EXHIBIT 10.8
EXECUTION COPY
BERKSHIRE GUARANTY AGREEMENT
(P1)
BERKSHIRE GUARANTY AGREEMENT (P1)
dated as of May 22, 2009 by and between OGLETHORPE POWER
CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION) (“
Oglethorpe ”), an electric membership generating and
transmission corporation organized under the laws of the State of
Georgia, and BERKSHIRE HATHAWAY ASSURANCE CORPORATION (“
Berkshire ”), a New York insurance company.
W I T N E S S E T H:
WHEREAS, pursuant to a Participation
Agreement (P1), dated as of December 30, 1996 (the “
Participation Agreement ”), by and among Oglethorpe,
Rocky Mountain Leasing Corporation (“ RMLC ”),
U.S. Bank National Association, successor to SunTrust Bank, Atlanta
(the “ Facility Lessor ”), U.S. Bank National
Association, successor to Fleet National Bank (the “ Owner
Trustee ”), Philip Morris Capital Corporation (the
“ Owner Participant ”) and Utrecht-America
Finance Co. (the “ Lender ”),
(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 undivided interest in the Rocky
Mountain Site to RMLC pursuant to the Ground Sublease,
(vi) RMLC has leased such undivided 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
its rights and obligations under the Rocky Mountain Agreements to
RMLC, and RMLC has assumed such obligation, pursuant to the Rocky
Mountain Agreements Re-assignment, and (ix) RMLC has assigned
its 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;
and
WHEREAS, Berkshire has agreed to
issue its Surety Bond (Facility Sublease-P1) No. 98SRD102495
(the “ Facility Sublease Surety Bond ”),
guaranteeing certain payments required to be made by Oglethorpe
pursuant to the Facility Sublease and certain obligations of AMBAC
under the “AMBAC Surety Bond” (as defined in the
Facility Sublease Surety Bond), subject to the terms and conditions
of the Facility Sublease Surety Bond; and
WHEREAS, Berkshire has agreed to
issue its Surety Bond (Head Lease-P1) No. 98SRD102494 (the
“ Head Lease Surety Bond ” and, together with
the Facility Sublease Surety Bond, the “ Surety Bonds
”), guaranteeing certain payments required to be made by
Oglethorpe
pursuant to the Head Lease and the Participation
Agreement and certain obligations of AMBAC under the “AMBAC
Surety Bond” (as defined in the Head Lease Surety Bond),
subject to the terms and conditions of the Head Lease Surety Bond;
and
WHEREAS, to induce Berkshire to
issue the Surety Bonds, Oglethorpe has agreed to (i) pay the
Premium for such Surety Bonds and to pay certain of
Berkshire’s expenses related to the Overall Transaction,
(ii) reimburse Berkshire for all payments made by Berkshire
pursuant to the Surety Bonds and/or the Berkshire Agreement for
Assignment on Default (P1) dated as of the date hereof (the “
Agreement for Assignment on Default ”) among the Owner
Participant, the Facility Lessor, the Owner Trustee and Berkshire,
and (iii) secure its obligation to reimburse Berkshire
pursuant to this Agreement in the manner hereinafter set forth;
and
WHEREAS, Oglethorpe understands that
Berkshire expressly requires the delivery of this Agreement as part
of the consideration for the issuance by Berkshire of the Surety
Bonds.
NOW, THEREFORE, in consideration of
the premises and of the agreements herein contained and of the
execution of the Surety Bonds, Oglethorpe and Berkshire agree as
follows:
ARTICLE
I
DEFINITIONS;
SURETY BONDS; PREMIUM; CERTAIN COSTS
Section 1.01.
Definitions . Except as otherwise expressly provided
herein or unless the context otherwise requires, the terms which
are capitalized herein shall have the meanings specified in Annex A
hereto.
Section 1.02.
Surety Bonds . The maximum liability of Berkshire
under the Facility Sublease Surety Bond and the Head Lease Surety
Bond, respectively, and the respective coverages and terms thereof
shall be subject to and limited by the terms and conditions of the
Facility Sublease Surety Bond and the Head Lease Surety Bond,
respectively.
Section 1.03.
Premium .
(a)
In consideration
of Berkshire’s agreeing to issue the Surety Bonds pursuant to
the Agreement Regarding Surety Bonds, Oglethorpe hereby agrees to
pay, or cause to be paid, to Berkshire, a premium (the “
Premium ”) equal to the sum of 1.25% of the average of
the amounts shown on Schedule A hereto as the “Surety Bond
Coverage” for January and July for each calendar
year during the scheduled term of the Surety Bonds (i.e., from the
date on which the Surety Bonds are issued through January 11,
2027 (the “ Scheduled Termination Date ”)), with
the amount calculated for each calendar year being payable in
advance on October 31 of the preceding calendar year or, in
the case of calendar years 2009 and 2010, on the Closing Date, as
the case may be, and prorated for the first and last years of the
scheduled term of the Surety Bonds, in each case as
follows:
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(i)
on the Closing Date, Oglethorpe will
pay to Berkshire an amount equal to $2,089,615.06, which represents
the portion of the Premium calculated for 2009 and 2010, with the
amount calculated for 2009 being prorated based on the weighted
average of the amounts shown on Schedule A as the “Surety
Bond Coverage” for May and July for the number of
days remaining in such year;
(ii)
for each calendar year subsequent to
2010 through 2026, Oglethorpe shall pay the portion of the Premium
calculated for such calendar year in advance on October 31 of
the preceding calendar year (or, if such day is not a Business Day,
on the next succeeding Business Day); and
(iii)
for the calendar year 2027,
Oglethorpe shall pay the portion of the Premium calculated for such
calendar year in advance on October 31 of the preceding
calendar year (or, if such day is not a Business Day, on the next
succeeding Business Day), in an amount equal to $6,942.99, which
represents the portion of the Premium calculated for such calendar
year, with the amount payable for such calendar year being prorated
based on the amount shown on Schedule A as the “Surety Bond
Coverage” for January for the number of days from
January 1 of such year to the Scheduled Termination
Date.
(b)
Anything
contained herein to the contrary notwithstanding, the termination
of either or both of the Surety Bonds prior to the Scheduled
Termination Date shall not relieve Oglethorpe of its responsibility
for payment of the full amount of the Premium for the full
scheduled term of the Surety Bonds through the Scheduled
Termination Date as provided above, provided
that:
(i)
if (A) either (1) the
Overall Transaction is terminated, (2) the claims paying
ability and senior debt obligations of AMBAC Assurance Corporation
(formerly known as AMBAC Indemnity Corporation) (“
AMBAC ”), as applicable, are rated at least AA by
S&P and Aa2 by Moody’s (and not on credit watch by either
rating agency) or (3) the Facility Lease is terminated
pursuant to Section 14.1 or Section 17.1(b) thereof
and the Facility Sublease is terminated pursuant to
Section 14.1 or Section 17.1(b) thereof,
(B) the Surety Bonds are released and terminated,
(C) Oglethorpe has paid to Berkshire, within 10 Business Days
after the occurrence of (A) and (B) above, all amounts in
respect of the Premium due or to become due hereunder for the
period commencing on the Closing Date and ending December 31,
2012, (D) if the Surety Bonds are being terminated after
December 31, 2012, Oglethorpe has paid to Berkshire, within 10
Business Days after the occurrence of (A) and (B) above,
all amounts in respect of the Premium due hereunder for the period
commencing on January 1, 2013 and ending on December 31st
of the year in which the termination occurs, (E) Oglethorpe is
not otherwise in default in the payment of any amounts due
hereunder (including, without limitation, if the Surety Bonds are
being terminated between October 31st and December 31st
of any year, amounts due on October 31st of such year in
respect of the Premium for the succeeding calendar year) and
(F) Oglethorpe pays to Berkshire, without duplication of the
amounts payable in the parenthetical in clause (E) above,
within 10 Business Days after the occurrence of (A) and
(B) above, an amount equal to the portion of the Premium
calculated for the calendar year succeeding the year in which the
termination occurs (or,
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if terminated on or prior to
December 31, 2012, the calendar year ending December 31,
2013), together with interest, if any, at the Default Rate on any
payments under this clause (i) from the date the Surety Bonds
are terminated until the date paid, Oglethorpe shall not be
required to pay any further amounts in respect of the
Premium;
(ii)
if (A) Oglethorpe delivers
replacement Qualifying Surety Bonds or Qualifying Letters of Credit
or other credit enhancement acceptable to the Owner Participant in
accordance with the terms and conditions of Sections 8.5 and 8.6 of
the Participation Agreement (other than as a result of a reduction
of Berkshire’s financial strength rating to less than AA by
S&P and less than Aa2 by Moody’s), (B) the Surety
Bonds are released and terminated, (C) Oglethorpe has paid to
Berkshire all amounts in respect of the Premium due or to become
due hereunder for the period commencing on the Closing Date and
ending December 31, 2012, (D) if the Surety Bonds are
being terminated after December 31, 2012, Oglethorpe has paid
to Berkshire, within 10 Business Days after the occurrence of
(A) and (B) above, all amounts in respect of the Premium
due hereunder for the period commencing on January 1, 2013 and
ending on December 31st of the year in which the termination
occurs, (E) Oglethorpe is not otherwise in default in the
payment of any amounts due hereunder (including, without
limitation, if the Surety Bonds are being terminated between
October 31st and December 31st of any year, amounts due
on October 31st of such year in respect of the Premium for the
succeeding calendar year) and (F) Oglethorpe pays to
Berkshire, without duplication of the amounts payable in the
parenthetical in clause (E) above, within 10 Business Days
after the occurrence of (A) and (B) above, an amount
equal to the portion of the Premium calculated for the two years
succeeding the year in which the termination occurs (or, if
terminated on or prior to December 31, 2012, the calendar
years ending December 31, 2013 and December 31, 2014),
together with interest, if any, at the Default Rate on any payments
under this clause (ii) from the date the Surety Bonds are
terminated until the date paid, Oglethorpe shall not be required to
pay any further amounts in respect of the Premium; and
(iii)
if (A) the financial strength
rating of Berkshire is less than AA by S&P and less than Aa2 by
Moody’s, (B) the Surety Bonds are released and
terminated, (C) Oglethorpe has paid all amounts in respect of
the Premium due hereunder prior to the date of such termination
(including, without limitation, the portion of the Premium
calculated for the calendar year in which the termination occurs)
and is not otherwise in default in the payment of any amounts due
hereunder (other than, if the Surety Bond is terminated between
October 31st and December 31st of any year, the amount in
respect of the Premium for the following year need not have been
paid), Oglethorpe shall not be required to pay any further amounts
in respect of the Premium.
(c)
Once paid,
neither any payment in respect of the Premium nor any part thereof
or payment in respect of any portion thereof shall be subject to
rebate, reduction or refund for any reason or under any
circumstances whatsoever.
(d)
Each payment in
respect of the Premium shall be paid by Oglethorpe by wire transfer
to the account of Berkshire designated in Section 5.07 as the
“Account for Payments” or such other account or in such
other manner as may be designated by Berkshire from time to
time.
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If Berkshire has not
received payment of any amount in respect of the Premium as and
when due and payable hereunder, Berkshire shall be authorized,
without notice to or authorization from Oglethorpe, and without any
liability to Oglethorpe, to deliver a Notice of Termination to the
Beneficiaries under the Surety Bonds.
Section 1.04.
Certain Other Expenses . Oglethorpe agrees to pay on
the Closing Date, the fees and disbursements of Berkshire’s
counsel related to issuance of the Surety Bonds and the
preparation, negotiation and execution of the Surety Bond Documents
and all other documents and agreements relating thereto, in each
case to the extent invoiced to Oglethorpe prior to the Closing
Date.
ARTICLE
II
REIMBURSEMENT
OBLIGATIONS; SECURITY; EXPENSES;
INDEMNITY;
NOTICES; OTHER COVENANTS
Section 2.01.
Reimbursement for Payments Under the Surety Bonds, Expenses and
Indemnification .
(a)
Oglethorpe will
reimburse Berkshire immediately, without demand or notice by
Berkshire to Oglethorpe or any other Person, to the extent of each
Surety Bond Payment. If and to the extent that Oglethorpe
fails to reimburse Berkshire immediately in respect of each such
Surety Bond Payment, Oglethorpe shall pay on the first Business Day
of each month, on the date of any demand therefor from time to time
and on the date such reimbursement payment is made hereunder,
interest on each such Surety Bond Payment from and including the
Surety Bond Payment Date to the date of the reimbursement by
Oglethorpe at the Default Rate. To the extent that interest
payments due hereunder are not paid on the first Business Day of
each month, or are not paid as each principal repayment is made,
interest shall accrue on such unpaid amounts at a rate equal to the
Default Rate.
(b)
Oglethorpe also
agrees to reimburse Berkshire immediately and unconditionally upon
demand (in the case of enforcement expenses) and within 30 days
after demand (in the case of other expenses) for all costs, fees
and expenses (including reasonable fees and disbursements of
Berkshire’s counsel) incurred by Berkshire in connection with
the Surety Bonds and the other Surety Bond Documents (including any
amendment thereof) and/or the enforcement by Berkshire of this
Agreement and/or any of the other Surety Bond Documents, in each
case together with interest on all such expenses from and including
the date of demand (in the case of enforcement expenses) or the
date which is 30 days from the date a statement for such expenses
is received by Oglethorpe (in the case of other expenses) to the
date of payment at the Default Rate; provided ,
however , that Oglethorpe shall not be obligated to pay any
expenses of Berkshire in terminating the Surety Bonds if at the
time Berkshire’s financial strength rating is less than AA by
S&P and less than Aa2 by Moody’s.
Section 2.02.
Security for Payments; Instruments of Further Assurance
.
(a)
In order to
secure its payment obligations to Berkshire hereunder, Oglethorpe
has amended the Subordinated Mortgage. Oglethorpe hereby
represents to Berkshire
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that the Subordinated
Mortgage grants to Berkshire a perfected security interest in the
Subordinated Collateral.
(b)
Oglethorpe agrees
that it will, from time to time, execute, acknowledge and deliver,
or cause to be executed, acknowledged and delivered, any and all
deeds of trust, mortgages and/or financing statements, if
applicable, and all other further instruments as may be required by
law, or as shall reasonably be requested by Berkshire, for the
perfection of the security interest in the Subordinated Collateral
granted to Berkshire pursuant to the Subordinated Mortgage and for
the preservation and protection of all rights of Berkshire
thereunder.
Section 2.03.
Indemnification Rights . In addition to any and all
rights of reimbursement, indemnification, subrogation and any other
rights pursuant to this Agreement or any of the other Surety Bond
Documents or at law or in equity, Oglethorpe agrees to pay and
assume liability for, and to protect, defend, indemnify and save
harmless Berkshire and its Affiliates, and their respective
officers, directors, shareholders, employees, agents, attorneys and
advisors, and each Person, if any, who controls Berkshire or any
Affiliate of Berkshire within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act, from
any against any and all claims, losses, liabilities, obligations,
penalties, damages, suits, actions and other proceedings, costs and
expenses (including, without limitation, fees and expenses of
attorneys, consultants and auditors and costs of investigations) of
any nature in any way arising out of or relating to the Overall
Transaction, the Operative Documents, the AMBAC Guaranty and/or the
Surety Bond Documents, or any of the transactions contemplated
thereby or the enforcement thereof (including, without limitation,
any claim (a) that any payment made or collateral delivered to
Oglethorpe is subject to the claims of any other Person or subject
to avoidance, disgorgement, repayment, redelivery or reimbursement
or (b) arising out of any failure by Oglethorpe to perform or
observe any covenant, condition or agreement in, or the falsity of
any representation or warranty of Oglethorpe made in or pursuant
to, this Agreement or any of the other Surety Bond Documents);
provided , however , that, without limitation of the
foregoing provisions of this Section 2.03, if Berkshire
acquires the interests of the Owner Participant or any other Person
under or in respect of any of the Operative Documents, Berkshire
shall thereupon b
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