enforce any provision of the GSOC Tariff, this Agreement, and related agreements against either of the Parties, and that the covenants, undertakings and agreements set forth in the aforementioned documents shall be solely for the benefit of, and shall be enforceable only by, the Parties or their respective successors or permitted assigns. 4.9.3 Responsibility of Parties. Each of the Parties will be responsible for its own conduct and neither will be responsible for the conduct of the other. The GSOC Tariff and this Agreement do not create a contractual relationship or duty of one Party with or to the customers of the other Party. 4.10 No Dedication of Facilities. GSOC's agreement to provide service under the provisions of the GSOC Tariff or this Agreement shall not constitute the dedication of GSOC's operating system, or any portion thereof, to OPC or the public. GSOC's service obligations to OPC under any provisions of the GSOC Tariff or this Agreement will cease upon termination of the GSOC Tariff or this Agreement. GSOC's provision of service under the GSOC Tariff or this Agreement does not constitute a sale, lease, rental, transfer, or conveyance of an ownership interest in or to any facilities of any kind. 4.11 Action by Affiliates. Failure by either Party to perform fully any obligation required by the GSOC Tariff, this Agreement, and any related agreements, shall not be excused by reason of the fact that such performance was prevented by any action or inaction of an Affiliate unless such Affiliate's actions or inactions are the result of a Force Majeure or are taken pursuant to the GSOC Tariff and are not unduly discriminatory. 4.12 Independent Contractors. The Parties to this Agreement are independent contractors, and nothing contained in the GSOC Tariff, the Service Schedules, or this Agreement will be deemed to create an association, joint venture, partnership, principal-agent or any other kind of fiduciary relationship between the Parties. 4.13 Rules of Construction. 4.13.1 Headings. The descriptive headings of the various articles, sections and subsections of the GSOC Tariff have been inserted for convenience of reference only and should not be construed as to define, expand, or restrict the rights and obligations of the Parties. 4.13.2 Including. Wherever the term "including" is used in the GSOC Tariff or the Service Schedules, such term shall not be construed as limiting the generality of any statement, clause, phrase or term. - 10 - 4.13.3 Singular and Plural. The terms defined in the GSOC Tariff and this Agreement shall be applicable to the plural as well as the singular and the singular as well as the plural. 4.13.4 Time of the Essence. Time is of the essence in the performance of the obligations set forth in the GSOC Tariff, the Service Schedules and this Agreement. 4.14 Survival. The applicable provisions of the GSOC Tariff and this Agreement will continue in effect after termination or cancellation of the GSOC Tariff or this Agreement to the extent necessary to provide for final billing, billing adjustments and payments, and with respect to liability and indemnification from acts or events that occurred while the GSOC Tariff and Agreement were in effect. 4.15 Amendments. No amendment to this Agreement shall be effective unless it is in writing, executed by both Parties, and has been approved or accepted for filing and permitted to go into effect by any Governmental Authority having jurisdiction. Changes to the GSOC Tariff shall be effective as to OPC when approved by GSOC and not prohibited by the express provisions of this Agreement. 4.16 Relationship of GSOC to OPC. OPC shall furnish to GSOC promptly upon request any and all information about itself, its financial condition, business and properties that may be necessary or desirable to facilitate any financing undertaken by GSOC or any continuing disclosure obligation incurred by GSOC in connection with any such financing. OPC shall be responsible only to GSOC for the accuracy and completeness of the information furnished and shall have no responsibility or liability for the manner in which such information is used or its appropriateness for such use. OPC shall have no liability to any third party to which GSOC may furnish this information or any excerpt therefrom or summary thereof, and shall be entitled to receive appropriate assurances and indemnities from GSOC to that effect as a condition to providing such information, provided that no such assurance or indemnity shall relieve OPC of liability to GSOC for the accuracy and completeness of the information supplied. 4.17 OPC's Information Obligations. OPC is obligated to provide GSOC or its agent information concerning all transmissions of energy into, out of or across the Transmission System by or on behalf of OPC in a manner consistent with all NERC and SERC guidelines, and in such detail and upon such frequency as GSOC or its agent reasonably requests in connection with those services furnished by GSOC to OPC pursuant to the GSOC Tariff. 4.18 Entire Agreement. This Agreement constitutes the entire agreement between the Parties hereto relating to the subject matter contemplated by this Agreement and supersedes all prior agreements, whether oral or written. The GSOC Tariff is incorporated herein by reference. All exhibits attached hereto are incorporated herein by reference. [The next page is the signature page.] - 11 - IN WITNESS WHEREOF, the Parties hereto have caused this Operation Services Agreement to be executed, attested, sealed and delivered by their respective duly authorized officers as of the day and year first set forth above. GSOC: GEORGIA SYSTEM OPERATIONS CORPORATION [CORPORATE SEAL] By: /s/ James E. Estes --------------------------------------- James E. Estes Chairman of the Board ATTEST: By: /s/ Patricia N. Nash -------------------------------- Patricia N. Nash Assistant Secretary OPC: OGLETHORPE POWER CORPORATION (An Electric Membership Generation & Transmission Corporation) [CORPORATE SEAL] By: /s/ J. Calvin Earwood --------------------------------------- J. Calvin Earwood Chairman of the Board ATTEST: By: /s/ Gary M. Bullock -------------------------------- Gary M. Bullock Secretary-Treasurer - 12 - EXHIBIT 1 OPERATION SERVICES TO BE PROVIDED UNDER OPERATION SERVICES AGREEMENT 1. GSOC will provide the following Operation Services to OPC pursuant to the Operation Services Agreement and the GSOC Tariff: Short-Term Load Forecasting Unit Commitment & Scheduling Import/Export Scheduling Operating Reserve Management Real-Time Load Data Real-Time Unit Data Unit Availability & Incident Reporting Energy Contracts Management Energy Transaction Booking & Accounting Load Metering Hourly Market Price Determination Daily Load & Resource Reporting Short-Term System Planning Studies Fuel-Requirements Studies Rocky Mountain Water Accounting SoCo/GPC Coordination Reliability Standards Compliance Operating Standards Compliance Power Marketer Procedure Development Load Management Operations & Compliance Real-Time Pricing Support AGC Support Economic Dispatch 2. For each Operation Service listed in (1) above, specify the duration of the Service or the transaction to which the Service applies: All services listed in (1) are to be provided on an ongoing basis to accommodate OPC operations. 3. Other material terms: None. [Signatures appear on following page] - 1-1 - GSOC: GEORGIA SYSTEM OPERATIONS CORPORATION By: /s/ James E. Estes ----------------------------------------- James E. Estes Chairman of the Board OPC: OGLETHORPE POWER CORPORATION (An Electric Membership Generation & Transmission Corporation) By: /s/ J. Calvin Earwood ----------------------------------------- J. Calvin Earwood Chairman of the Board - 1-2 - EXHIBIT 2 RATE FORMULAS Under the terms of the Operation Services Agreement GSOC agrees, on behalf of OPC, to implement, monitor, administer and account for dispatch service of all OPC resources owned or contracted, used to serve the load of OPC Members or serve off-system sales. Dispatch service includes all of the operational services listed in the GSOC Tariff. GSOC shall charge OPC the following rate for this service: 1.0 Dispatch Service Monthly Charge DSCH = DSC/12 * (sum)KWHM/(sum)KWHT DSCH is the Dispatch Service Monthly Charge. DSC is the Dispatch Service Cost as defined in Section 1.1 below. KWHM is the kilowatt-hours delivered annually, including purchases, to the load of members. KWHT is the kilowatt-hours delivered annually, including purchases, to serve the load of all participants in the area for which GSOC provides scheduling services. 1.1 Dispatch Service Cost DSC = [(SCDAC + SCAGO) * GPCNT] - SCREV DSC is the annual Dispatch Service Cost which includes both direct and allocated costs. SCDAC is the System Control annual Direct Administrative Costs reflecting direct costs associated with control center operation. SCAGO is the System Control allocated annual Administrative and General expenses and Other general expenses. GPCNT is the percent of system control costs related to generation services. SCREV is the System Control Revenue credits assigned to the generation category. - 2-1 - EX-27.1 40 EXHIBIT 27.1
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OGLETHORPE POWER CORPORATION'S BALANCE SHEET AS OF DECEMBER 31, 1996 AND RELATED STATEMENTS OF REVENUES AND EXPENSES AND CASH FLOWS FOR THE PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 PER-BOOK 4,376,381 197,288 442,021 346,485 0 5,362,175 0 0 356,229 0 0 0 4,052,470 0 0 0 155,535 0 293,682 4,087 500,172 5,362,175 1,101,437 0 818,688 818,688 282,749 65,334 348,083 326,331 21,752 0 0 0 53,769 143,290 0 0 $356,229 represents total retained patronage capital. The registrant is a membership corporation and has no authorized or outstanding equity securities.
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