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EXHIBIT 4.3
FACILITY LEASE AGREEMENT
(--)
Dated as of December ___, 2001
between
▇▇▇▇▇ CITY OL[1] LLC,
as Owner Lessor
and
EME HOMER CITY GENERATION L.P.
as Facility Lessee
▇▇▇▇▇ CITY GENERATING STATION
1,884 Megawatt (net), Coal-Fired Electric Generation Power Facility
Located northeast of
Pittsburgh, Pennsylvania
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CERTAIN OF THE RIGHT, TITLE AND INTEREST OF THE OWNER LESSOR IN AND TO THIS
LEASE AND THE RENT DUE AND TO BECOME DUE HEREUNDER HAVE BEEN ASSIGNED AS
COLLATERAL SECURITY TO, AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF
LENDER, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS LEASE INDENTURE TRUSTEE
UNDER AN INDENTURE OF TRUST, MORTGAGE AND SECURITY AGREEMENT, DATED AS OF
DECEMBER __, 2001 BETWEEN SAID LEASE INDENTURE TRUSTEE, AS SECURED PARTY, FOR
THE BENEFIT OF THE HOLDERS THEREUNDER, AND THE OWNER LESSOR, AS DEBTOR. SEE
SECTION 21 HEREOF 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 LEASE TERM.................................................................2
Section 3.2 RENT.............................................................................2
Section 3.3 SUPPLEMENTAL LEASE RENT..........................................................4
Section 3.4 ADJUSTMENT OF BASIC LEASE RENT AND TERMINATION VALUE.............................4
Section 3.5 Manner of Payments...............................................................6
Section 4 DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT..................................................7
Section 4.1 Disclaimer of Warranties.........................................................7
Section 4.2 QUIET ENJOYMENT..................................................................9
Section 5 RETURN OF UNDIVIDED INTEREST........................................................................9
Section 5.1 RETURN...........................................................................9
Section 5.2 CONDITION UPON RETURN............................................................9
Section 5.3 EXPENSES........................................................................13
Section 6 LIENS..............................................................................................13
Section 7 MAINTENANCE; REPLACEMENTS OF COMPONENTS............................................................13
Section 7.1 MAINTENANCE.....................................................................13
Section 7.2 REPLACEMENT OF COMPONENTS.......................................................14
Section 7.3 ENVIRONMENTAL MATTERS...........................................................15
Section 8 IMPROVEMENTS.......................................................................................16
Section 8.1 REQUIRED IMPROVEMENTS...........................................................16
Section 8.2 OPTIONAL IMPROVEMENTS...........................................................17
Section 8.3 TITLE TO IMPROVEMENTS...........................................................17
Section 8.4 FINANCING OF IMPROVEMENTS.......................................................18
Section 9 NET LEASE..........................................................................................18
Section 10 EVENTS OF LOSS.....................................................................................20
Section 10.1 OCCURRENCE OF EVENTS OF LOSS....................................................20
Section 10.2 Payment Upon Termination; Special Lessee Transfer...............................20
Section 10.3 APPLICATION OF PROCEEDS.........................................................23
Section 10.4 Rebuilding or Replacement.......................................................24
Section 10.5 Application of Payments Not Relating to an Event of Loss........................25
Section 10.6 Partial Casualties..............................................................25
Section 11 INSURANCE..........................................................................................26
Section 11.1 General.........................................................................26
Section 11.2 Application of Insurance Proceeds...............................................26
Section 12 INSPECTION.........................................................................................27
Section 13 TERMINATION OPTION FOR BURDENSOME EVENTS...........................................................27
Section 13.1 ELECTION TO TERMINATE...........................................................28
Section 13.2 SOLICITATION OF QUALIFYING BIDS; PAYMENTS UPON TERMINATION......................29
Section 13.3 PROCEDURE FOR EXERCISE OF TERMINATION OPTION....................................30
Section 13.4 Assumption of the Lessor Notes; Special Lessee Transfers .......................31
Section 14 TERMINATION FOR OBSOLESCENCE; PARTIAL RELEASE OF INTEREST..........................................32
Section 14.1 TERMINATION.....................................................................32
Section 14.2 SOLICITATION OF OFFERS..........................................................32
Section 14.3 RIGHT OF OWNER LESSOR TO RETAIN THE UNDIVIDED INTEREST..........................33
Section 14.4 PROCEDURE FOR EXERCISE OF TERMINATION OPTION....................................33
Section 15 LEASE RENEWAL......................................................................................34
Section 15.1 RENEWAL LEASE TERMS.............................................................34
Section 15.2 FAIR MARKET VALUE RENEWAL LEASE TERMS...........................................36
Section 15.3 RENEWAL RENT AND TERMINATION VALUE FOR RENEWAL LEASE TERM.......................36
Section 15.4 DETERMINATION OF FAIR MARKET RENTAL VALUE.......................................37
Section 15.5 TERMINATION VALUE DURING RENEWAL LEASE TERMS....................................37
Section 16 EVENTS OF DEFAULT..................................................................................37
Section 17 REMEDIES...........................................................................................41
Section 17.1 REMEDIES FOR LEASE EVENT OF DEFAULT.............................................41
Section 17.2 CUMULATIVE REMEDIES.............................................................44
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Section 17.3 NO DELAY OR OMISSION TO BE CONSTRUED AS WAIVER..................................44
Section 18 SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS.................................................44
Section 19 RIGHT TO SUBLEASE..................................................................................45
Section 19.1 SUBLEASE........................................................................45
Section 20 OWNER LESSOR'S RIGHT TO PERFORM....................................................................46
Section 21 SECURITY FOR OWNER LESSOR'S OBLIGATION TO THE LEASE INDENTURE TRUSTEE..............................47
Section 22 MISCELLANEOUS......................................................................................47
Section 22.1 AMENDMENTS AND WAIVERS..........................................................47
Section 22.2 NOTICES.........................................................................47
Section 22.3 SURVIVAL........................................................................48
Section 22.4 SUCCESSORS AND ASSIGNS..........................................................48
Section 22.5 TRUE LEASE; SEPARATE LEGAL OBLIGATIONS..........................................50
Section 22.6 GOVERNING LAW...................................................................51
Section 22.7 SEVERABILITY....................................................................51
Section 22.8 COUNTERPARTS....................................................................51
Section 22.9 HEADINGS AND TABLE OF CONTENTS..................................................51
Section 22.10 FURTHER ASSURANCES..............................................................51
Section 22.11 EFFECTIVENESS...................................................................51
Section 22.12 LIMITATION OF LIABILITY.........................................................52
Section 22.13 MEASURING LIFE..................................................................52
EXHIBITS AND SCHEDULES
Exhibit A Description of Facility Site
Exhibit B Description of Facility
Schedule 1-1 Basic Lease Rent
Schedule 1-2 Allocated Rent
Schedule 1-3 467 Rent Allocation
Schedule 2 Termination Values
Schedule 3 Stipulated Loss Values
Schedule 5.2(d) Return Items
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FACILITY LEASE AGREEMENT
This
FACILITY LEASE AGREEMENT, dated as of September __, 2001
(as amended, supplemented or otherwise modified from time to time and in
accordance with the provisions hereof, this "FACILITY LEASE"), between GE LLC, a
Delaware limited liability company (together with its successors and permitted
assigns, the "OWNER LESSOR") created for the benefit of [GE Capital Owner
Participant][Full Service Leasing Corporation Owner Participant], a Delaware
corporation (together with its successors and permitted assigns, the "OWNER
PARTICIPANT"), and EME Homer City Generation L.P., a Pennsylvania limited
partnership (together with its successors assigns, the "FACILITY LESSEE" or
"▇▇▇▇▇ CITY").
WITNESSETH:
WHEREAS, the Facility Lessee owns the Facility Site which is
more particularly described in Exhibit A hereto, such Exhibit A being attached
to this Facility Lease as a part hereof;
WHEREAS, pursuant to the Facility Site Lease, ▇▇▇▇▇ City has
leased the Ground Interest and granted certain non-exclusive easements to the
Owner Lessor for the Facility Lease Term;
WHEREAS, pursuant to the Facility Site Sublease, the Owner
Lessor has leased the Ground Interest to ▇▇▇▇▇ City for the term equal to the
term of this Facility Lease, including any renewals hereof;
WHEREAS, the Facility is located on the Facility Site and is
more particularly described in Exhibit B hereto, such Exhibit B being attached
to this Facility Lease as a part hereof;
WHEREAS, pursuant to the Facility Deed and the ▇▇▇▇ of Sale,
the Owner Lessor has acquired from the Facility Lessee an undivided ownership
interest in the Facility, with the right to nonexclusive possession of the
Facility including an entitlement share in the electrical capacity and output of
the Facility equal to the Owner Lessor's Percentage (such undivided ownership
interest and entitlement share together, the "UNDIVIDED INTEREST");
WHEREAS, the Facility does not include the Facility Site or
any part thereof, and the Facility Site is being leased to the Owner Lessor
pursuant to the Facility Site Lease and is being subleased to the Facility
Lessee pursuant to the Facility Site Sublease; and
WHEREAS, pursuant to this Facility Lease, the Owner Lessor
will lease the Undivided Interest to the Facility Lessee for the Basic Lease
Term and the Renewal Lease Terms, if any, 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 those
in the recitals, and not otherwise defined herein shall have the respective
meanings set forth in Appendix A to that certain Participation Agreement (P1),
dated as of December ___, 2001 (the "PARTICIPATION AGREEMENT"), among the
Facility Lessee, the Owner Lessor, the Owner Manager, the Owner Participant, The
Bank of
New York, as successor to United States Trust Company of
New York, as
Existing Trustee, Lender, Bondholder Trustee, Security Agent and Lease Indenture
Trustee unless the context hereof shall otherwise require. The general
provisions of Appendix A to the Participation Agreement shall apply to the terms
used in this Facility Lease and not specifically defined herein.
SECTION 2 LEASE OF THE UNDIVIDED INTEREST
Upon the terms and conditions set forth herein, the Owner
Lessor hereby leases the Undivided Interest to the Facility Lessee, and the
Facility Lessee hereby leases the Undivided Interest from the Owner Lessor, for
the Basic Lease Term and, subject to the Facility Lessee's exercise of any of
its options to renew this Facility Lease as provided in SECTION 15, one or more
Renewal Lease Terms. The Facility Lessee and the Owner Lessor understand and
agree that this Facility Lease is subject to those encumbrances set forth in the
Title Policies. 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 LEASE TERM. The basic lease term of this
Facility Lease (the "BASIC LEASE TERM") shall commence on the Closing Date
(the "BASIC LEASE COMMENCEMENT DATE") and shall continue for a period of 33
years and nine months, to and including _______ ___, 2034, subject to earlier
termination pursuant to SECTION 10, 13, 14 OR 17 hereof. The Facility Lessee
shall have the right to renew this Facility Lease in accordance with SECTION
15 hereof. The Basic Lease Term and the Renewal Lease Terms are referred to
as the "FACILITY LEASE TERM".
SECTION 3.2 RENT
(a) . The Facility Lessee hereby agrees to pay to the Owner
Lessor lease rent payable with respect to the Basic Lease Term ("BASIC LEASE
RENT"). The Basic Lease Rent shall be paid by the Facility Lessee to the Owner
Lessor in installments in the amounts and on the dates (each a "RENT PAYMENT
DATE") shown on SCHEDULE 1-1 hereto. All Basic Lease Rent to be paid pursuant to
this SECTION 3.2 shall be payable in the manner set forth in SECTION 3.5 and
shall be adjusted from time to time in accordance with SECTION 3.4 hereof.
Renewal Rent, with respect to any exercised Renewal Lease
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Term, shall be paid in accordance with the provisions of SECTION 15.3 hereof.
The term "BASIC LEASE RENT" is intended to constitute "fixed rent" (as such
term is defined in Treasury Regulation Section 1.467-1(h)(3)).
(b) Unless and until such time as adjustments are made
pursuant to Section 3.4, the Basic Lease Rent allocated to each period for the
use by the Facility Lessee of the Undivided Interest shall be the amount set
forth on SCHEDULE 1-2 hereto (the "ALLOCATED RENT"). Notwithstanding that Basic
Lease Rent is payable in accordance with SECTION 3.2(a), the Allocated Rent
allocated pursuant to this SECTION 3.2(b) shall represent and be the amount of
Basic Lease Rent for which the Facility Lessee becomes liable on account of the
use of the Undivided Interest for each calendar year in whole or in part of the
Basic Lease Term.
(c) It is the intention of the parties hereto that the
allocation of Basic Lease Rent to each Rent Payment Period as provided in
SECTION 3.2(b) constitutes a specific allocation of fixed rent within the
meaning of Treasury Regulation Section 1.467-1(c)(2)(ii)(a) with the effect that
pursuant to Treasury Regulation Section 1.467-1(d) and 1.467-2 the Owner Lessor
and the Facility Lessee, on any federal income tax returns filed by them (or on
any return on which their income is included), shall accrue the amounts of
rental income and rental expense, respectively, set forth for each Rent Payment
Period on SCHEDULE 1-3 hereto under the caption "Proportional Rent" (the
"PROPORTIONAL RENT"). Because there shall be from time to time a difference
between (i) the cumulative amount of Basic Lease Rent paid by the Facility
Lessee (as set forth in SECTION 3.2(a) and (ii) the cumulative amount of Basic
Lease Rent allocated pursuant to SECTION 3.2(b), there shall be considered to
exist a loan for purposes of Section 467 of the Code, the amount of which is
equal to the difference between the cumulative amount of Basic Lease Rent paid
by the Facility Lessee and the cumulative amount of the Proportional Rent
accrued by the Facility Lessee as set forth on SCHEDULE 1-3 hereto under the
caption "Section 467 Loan" (the "SECTION 467 LOAN"). If the applicable amount of
the Section 467 Loan set forth on SCHEDULE 1-3 hereto is positive, such amount
(the "LESSOR SECTION 467 LOAN BALANCE") represents a loan from the Facility
Lessee to the Owner Lessor; if the applicable amount of the Section 467 Loan set
forth on SCHEDULE 1-3 hereto is negative, such amount (the "LESSEE SECTION 467
LOAN BALANCE") represents a loan from the Owner Lessor to the Facility Lessee.
If there shall be a Lessor Section 467 Loan Balance, the Owner Lessor shall
deduct interest expense and the Facility Lessee shall accrue interest income, in
each case, in an amount equal to the amount set forth under the caption "Lessor
Section 467 Interest" for the applicable Rent Payment Period on SCHEDULE 1-3
hereto (the "LESSOR SECTION 467 INTEREST"). If there shall be a Lessee Section
467 Loan Balance, the Owner Lessor shall accrue interest income and the Facility
Lessee shall deduct interest expense, in each case, in an amount equal to the
amount set forth for the applicable Rent Payment Period on SCHEDULE 1-3 hereto
(the "LESSEE SECTION 467 INTEREST").
(d) If the Lease is terminated prior to the end of the Basic
Lease Term or the Lessee is otherwise required to pay Termination Value (or
amounts computed by reference thereto) (A) the Owner Lessor shall make a payment
to the Lessee on the applicable Termination Date equal to the Lessor Section 467
Loan Balance on such date, if any, and (B) the Lessee shall make a payment to
the Owner Lessor on the applicable
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Termination Date equal to the Lessee Section 467 Loan Balance on such date,
if any. Notwithstanding the foregoing, either party may offset any Lessor
Section 467 Loan Balance owed by the Owner Lessor to the Lessee against the
amount of Termination Value (or amounts computed by reference thereto) due
and payable by the Lessee to the Owner Lessor on such date, and the Lessee
shall pay an amount equal to the excess of such Termination Value (or amounts
computed by reference thereto) over such Lessor Section 467 Loan Balance or
the Owner Lessor shall pay an amount equal to the excess of such Lessor
Section 467 Loan Balance over such Termination Value (or amounts computed by
reference thereto). The obligations of the Owner Lessor and the Lessee to
repay the Lessor Section 467 Loan Balance and the Lessee Section 467 Loan
Balance, respectively, shall, except as otherwise provided in this SECTION
3.2, survive termination of this Lease.
SECTION 3.3 SUPPLEMENTAL LEASE RENT. The Facility Lessee also
agrees to pay, on an After-Tax Basis, to the Owner Lessor, or to any other
Person entitled thereto as expressly provided herein or in any other
Operative Document, as appropriate, any and all Supplemental Lease 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 Lease Rent, the Owner Lessor shall have all rights, powers and
remedies provided for herein or by law or equity or otherwise for the failure
to pay Basic Lease Rent. The Facility Lessee will also pay as Supplemental
Lease Rent, unless prohibited by any Requirement of Law, an amount equal to
interest at the applicable Overdue Rate (computed on the basis of a 360-day
year of twelve 30-day months) on any part of any payment of Basic Lease Rent
not paid when due for any period for which the same shall be overdue and on
any Supplemental Lease 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 Lease Rent to be paid pursuant to this SECTION 3.3 shall be
payable in the manner set forth in SECTION 3.5.
SECTION 3.4 ADJUSTMENT OF BASIC LEASE RENT AND TERMINATION
VALUE (a) The Facility Lessee and the Owner Lessor agree that Basic Lease
Rent, Allocated Rent, Proportional Rent, Lessor Section 467 Loan Balance,
Lessee Section 467 Loan Balance, Lessor Section 467 Interest, Lessee Section
467 Interest and Termination Values may be adjusted, either upwards or
downwards, at the request of the Facility Lessee or the Owner Participant in
the following situations: (i) after the Closing Date to reflect the change in
interest rate on any New Lessor Notes issued pursuant to SECTION 2.6 of the
Lease Indenture and (ii) in connection with the financing of improvements
through Additional Lessor Notes pursuant to Section 12.1(a)(iii) of the
Participation Agreement and (iii) to reflect the payments made pursuant to
Section 10.3(d) hereof.
(b) Any adjustments pursuant to this SECTION 3.4 shall be
calculated, (A) first, so as to maintain the Owner Participant's Net Economic
Return, the minimum and average Rent Service Coverage Ratios set forth in the
Closing Projections through the end of the Basic Lease Term, and the "operating
lease" treatment for the Facility Lessee and, (B) second at the option of the
Facility Lessee (x) to minimize the average annual Basic Lease Rent over the
Basic Lease Term for GAAP accounting purposes of the Facility Lessee and/or (y)
to minimize, to the extent possible, the net present value of the
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Basic Lease Rent (PROVIDED, that with respect to GAAP earnings, the Owner
Participant shall not be obligated by any such adjustment to record a book
loss or reduce book earnings in the year of adjustment). Adjustments shall be
computed by the Owner Participant, using the same method of computation, Tax
Assumptions and Pricing Assumptions originally used (other than those that
have changed as a result of the event giving rise to the adjustment) in the
calculation of Basic Lease Rent, Allocated Rent, Proportional Rent, Lessor
Section 467 Loan Balance, Lessee Section 467 Loan Balance, Lessor 467
Interest, Lessee 467 Interest and Termination Values set forth in SCHEDULES
1-1, 1-2, 1-3 and SCHEDULE 2 hereto, respectively, but shall be subject to
the verification procedure described in SECTION 3.4(d) and shall be in
compliance with SECTION 467 of the Code and Rev. Proc. 2001-28, 2001-19 IRB
1156 or Rev. Proc. 2001-29, 2001-19 IRB 1160 except to the extent the
original transaction did not comply therewith.
(c) Anything herein or in any other Operative Document to
the contrary notwithstanding, Basic Lease Rent (excluding the Equity Portion
of Basic Lease Rent) payable on any Rent Payment Date, whether or not
adjusted in accordance with this SECTION 3.4, shall, in the aggregate, be in
an amount at least sufficient to pay in full principal and interest payable
on the Lessor Notes on such 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, whether or not adjusted in accordance with this SECTION
3.4, shall in the aggregate, together with all other Rent due and owing on
such date, exclusive of any portion thereof that is the Equity Portion of
Basic Lease Rent or an Excepted Payment, be in an amount at least sufficient
to pay in full the principal of, premium, if any, and accrued interest on the
Lessor Notes payable on such date.
(d) Any adjustment pursuant to this SECTION 3.4 or SECTION 14
of the Participation Agreement computed by the Owner Participant pursuant to
SECTION 3.4(b) shall be subject to the verification procedure described in this
SECTION 3.4(d). Once computed, the results of such computation shall promptly be
delivered by the Owner Participant to the Facility Lessee. Within 30 days after
the receipt of the results of any such adjustment, the Facility Lessee may
request that a nationally recognized firm of accountants or lease advisors
selected by the Owner Participant and reasonably acceptable to the Facility
Lessee (the "VERIFIER") verify, on a confidential basis, after consultation with
the Owner Participant and the Facility Lessee, the accuracy of such adjustment
in accordance with this SECTION 3.4. The Owner Participant and the Facility
Lessee hereby agree, subject to the execution by the Verifier of an appropriate
confidentiality agreement, to provide the Verifier with all necessary
information and materials (other than the Owner Participant's, the OP
Guarantor's or any of their respective Affiliates' income tax returns or
accounting records) as shall be necessary in connection with such verification.
Both the Owner Participant and the Facility Lessee shall have the right to
communicate with the Verifier and to submit supporting information and data to
the Verifier. If the Verifier confirms that such adjustment is in accordance
with this SECTION 3.4, and the adjustment to Basic Lease Rent, Allocated Rent
and Termination Value calculated by the Verifier are the same as those
calculated by the Owner Participant, it shall so certify to the Facility Lessee,
the Owner Lessor and the Owner Participant and such certification shall be
final, binding and conclusive on the Facility Lessee, the Owner Lessor and the
Owner Participant. If the Verifier concludes
5
that such adjustment is not in accordance with this SECTION 3.4, and the
adjustments to Basic Lease Rent, Allocated Rent and Termination Value
calculated by the Verifier are different from those calculated by the Owner
Participant, it shall so certify to the Facility Lessee, the Owner Lessor and
the Owner Participant, and the Verifier's calculation shall be final, binding
and conclusive on the Facility Lessee, the Owner Lessor and the Owner
Participant. If the Facility Lessee does not request a verification of any
adjustment within the 30 day period specified above in this SECTION 3.4(d),
the computation provided by the Owner Participant shall be final, binding and
conclusive on the Facility Lessee, the Owner 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
Owner 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 costs of the Verifier in verifying an adjustment
pursuant to this SECTION 3.4 shall be paid by the Facility Lessee; PROVIDED,
HOWEVER, that in the event that such Verifier determines that the present
value of the remaining Basic Lease Rent to be made under this Facility Lease
as calculated by the Owner Participant is greater than the present value of
the remaining Basic Lease Rent as certified by the Verifier, in each case,
discounted annually at the Discount Rate, by more than ten basis points, then
such reasonable costs of the Verifier shall be paid by the Owner Participant.
Notwithstanding anything herein to the contrary, the sole responsibility of
the Verifier shall be to verify the calculations hereunder and the scope of
the Verifier's responsibilities shall not include matters of interpretation
of this Facility Lease or any other Operative Document.
SECTION 3.5 MANNER OF PAYMENTS. All Rent (whether Basic Lease
Rent, Renewal Rent or Supplemental Lease Rent) and all Termination Value
payments shall be paid by the Facility Lessee in Dollars in immediately
available funds to the recipient not later than 11:00 a.m. (
New York City
time) on the date due. If any Rent is due on a day which is not a Business
Day, payment thereof shall be made on the next succeeding Business Day with
the same effect as if made on the date on which such payment was due. All
Rent payments payable to the Owner Lessor (other than Excepted Payments)
shall be paid by the Facility Lessee to the Owner Lessor at its account at
[________] (Account No. [________])(the "OWNER LESSOR'S RENT ACCOUNT"), or to
such other place as the Owner Lessor shall notify the Facility Lessee in
writing; provided, however, that so long as the Lessor Notes are outstanding
and the Lien created under the Lease Indenture has not been discharged, the
Owner Lessor hereby irrevocably directs (it being agreed and understood that
such direction shall be deemed to have been revoked after the Lien created
under the Lease Indenture shall have been fully discharged in accordance with
its terms), and the Facility Lessee agrees, that all payments of Rent (other
than Excepted Payments) payable to the Owner Lessor shall be paid by "wire"
transfer directly to the Security Agent's Account or to such other place as
the Security Agent shall notify the Facility Lessee in writing pursuant to
the Participation Agreement. On each Rent Payment Date, Basic Lease Rent
shall be paid by transferring funds in the amount equal to the Basic Lease
Rent payment (in the amount notified by the Facility Lessee to the Owner
Lessor and, so long as the Lessor Notes are outstanding and the Lien created
under the Lease Indenture has not been discharged, the Security Agent) into
the Owner Lessor's Rent Account or, so long as the Lessor Notes are
outstanding and the
6
Lien created under the Lease Indenture has not been discharged, the Security
Agent's Account. 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.
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, THE FACILITY LESSEE ACKNOWLEDGES
AND AGREES SOLELY FOR THE BENEFIT OF THE OWNER LESSOR AND THE OWNER PARTICIPANT
THAT (i) THE FACILITY AND EACH COMPONENT 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 ARE SUITABLE FOR THEIR RESPECTIVE
PURPOSES, (iii) NEITHER THE OWNER 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 LEASE TERM AND
THE RENEWAL LEASE TERMS, IF ANY, SPECIFIED HEREIN SUBJECT TO ALL REQUIREMENTS OF
LAW NOW IN EFFECT OR HEREAFTER ADOPTED, INCLUDING (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 LEASE
WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE OWNER LESSOR OR THE OWNER
PARTICIPANT AND (v) THE OWNER LESSOR LEASES FOR THE BASIC LEASE TERM AND THE
RENEWAL LEASE TERMS, 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 OWNER LESSOR, 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 Owner Lessor represents and warrants that
on the Closing Date, the Undivided Interest will be free of Owner Lessor Liens.
It is agreed that all such risks, as between the Owner Lessor and the Owner
Participant on the one hand and the Facility Lessee on the other hand are to be
borne by
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the Facility Lessee with respect to acts, occurrences or omissions during the
Facility Lease Term. Neither the Owner Lessor nor the Owner Participant shall
have any responsibility or liability to the Facility Lessee or any other
Person with respect to any of the following: (x) 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; (y) the use, operation
or performance of the Facility, any Component or any risks relating thereto;
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 Owner Lessor, express or implied, with
respect to the Facility, any Component or the Undivided Interest that may
arise pursuant to any Requirement of Law now or hereafter in effect, or
otherwise.
(b) During the Facility Lease Term, so long as no Lease Event
of Default shall have occurred and be continuing, the Owner 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 Owner Lessor and the Facility
Lessee, as their interests may appear, but in all cases at the sole cost and
expense of the Facility Lessee, whatever claims and rights the Owner Lessor may
have in respect of the Facility, any Component or the Undivided Interest against
any manufacturer, vendor or contractor, or under any express or implied
warranties relating to the Facility, any Component or the Undivided Interest.
Notwithstanding the foregoing, any amount in excess of $5,000,000 that is
payable under any warranty shall not be payable to or retained by the Facility
Lessee (for application in repair or replacement of the affected property if
necessary) if at the time of such payment a Material Lease Default or Lease
Event of Default shall have occurred and be continuing, but shall be paid to and
held by the Owner Lessor as security for the obligations of the Facility Lessee
under this Facility Lease (or, if the Lien created under the Lease Indenture
shall not have been discharged pursuant to the terms thereof, such amounts shall
be paid to and held by the Security Agent in accordance with the terms of the
Lease Indenture) in accordance with [SECTION 21] or shall be applied towards
payment of the Facility Lessee's obligations under the Operative Documents at
the Owner Lessor's option during such time as any Material Lease Default or
Lease Event of Default shall have occurred and be continuing. At such time
thereafter as no Material Lease Default or Lease Event of Default shall be
continuing, such amount at the time held by the Owner Lessor, or, if applicable,
the Security Agent, in excess of the amount applied in accordance with the
preceding sentence shall be paid to the Facility Lessee net of and after
deduction for any applicable withholding Taxes, upon the Facility Lessee's
written request therefor, specifying the amount to be paid and certifying that
no Material Lease Default or Lease Event of Default has occurred and is
continuing. The Owner Lessor agrees to execute and deliver such further
documents and take such further action (including the assignment of warranty
claims), at the Facility Lessee's expense and at no after-tax cost to the Owner
Participant, as may be reasonably requested by the Facility Lessee in order to
obtain such warranty service as may be furnished for the Facility or any
Component by any of the
8
warrantors.
SECTION 4.2 QUIET ENJOYMENT. So long as no Lease Event of Default has
occurred and is continuing, the Facility Lessee's quiet enjoyment of the use,
operation, or possession by the Facility Lessee of the Facility or the
Undivided Interest will not be disturbed by the Owner Lessor or the Owner
Participant, any of their respective Affiliates thereof or any other Person
having a rightful, valid and legal claim by, through or under the Owner
Lessor or any of its Affiliates.
SECTION 5 RETURN OF UNDIVIDED INTEREST
SECTION 5.1 RETURN. Upon expiration of the Facility Lease Term (or
earlier than such date if required pursuant to the provisions of this
Facility Lease) (the "DATE OF RETURN"), unless the Undivided Interest is
being transferred to the Facility Lessee (or its designee) pursuant to
SECTION 10 OR 13, the Facility Lessee shall return the Undivided Interest
(together with all Required Improvements, all Non-Severable Improvements, all
other Improvements financed through this Facility Lease, if any, all logs and
records relating to the Undivided Interest title to each of which shall vest
in the Owner Lessor) to the Owner Lessor or any designee or transferee of the
Owner Lessor by surrendering the Undivided Interest into the possession of
the Owner Lessor or such designee or transferee at the location of the
Facility on the Facility Site.
SECTION 5.2 CONDITION UPON RETURN. On the Date of Return, (other than
in connection with a return of the Undivided Interest by the Facility Lessee
pursuant to SECTION 13 OR 14), the Facility Lessee agrees that the following
conditions (the "RETURN CONDITIONS") shall be satisfied or waived, whereupon
this Facility Lease and the Facility Site Sublease shall terminate:
(a) the Facility will be in at least as good condition as
it would have been in if it had been maintained during the Facility Lease
Term in compliance with the provisions of this Facility Lease (including,
without limitation, SECTION 7) ordinary wear and tear excepted; and the
Designated Representative Agreement shall be terminated and all emissions
credits and allowances allocated on or after the Termination Date shall be
for the exclusive account of the Owner Lessor (and the Facility Lessee shall
take such action as the Owner Lessor may reasonably request which the Owner
Lessor deems necessary to obtain such credits or allowances);
(b) the Facility Lessee shall, to the extent permitted by
Requirements of Law and the provisions of such licenses or permits, assign an
undivided interest equal to the Owner Lessor's Percentage to the Owner Lessor or
its transferee or designee in, and shall cooperate with all reasonable requests
of the Owner Participant, the Owner Lessor or any transferee or designee of
either such Person for purposes of obtaining, or enabling the Owner Participant,
the Owner Lessor or such transferee or designee to obtain, any and all licenses
and permits of any Governmental Authorities or other Persons that are or will be
required to be obtained by the Owner Participant, the Owner Lessor or such
transferee or designee in connection with the use, operation or maintenance of
the Undivided Interest that are not already in the name of the Owner Lessor or a
transferee or designee, as the case may be on or after such return as required
by Requirements of Law;
(c) the Facility Lessee shall provide the Owner Lessor or its
transferee or designee with originals or copies of all documents, instruments,
plans, maps,
9
specifications, manuals, drawings and other documentary materials relating to
the installation, maintenance, operation, construction, design, modification
and repair of the Facility, in each case as shall be in the Facility Lessee's
possession and reasonably appropriate or necessary for the continued
operation of the Facility;
(d) the Facility Lessee, at the request of the Owner Lessor,
shall sell to the Owner Lessor or its designee or transferee at the then fair
market value thereof, determined by agreement between the Facility Lessee and
the Owner Lessor or, absent such agreement, by an appraisal (the fees and
expenses to be for the account of the Owner Lessor) conducted according to the
Appraisal Procedure, an undivided interest equal to the Owner Lessor's
Percentage in (i) the Facility Lessee's right, title and interest in and to any
or all Severable Improvements made to the Facility that are owned by the
Facility Lessee, and (ii) any and all supplies, spare parts, consumables, safety
equipment, and other parts or materials as shall be in the Facility Lessee's
possession and shall be reasonably appropriate or necessary for the continued
operation of the Facility;
(e) the Undivided Interest (and the Severable Improvements,
supplies, spare parts, consumables, safety equipment, and other parts and
materials referred to in Section 5.2(d)) shall be free and clear of all Liens
other than Permitted Encumbrances set forth in clauses (ii), (iii), (vii),
(viii), (ix), (xi) and (xiii) of the definition thereof; PROVIDED, HOWEVER, in
the case of Permitted Encumbrances set forth in clauses (iii), (vii), (viii) and
(ix) of the definition thereof, adequate cash reserves shall have been escrowed
in a manner reasonably satisfactory to the Owner Lessor; PROVIDED, FURTHER, that
nothing in this SECTION 5.2(e) shall limit the obligations of the Facility
Lessee under SECTION 10.1 of the Participation Agreement;
(f) any Component in existence on the Date of Return shall
satisfy the standards of SECTION 7.2;
(g) the Facility Lessee, or an Affiliate thereof, shall enter
into an agreement or other arrangements reasonably acceptable to the Owner
Lessor, which arrangements, however, shall not be a condition precedent to the
return of the Undivided Interest (the "SUPPORT ARRANGEMENTS") to provide the
Owner Lessor with the Support Services; PROVIDED, that the Facility Lessee, or
its Affiliate, as the case may be, shall be bound to provide Support Services
only to the extent the Facility Lessee or any domestic, unregulated Affiliate
thereof is capable of providing such services and is either in the business of
providing such Support Services to others or performs such Support Services on
its own behalf, and only to the extent that such services are necessary for the
operation of the Facility and cannot commercially reasonably and timely be
obtained by the Owner Lessor or its Affiliates from third parties. It is the
intent of the parties hereto that the Support Arrangements, together with the
Facility Site Lease, and mutually agreed easements and rights of way, if
required, will provide all rights, including reasonable access to the Facility
and the Facility Site, that are necessary and appropriate for the Owner Lessor
(or any transferee or designee thereof) to own and operate the Facility, and
transmit power generated thereby, during and after the expiration of this
Facility Lease in the same manner as operated and transmitted by the Facility
Lessee during the Facility Lease Term (assuming such operation and transmission
was in accordance with the
10
Facility Site Lease and the other Operative Documents). Support Arrangements
shall provide for the provision of Support Services from and after the
expiration of this Facility Lease, and will provide for fair market value
compensation from time to time to be paid to the Facility Lessee, or an
Affiliate thereof, for the performance of such Support Services, periodically
in advance on no more than a monthly basis and no less than an annual basis,
for such rights and the performance of other services and all such
arrangements shall terminate upon expiration or early termination of the
Facility Site Lease or at the Owner Lessor's option. Within 180 days after
the expiration or termination of this Facility Lease, the Owner Lessor shall
notify the Facility Lessee of the material elements of the Support Services
that the Owner Lessor desires the Facility Lessee, or its Affiliate, to
continue to perform. Following such notice, the Facility Lessee and the Owner
Lessor shall negotiate in good faith the terms of the fair market value,
performance standards, compensation and other terms of such specified Support
Services, including the circumstances under which the Facility Lessee and its
Affiliates shall be released of any further obligation to provide such
Support Services, and enter into contracts for the performance of the Support
Services upon any such negotiated terms, provided, further, that if the
notice referenced in the preceding sentence is given by the Owner Lessor at
any time up to 60 days prior to the Date of Return, the Owner Lessor and the
Facility Lessee shall use reasonable efforts to cause such contracts to be
executed no later than the Date of Return; PROVIDED, FURTHER, that, in the
event such contracts shall not have been executed prior to the Date of
Return, from the period beginning on such Date of Return and ending on the
date on which such contracts are executed, the Facility Lessee shall provide
to the Owner Lessor, at the then prevailing rate being charged for the same
or similar services in the power generation industry, such specified Support
Services as are necessary to enable the Owner Lessor to operate, maintain and
repair the Facility in accordance with Prudent Industry Practice and the
Facility Lease and in compliance with applicable Requirements of Law. The
Facility Lessee shall also, subject to obtaining any required third party
consents, assign to the Owner Lessor upon termination of this Facility Lease
any support or similar agreements to the extent relating to the Facility it
has with third parties.
(h) the Facility Lessee shall provide to the Owner Lessor and
the Owner Participant a Phase I Environmental Survey of the Facility and the
Facility Site and, if as a result of such survey, facts are revealed that would
reasonably necessitate a Phase II Environmental Survey, a Phase II Environmental
Survey, as to the presence or absence of Environmental Conditions (and
compliance or non-compliance with applicable Environmental Laws), not later than
12 months prior to the Date of Return or, in connection with a return other than
pursuant to SECTION 5.1, not later than the date such Undivided Interest is
returned, such surveys to be prepared by a reputable and nationally recognized
environmental consulting firm (selected by the Facility Lessee and reasonably
acceptable to the Owner Participant) and to be in form and scope reasonably
satisfactory to the Owner Participant. The cost and expense of preparing and
providing such surveys shall be for the account of the Facility Lessee. If, as a
result of either such environmental survey, any action (including, any cleaning,
investigation, abatement, correction, removal or remediation) is required in
order that the Facility and the Facility Site are in compliance with applicable
Environmental Laws and the Return Conditions, the Facility Lessee shall, at its
own expense, within 90 days of the Owner Lessor having received
11
such environmental survey, (a) provide the Owner Participant and, so long as
the Lessor Notes are outstanding and the Lien of the Lease Indenture shall
not have been discharged, the Security Agent with a plan, reasonably
satisfactory to the Owner Participant and/or the Security Agent, designed to
ensure that the Facility and the Facility Site will be brought into
compliance with applicable Environmental Laws and all material Environmental
Conditions recommended for correction in such survey will be corrected as
promptly as is reasonably practical and without materially adversely
affecting the continued operation of the Facility. The actions referred to in
this SECTION 5.2(h) shall be completed prior to the expiration of the Basic
Lease Term or any then existing Renewal Lease Term or early termination
thereof, as applicable, in compliance with Environmental Laws other than
immaterial violations that do not involve any (1) material risk of
foreclosure, sale, forfeiture or loss of, or imposition of a Lien (other than
Liens permitted pursuant to SECTION 5.2(e)) on the Facility, the Undivided
Interest or the Facility Site or the impairment of the use, operation or
maintenance of the Facility or the Facility Site in any material respect, (2)
the risk of criminal liability being incurred by the Owner Lessor, the Owner
Participant or the OP Guarantor or (3) a material risk of any material
adverse effect on the interest of the Owner Lessor, the Owner Participant or
the OP Guarantor; PROVIDED, HOWEVER, if any such action cannot reasonably be
completed prior to the expiration or early termination of such Lease Term and
if continued operation of the Facility could not reasonably be expected to
result in strict liability being imposed upon the Owner Lessor, the Owner
Participant, the OP Guarantor or the Facility Lessee shall complete such
action as promptly thereafter as is reasonably practical and shall provide
financial assurance in the form of a satisfactory letter of credit or
equivalent collateral to the Owner Lessor and the Owner Participant,
reasonably satisfactory to each such Person, during the period of such action
following the end of such Lease Term and provided, further, that any such
action shall be completed no later than 12 months after the Date of Return.
Neither the provision of the surveys contemplated by this SECTION 5.2(h), nor
any other provision of this SECTION 5.2(h), shall alter the obligations of
any party to the Operative Documents, including those set forth in SECTIONS
5.4(iii) and 10.1 of the Participation Agreement. The obligations of the
Facility Lessee set forth in this SECTION 5.2(h) shall survive the
termination of this Facility Lease and the expiration of the applicable
Facility Lease Term;
(i) the Facility shall have at least the capability and the
functional ability to generate electricity, on a continuous basis in normal
commercial operating conditions, substantially at the ratings for which it was
designed after taking into account normal performance degradation as a function
of (i) time and (ii) all Required Improvements to the Facility made in
accordance with this Facility Lease; and
(j) at the Owner Lessor's request, a nationally recognized
independent engineer (selected by the Facility Lessee and reasonably acceptable
to the Owner participant) shall provide a certificate certifying that the
Facility is in compliance with the Return Conditions.
There shall be no other return conditions or requirements
other than the Return Conditions set forth in this Section 5.2.
12
SECTION 5.3 EXPENSES. Except as provided in SECTION 5.2(d) AND
5.2(g), the Facility Lessee agrees to pay or reimburse or to cause to be paid
or reimbursed, on an After-Tax Basis, on demand, all costs and expenses
incurred in connection with any return contemplated by this SECTION 5.
SECTION 6 LIENS
The Facility Lessee hereby covenants that it will not directly
or indirectly create, incur, assume or suffer to exist any Lien or other
encumbrance on or with respect to the Undivided Interest, the Facility, the
Facility Site, any Component, any Project Document, or on any Operative Document
or on the Owner Lessor's or the Owner Participant's interest in or under any
Operative Document, except Permitted Encumbrances. The Facility Lessee shall
promptly notify the Owner Lessor of the imposition of any such Lien of which the
Facility Lessee has Actual Knowledge and shall promptly, at its own expense,
take such action as may be necessary to fully discharge or release any such Lien
(except for Permitted Encumbrances). The Facility Lessee shall defend the Owner
Lessor from and against all claims to the Owner Lessor's title to the Undivided
Interest or any portion thereof.
SECTION 7 MAINTENANCE; REPLACEMENTS OF COMPONENTS
SECTION 7.1 MAINTENANCE. The Facility Lessee, at its own cost and
expense, will (i) cause the Facility to be maintained in as good condition,
repair and working order as when delivered, ordinary wear and tear excepted,
and in any event, in all material respects (a) no less favorably as compared
to other facilities of a similar type owned or operated by the Facility
Lessee (or any of its domestic unregulated Affiliates), solely as a result of
the status of the Facility as a leased facility as opposed to an owned
facility, (b) in accordance with Prudent Industry Practice, (c) in compliance
with all Requirements of Law, including, without limitation all applicable
Environmental Laws and safety laws and FERC, unless such noncompliance could
not reasonably be expected to result in a Material Adverse Effect or involve
any (1) material risk of foreclosure, sale, forfeiture or loss of, or
imposition of a Lien (other than a Permitted Encumbrance) on, the Facility,
the Undivided Interest or the Facility Site or the impairment of the use,
operation or maintenance of the Facility or the Facility Site in any material
respect, (2) risk of criminal or material civil liability being incurred by
the Owner Lessor, the Owner Participant or the OP Guarantor, or (so long as
the Lessor Notes are outstanding and the Lien of the Lease Indenture has not
been discharged) the Security Agent, any Lender or the Bondholder Trustee or
any of their respective Affiliates, or (3) material risk of any material
adverse effect on the interests of the Owner Lessor, the Owner Participant or
the OP Guarantor, or (so long as the Lessor Notes are outstanding and the
Lien of the Lease Indenture has not been discharged) the Security Agent, any
Lender or the Bondholder Trustee or any of their respective Affiliates
(including, without limitation, subjecting any such Person to regulation as a
public utility under any Requirement of Law), and (d) in accordance with the
terms of all insurance policies required to be maintained pursuant to Section
11 and (ii) cause to be made all repairs, renewals, replacements, betterments
and improvements to the Facility, all as in the reasonable judgment of the
Facility Lessee may be necessary so that the Facility may be operated (x) in
compliance with all Requirements
13
of Law, unless such noncompliance could not reasonably be expected to result
in a Material Adverse Effect, (y) in accordance with the Operative Documents
and (z) to the extent commercially reasonable, consistent with the estimated
remaining economic useful life of the Facility as set forth in the Closing
Appraisal (it being understood and agreed that the timing of such repairs,
renewals, replacements, betterments and improvements required under clause
(z) of this SECTION 7.1 shall be in the sole discretion of the Facility
Lessee).
SECTION 7.2 REPLACEMENT OF COMPONENTS. In the ordinary course of
maintenance, service, repair or testing of the Facility or any Component, the
Facility Lessee, at its own cost and expense, may remove or cause, or permit,
to be removed from the Facility any Component; provided, however, that the
Facility Lessee shall (a) cause any such Component to be replaced as soon as
commercially practicable by a replacement Component which shall be free and
clear of all Liens (other than Permitted Encumbrances) and which shall be in
as good an operating condition as and shall have a current and residual
value, remaining economic useful life and utility at least equal to that of
the Component replaced, assuming such replaced Component was maintained in
accordance with the terms of this Facility Lease, and (b) cause such
replacement to be performed in a manner that does not diminish the current
value, residual value, utility or remaining economic useful life of the
Facility by more than a de minimis amount (as measured immediately prior to
such replacement, assuming the Facility is, at such time, in the condition
required by the terms of this Facility Lease) or cause the Facility to become
"limited use property" within the meaning of Rev. Proc. 2001-28, 2001-19 IRB
1156 or Rev. Proc. 2001-29, 2001-19 IRB 1160 (each such replacement Component
being herein referred to as a "REPLACEMENT COMPONENT"). An undivided interest
equal to the Owner Lessor's Percentage in each Component at any time removed
from the Facility shall remain subject to this Facility Lease, 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 Owner Lessor and with no adjustment to the
Purchase Price, Basic Lease Rent, Renewal Rent, Proportional Rent, Allocated
Rent, Lessor Section 467 Loan Balance, Lessee Section 467 Loan Balance,
Lessor Section 467 Interest, Lessee Section 467 Interest or Termination
Values), (i) the replaced Component shall no longer be subject to this
Facility Lease, (ii) title to the Owner Lessor's undivided interest equal to
the Owner Lessor's Percentage in the removed Component shall thereupon vest
in the Facility Lessee or such other Person as shall be designated by the
Facility Lessee, free and clear of all rights of the Owner Lessor and the
Lease Indenture Trustee, and (iii) title to an undivided interest equal to
the Owner Lessor's Percentage in the Replacement Component shall thereupon
vest with the Owner Lessor and such undivided interest shall (a) become
subject to this Facility Lease and, so long as the Lessor Notes are
outstanding, the Lien of the Lease Indenture, and (b) be deemed a part of the
Facility and the Undivided Interest for all purposes of this Facility Lease.
Notwithstanding anything in this SECTION 7.2 to the contrary, if the Facility
Lessee has determined that any part, Component or portion of the Facility is
surplus or obsolete, the Facility Lessee shall have the right to remove such
part, Component or portion of the Facility without replacing it as long as
such removal would not diminish the current
14
value, residual value, utility or remaining economic useful life of the
Facility or the Undivided Interest by more than a de minimis amount below the
then current or residual value, the remaining economic useful life or the
utility thereof (as measured immediately prior to such removal, assuming the
Facility is, at such time, in the condition required by the terms of this
Facility Lease) or cause the Facility to become "limited use property" within
the meaning of Rev. Proc. 2001-28, 2001-19 IRB 1156 or Rev. Proc. 2001-29,
2001-19 IRB 1160.
SECTION 7.3 ENVIRONMENTAL MATTERS. The Facility Lessee will, at its
own expense:
(a) comply with all Environmental Laws applicable to the
Facility or the Facility Site, except instances of non-compliance that could not
reasonably be expected to have a Material Adverse Effect or involve any (1)
material risk of foreclosure, sale, forfeiture or loss of, or imposition of a
Lien (other than a Permitted Encumbrance) on, the Facility, the Undivided
Interest or the Facility Site or the impairment of the use, operation or
maintenance of the Facility or the Facility Site in any material respect, (2)
risk of criminal or material civil liability being incurred by the Owner Lessor,
the Owner Participant or the OP Guarantor, or (so long as the Lessor Notes are
outstanding and the Lien of the Lease Indenture has not been discharged) the
Security Agent, any Lender or the Bondholder Trustee or any of their respective
Affiliates, or (3) material risk of any material adverse effect on the interests
of the Owner Lessor, the Owner Participant or the OP Guarantor, or (so long as
the Lessor Notes are outstanding and the Lien of the Lease Indenture has not
been discharged) the Security Agent, any Lender or the Bondholder Trustee or any
of their respective Affiliates (including, without limitation, subjecting any
such Person to regulation as a public utility under any Requirement of Law);
(b) obtain and maintain all necessary Governmental Approvals
required under any applicable Environmental Law in connection with the use,
operation and maintenance of the Facility and the Facility Site and operate the
Facility in compliance with such Governmental Approvals except instances of
non-compliance that could not reasonably be expected to have a Material Adverse
Effect or involve any (1) material risk of foreclosure, sale, forfeiture or loss
of, or imposition of a Lien (other than a Permitted Encumbrance) on, the
Facility, the Undivided Interest or the Facility Site or the impairment of the
use, operation or maintenance of the Facility or the Facility Site in any
material respect, (2) risk of criminal or material civil liability being
incurred by the Owner Lessor, the Owner Participant or the OP Guarantor, or (so
long as the Lessor Notes are outstanding and the Lien of the Lease Indenture has
not been discharged) the Security Agent, any Lender or the Bondholder Trustee or
any of their respective Affiliates, or (3) material risk of any material adverse
effect on the interests of the Owner Lessor, the Owner Participant or the OP
Guarantor, or (so long as the Lessor Notes are outstanding and the Lien of the
Lease Indenture has not been discharged) the Security Agent, any Lender or the
Bondholder Trustee or any of their respective Affiliates (including, without
limitation, subjecting any such Person to regulation as a public utility under
any Requirement of Law);
(c) conduct and complete, at no cost and expense to the Owner
Participant
15
or the Owner Lessor, any investigation, study, sampling, monitoring and
testing and undertake any cleanup, removal, remediation, correction,
mitigation, response or other action necessary or advisable to ▇▇▇▇▇,
correct, remove and clean up any Environmental Condition at the Facility or
the Facility Site, to the extent required by and in material compliance with
applicable Environmental Laws except instances of non-compliance that could
not reasonably be expected to have a Material Adverse Effect or involve any
(1) material risk of foreclosure, sale, forfeiture or loss of, or imposition
of a Lien (other than a Permitted Encumbrance) on, the Facility, the
Undivided Interest or the Facility Site or the impairment of the use,
operation or maintenance of the Facility or the Facility Site in any material
respect, (2) risk of criminal or material civil liability being incurred by
the Owner Lessor, the Owner Participant or the OP Guarantor, or (so long as
the Lessor Notes are outstanding and the Lien of the Lease Indenture has not
been discharged) the Security Agent, any Lender or the Bondholder Trustee or
any of their respective Affiliates, or (3) material risk of any material
adverse effect on the interests of the Owner Lessor, the Owner Participant or
the OP Guarantor, or (so long as the Lessor Notes are outstanding and the
Lien of the Lease Indenture has not been discharged) the Security Agent, any
Lender or the Bondholder Trustee or any of their respective Affiliates
(including, without limitation, subjecting any such Person to regulation as a
public utility under any Requirement of Law); and
(d) as soon as possible and in any event within thirty
Business Days of the Facility Lessee obtaining Actual Knowledge thereof, provide
the Owner Lessor with written notice of any pending or threatened material
Environmental Claim involving the Facility or the Facility Site that could be
expected to have a Material Adverse Effect on the Facility Lessee or involve any
(1) material risk of foreclosure, sale, forfeiture or loss of, or imposition of
a Lien (other than a Permitted Encumbrance) on, the Facility, the Undivided
Interest or the Facility Site or the impairment of the use, operation or
maintenance of the Facility or the Facility Site in any material respect, (2)
risk of criminal or material civil liability being incurred by the Owner Lessor,
the Owner Participant or the OP Guarantor, or (so long as the Lessor Notes are
outstanding and the Lien of the Lease Indenture has not been discharged) the
Security Agent, any Lender or the Bondholder Trustee or any of their respective
Affiliates, or (3) material risk of any material adverse effect on the interests
of the Owner Lessor, the Owner Participant or the OP Guarantor, or (so long as
the Lessor Notes are outstanding and the Lien of the Lease Indenture has not
been discharged) the Security Agent, any Lender or the Bondholder Trustee or any
of their respective Affiliates (including, without limitation, subjecting any
such Person to regulation as a public utility under any Requirement of Law).
SECTION 8 IMPROVEMENTS
SECTION 8.1 REQUIRED IMPROVEMENTS. The Facility Lessee, at its own
cost and expense, and without the consent of the Lease Indenture Trustee, the
Lender, the Bondholder Trustee, the Owner Lessor or Owner Participant, shall
make or cause to be made any Improvements as are required (x) by Requirements
of Law or by any Governmental Authority having jurisdiction thereon, (y) by
any insurance policy required to be maintained by the Facility Lessee under
any Operative Document or (z) by the terms of the Operative Documents (each,
a "REQUIRED IMPROVEMENT"); provided,
16
however, that the Facility Lessee may, in good faith and by appropriate
proceedings, diligently contest the validity or application of any
Requirement of Law in any reasonable manner which does not involve any (1)
material risk of foreclosure, sale, forfeiture or loss of, or imposition of a
Lien (other than a Permitted Encumbrance) on, the Facility, the Undivided
Interest or the Facility Site or the impairment of the use, operation or
maintenance of the Facility or the Facility Site in any material respect, (2)
risk of criminal liability being incurred by the Owner Lessor, the Owner
Participant or the OP Guarantor, or (so long as the Lessor Notes are
outstanding and the Lien of the Lease Indenture has not been discharged) the
Security Agent, any Lender or the Bondholder Trustee or any of their
respective Affiliates, or (3) material risk of any material adverse effect on
the interests of the Owner Lessor, the Owner Participant or the OP Guarantor,
or (so long as the Lessor Notes are outstanding and the Lien of the Lease
Indenture has not been discharged) the Security Agent or any of its
respective Affiliates (including, without limitation, subjecting any such
Person to regulation as a public utility under any Requirement of Law);
provided further, that no such contest may extend beyond the date that is 180
days prior to the expiration or earlier termination of this Facility Lease.
SECTION 8.2 OPTIONAL IMPROVEMENTS. So long as no Material
Lease Default or Lease Event of Default shall have occurred and be
continuing, the Facility Lessee at any time may, at its own cost and expense,
and without the consent of the Lease Indenture Trustee, the Lender, the
Bondholder Trustee, the Owner Lessor or Owner Participant make, cause to be
made, or permit to be made any Improvement as the Facility Lessee considers
desirable in the proper conduct of its business (any such non-Required
Improvement being referred to as an "OPTIONAL IMPROVEMENT"); provided that
the Facility Lessee shall prevent any Optional Improvement from being made
that would decrease the then current value, residual value, utility or
remaining economic useful life of the Facility by more than a de minimis
amount below the then current or residual value, the remaining economic
useful life or the utility thereof (as measured immediately prior to the
making of such Optional Improvement, assuming the Facility is, at such time,
in the condition required by the terms of this Facility Lease), or cause the
Facility to become "limited use property" within the meaning of Rev. Proc.
2001-28, 2001-19 IRB 1156 or Rev. Proc. 2001-29, 2001-19 IRB 1160.
SECTION 8.3 TITLE TO IMPROVEMENTS. Title to an undivided
interest equal to the Owner Lessor's Percentage in (i) all Required
Improvements, (ii) all Non-Severable Improvements and (iii) all other
Improvements which are financed by the Owner Lessor by an Additional Equity
Investment or a Supplemental Financing pursuant to SECTION 12.1 of the
Participation Agreement shall (at no cost to the Owner Lessor, the Owner
Participant or the OP Guarantor and with no adjustment to the Purchase Price,
or except as expressly provided herein, Basic Lease Rent, Renewal Rent,
Proportional Rent, Allocated Rent, Lessor Section 467 Loan Balance, Lessee
Section 467 Loan Balance, Lessor Section 467 Interest, Lessee Section 467
Interest or Termination Values) automatically vest in the Owner Lessor upon
being affixed to or incorporated into the Facility, and such undivided
interest shall immediately (a) become subject to this Facility Lease and (b)
be deemed part of the Undivided Interest for all purposes of this Facility
Lease. The Facility Lessee shall, at its own cost and expense, take such
steps as the Owner Lessor may reasonably require from time to time to confirm
that title to such
17
Improvement has vested in the Owner Lessor and is subject to this Facility
Lease. No interest in any Optional Improvement which is a Severable
Improvement (other than Severable Improvements which are financed by the
Owner Lessor by an Additional Equity Investment or a Supplemental Financing
pursuant to SECTION 12.1 of the Participation Agreement) shall vest in the
Owner Lessor or become subject to this Facility Lease; provided, however,
that if the Facility Lessee shall, at its cost and expense, cause such
Optional Improvements which are Severable Improvements to be made to the
Facility, the Owner Lessor shall have the right, prior to the return of the
Undivided Interest to the Owner Lessor hereunder, to purchase an undivided
interest equal to the Owner Lessor's Percentage in any such Optional
Improvements which are Severable Improvements. The purchase price for such
undivided interest shall be the then Fair Market Sales Value of such
undivided interest. If the Owner Lessor does not elect to purchase such
Optional Improvements which are Severable Improvements, the Facility Lessee
may, and at the request of the Owner Lessor shall, remove such Improvements
at the end of the Facility Lease Term. The Facility Lessee shall repair any
damage to the Facility and the Facility Site caused by such removal, all at
the Facility Lessee's sole cost and expense; provided that such removal shall
not (i) materially diminish the value, remaining economic useful life or
utility of the Facility as a whole (assuming the Facility is, at such time,
in the condition required by the terms of this Facility Lease) or (ii) cause
the Facility to become "limited use property" within the meaning of Rev.
Proc. 2001-28, 2001-19 IRB 1156 or Rev. Proc. 2001-29, 2001-19 IRB 1160. If
the Facility Lessee shall have failed to remove any Optional Improvement
which is a Severable Improvement as above provided prior to the return of the
Undivided Interest pursuant to Section 5.1, title to an undivided interest
equal to the Owner Lessor's Percentage in such Optional Improvement shall (at
no cost to the Owner Lessor, the Owner Participant or the OP Guarantor) vest
in the Owner Lessor.
SECTION 8.4 FINANCING OF IMPROVEMENTS. Subject to SECTION 6.7
of the Participation Agreement, the Facility Lessee shall at all times have
the right to finance Improvements other than through this Facility Lease. The
Facility Lessee may elect to finance Improvements to the Facility through
this Facility Lease in accordance with Section 12.1 of the Participation
Agreement.
SECTION 9 NET LEASE
This Facility Lease is a "net lease." The Facility Lessee's
obligation to make all Rent payments payable hereunder (and all amounts,
including Termination Value, 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 by any
circumstance of any character, including by (i) any setoff, counterclaim,
recoupment, defense or other right which the Facility Lessee may have against
the Owner Lessor, the Owner Participant, the OP Guarantor, the Lease Indenture
Trustee, the Security Agent, the Lender, the Bondholder Trustee or any other
Person, including, without limitation, any claim as a result of any breach by
any of said parties of any covenant or provision in this Facility Lease or any
other 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
18
eviction by paramount title or otherwise, or any unavailability of the
Facility, the Facility Site, any Component, any other portion of the
Undivided Interest, or any part thereof, (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 thereof 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 Facility Site, any Component, or any other portion of the
Undivided Interest by any Governmental Authority 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 Owner 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 to comply with any Requirement of 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
Facility Site, any Component, any other portion of the Undivided Interest or
any part thereof, (xii) any prohibition, limitation or restriction of the
Facility Lessee's use of all or any part of the Facility or any portion
thereof or any interest therein or the interference with such use by any
Person, (xiii) the termination or loss of the Facility or any portion
thereof, any other lease, sublease, right-of-way, easement or other interest
in personal or real property upon or to which any portion of the Facility is
located, attached or appurtenant or in connection with which any portion of
the Facility is used or otherwise affects or may affect the Facility or any
right thereto, (xiv) the existence of any Lien with respect to the Facility
or any act or circumstance that may constitute an eviction or constructive
eviction, failure of consideration or commercial frustration of purpose, (xv)
any breach, default or misrepresentation by the Owner Lessor or any other
Person under the Facility Lease or any of the other Operative Documents,
PROVIDED that the Facility Lessee reserves it rights with respect to any
breach, default or misrepresentation by the Owner Lessor or any other Person
or (xvi) 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 Document, it being the intention of the parties
hereto that Allocated Rent shall continue to accrue and all Basic Lease Rent,
Renewal Rent and Supplemental Lease Rent (and all amounts, including
Termination Value, in lieu of Basic Lease Rent, following termination of this
Facility Lease) payable by the Facility Lessee hereunder shall continue to be
payable in all events in the manner and at times provided for herein. Such
Allocated Rent, Basic Lease Rent, Renewal Rent and Supplemental Lease Rent
(and all amounts, including Termination Value, in lieu of Basic Lease Rent,
following termination of this Facility Lease) shall not be subject to any
abatement and the accrued and 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 Owner
Lessor or any other Person under this Facility Lease or otherwise. To the
extent permitted by Requirements of 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
19
accordance with SECTION 10, 13, OR 14. 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 Requirements of Law, (x) that
Allocated Rent shall continue to accrue and (y) to pay to the Owner Lessor an
amount equal to each installment of Basic Lease Rent, Renewal Rent and all
Supplemental Lease 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. Nothing contained herein shall be construed to
waive any claim which the Facility Lessee might have under any of the
Operative Documents or otherwise or to limit the right of the Facility Lessee
to make any claim it might have against the Owner Lessor or any other Person
or to pursue such claim in such manner as the Facility Lessee shall deem
appropriate.
SECTION 10 EVENTS OF LOSS
SECTION 10.1 OCCURRENCE OF EVENTS OF LOSS.
(a) Each of the Owner Participant and the Owner Lessor will
promptly notify the Facility Lessee of any event of which it is aware that would
result in a Regulatory Event of Loss; PROVIDED, HOWEVER, that the failure to
provide such notice shall not result in any liability with respect to the Owner
Participant or the Owner Lessor and shall not in any way relieve the Facility
Lessee of any of its obligations under this Facility Lease, including the
obligations under this SECTION 10. The Facility Lessee shall promptly notify
each other Lease Financing Party of any Event of Loss.
(b) If an Event of Loss described in clauses (i), (ii) or
(iii) of the definition of Event of Loss shall occur, then the Facility Lessee
shall rebuild or replace the Facility in accordance with this Facility Lease and
the other Operative Documents and subject to the Rebuild Conditions; provided,
that in the event that any such Event of Loss occurs after the last day upon
which the Facility Lessee may exercise a renewal right under this Facility Lease
pursuant to SECTION 15.1, (i) the Lease Term shall be automatically extended for
such period of time as is reasonably necessary for the Facility Lessee to
complete any rebuilding or replacement required hereunder, (ii) the Facility
Lessee shall pay as Renewal Rent during any such extended term an amount,
payable monthly in arrears, equal to the average monthly Rent paid during the
Basic Lease Term or Renewal Term, as the case may be, then being extended, and
(iii) the Termination Value during such extended term shall be the Termination
Value as of the end of the Facility Lease Term without giving effect to any such
extension. The Facility Lessee shall have the right, in lieu of rebuilding or
replacing the Facility, to terminate this Facility Lease and purchase the
Undivided Interest from the Owner Lessor by paying to the Owner Lessor an amount
equal to the Termination Value and paying to the parties entitled thereto all
other amounts payable pursuant to SECTION 10.2; provided that the Facility
Lessee shall give irrevocable written notice of its election to terminate the
Facility Lease not later than six (6) months after such Event of Loss.
In the event of a Regulatory Event of Loss or an Event of Loss
described in clause (v) of the definition of Event of Loss, the Facility
Lessee shall use commercially reasonable efforts to obtain bids from third
parties unaffiliated with the Facility Lessee and sell the Owner Lessor's
interest following such Event of Loss subject to Section 10.2(b) hereof.
SECTION 10.2 PAYMENT UPON TERMINATION; SPECIAL LESSEE TRANSFER
PAYMENT UPON TERMINATION; SPECIAL LESSEE TRANSFER
20
(a) If (A) the Facility Lessee shall elect (or be deemed to
have elected) to terminate this Facility Lease pursuant to SECTION 10.1(b)
following an Event of Loss described in clause (i), (ii) or (iii) of the
definition of Event of Loss, then on the next Termination Date following the
Facility Lessee's election not to rebuild or replace the Facility and (B) the
Owner Lessor tenders all of its right, title and interest in the Facility to
the Facility Lessee, the Facility Lessee shall pay to the Owner Lessor, or so
long as the Lessor Notes are outstanding and the Lien of the Lease Indenture
has not been discharged, the Security Agent, the sum of (a) the Termination
Value determined as of the relevant Termination Value Payment Date, plus (b)
all reasonable documented out-of-pocket costs and expenses incurred in
connection with the Event of Loss by the Owner Lessor, the Owner Participant,
and so long as the Lessor Notes are outstanding and the Lien of the Lease
Indenture has not been discharged, the Security Agent, the Lender and the
Bondholder Trustee plus (c) any other Rent (other than Basic Lease Rent or
Renewal Rent payable on or after the Termination Value Payment Date) due and
unpaid on the Termination Value Payment Date and any amount due and unpaid or
accrued and unpaid on the Termination Value Payment Date under any other
Operative Document (the "EVENT OF LOSS PAYMENT") plus (d) any Lessee Section
467 Loan Balance.
Upon payment of the Event of Loss Payment (i) the Owner Lessor shall redeem
the Lessor Notes together with all other amounts due to the Security Agent
including the Lessor Section 467 Loan Balance, if any, determined as of such
date (the obligations to make such payments shall be subject to the
provisions of SECTION 3.2(d)); (ii) the Bondholder Trustee shall use such
funds to repay the Lease Debt (iii) this Facility Lease, Facility Site Lease
and the Facility Site Sublease shall terminate and the Facility Lessee shall
cease to have any liability to the Owner Lessor or the Owner Participant
other than for obligations surviving pursuant to the express terms of the
Operative Documents and (iv) all of the Owner Lessor's right, title and
interest in and to the Facility shall be transferred to the Facility Lessee,
on an "as is," "where is" and "with all faults" basis, without warranty but
free of Lessor Liens.
(b) In the case of Regulatory Event of Loss or an Event of
Loss described in clause (v) of the definition of Event of Loss, if at least
one cash bid is received on or prior to the next Termination Date occurring at
least three months after the occurrence of such Regulatory Event of Loss or an
Event of Loss described in clause (v) of the definition of Event of Loss, this
Facility Lease shall terminate on such Termination Date and the Owner Lessor
shall, subject to the Facility Lessee's right of first refusal, sell the
Undivided Interest in the Facility to the party submitting the highest cash bid
on an "as is", "where is" and "with all faults" basis, without representations
or warranties other than a warranty of the Owner Lessor as to the absence of
Owner Lessor Liens and a warranty of the Owner Participant as to the absence of
Owner Participant Liens, all of the proceeds of which will be for the account
of the Owner Lessor. The Facility Lessee shall pay to the Owner Lessor (i) the
amount, if any, by which the Termination Value determined as of the Termination
Date exceeds the sales price received by the Owner Lessor for the Facility (net
of the fees, commissions and costs of any broker engaged by the Facility Lessee
or any Affiliate thereof), plus (ii) on an After-Tax Basis all reasonable
documented out-of-pocket costs and expenses incurred in connection with the
Event of Loss by the Owner Lessor, the Owner Participant, and so long as the
Lessor Notes are outstanding and the Lien of the Lease Indenture has not been
discharged, the Security Agent, the Lease Indenture Trustee, the Lender and the
Bondholder Trustee plus (iii) any other Rent (other
21
than Basic Lease Rent or Renewal Rent payable after the Termination Value
Payment Date) due and unpaid on the Termination Value Payment Date and any
amount due and unpaid or accrued and unpaid on the Termination Value Payment
Date under any other Operative Document plus (iv) Lessee Section 467 Loan
Balance. If no cash bids are received by such time or if any cash bids are
received but no sale is consummated, the Facility Lessee shall pay (x)
Termination Value as of such Termination Date, plus (y) the amounts described
in clauses (ii) and (iii) above. Upon payment of such amounts, (a) the
obligation to pay or accrue rent shall cease and (b) this Facility Lease shall
terminate other than certain specified covenants. The Owner Lessor shall pay to
the Facility Lessee The Section 467 Loan Balance if any, determined as of such
date. The obligation to make such payments shall be subject to the provisions
of SECTION 3.2(d). In the case of a Regulatory Event of Loss, if shutting down
the Facility does not eliminate the burdensome regulation on the Owner
Participant, the Owner Lessor shall sell the Facility as scrap subject to the
Facility Lessee's right of first refusal; PROVIDED, HOWEVER, that if shutting
down the Facility eliminates such burdensome regulation, the Facility shall be
shut down and the Facility Lessee may, at its option, continue marketing the
Facility for up to an additional three months (the "EXTENDED MARKETING
PERIOD"). In the case of an Event of Loss defined in clause (v) of the
definition of Event of Loss, the Facility Lessee may, at its option, continue
remarketing the Facility during the Extended Marketing Period. If at least one
cash bid is received prior to the end of the Extended Marketing Period, the
Owner Lessor shall, subject to the Facility Lessee's right of first refusal,
sell the Undivided Interest in the Facility to the highest cash bidder on an
"as, is", "where is" and "with all faults" basis, without representations or
warranties other than a warranty of the Owner Lessor as to the absence of Owner
Lessor's Liens and a warranty of the Owner Participant as to the absence of
Owner Participant's Liens. The Facility Lessee shall pay on an After-Tax Basis
all reasonable, documented out-of-pocket costs and expenses of the Owner
Participant the Owner Lessor, and so long as the Lessor Notes are outstanding
and the Lien of the Lease Indenture has not been terminated, the Security
Agent, the Lender and the Bondholder Trustee; the Owner Lessor shall pay the
net cash proceeds of the sale to the Facility Lessee to the extent of payments
made by the Facility Lessee under clauses (x) or (y) above. If there is no
Extended Marketing Period or no offers are received prior to the end of the
Extended Marketing Period, the Owner Lessor shall sell the Facility as scrap
subject to the Facility Lessee's right of first refusal.
(c) Any Requisition or property damage insurance proceeds
received in respect of an Event of Loss shall be used to pay, or to reimburse
the Facility Lessee for, the Event of Loss Payment. Requisition proceeds in
excess of the Event of Loss Payment shall be for the account of the Owner
Lessor and the Facility Lessee in accordance with their respective interests.
(d) Notwithstanding anything herein to the contrary, in the
event of a Regulatory Event of Loss or an Event of Loss described in clause
(v) of the definition of Event of Loss and in connection with the Facility
Lessee's purchase of the Undivided Interest in accordance with SECTION
10.1(b), the Facility Lessee may, at its option, in lieu of paying
Termination Value, assume the Owner Lessor's obligations under the Lease
Indenture and pay an amount equal to the difference between the Termination
Value and the outstanding principal amount of the Lessor Notes assumed by the
Facility Lessee, so long as all payments required to be made pursuant to
Section 10.3(d) have been made and no Lease Event of Default or Material
Lease Default shall have occurred and be continuing after giving effect to
such assumption. (Alternatively, the Facility Lessee may purchase the Owner
Participant's interest in the Owner Lessor and elect not to terminate
22
this Facility Lease pursuant to SECTION 13.4). In addition, on the Termination
Value Payment Date, the Facility Lessee, in addition to the Termination Value
determined as of the relevant Termination Value Payment Date, shall also pay
(without duplication of any other amount paid hereunder) on an After-Tax Basis
to the Owner Lessor all reasonable documented out-of-pocket costs and expenses
incurred in connection with the Event of Loss by the Owner Lessor, the Owner
Participant, and so long as the Lessor Notes are outstanding and the Lien of
the Lease Indenture has not been discharged, the Security Agent, the Lease
Indenture Trustee, the Lender and the Bondholder Trustee plus any other Rent
(other than Basic Lease Rent or Renewal Rent payable after the Termination
Value Payment Date) due and unpaid on the Termination Value Payment Date and
any amount due and unpaid or accrued and unpaid on the Termination Value
Payment Date under any other Operative Document, whereupon (other than in the
case of a Special Lessee Transfer) this Facility Lease, Facility Site Lease and
Facility Site Sublease shall terminate. The Facility Lessee shall pay any
Lessee Section 467 Loan Balance and the Owner Lessor shall pay to the Facility
Lessee the Lessor Section 467 Loan Balance, if any, determined as of such date.
The obligation to make such payments shall be subject to the provisions of
SECTION 3.2(d).
SECTION 10.3 APPLICATION OF PROCEEDS. Any payments with respect
to the Undivided Interest received at any time by the Owner Lessor or the
Facility Lessee from any Governmental Authority or from insurance proceeds as
a result of the occurrence of an Event of Loss shall be applied as follows:
(a) all such payments received at any time by the Facility
Lessee shall be promptly paid to the Owner Lessor or, so long as the Lessor
Notes are outstanding, to the Security Agent, for application pursuant to the
following provisions of this SECTION 10.3, except that, so long as no Material
Lease Default or Lease Event of Default shall have occurred and be continuing or
shall be created thereby (other than Material Lease Defaults and Lease Events of
Defaults arising as a result of such Event of Loss), the Facility Lessee may
retain any amounts that the Owner Lessor would at the time be obligated to pay
to the Facility Lessee as reimbursement pursuant to Section 10.3(b);
(b) so much of such payments as shall not exceed the Event of
Loss Payment required to be paid by the Facility Lessee pursuant to 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, so long as no Material Lease Default or Lease Event of
Default shall have occurred and be continuing or shall be created thereby (other
than Material Lease Defaults and Lease Events of Defaults arising as a result of
such Event of Loss), be applied to reimburse the Facility
23
Lessee for its payment of such amount; and
(c) the balance, if any, of such payments remaining thereafter
shall be apportioned between the Owner Lessor and the Facility Lessee in
accordance with their respective interests.
Notwithstanding the foregoing, if the Facility Lessee shall have
elected to rebuild or replace the Facility pursuant to SECTION 10.1(b), any
insurance proceeds received by the Owner Lessor, the Security Agent or the
Facility Lessee as a result of the occurrence of an Event of Loss described in
clause (i) or (ii) of the definition of Event of Loss shall be applied as
provided in SECTION 11.2.
(d) Notwithstanding anything to the contrary herein, upon
the occurrence of an Event of Loss described in clauses (i), (ii), (iii) or
(v) of the definition of Event of Loss or a Partial Event of Loss in
connection with which the Facility Lessee does not elect to rebuild or does
not deliver the Reinvestment Notice to the Owner Lessor, the Owner
Participant and so long as the Lessor Notes are outstanding and the Lien of
the Lease Indenture has not been discharged, the Security Agent, the Lender
and the Bondholder Trustee, within 45 days of the settlement of or payment of
$5,000,000 or more in respect of an Event of Loss described in clauses (i),
(ii), (iii) or (v) of the definition of the Event of Loss or a Partial Event
of Loss, then the Facility Lessee shall pay to the Owner Lessor as
Supplemental Rent an amount equal to such Owner Lessor Percentage of such
payment to be applied pursuant to Section 4.8 of the Lease Indenture. Payment
of any such Supplemental Rent shall not relieve the Facility Lessee from any
of its other obligations hereunder, including its obligations as set forth in
Section 10.6.
SECTION 10.4 Rebuilding or Replacement. In connection with the
Facility Lessee's obligation to rebuild or replace the Facility pursuant to
Section 10.1(b), the Facility Lessee shall have satisfied the conditions set
forth in clauses (a) through (g) below (collectively, the "Rebuild Conditions"):
(a) delivery to the Owner Participant either (i) an opinion
reasonably satisfactory to it from Owner Participant's Counsel to the effect
that such rebuilding or replacement should not result in any material
unindemnified incremental tax consequences to the Owner Participant, (ii) an
indemnity against such risk in form and substance reasonably satisfactory to the
Owner Participant from or guaranteed by an entity that meets the Minimum Credit
Rating or (iii) any other indemnity arrangement against such risks satisfactory
to the Owner Participant;
(b) delivery to the Owner Participant and, so long as the
Lessor Notes are outstanding, the Security Agent, the Lender and the Bondholder
Trustee (i) a report of the Engineering Consultant, or such other independent
engineer satisfactory to the Owner Participant and the Lease Indenture Trustee,
to the effect that the rebuilding or replacement of the Facility is
technologically feasible and economically viable and that it is reasonable to
expect that such rebuilding or replacement can be completed prior to the end of
the Facility Lease Term, including any Renewal Lease Term then in effect or
elected by the Facility Lessee (including any extension pursuant to Section
10.1(b), and (ii) a report of an appraiser selected by the Facility Lessee and
reasonably acceptable to the Owner Participant, to the effect that the Facility
will after completion of the rebuilding or replacement have at least the same
current value, residual value, utility and remaining economic useful life as
the Facility immediately prior to the Event of Loss (assuming the Facility
shall be in the condition required by the terms of this Facility Lease) and
such rebuilding or replacement will not result in the Facility being "limited
use property" within the meaning on Rev. Proc. 2001-28, 2001-19 I.R.B. 1156 or
Rev. Proc. 2001-29, 2001-19 I.R.B. 1160;
(c) delivery of a certificate from a responsible officer of
the Facility Lessee to the reasonable satisfaction of the Owner Participant and
the Lease Indenture Trustee that the Facility Lessee (i) has adequate financial
resources, from insurance proceeds or otherwise, to complete such rebuilding or
replacement and to perform its other obligations under the Operative Documents
including the payment Basic Lease Rent or Renewal Rent, as the case may be, that
is projected to become due and payable while the Facility is being rebuilt or
replaced and (ii) reasonably expects to be capable of replacing or modifying any
project documents that must be replaced or modified in order
24
to avoid a Material Adverse Effect;
(d) commencement of such rebuilding or replacement as soon
as reasonably practicable and, in any event, within 12 months of such damage
or destruction;
(e) not causing any material adverse accounting effect on
the Owner Participant;
(f) demonstration of the absence of any Material Lease
Default or Lease Event of Default (other than any Material Lease Default or
Lease Event of Default that would be cured by such rebuilding); and
(g) demonstration that all Governmental Approvals required
in connection with the work done or proposed to be done have been obtained or
can reasonably be expected to be obtained on or prior to the date required in
connection therewith
SECTION 10.5 APPLICATION OF PAYMENTS NOT RELATING TO AN EVENT OF
LOSS. (i) In the event that during the Facility Lease Term title to, or the use
of, all or any portion of the Undivided Interest, the Facility or the Facility
Site is requisitioned or taken by or pursuant to a request of any Governmental
Authority under the power of eminent domain or otherwise for a period or in a
manner which does not constitute an Event of Loss, the Facility Lessee's
obligation to pay all installments of Basic Lease Rent or Renewal Rent, as
applicable, shall continue for the duration of such requisitioning or taking.
Subject to Section 10.3(d) hereof, the Facility Lessee shall be entitled to
receive and retain for its own account all sums payable for any such period by
such Governmental Authority as compensation for such requisition or taking of
possession; PROVIDED, that if at the time of such payment a Material Lease
Default or a Lease Event of Default shall have occurred and be continuing, such
amounts shall be paid to and held by the Owner Lessor unless the Lessor Notes
are outstanding, in which case such amounts shall be paid to and held by the
Security Agent, as security for the obligations of the Facility Lessee under
this Facility Lease until such time as no Material Lease Default or Lease Event
of Default is continuing.
(b) Any insurance proceeds with respect to the Undivided
Interest received at any time by the Owner Lessor, the Security Agent or the
Facility Lessee under any of the insurance policies required to be maintained by
the Facility Lessee under SECTION 11 as a result of any damage to the Facility
or any part thereof which does not constitute an Event of Loss shall be applied
as follows: (i) in accordance with SECTION 11.7, and (ii) the balance, if any,
of such insurance proceeds remaining thereafter shall be paid to the Facility
Lessee.
SECTION 10.6 PARTIAL CASUALTIES. If the Facility or any part
thereof shall suffer any destruction, damage, loss or theft not constituting an
Event of Loss ("Partial Event of Loss"), the Facility Lessee shall rebuild or
make such repairs as are necessary (i) to restore the Facility to the current
value, residual value, utility and remaining economic useful life it had
immediately prior to such destruction, damage, loss or theft (assuming, for the
purposes
25
of determining the current value, residual value, utility and remaining
economic useful life of the Facility, that no Severable Improvements that are
not Required Improvements shall have been made to the Facility during the
Facility Lease Term (and assuming the Facility was in the condition and repair
required to be maintained by the terms of this Facility Lease) and (ii) to
ensure that the Facility is maintained in accordance with Sections 7 and 8
hereof and that the Facility does not become "limited use property" within the
meaning of Rev. Proc. 2001-28, 2001-19 I.R.B. 1156 or Rev. Proc. 2001-29,
2001-19 I.R.B. 1160, provided however, that in connection with a Partial Event
of Loss in respect of which the Facility Lessee received a settlement of or
payment of $5,000,000 or more, the Facility Lessee shall deliver a Reinvestment
Notice to the Owner Lessor, the Owner Participant, the Lease Indenture Trustee,
the Security Agent, the Lender and the Bondholder Trustee within 45 days of the
receipt of the proceeds in respect of such Partial Event of Loss.
SECTION 11 INSURANCE
SECTION 11.1 GENERAL. The Facility Lessee will comply with the
requirements set forth in Schedule 5.10 of the Participation Agreement.
SECTOPM 11.2 APPLICATION OF INSURANCE PROCEEDS.
(a) All insurance proceeds exceeding $5,000,000 but less
than $50,000,000 on account of any damage to, or destruction of, the Facility
or any part thereof (in each case less the actual costs, fees and expenses
incurred in the collection thereof), shall, subject to the provisions of
SECTION 11.2(d), be held in the Recovery Event Proceeds Account for
application in repair or replacement of the affected property. If the
insurance proceeds on account of such damage to, or destruction of, the
Facility exceed $50,000,000, or in the case of an Event of Loss, then the
Owner Lessor's Percentage of all insurance proceeds on account of such damage
or destruction to the Facility shall be paid to the Owner Lessor or, if the
Lessor Notes are outstanding and the Lien of the Lease Indenture shall not
have been discharged, the Security Agent and shall be applied and dealt with
as provided in SECTION 11.2(b) below.
(b) Other than proceeds of insurance paid to the Security
Agent or the Owner Lessor in connection with an Event of Loss, all proceeds
of insurance paid to the Security Agent or the Owner Lessor, as the case may
be, and the Facility Lessee shall be paid over to the Facility Lessee upon
receipt by the Owner Lessor and the Lease Indenture Trustee, if applicable,
of evidence satisfactory to each of them, in their reasonable judgment that
such proceeds, together with funds of the Facility Lessee available for the
purpose will be sufficient to complete such repair and restoration of the
Facility or portion thereof. Promptly after receiving Actual Knowledge that a
Material Lease Default or Lease Event of Default shall have occurred and be
continuing, the Facility Lessee shall notify the insurer under any property
insurance policy providing coverage of the Undivided Interest of the
existence of such Material Lease Default or Lease Event of Default. After
receipt of any such notification, each such insurer shall pay the proceeds of
any property insurance policies in accordance with SECTION 11.2(d).
(c) Within 30 days after receiving Actual Knowledge that an
Event of
26
Loss has occurred, the Facility Lessee shall notify the insurer under any
property insurance policy providing coverage for such Event of Loss, the
Security Agent so long as the Lien of the Lease Indenture shall not have been
discharged, and the Owner Lessor of the occurrence of such Event of Loss.
Each of the Facility Lessee, the Owner Lessor and the Security Agent, as
applicable, shall provide any necessary endorsements and otherwise cooperate
in the processing of any related claims or proceeds in accordance with the
terms of this SECTION 11.
(d) Notwithstanding the foregoing provisions of this SECTION
11 or SECTION 10, so long as a Material Lease Default or Lease Event of Default
shall have occurred and be continuing, the proceeds of any insurance required to
be maintained pursuant to this SECTION 11 that would otherwise be payable to or
for the account of, or that would otherwise be retained by, the Facility Lessee
pursuant to this SECTION 11 or SECTION 10.3 will be held as security for the
obligations of the Facility Lessee under this Facility Lease by the Owner Lessor
or, so long as the Lien of the Lease Indenture shall not have been terminated or
discharged, the Security Agent and, at such time thereafter as no Material Lease
Default or Lease Event of Default shall be continuing, such amount shall be paid
promptly to the Facility Lessee.
SECTION 12 INSPECTION
During the Facility Lease Term, each of the Owner Lessor, the
Owner Participant, the OP Guarantor and, so long as the Lessor Notes are
outstanding and the Lien of the Lease Indenture has not been discharged, the
Security Agent, the Lender and the Bondholder Trustee and their respective
representatives shall have the right, during normal business hours, upon
reasonable notice to the Facility Lessee and at their own expense (except when a
Lease Default or a Lease Event of Default has occurred and is continuing) and
risk, to inspect the Facility and the records relating to the operation and
maintenance thereof in the Facility Lessee's custody or, so long as the Facility
Lessee has the opportunity to be present, to which the Facility Lessee has
access; PROVIDED, HOWEVER, that any such inspection will not interfere with the
operation or maintenance of the Facility or the conduct by the Facility Lessee
of its business and shall be in accordance with the Facility Lessee's safety and
insurance programs; PROVIDED, FURTHER, HOWEVER, that, except during the
continuance of a Material Lease Default or a Lease Event of Default, no more
than one inspection in any twelve (12) month period shall be conducted by each
of (x) the Owner Lessor and the Owner Participant and (y), if applicable, the
Lease Indenture Trustee; PROVIDED, FURTHER, HOWEVER, that any such Person (or
group of Persons) may make more than one inspection during the last eighteen
(18) months of the Facility Lease Term unless the Facility Lessee has exercised
one of its options under SECTION 15 hereof to renew this Facility Lease beyond
such eighteen (18) month period. In no event shall the Owner Lessor, the Owner
Participant, the OP Guarantor, or the Lease Indenture Trustee, the Lender and
the Bondholder Trustee 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
27
SECTION 13.1 ELECTION TO TERMINATE. The Facility Lessee, by giving
written notice (the "BURDENSOME TERMINATION NOTICE") to the Owner Lessor no
later than twelve (12) months after the date the Facility Lessee receives
notice or first has Actual Knowledge of either of the events specified below,
shall have the right, at its option, to terminate this Facility Lease in
accordance with SECTION 13.3 on the Termination Date specified in the
Burdensome Termination Notice (which shall be a date occurring not less than
30 days nor more than 60 days after the date of the Burdensome Termination
Notice) or such later Termination Date (which shall be a date occurring not
more than 12 months after the date of the Burdensome Termination Notice) as
may be necessary for the Facility Lessee to obtain such consents and
approvals required for the Facility Lessee to comply with its obligations
under this SECTION 13 if:
(a) as a result of a change in Requirements of Law, 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 to
comply with such change in Requirements of Law in a manner reasonably acceptable
to the Facility Lessee, the Owner Participant, the Owner Lessor, and, so long as
the Lessor Notes are outstanding, the Security Agent, the Lender and the
Bondholder Trustee; or
(b) one or more events outside the control of the Facility
Lessee, shall have occurred which will, or can reasonably be expected to give
rise to an obligation by the Facility Lessee to make a payment or to incur an
indemnity obligation in respect of the Tax Indemnity Agreement or Section 10.1
or 10.2 of the Participation Agreement; PROVIDED, HOWEVER, that (i) such payment
or indemnity obligation (and the underlying cost or tax) can be avoided in whole
or in material part if this Facility Lease is terminated or the Owner Lessor
sells the Owner Lessor's Interest and (ii) the amount of such avoided payments
would exceed (on a present value basis, discounted at the Discount Rate,
compounded on an annual basis to the date of the termination) 2.5% of the
Purchase Price (unless the Owner Participant has waived its right to payments in
excess of 2.5% of the Purchase Price or arranged for its own account for the
payment thereof).
(c) Notwithstanding the foregoing, if the Owner Participant or
any Affiliate thereof owns the membership interest in any Other Owner Lessor,
the Facility Lessee may deliver to the Owner Lessor a Burdensome Termination
Notice and exercise the Burdensome Buyout Option (as defined below) only if (i)
it has also delivered such a notice to each Other Owner Lessor under Section
13.1 of the Other Facility Leases and (ii) it is concurrently exercising its
Burdensome Buyout Option under Section 13 of the Other Facility Leases;
provided, however, that the requirements in clauses (i) and (ii) of this
paragraph shall not apply in the event the Facility Lessee does not have the
right to deliver such notice or exercise such Burdensome Buyout Option, as
applicable, under Section 13 of the Other Facility Leases.
(d) If the Facility Lessee does not give the Burdensome
Termination Notice within twelve (12) months of the date the Facility Lessee
receives notice or has Actual Knowledge of an event or condition described
above, the Facility Lessee shall lose its right to terminate this Facility Lease
pursuant to this SECTION 13.1 as a result of
28
such event or condition.
SECTION 13.2 SOLICITATION OF QUALIFYING BIDS; PAYMENTS UPON
TERMINATION.
(a) (i) Upon receipt of a Burdensome Termination Notice
pursuant to SECTION 13.1, the Owner Lessor shall have the right, but shall be
under no obligation to, sell the Undivided Interest and, at the request of
the Owner Lessor, the Facility Lessee will, as nonexclusive agent for the
Owner Lessor, use commercially reasonable efforts to obtain cash bids from
unaffiliated third parties for the sale of the Undivided Interest. In
connection with the delivery of a Burdensome Termination Notice, the Facility
Lessee may, but shall be under no obligation to, make an offer to purchase
the Undivided Interest and shall have a right of first refusal with respect
to any offer received from an unaffiliated third party (which may be
exercised any time prior to the Termination Date), in connection with such
sale. Only bona fide bids, whether from the Facility Lessee or a third party,
to purchase the Undivided Interest for cash on the Termination Date on an "as
is, where is" and "with all faults" basis without any representation, other
than by the Owner Lessor that the Owner Lessor's Undivided Interest is free
of Owner Lessor Liens and a warranty of the Owner Participant as to the
absence of Owner Participant Liens, shall be qualifying cash bids
("QUALIFYING CASH BIDS") and all the proceeds of any such Qualifying Cash Bid
shall be for the account of the Owner Lessor. If a Qualifying Cash Bid is
received and the Owner Lessor accepts such bid in writing, the Facility
Lessee shall pay the Owner Lessor on the Termination Date (i) the Termination
Value determined as of such Termination Date, less the cash actually received
by the Owner Lessor in connection with such Qualifying Cash Bid (or, if the
amount of such cash actually received by the Owner Lessor from such
Qualifying Cash Bid is equal to or greater than such Termination Value, zero)
plus (ii) all amounts due and payable under SECTION 13.3. If a Qualifying
Cash Bid is rejected in writing by the Owner Lessor and the Owner Lessor has
not elected to retain the Owner Lessor's Interest, the Facility Lessee shall
pay the Owner Lessor on the Termination Date (x) the Termination Value
determined as of such Termination Date, less the amount of such rejected
Qualifying Cash Bid (or, if the amount of such rejected Qualifying Cash Bid
is equal to or greater than such Termination Value, zero) plus (y) all
amounts due and payable under SECTION 13.3. If no Qualifying Cash Bid is
offered and the Owner Lessor has not elected to retain the Owner Lessor's
Interest, the Facility Lessee shall pay the Owner Lessor on the Termination
Date (A) the Termination Value determined as of such Termination Date plus
(B) all amounts due and payable under SECTION 13.3. If the Owner Lessor
elects in writing to retain the Owner Lessor's Interest, the Facility Lessee
shall pay the Owner Lessor on the Termination Date all amounts due and
payable under Section 13.3 (but shall have no obligation to pay Termination
Value). In any case, the Owner Lessor shall be obligated to pay all amounts
payable under SECTION 13.3.
(b) If, within 30 days of the Termination Date set forth in
the Burdensome Termination Notice delivered pursuant to Section 13.1 (a), (i)
the Facility Lessee shall not have paid Termination Value in accordance with
clause (A) of Section 13.1 above, (ii) the Owner Lessor shall not have received
a Qualifying Cash Bid from the Facility Lessee, and (iii) the Owner Lessor shall
not have elected to retain the Owner Lessor's Interest, this Facility Lease
shall continue, the Facility Lessee shall lose its right to terminate this
Facility Lease for the Burdensome Buyout Event referred to in such
29
Burdensome Termination Notice, and any and all rights that the Owner Lessor
had immediately prior to the receipt of such Burdensome Termination Notice
shall remain in full force and effect.
SECTION 13.3 PROCEDURE FOR EXERCISE OF TERMINATION OPTION.
(a) (i) If the Facility Lessee shall have exercised its
option under SECTION 13.1 (a "BURDENSOME BUYOUT OPTION"), the Facility Lessee
shall, prior to and as a condition to the closing of the sale, pay (in
addition to the applicable amount set forth in SECTION 13.2(a), if any,
without duplication of any other amounts paid hereunder): (i) on an After-Tax
Basis, all reasonable documented out-of-pocket costs and expenses of the
Owner Lessor, the Owner Participant and, so long as the Lessor Notes are
outstanding and the Lien of the Lease Indenture has not been discharged, the
Security Agent; (ii) any Lessee Section 467 Loan Balance; and (iii) any other
payment under this Facility Lease (other than Basic Lease Rent or Renewal
Rent payable after the Termination Date) due and unpaid on the Termination
Date and any amounts due and unpaid, or accrued and unpaid, on the
Termination Date under any other Operative Document. Concurrently with the
payment of all sums specified in SECTION 13.2 and this SECTION 13.3(a), (A)
Allocated Rent and Basic Lease Rent or Renewal Rent, as the case may be, for
the Undivided Interest shall cease to accrue, (B) this Facility Lease, the
Facility Site Lease and the Facility Site Sublease shall terminate and the
Facility Lessee shall cease to have any liability to the Owner Lessor with
respect to the Undivided Interest, except for Supplemental Lease Rent and
other obligations surviving pursuant to the express terms of any Operative
Document, (C) the Owner Lessor will pay all amounts of principal and interest
and any other amounts owing under the Lessor Notes (excluding any Make Whole
Premium, if any, due and payable) to the Security Agent pursuant to SECTION
2.11 of the Lease Indenture, (D) in connection with any sale of the Owner
Lessor's Interest pursuant to SECTION 13.2, the Owner Lessor shall transfer
(by an appropriate instrument of transfer in form and substance reasonably
satisfactory to the Owner Participant and Facility Lessee and prepared by and
at the expense of the Facility Lessee) all of its right, title and interest
in and to the Owner Lessor's Interest to the Facility Lessee (or its
designee) or to the third party making the accepted Qualifying Cash Bid on an
"as is", "where is", "with all faults" basis, without representation or
warranty other than a warranty as to the absence of Owner Lessor Liens and a
warranty of the Owner Participant as to the absence of Owner Participant
Liens, (E) the Owner Lessor 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 sole
cost and expense of the Facility Lessee and (F) the Owner Lessor shall pay to
the Facility Lessee the Lessor Section 467 Loan Balance, if any, determined
as of such date. The obligation to make such payments shall be subject to the
provisions of SECTION 3.2(d). It shall be a condition precedent to the
termination of this Facility Lease pursuant to this SECTION 13.3, that the
Owner Lessor and the Facility Lessee shall each pay all amounts that each is
obligated to pay under this SECTION 13.3.
(b) If the Facility Lessee fails to consummate the termination
option under this SECTION 13 after giving notice of its intention to do so
(other than in consequence of failure of the Owner Lessor or the Owner
Participant to fulfill their respective obligations under this SECTION 13), (A)
this Facility Lease shall continue, (B) such failure to
30
consummate shall not constitute a default under this Facility Lease, (C) the
Facility Lessee will lose its right to terminate this Facility Lease pursuant
to this SECTION 13 as a result of such event or condition during the
remainder of the Facility Lease Term but the Facility Lessee shall in any
event (without relieving the Owner Lessor of any liability hereunder) pay the
amounts set forth in clause (ii) of the first sentence of SECTION 13.3(a) and
(D) the Owner Lessor shall pay to the Facility Lessee the Lessor Section 467
Loan Balance, if any, determined as of such date. The obligation to make such
payments shall be subject to the provisions of SECTION 3.2(d).
SECTION 13.4 ASSUMPTION OF THE LESSOR NOTES; SPECIAL LESSEE
TRANSFERS.
(a) Notwithstanding the foregoing provisions of SECTION 13.3
to the contrary, at the option of the Facility Lessee, if (i) the Facility
Lessee shall have executed and delivered an assumption agreement to assume the
Lessor Notes on a fully recourse basis, as permitted by and in accordance with
SECTION 2.12 of the Lease Indenture, (ii) all other conditions contained in such
SECTION 2.12 of the Lease Indenture shall have been satisfied, (iii) no Material
Lease Default or Lease Event of Default shall have occurred and be continuing
and shall not be cured by such assumption and (iv) the Facility Lessee shall
purchase the Undivided Interest pursuant to SECTION 13.1 OR 13.2, as the case
may be, then, the obligation of the Facility Lessee to pay Termination Value
shall be reduced by the outstanding principal amount of the Lessor Notes so
assumed by the Facility Lessee and the Owner Lessor shall have no further
obligation to prepay the outstanding principal and accrued interest on the
Lessor Notes to the extent of the Lessor Notes so assumed by the Facility
Lessee; PROVIDED, HOWEVER, for so long as the Lessor Notes are outstanding, if
the Facility Lessee shall have chosen to assume the Lessor Notes pursuant to
this SECTION 13.4(a), the Facility Lessee shall acquire the Undivided Interest
from the Owner Lessor subject to the Lien of the Lease Indenture.
(b) If the Facility Lessee assumes the Lessor Notes under
this SECTION 13, the Facility Lessee shall, on the Termination Date, also pay
(without duplication of any other amount paid hereunder) the Owner Lessor the
following: (i) on an After-Tax Basis, all reasonable out-of-pocket costs and
expenses of the Owner Lessor, the Owner Participant, the OP Guarantor, the
Security Agent, the Lender and the Bondholder Trustee; (ii) the Lessee Section
467 Loan Balance; (iii) any other payment under this Facility Lease (other than
Basic Lease Rent or Renewal Rent payable after the Termination Date) due and
unpaid on the Termination Date and any amounts due and unpaid, or accrued and
unpaid, on the Termination Date under any other Operative Document. The Owner
Lessor shall pay to the Facility Lessee the Lessor Section 467 Loan Balance, if
any, determined as of such date. The obligation to make such payment shall be
subject to the provisions of Section 3.2(d).
(c) Notwithstanding the foregoing provisions of SECTION 13.3
to the contrary, in the case of a Burdensome Buyout Event, the Facility Lessee
(or its designee) so long as the Facility Lessee shall remain liable under this
Facility Lease to pay Basic Lease Rent and all other payments hereunder in full,
and in all respects in accordance with SECTION XV of the Participation
Agreement, may purchase the Lessor Membership Interest or all of the outstanding
membership interests in the Owner Participant, in lieu of purchasing the
Undivided Interest pursuant to SECTIONS 13.1 AND 13.2 hereof, and keep this
Facility Lease (and Lessor Notes) in place in consideration of the amounts set
forth in SECTION XV of the Participation Agreement.
31
SECTION 14 TERMINATION FOR OBSOLESCENCE; PARTIAL RELEASE OF INTEREST
SECTION 14.1 TERMINATION. Upon at least six months' prior written
notice to the Owner Lessor, (which notice shall be accompanied by a
certification by the Facility Lessee's Manager as to one or more of the matters
described below), the Facility Lessee shall have the option, so long as no
Lease Event of Default shall have occurred and be continuing on the date of
such notice or on the proposed Obsolescence Termination Date (as defined
below), to terminate this Facility Lease on any Termination Date occurring on
or after the seventh anniversary of the Closing Date (the date of termination
selected by the Facility Lessee being the "Obsolescence Termination Date")
which proposed Obsolescence Termination Date shall be set forth in the
aforementioned notice, on the terms and conditions set forth in this Section
14, if the Facility is economically or technologically obsolete; as determined
by the general partner of the Facility Lessee in good faith, including, without
limitation, as a result of any change in applicable law, regulation or tariff,
any material change in the markets for the wholesale purchase and/or sale of
energy or any imposition by FERC or any other Governmental Authority having or
claiming jurisdiction over the Facility Lessee or the Facility of any
burdensome conditions or requirements including requiring capital improvements
to the Facility.
Notwithstanding the foregoing, the Facility Lessee may
elect to terminate this Facility Lease pursuant to this SECTION 14.1 and
exercise its other rights under this SECTION 14 only if (i) concurrently with
such election, it also elects to terminate all Other Facility Leases pursuant
to SECTION 14.1 thereof and (ii) concurrently with its termination hereunder,
it terminates all Other Facility Leases in accordance with SECTION 14 thereof.
SECTION 14.2 SOLICITATION OF OFFERS. If the Facility Lessee shall
give the Owner Lessor notice pursuant to SECTION 14.1 and the Owner Lessor
shall not have elected to retain the Undivided Interest pursuant to SECTION
14.3 below, the Facility Lessee shall (i) as non-exclusive agent for the
Owner Lessor, use commercially reasonable efforts to obtain bids from
unaffiliated third parties with the Facility Lessee and sell the Owner
Lessor's Interest on the Obsolescence Termination Date and (ii) covenant that
it will not sell the Owner Lessor's Interest to itself, an Affiliate or to
any third party with whom the Facility Lessee or its Affiliate has an
arrangement to use or operate the Facility to generate power for the Facility
Lessee's or any such Affiliate's benefit after the termination of this
Facility Lease. All of the proceeds of any such sale, will be for the account
of the Owner Lessor; PROVIDED that, so long as the Lessor Notes are
outstanding and the Lien of the Lease Indenture has not been discharged, the
proceeds of such sale shall be paid directly to the Security Agent. At least
120 days prior to the Obsolescence Termination Date, the Facility Lessee
shall certify to the Owner Lessor and, so long as the Lessor Notes are
outstanding and the Lien of the Lease Indenture has not been discharged, the
Security Agent, the Lender and the Bondholder Trustee 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 of its Affiliates or any third party with
whom it or any such Affiliate has an arrangement to use or operate the
Facility to generate power for the benefit of the Facility Lessee or such
Affiliate after the termination of this Facility Lease)
32
submitting such bid or offer. The Owner Lessor shall also have the right, but
not the obligation, to obtain bids for the sale of the Owner Lessor's
Interest either directly or through agents other than the Facility Lessee.
SECTION 14.3 RIGHT OF OWNER LESSOR TO RETAIN THE UNDIVIDED
INTEREST. The Owner Lessor may irrevocably elect to retain, rather than sell,
the Undivided Interest by giving notice to the Facility Lessee at least 90
days prior to the Obsolescence Termination Date. If the Owner Lessor elects
to retain the Undivided Interest pursuant to this SECTION 14.3, on the
Obsolescence Termination Date the Facility Lessee shall pay to the Owner
Lessor the amounts described in clauses (i) through (iii) of SECTION 14.4
below. Concurrently with the payment of all sums required to be paid pursuant
to this SECTION 14.3 or SECTION 14.4 below, (i) Allocated Rent and Basic
Lease Rent or Renewal Rent, as the case may be, for the Undivided Interest
shall cease to accrue, (ii) this Facility Lease and the Facility Site
Sublease shall terminate and the Facility Lessee shall cease to have any
liability or obligations hereunder or any other Operative Document with
respect to the Undivided Interest, except for Supplemental Lease Rent and
other obligations surviving pursuant to the express terms of the Operative
Documents, (iii) the Owner Lessor shall pay all outstanding principal and
accrued interest on the Lessor Notes and, to the extent actually received
from the Facility Lessee as Supplemental Lease Rent, all other amounts due
under the Lease Indenture including the reimbursement of any fees or expenses
of the Security Agent, (iv) the Facility Lessee shall return the Undivided
Interest to the Owner Lessor in accordance with SECTION 5.1 hereof and (v)
only with respect to the termination option of the Owner Lessor under Section
14.4 , the Owner Lessor will transfer (by an appropriate instrument of
transfer in form and substance reasonably satisfactory to the Owner Lessor
the Owner Lessor's Interest under Section 14.4 to the purchaser on "as is",
"where is", "with all faults" basis, without representations or warranties
other than a warranty as to the absence of Owner Lessor's Liens and a
warranty from the Owner Participant as to the absence of Owner Participant's
Liens, (vi) the Owner Lessor shall execute and deliver appropriate releases
and other documents or instruments necessary or desirable to effect the
foregoing and (vii) the Owner Lessor shall pay to the Facility Lessee the
Lessor Section 467 Loan Balance, if any, determined as of such date. The
obligation to make such payments shall be subject to the provisions of
SECTION 3.2(D). It shall be a condition precedent to the termination of this
Facility Lease pursuant to this SECTION 14.3, that the Owner Lessor and the
Facility Lessee shall each pay all amounts that each is obligated to pay
under this SECTION 14.3.
SECTION 14.4 PROCEDURE FOR EXERCISE OF TERMINATION OPTION. If the
Owner Lessor has not elected to retain the Undivided Interest in accordance
with SECTION 14.3 hereof, on the Obsolescence Termination Date, the Owner
Lessor shall sell the Owner Lessor's Undivided Interest under this SECTION
14.4 and its interest in the Ground Interest under SECTION 6 of the Facility
Site Lease and SECTION 6 of the Facility Site Sublease to the bidder or
bidders pursuant to SECTION 14.2 hereof (which shall not be the Facility
Lessee, any Affiliate thereof or any third party with whom the Facility
Lessee or any such Affiliate has an arrangement to use or operate the
Facility to generate power for the benefit of the Facility Lessee or such
Affiliate after the termination of this Facility Lease), that shall have
submitted the highest cash bid or bids with respect to the Owner Lessor's
Interest and the Facility Lessee shall certify to the Owner Lessor, the Owner
33
Participant and, so long as the Lien of the Lease Indenture shall not have
been terminated or discharged, the Security Agent that such buyer is not the
Facility Lessee, any Affiliate thereof or any third party with whom it or an
Affiliate has an arrangement with respect to the use or operation of the
Facility after the termination of this Facility Lease. On the Obsolescence
Termination Date, the Facility Lessee shall pay to the Owner Lessor the
excess, if any, of the applicable Termination Value determined as of such
Obsolescence Termination Date over the net proceeds from the sale of the
Undivided Interest paid to or retained by the Owner Lessor plus (without
duplication) (i) on an After-Tax Basis all reasonable out-of-pocket costs and
expenses incurred by the Owner Lessor, the Owner Participant, the OP
Guarantor and, so long as the Lessor Notes are outstanding and the Lien of
the Lease Indenture has not been discharged, Security Agent in connection
therewith (excluding the reasonable fees and costs of any broker unless
engaged by the Facility Lessee on the Owners Lessor's behalf) plus (ii) any
Lessee Section 467 Loan Balance plus (iii) any other payment of the Facility
Lessee (other than Basic Lease Rent or Renewal Rent payable after the
Obsolescence Termination Date) under this Facility Lease due and unpaid on
the Obsolescence Termination Date and any amount due and unpaid, or accrued
and unpaid, on the Obsolescence Termination Date under any Operative
Document. Upon payment of all amounts due under this section, the Owner
Lessor shall pay to the Facility Lessee the Lessor Section 467 Loan Balance,
if any, determined as of such date. The obligation to make such payments
shall be subject to the provisions of SECTION 3.2(d). Unless the Owner
Lessor, with the consent of the Facility Lessee, shall have entered into a
legally binding contract to sell the Owner Lessor's Interest, the Facility
Lessee may, at its election, revoke its notice of termination by giving
notice to the Owner Lessor at least 30 days prior to the proposed
Obsolescence Termination Date, in which event this Facility Lease shall
continue with respect to the Undivided Interest and the Facility Lessee shall
have the right to later reissue a notice to terminate pursuant to SECTION
14.1; PROVIDED that the Facility Lessee may give notice that it is exercising
its Termination Option for obsolescence no more than once in any five (5)
year period. The Owner 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 Owner Lessor's Interest
other than, if the Owner Lessor has not elected to retain the Owner Lessor's
Interest, to transfer the Owner Lessor's Interest in accordance with this
SECTION 14.4. It shall be a condition of the Owner Lessor's obligation to
consummate a sale of the Owner Lessor's 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
with respect to the Undivided Interest in full force and effect in accordance
with its terms (without prejudice to the Facility Lessee's right to exercise
its rights under this SECTION 14); PROVIDED, HOWEVER, that the Facility
Lessee shall in any event pay, without duplication of any amounts payable
hereunder, the amounts set forth in clause (i) of this SECTION 14.4.
SECTION 15 LEASE RENEWAL
SECTION 15.1 RENEWAL LEASE TERMS.
(a) Not earlier than 42 months prior to, but not less than 18
months prior
34
to, the expiration of the Basic Lease Term, so long as no Material Lease
Default or Lease Event of Default shall have occurred and be continuing on
the date any notice is given pursuant to this SECTION 15.1(a) and no Material
Lease Default or Lease Event of Default shall have occurred and be continuing
on the date the lease renewal proposed pursuant to this SECTION 15.1(a) is to
commence, the Facility Lessee may deliver to the Owner Lessor a notice (which
notice may be in addition to a notice of the Facility Lessee's interest in
electing a FMV Renewal Lease Term under SECTION 15.2) of the Facility
Lessee's interest in renewing this Facility Lease at the end of the Basic
Lease Term for a term (the "FIRST RENEWAL TERM") selected by the Facility
Lessee, which term shall satisfy the following criteria: (i) the aggregate of
the proposed First Renewal Term and the Basic Lease Term shall be no greater
than 75% of the estimated remaining economic useful life of the Facility as
of the Closing Date, as determined in an appraisal to be conducted at such
time and (ii) on the last date of such proposed First Renewal Term, the
estimated Fair Market Sales Value of the Facility is expected to be no less
than 20% of the Purchase Price (without taking into account inflation or
deflation subsequent to the Closing Date as determined in an appraisal to be
conducted at such time). Items (i) and (ii) of the immediately preceding
sentence shall be determined by an Independent Appraiser selected by the
Facility Lessee and reasonably acceptable to the Owner Lessor. The Facility
Lessee shall pay all expenses and fees of such Independent Appraiser. The
Facility Lessee may withdraw any notice given in accordance with this SECTION
15.1(a) by written notice of such withdrawal to the Owner Lessor, on or prior
to the date which is 18 months before the commencement of the proposed First
Renewal Term.
(b) Not earlier than 42 months prior to, but not less than
18 months prior to, the expiration of the First Renewal Term, so long as no
Material Lease Default or Lease Event of Default shall have occurred and be
continuing on the date any notice is given pursuant to this SECTION 15.1(b)
and no Material Lease Default or Lease Event of Default shall have occurred
and be continuing on the date the lease renewal proposed pursuant to this
SECTION 15.1(b) is to commence, the Facility Lessee may deliver to the Owner
Lessor a notice (which notice may be in addition to a notice of the Facility
Lessee's interest in electing a FMV Renewal Lease Term under SECTION 15.2) of
the Facility Lessee's interest in renewing this Facility Lease at the end of
the First Renewal Term for a term (the "SECOND RENEWAL TERM") selected by the
Facility Lessee, which term shall satisfy the following criteria: (i) the
aggregate of the proposed Second Renewal Term, the First Renewal Term and the
Basic Lease Term shall be no greater than 75% of the estimated remaining
economic useful life of the Facility as of the Closing Date, as determined in
an appraisal to be conducted at such time and (ii) on the last date of such
proposed Second Renewal Term, the estimated Fair Market Sales Value of the
Facility is expected to be no less than 20% of the Purchase Price (without
taking into account inflation or deflation subsequent to the Closing Date as
determined in an appraisal to be conducted at such time). Items (i) and (ii)
of the immediately preceding sentence shall be determined by an Independent
Appraiser selected by the Facility Lessee and reasonably acceptable to the
Owner Lessor. The Facility Lessee shall pay all expenses and fees of such
Independent Appraiser. The Facility Lessee may withdraw any notice given in
accordance with this SECTION 15.1(b) by written notice of such withdrawal to
the Owner Lessor on or prior to 18 months before commencement of the proposed
Second Renewal Lease Term.
35
Notwithstanding the foregoing, the Facility Lessee may
elect to renew this Facility Lease pursuant to subsection (a) or (b) of this
SECTION 15.1 and exercise its other rights under such subsections only if (i)
concurrently with such election, the Facility Lessee also elects to renew
each Other Facility Lease pursuant to subsection (a) or (b), as applicable,
of SECTION 15.1 thereof and (ii) concurrently with the renewal of this
Facility Lease, the Facility Lessee renews each Other Facility Lease in
accordance with subsection (a) or (b), as applicable, of SECTION 15.1 thereof.
SECTION 15.2 FAIR MARKET VALUE RENEWAL LEASE TERMS. Not earlier
than 42 months prior to, but not less than 18 months prior to, the expiration
of the Basic Lease Term or any Renewal Lease Term, so long as no Material
Lease Default or Lease Event of Default shall have occurred and be continuing
on the date any notice is given pursuant to this SECTION 15.2 and no Material
Lease Default or Lease Event of Default shall have occurred and be continuing
on the date the lease renewal proposed pursuant to this SECTION 15.2 is to
commence, the Facility Lessee may deliver to the Owner Lessor a notice (which
notice may be in addition to a notice of the Facility Lessee's interest in
electing the First Renewal Term or the Second Renewal Term, as applicable) of
the Facility Lessee's interest in renewing this Facility Lease for a term
(each such term, a "FMV RENEWAL LEASE TERM") commencing upon expiration of
the Basic Lease Term or the Renewal Lease Term otherwise expiring and
extending for no less than one year and no more than five years; PROVIDED
that, no such FMV Renewal Lease Term shall extend beyond the first date
(rounded to the last day of the immediately preceding whole year) as of which
10% or less of the estimated remaining economic useful life of the Facility
as of the Closing Date would remain (such estimated remaining economic useful
life being measured as of the Closing Date) and on or after which the
estimated Fair Market Sales Value of the Facility is expected to be less than
10% of the Purchase Price (in each case, as set forth in the most recent of
(a) the Closing Appraisal, (b) the appraisal obtained in connection with the
Facility Lessee's option to elect the First Renewal Term (the "FIRST RENEWAL
OPTION") and (c) the appraisal obtained in connection with the Facility
Lessee's option to elect the Second Renewal Term (the "SECOND RENEWAL
OPTION.") The Facility Lessee may withdraw any notice given in accordance
with this SECTION 15.2 by written notice of such withdrawal to the Owner
Lessor on or prior to 18 months before commencement of the proposed Fair
Market Value Renewal Lease Term.
Notwithstanding the foregoing, the Facility Lessee may
elect to renew this Facility Lease pursuant to this SECTION 15.2 and exercise
its other rights under such Section only if (i) concurrently with such
election, the Facility Lessee also elects to renew each Other Facility Lease
pursuant to SECTION 15.1 thereof and (ii) concurrently with the renewal of
this Facility Lease, the Facility Lessee renews each Other Facility Lease in
accordance with SECTION 15.1 thereof.
SECTION 15.3 RENEWAL RENT AND TERMINATION VALUE FOR RENEWAL
LEASE TERM. During each Renewal Lease Term, Renewal Rent shall be paid on the
Rent Payment Dates. The installment of Renewal Rent payable on each such Rent
Payment Date during the First Renewal Term shall be equal to the lesser of
(i) the Fair Market Rental Value of the Undivided Interest (as determined at
the commencement of the First Renewal Lease Term) and (ii) 75% of the average
Basic Lease Rent payable with respect to the Basic
36
Lease Term. The installment of Renewal Rent payable on each such Rent Payment
Date during the Second Renewal Term shall be equal to the lesser of (i) the
Fair Market Rental Value of the Undivided Interest (determined at the
commencement of the Second Renewal Term) and (ii) 75% of the average Basic
Lease Rent payable with respect to the Basic Lease Term. The installment of
Renewal Rent payable on each such Rent Payment Date during the FMV Renewal
Lease Term shall be equal to the Fair Market Rental Value of the Undivided
Interest at the end of the applicable Lease Term (determined not more than 36
months prior to the commencement of such FMV Renewal Lease Term).
SECTION 15.4 DETERMINATION OF FAIR MARKET RENTAL VALUE. The Fair
Market Rental Value of the Undivided Interest as of the commencement of any
Renewal Lease Term shall be determined by agreement of the Owner Lessor and
the Facility Lessee within six months after receipt by the Owner Lessor of
the notice from the Facility Lessee of its election to renew pursuant to
SECTION 15.1 or 15.2 (but not more than 36 months before the commencement of
such Renewal Lease Term) or, if they shall fail to agree within such six
month period, shall be determined by an appraisal conducted by an Independent
Appraiser according to the Appraisal Procedure. The Facility Lessee shall be
responsible for such Independent Appraiser's fees and expenses.
SECTION 15.5 TERMINATION VALUE DURING RENEWAL LEASE TERMS. The
amounts which are payable during any Renewal Lease Term in respect of
Termination Value shall be determined on the basis of the Fair Market Sales
Value of the Undivided Interest as of the commencement of such Renewal Lease
Term, amortized on a straight-line basis over such Renewal Lease Term to the
projected Fair Market Sales Value of the Facility as of the expiration of
such Renewal Lease Term, as such Fair Market Sales Value in each case is
determined prior to the commencement of such Renewal Lease Term.
SECTION 16 EVENTS OF DEFAULT
Each of the following events shall constitute a "Lease
Event of Default" 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 Authority):
(a) the Facility Lessee shall fail to make any payment of
Basic Lease Rent, Renewal Rent, or Termination Value, when due, and such
failure shall continue unremedied for five (5) Business Days; or
(b) the Facility Lessee shall fail to make any other
payment required to be made under any Operative Document (other than Excepted
Payments, unless the Owner Participant shall have declared a default with
respect thereto) when due, and such failure shall have continued unremedied
for 10 days after receipt by the Facility Lessee of written notice of such
failure from the Owner Participant, the Owner Lessor or, so long as the
Lessor Notes are outstanding and the Lien of the Lease Indenture has not been
discharged, the Security Agent; or
(c) the Facility Lessee shall fail to maintain insurance in
the amounts and
37
on the terms set forth in the Operative Documents, including SECTION 11
hereof; or
(d) the Facility Lessee shall fail to perform or observe in
all material respects (i) the covenant set forth in SECTIONS 6.1 and 5.13 of
the Participation Agreement, or (ii) if such failure is in respect of any
borrowed money, the covenant set forth in SECTION 6.3 of the Participation
Agreement; or
(e) the Facility Lessee shall fail to perform or observe
any other covenant set forth in the Participation Agreement, this Facility
Lease, any Project Document or in any other Operative Document (other than
any of the covenants referred to in clauses (a), (b), (c) and (d) of this
SECTION 16) , in any material respect and such failure shall continue
unremedied for 30 days after receipt by the Facility Lessee of written notice
thereof from the Owner Participant, Owner Lessor, or, so long as the Lessor
Notes are outstanding and the Lien of the Lease Indenture has not been
discharged, the Security Agent; PROVIDED, HOWEVER, that for any failure other
than a failure to comply with any covenant set forth in Article 6 of the
Participation Agreement if such failure cannot be remedied within such 30-day
period, then the period within which to remedy such failure shall be extended
up to an additional 180 days, so long as the Facility Lessee diligently
pursues such remedy and such failure is reasonably capable of being remedied
within such additional 180-day period; PROVIDED, FURTHER, that in the case of
the Facility Lessee's obligation set forth in clause (b) of SECTION 7.1, to
the extent and for so long as a test, challenge, appeal or proceeding to
review with respect to such non-compliance shall be prosecuted in good faith
by the Facility Lessee, the failure by the Facility Lessee to comply with the
requirements thereof shall not constitute a Lease Event of Default if such
test, challenge, appeal or proceeding shall not involve any (i) material risk
of foreclosure, sale, forfeiture or loss of, or imposition of a Lien (other
than a Permitted Encumbrance) on, the Facility, the Undivided Interest or the
Facility Site or the impairment of the use, operation or maintenance of the
Facility or the Facility Site in any material respect, (ii) risk of criminal
liability being incurred by the Owner Lessor, the Owner Participant or the OP
Guarantor, or (so long as the Lessor Notes are outstanding and the Lien of
the Lease Indenture has not been discharged) the Security Agent, the Lender
or the Bondholder Trustee or any of their respective Affiliates, or (iii)
material risk of any material adverse effect on the interests of the Owner
Lessor, the Owner Participant or the OP Guarantor, or (so long as the Lessor
Notes are outstanding and the Lien of the Lease Indenture has not been
discharged) the Security Agent or any of their respective Affiliates
(including, without limitation, subjecting any such Person to regulation as a
public utility under any Requirement of Law); and PROVIDED, FURTHER, also in
the case of the Facility Lessee's obligation set forth in clause (b) of
SECTION 7.1, if such noncompliance is not of a type that can be immediately
remedied, the failure to comply shall not be a Lease Event of Default if the
Facility Lessee is taking all reasonable action to remedy such noncompliance
and if, and only if, such noncompliance shall not involve any danger
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 with respect to such noncompliance shall not extend
beyond the date that is 36 months prior to the scheduled expiration of the
Basic Lease Term or any Renewal Lease Term then in effect or already
irrevocably elected by the Facility Lessee; or
38
(f) any representation or warranty of the Facility Lessee
set forth in the Operative Documents (other than a tax representation set
forth in the Tax Indemnity Agreement) shall prove to have been incorrect in
any material respect when made or misleading in any material respect when
made because the omission to state a material fact continues to be material
and the circumstances upon which such breach of representation or warranty is
based continue to be material and unremedied for a period of 30 days after
receipt by the Facility Lessee of written notice thereof from the Owner
Participant, Owner Lessor, or, so long as the Lessor Notes are outstanding
and the Lien of the Lease Indenture has not been discharged, the Security
Agent; PROVIDED, HOWEVER, that if such condition cannot be remedied within
such 30-day period, then the period within which to remedy such condition
shall be extended by up to an additional 60 days, so long as the Facility
Lessee diligently pursues such remedy, such condition is reasonably capable
of being remedied within such additional 60-day period; or
(g) the Facility Lessee, ME Westside, Chestnut Ridge,
Finance Co., Property Co. or EMHC 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 within 60 days,
any such relief or the appointment of or taking possession by any such
official in any voluntary 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) make a general assignment for the
benefit of creditors; or
(h) an involuntary case or other proceeding shall be
commenced against the Facility Lessee, ME Westside, Chestnut Ridge, Finance
Co., Property Co. or EMHC 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 such entity, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 90 days; or
(i) default under any bond, debenture, note or other
evidence of Indebtedness (but excluding obligations arising under the
Operative Documents and non-recourse Indebtedness) for money borrowed by the
Facility Lessee under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness
of the Facility Lessee, whether such indebtedness now exists or shall
hereafter be created, which Indebtedness is in an aggregate principal amount
exceeding $5,000,000 at all other times and which default 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, without such
Indebtedness having been discharged, or such acceleration having been
rescinded or annulled; or
(j) any of the Security Documents to which the Facility
Lessee, Owner
39
Lessor, Owner Participant, the OP Guarantor or (so long as the Lessor Notes
are outstanding and the Lien of the Lease Indenture has not been discharged)
the Security Agent is a party are declared unenforceable, are terminated, or
cease to be in full force and effect; or
(k) any Reportable Event shall occur; (ii) there shall be
initiated any action by the Facility Lessee, the Facility Sublessee or any
member of the Controlled Group to terminate a Plan; (iii) there shall be
initiated proceedings by the PBGC under SECTION 4042 of ERISA to terminate a
Plan or to appoint a trustee to administer a Plan; (iv) any Plan shall incur
an "accumulated funding deficiency" (as defined in SECTION 412 of the Code or
SECTION 302 of ERISA), unless waived; (v) the imposition upon the Facility
Lessee, the Facility Sublessee or any member of the Controlled Group or any
Plan fiduciary of a material liability resulting from either the engagement
by any such party in a transaction prohibited under SECTION 4975 of the Code
or SECTION 406 of ERISA or any other violation of Title I of ERISA; (vi) the
Facility Lessee, the Facility Sublessee or any member of the Controlled Group
suffers a partial or complete withdrawal from a Multiemployer Plan, which,
with respect to clauses (i) through (vi) above, results in a liability,
individually or in the aggregate, of at least $5,000,000; or
(l) judgments or orders for the payment of money against
the Facility Lessee, which judgments or orders, as the case may be, are in
excess of $1,000,000 in the aggregate (taking into account any insurance
proceeds payable under a policy where the insurer has accepted coverage
without reservation) and which are not vacated, discharged or effectively
stayed or bonded within 60 days from the entry thereof; or
(m) except as permitted by Section 6.1 of the Participation
Agreement, EME shall, without the prior written consent of the Owner Lessor,
the Owner Participant and, so long as the Lessor Notes are outstanding and the
Lien of the Lease Indenture shall have been discharged or terminated, the
Lender or the Bondholder Trustee, cease to own directly or indirectly in excess
of 50% of the Ownership Interests in the Facility Lessee; provided, however,
that the consent of the Lender or Bondholder Trustee shall not be required if,
at such time either (i) the Fundco Bonds are rated at least BBB- by S&P, Baa3
by ▇▇▇▇▇'▇, and BBB- by Duff & ▇▇▇▇▇▇, and a reaffirmation of such ratings is
obtained, or (ii) the reduction of EME's interest in the Facility Lessee has
been approved by holders of more than 66 2/3% of the holders of the Lessor
Notes; or
(n) any of the Facility Site Lease, the Facility Site
Sublease, or any other material Project Document shall have been cancelled or
terminated, or shall otherwise cease to be in full force and effect unless,
in any such case, alternative arrangements satisfactory to the Owner Lessor,
the Owner Participant and, so long as the Lessor Notes are outstanding and
the Lien of the Lease Indenture has not been released or discharged, the
Security Agent, the Lender and the Bondholder Trustee have been made and such
parties have so acknowledged in writing; or
(o) at any time, funds on deposit in any Account are used
by or at the direction of the Facility Lessee other than for the purposes
expressly specified in the Operative Documents; or
(p) the Amended and Restated Guarantee and Collateral
Agreement or the Pledge and Collateral Agreement, once executed and
delivered, shall for any reason, cease to be in full force and effect; or
40
(q) at any time, the Facility Lessee shall fail to remain
exempt from regulation under PUHCA or to remain exempt from regulation under
state utility law which would cause a Material Adverse Effect (or would
materially adversely affect any of the Lease Financing Parties); or
(r) any material Operative Document to the which the
Facility Lessee or any of its Affiliates is a party is declared unenforceable
against the Facility Lessee or any of its Affiliates, is terminated by the
Facility Lessee or any of its Affiliates, or ceases to be in full force and
effect in respect of the Facility Lessee or any of its Affiliates (in each
case, other than in accordance with their terms); or
(s) default under any of the Other Facility Leases.
SECTION 17 REMEDIES
SECTION 17.1 REMEDIES FOR LEASE EVENT OF DEFAULT. Upon the
occurrence of any Lease Event of Default and at any time thereafter so long
as the same shall be continuing, the Owner Lessor may, at its option, declare
this Facility Lease to be in default by written notice to the Facility Lessee
(provided, that this Facility Lease shall automatically be in default without
the need for giving any notice upon the occurrence of a Lease Event of
Default in clause (g) or (h) of SECTION 16) in respect of the Facility
Lessee; and at any time thereafter, so long as the Facility Lessee shall not
have remedied all outstanding Lease Events of Default, the Owner Lessor may,
at the Facility Lessee's sole cost and expense, do one or more of the
following as the Owner Lessor in its sole discretion shall elect, to the
extent permitted by, and subject to compliance with any mandatory
Requirements of 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 of the
applicable covenants and terms of this Facility Lease or to recover damages
for breach thereof;
(b) by notice in writing to the Facility Lessee, terminate
this Facility Lease 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 Owner Lessor may demand that the
Facility Lessee, and the Facility Lessee shall, upon written demand of the
Owner Lessor and at the Facility Lessee's sole cost and expense, forthwith
return possession of the Undivided Interest to the Owner 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 Owner 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 Owner Lessor's Interest at public or private
sale, as the Owner 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 Owner Lessor
elects to exercise its rights under said paragraph and by Requirements of
Law), in which event (i) Allocated Rent shall cease to accrue and (ii) the
Facility
41
Lessee's obligation to pay Basic Lease Rent or Renewal Rent hereunder due for
any periods subsequent to the date of such sale shall terminate (except to
the extent that Basic Lease Rent or Renewal Rent is to be included in
computations under paragraph (f) below if the Owner Lessor elects to exercise
its rights under said paragraph);
(d) hold, keep idle or lease to others the Owner Lessor's
Interest as the Owner 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 Lease Rent or Renewal 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 Owner Lessor from leasing the Undivided
Interest to any Person other than the Facility Lessee;
(e) whether or not the Owner Lessor shall have exercised, or
shall thereafter at any time exercise, any of its rights under paragraph (b)
above with respect to the Undivided Interest, the Owner 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 Owner Lessor, and the Facility Lessee shall pay to
the Owner Lessor, on the Termination Date specified in such notice any due and
unpaid, or accrued and unpaid, Basic Lease Rent or Renewal Rent due through the
Termination Date, any Supplemental Lease 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 Basic Lease Rent or Renewal 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 Owner Lessor's
Interest as of the Termination Date specified in such notice; or (ii) an amount
equal to the excess, if any, of Termination Value computed as of the
Termination Date specified in such notice over the Fair Market Rental Value of
the Owner Lessor's Interest until the end of the Basic Lease Term or the then
current Renewal Lease Term, after discounting such Fair Market Rental Value
semi-annually to present value as of the Termination Date specified in such
notice at a rate equal to the Discount Rate; or (iii) an amount equal to the
Termination Value computed as of the Termination Date specified in such notice
provided that upon payment of such Termination Value by the Facility Lessee
pursuant to this clause (iii) and all other Rent then due and unpaid, or
accrued and unpaid by the Facility Lessee and the payment of the Lessee Section
467 Loan Balance as of the Termination Date, the Owner Lessor shall proceed to
exercise its commercially reasonable efforts promptly to sell the Undivided
Interest at public or private sale and shall pay over to the Facility Lessee
upon consummation of any such sale the net proceeds of such sale (after
deducting from such proceeds all costs and expenses incurred by the Owner
Lessor in connection therewith and all other amounts that may become payable to
the Owner Lessor, the Security Agent or any other Lease Financing Party) and
the Facility Lessee waives all claims against the Owner Lessor and the Owner
Participant in connection with the sale of the Undivided Interest or the use of
commercially reasonable efforts pursuant to this proviso; PROVIDED FURTHER that
in lieu of
42
paying an amount equal to the Termination Value pursuant to clause (iii) above,
the Facility Lessee may make a rejectable offer in writing to the Owner Lessor
(within 5 days following the Facility Lessee's receipt of notice by the Owner
Lessor specifying a Termination Date) (an "OFFER") to purchase the Undivided
Interest at a purchase price equal to or greater than Termination Value (the
"OFFER PRICE"). If the Owner Lessor rejects such Offer in writing, the Facility
Lessee shall remain liable to pay Termination Value pursuant to clause (iii)
above, all other Rent then due and unpaid, or accrued and unpaid, by the
Facility Lessee and the Lessee Section 467 Loan Balance provided that (1) the
Facility Lessee shall have no obligation to pay the costs and expenses incurred
by the Owner Lessor solely in connection with any sale of the Undivided
Interest and (2) the Owner Lessor shall proceed to exercise its best efforts
promptly to sell the Undivided Interest at public or private sale and shall pay
over to the Facility Lessee upon consummation of any such sale the proceeds of
such sale, but not to exceed the sum of Termination Value paid by the Facility
Lessee plus interest at the Applicable Rate from the Termination Date until the
date of payment of such proceeds to the Facility Lessee. If the Facility Lessee
has made an Offer and the Owner Lessor accepts such Offer or fails to respond
to such Offer within two (2) Business Days prior to the date on which the
Facility Lessee would have been required to pay Termination Value pursuant to
clause (iii) above, the Facility Lessee shall pay to the Owner Lessor the Offer
Price on or before the Termination Date and upon such payment of the Offer
Price and all other Rent then due and unpaid, or accrued and unpaid, by the
Facility Lessee and the Lessee Section 467 Loan Balance on the Termination
Date, the Facility Lessee shall no longer remain liable to pay Termination
Value or other amounts pursuant to clause (iii) above and the Owner Lessor
shall forthwith transfer to the Facility Lessee (or its designee) in accordance
with this SECTION 17.1(e) hereof and SECTION 6 of the Facility Site 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 Owner Lessor Liens
accompanied by a warranty of the Owner Participant as to the absence of the
Owner Participant Liens, all of its interest in the Owner Lessor's Interest and
execute, acknowledge and deliver, and record and file (as appropriate),
appropriate releases, including a release from the Lien of the Lease Indenture,
and all other documents or instructions necessary or desirable to effect the
foregoing all in form and substance reasonably satisfactory to the Owner Lessor
and at the cost and expense of the Facility Lessee, and upon payment of such
amounts due under this paragraph (e), (x) Allocated Rent shall cease to accrue,
(y) this Facility Lease, and the Facility Lessee's obligation to pay Basic
Lease Rent or Renewal Lease Rent hereunder due for any periods subsequent to
the date of such payment shall terminate and (z) the Owner Lessor shall pay to
the Facility Lessee the Lessor Section 467 Loan Balance, if any, determined as
of such date. The obligation to make such payments shall be subject to the
provisions of SECTION 3.2(d); and
(f) if the Owner Lessor shall have sold the Owner Lessor's
Interest pursuant to paragraph (c) above, the Owner Lessor may, if it shall so
elect, demand that the Facility Lessee pay to the Owner Lessor, and the Facility
Lessee shall pay to the Owner Lessor, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Basic Lease Rent or Renewal Rent
due for any periods subsequent to the date of such sale), an amount equal to (i)
any unpaid Basic Lease Rent or Renewal Rent due and unpaid through the date of
such sale plus (ii) the Lessee Section 467 Loan Balance plus (iii) the amount,
if any, by which the Termination Value computed as of the Termination
43
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 Lease Rent or Renewal
Rent for any periods subsequent to the date of such payment shall terminate,
Allocated Rent shall cease and the Owner Lessor shall pay to the Facility
Lessee the Lessor Section 467 Loan Balance, if any, determined as of such
date. The obligation to make such payments shall be subject to the provisions
of SECTION 3.2(d). In addition, the Facility Lessee shall be liable, except
as otherwise provided above, for (i) any and all unpaid Basic Lease Rent or
Renewal Rent due hereunder before, or during the exercise of any of the
foregoing remedies, and (ii) on an After-Tax Basis, for legal fees and other
costs and expenses incurred by reason of the occurrence of any Lease Event of
Default or the exercise of the Owner 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 hereof, including, without limitation, any costs
and expenses incurred by the Owner Lessor, the Owner Participant and the
Lease Indenture Trustee 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.
(g) upon the occurrence and during the continuance of a Rent Default
Event, the Owner Lessor may from time to time withdraw amounts from the
Equity Account pursuant to Section 7.1(g) of the Amended Security Deposit
Agreement and subject to the posting of an Equity Letter of Credit required
thereunder.
SECTION 17.2 CUMULATIVE REMEDIES. The remedies in this Facility
Lease provided in favor of the Owner Lessor shall not be deemed exclusive,
but shall be cumulative and shall be in addition to all other remedies in the
Owner Lessor's favor existing at law or in equity; and the exercise or
beginning of exercise by the Owner Lessor of any one or more of such remedies
shall not preclude the simultaneous or later exercise by the Owner Lessor of
any or all of such other remedies. To the extent permitted by Requirements of
Law, the Facility Lessee hereby waives any rights now or hereafter conferred
by statute or otherwise which may require the Owner Lessor to sell, lease or
otherwise use the Undivided Interest or any Component in mitigation of Owner
Lessor's damages as set forth in this SECTION 17 or which may otherwise limit
or modify any of Owner 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
Owner Lessor upon any breach or default by the Facility Lessee under this
Facility Lease shall impair any such right, power or remedy of the Owner
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 SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS
44
Any moneys received by the Owner Lessor or the Security
Agent pursuant to SECTION 10.3, 10.5 OR 11.2 shall, until paid to the
Facility Lessee as provided in accordance with such Sections, be held by the
Owner Lessor or the Security Agent, as the case may be, as security for the
Facility Lessee's obligations under this Facility Lease and be invested in
Permitted Investments by the Owner Lessor or the Security Agent, as the case
may be, at the sole risk of the Facility Lessee, from time to time as
directed in writing by the Facility Lessee 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 Lessee in the same
manner as the principal invested.
SECTION 19 RIGHT TO SUBLEASE
SECTION 19.1 SUBLEASE. The Facility Lessee shall have the right
to sublease the Undivided Interest without the consent of the Owner Lessor,
the Owner Participant or the Lease Indenture Trustee if:
(a) the sublessee is a United States Person within the
meaning of SECTION 7701(a)(30) of the Code that (i) is a solvent corporation,
partnership, business trust, limited liability company or other person or
entity not then subject to bankruptcy proceedings; and (ii) is not involved
in material pending or unresolved litigation with the Owner Participant or
any of its Affiliates; and (iii) is, or its operating, maintenance and use
obligations under the sublease are guaranteed by, or such obligations are
contracted to be performed by, an experienced operator of United States
based, coal-fired electric generating facilities similar to the Facility;
(b) The Owner Lessor, the Owner Participant, so long as the
Lessor Notes are outstanding, the Security Agent and the Bondholder Trustee
shall have received an opinion of counsel, which opinion of counsel shall be
reasonably acceptable to the recipients thereof, to the effect that all
material regulatory approvals required to enter into the sublease have been
obtained;
(c) the sublease does not extend beyond the scheduled
expiration of the Basic Lease Term or any Renewal Lease Term then in effect
or irrevocably elected by the Facility Lessee (and may be terminated upon
early termination of this Facility Lease) and is expressly subject and
subordinate to this Facility Lease;
(d) all terms and conditions of this Facility Lease and the
other Operative Documents and Project Documents remain in effect and the
Facility Lessee remains fully and primarily liable for its obligations under
this Facility Lease, the other Operative Documents and Project Documents;
(e) no Lease Default or Lease Event of Default shall have
occurred and be continuing or be created as a result of such sublease;
(f) the sublease prohibits further assignment or subletting;
45
(g) the sublease requires the sublessee to operate and
maintain the Undivided Interest (or to cause the Undivided Interest to be
operated and maintained) in a manner consistent with this Facility Lease;
(h) the sublease does not cause the Facility to become
"tax-exempt use property" within the meaning of SECTION 168(h) of the Code
(unless the Facility Lessee shall make a payment to the Owner Participant
contemporaneously with the execution of the sublease that, in the reasonable
judgment of the Owner Participant, compensates the Owner Participant for the
adverse tax consequences resulting from the classification of the Facility as
"tax-exempt use property");
(i) Neither the sublease nor the sublessee shall jeopardize
the Owner Lessor's, the Owner Participant's and the Lender or Bondholder
Trustee's or the Security Agent's exemption from regulation under PUHCA and
other laws relating to electric utilities, generators, wholesalers or retailers;
and
(j) the Facility sublessee shall pay all reasonable documented
out-of-pocket expenses incurred by the other Lease Financing Parties in
connection with such sublease.
As a condition precedent to such sublease, the Facility Lessee
shall provide the Owner Lessor, the Owner Participant and, so long as the Lessor
Notes are outstanding and the Lien of the Lease Indenture shall not have been
terminated or discharged, the Security Agent with all documentation in respect
of such sublease and an opinion of counsel to the effect that such sublease
complies with the provisions of this SECTION 19 (such documentation, counsel and
opinion to be reasonably satisfactory to each such recipient).
SECTION 20 OWNER LESSOR'S RIGHT TO PERFORM
If the Facility Lessee fails to make any payment required to
be made by it hereunder 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 Business Days thereafter,
the Owner 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 Owner Lessor, the Owner Participant or the OP
Guarantor 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 the Requirements of Law
shall be deemed to be Supplemental Lease Rent, payable by the Facility Lessee to
the Owner Lessor on demand. Notwithstanding anything to the contrary contained
in the foregoing, the provisions of this SECTION 20 shall in no event restrict
any of the Owner Lessor's rights following the occurrence of a Lease Event of
Default, it being agreed and understood that, subject to SECTION 7.3 of the
Participation Agreement, the Owner Lessor shall be entitled to exercise all of
its remedies pursuant to SECTION 17 upon the occurrence of any such event.
46
SECTION 21 SECURITY FOR OWNER LESSOR'S OBLIGATION TO THE LEASE INDENTURE
TRUSTEE
In order to secure the Lessor Notes, the Owner Lessor will
assign and grant a first priority security interest in favor of the Lease
Indenture Trustee in and to all of the Owner Lessor's right, title and interest
in, to and under this Facility Lease, and the Undivided Interest (other than
Excepted Payments and the rights to enforce and collect the same). The Facility
Lessee hereby consents to such assignment and to the creation of such Lien and
security interest and acknowledges receipt of copies of the Lease Indenture, 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 Lease Indenture Trustee that the Lien of the Lease
Indenture has been fully discharged, the Lease Indenture Trustee shall have the
right to exercise the rights of the Owner Lessor under this Facility Lease
(other than Excepted Payments and the rights to enforce and collect the same) to
the extent set forth in and subject in each case to the exceptions set forth in
the Lease Indenture. 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 LEASE INDENTURE
TRUSTEE ON THE SIGNATURE PAGE THEREOF.
SECTION 22 MISCELLANEOUS
SECTION 22.1 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 22.2 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 shall be produced 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 any 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 Owner Lessor:
47
with a copy to the Owner Participant:
and to the Lease Indenture Trustee:
with a copy to:
If to the Facility Lessee:
▇▇▇▇▇ City
with a copy to:
Edison Mission Energy
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (949)
Facsimile No.: (949)
Attention: President, with a copy to General Counsel
SECTION 22.3 SURVIVAL. Except for the provisions of SECTIONS
[3.3, 3.5, 5, 9 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 in accordance with its terms. Notwithstanding any
provisions hereof, any indemnity contained in Sections 10.1 and 10.2 of the
Participation Agreement or elsewhere in the Operative Documents shall,
subject to the provisions thereof, survive the expiration or early
termination of this Facility Lease regardless of the cause therefor.
SECTION 22.4 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 in SECTION 22.4(c), the
Facility Lessee may not assign this Facility Lease or any other Operative
Document or Project Document, or any interest therein, without the prior written
consent of the Owner Lessor.
(c) The Facility Lessee may, upon satisfaction of the
conditions set forth herein and in SECTION 22.4(d), without the consent of the
Owner Lessor or the Owner Participant, so long as none of the Owner Lessor, the
Owner Participant and the OP Guarantor becomes subject to regulation as a
"public utility," a "public utility company," a "holding company," a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding company" within
the meaning of the Federal Power Act or PUHCA as a
48
result of such assignment, assign this Facility Lease and the corresponding
Operative Documents to any person or entity. In the case of an assignment,
upon the transferee's assumption of the Facility Lessee's obligations under
this Facility Lease and the other Operative Documents in accordance with the
terms of this SECTION 22.4(c) and SECTION 22.4(d), the Facility Lessee shall
have no further liability or obligation thereunder, except any liability and
obligation relating to the period prior to such assignment.
(d) Any assignment by the Facility Lessee pursuant to SECTION
22.4(B) shall be subject to satisfaction of the following additional conditions:
(1) the transferee (or a party which
guarantees such transferee's obligations under the
Operative Documents assigned to such entity): (i)
shall have a credit rating equal to, or greater than,
BBB- by S&P and Baa3 by ▇▇▇▇▇'▇ and (ii) shall be
substantially engaged in the wholesale power
generating business;
(2) such transfer occurs subsequent to the
seventh year of the Lease Term;
(3) the Owner Lessor and the Owner
Participant (and, so long as the Lessor Notes are
outstanding and the Lien of the Lease Indenture has
not been discharged, the Security Agent) shall have
received an opinion of counsel, which opinion of
counsel shall be reasonably satisfactory to each
recipient thereof, to the effect that all regulatory
approvals required in connection with such transfer
or necessary to assume the Facility Lessee's
obligations under the Operative Documents shall have
been obtained and such transfer shall not subject the
Facility Lessee, the Owner Lessor or the Owner
Participant to regulation under PUHCA or state laws
and regulations regarding the rate and financial or
organizational regulation of electric utilities;
(4) such transfer shall be pursuant to an
assignment and assumption agreement in form and
substance reasonably satisfactory to the Owner
Participant (and, so long as the Lessor Notes are
outstanding and the Lien of the Lease Indenture has
not been discharged, the Security Agent);
(5) the Owner Lessor and the Owner
Participant (and, so long as the Lessor Notes are
outstanding and the Lien of the Lease Indenture has
not been discharged, the Security Agent and the Pass
Through Trustee) shall have received an opinion of
counsel, which opinion of counsel shall be reasonably
satisfactory to each recipient thereof, in respect of
such assignment and assumption;
49
(6) the Owner Participant shall have
received (x) an opinion reasonably satisfactory to it
from Owner Participant's Counsel to the effect that
such transfer should not result in any incremental
risk of material adverse federal income tax
consequences to the Owner Participant or (y) an
indemnity against such risk in form and in substance
reasonably satisfactory to the Owner Participant;
(7) no Lease Event of Default shall have
occurred and be continuing, or shall be created by
such transfer;
(8) such transfer by the Facility Lessee
shall not result in a Regulatory Event of Loss;
(9) the transferee shall not be involved in
material litigation with the Owner Participant or
any of its Affiliates;
(10) the Facility Lessee shall pay on an
After-Tax Basis all reasonable documented
out-of-pocket expenses incurred by the Owner Lessor
and the Owner Participant, the Lease Indenture
Trustee and the Pass Through Trustees, in connection
with such assignment;
(11) concurrently with such transfer, the
Facility Lessee assigns to the transferee each Other
Facility Lease and, in each such case, the
corresponding Operative Documents;
(12) each of the Rating Agencies shall have
confirmed the then existing long term secured debt
credit rating of the Lender and the Bondholder
Trustee; and
(13) unless the Facility Lessee has elected
to provide to the Lease Indenture Trustee an
indemnity against the risk that such assignment will
cause a Tax Event to occur to any direct or indirect
holder of any Lessor Note, the Lease Indenture
Trustee shall have received an opinion of counsel to
the Facility Lessee (with customary qualifications
and limitations and otherwise reasonably satisfactory
to the Lease Indenture Trustee), addressed to the
Lease Indenture Trustee, the Lender and the
Bondholder Trustee, to the effect that such
assignment shall not cause a Tax Event to occur to
any direct or indirect holder of any Lessor Note.
SECTION 22.5 TRUE LEASE; SEPARATE LEGAL OBLIGATIONS. This
Facility Lease shall constitute an agreement of lease and nothing herein
shall be construed as conveying to the Facility Lessee any right, title or
interest in or to the Undivided Interest except as lessee only. The parties
hereto hereby agree that the Facility Lessee's obligation to make Excepted
Payments is a separate and independent obligation from its obligation to make
other Rent payments, and that the Facility Lessee's obligation to make
Excepted
50
Payments may be assigned, pledged or otherwise transferred separately from
the Facility Lessee's obligations to make other Rent payments. The obligation
to make Excepted Payments has been included herein for the convenience of the
parties.
SECTION 22.6 GOVERNING LAW. This Facility Lease was negotiated
in the State of
New York which the Facility Lessee and the Owner Lessor agree
has a substantial relationship to the parties and to the underlying
transaction embodied hereby, and, in accordance with ss. 5-1401 of the
New
York General Obligations Law, in all respects, including matters of
construction, validity and performance, this Facility Lease shall be governed
by, and construed in accordance with, the laws of the State of
New York
applicable to contracts made and performed in such State and any Requirement
of Law of the United States of America, except provisions for the creation
and enforcement of the leasehold interest created hereby shall be governed by
and construed according to the law of the state in which the Facility is
located, it being understood that, to the fullest extent permitted by the law
of the state in which the Facility is located, the law of the State of
New
York shall govern the validity and the enforceability of the representations,
warranties, covenants and obligations of the Facility Lessee and the Owner
Lessor under this Facility Lease and all other Operative Documents and all of
the indebtedness arising hereunder or thereunder. To the fullest extent
permitted by law, the Facility Lessee and the Owner Lessor hereby
unconditionally and irrevocably waive any claim to assert that the law of any
other jurisdiction governs this Facility Lease, except as expressly otherwise
provided above.
SECTION 22.7 SEVERABILITY. Any provision of this Facility Lease
that 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 22.8 COUNTERPARTS. This Facility Lease may be executed
by the parties hereto in separate counterparts, each of which, subject to
SECTION 21, when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
SECTION 22.9 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 22.10 FURTHER ASSURANCES. Each party hereto will
promptly and duly execute and deliver such further documents and assurances
for and take such further action reasonably requested by the other party, all
as may be reasonably necessary to carry out more effectively the intent and
purpose of this Facility Lease.
SECTION 22.11 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 Owner Lessor.
51
SECTION 22.12 LIMITATION OF LIABILITY. It is expressly
understood and agreed by the parties hereto that (a) this Facility Lease is
executed and delivered by the Trust Company, not individually or personally
but solely as manager of the Owner Lessor under the Owner Lessor LLC
Agreement, in the exercise of the powers and authority conferred and vested
in it pursuant thereto, (b) each of the representations, undertakings and
agreements herein made on the part of the Owner Lessor is made and intended
not as personal a representation, undertaking and agreement by the Trust
Company but is made and intended for the purpose for binding only the Owner
Lessor, (c) nothing herein contained shall be construed as creating any
liability on the Trust Company 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
the Trust Company be personally liable for the payment of any indebtedness or
expenses of the Owner Lessor or be liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by the
Owner Lessor under this Facility Lease.
SECTION 22.13 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 of 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: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇
▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇. ▇▇▇▇ 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.
52
IN WITNESS WHEREOF, the Owner Lessor and the Facility Lessee have
caused this Facility Lease to be duly executed and delivered under seal by
their respective officers thereunto duly authorized.
▇▇▇▇▇ CITY OL1 LLC
By:
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
EXHIBIT A
TO FACILITY LEASE
DESCRIPTION OF FACILITY SITE
A-1
EXHIBIT B
TO FACILITY LEASE
DESCRIPTION OF FACILITY
B-1
SCHEDULE 1-1
TO FACILITY LEASE
BASIC LEASE RENT
COLUMN (A) COLUMN (B)
COMPONENT A OF COMPONENT B OF
RENT PAYMENT DATE BASIC LEASE RENT BASIC LEASE RENT
----------------- ---------------- ----------------
Schedule 1-1-1
SCHEDULE 1-2
TO
FACILITY LEASE
ALLOCATION OF PERIODIC LEASE RENT
RENTAL PERIOD ENDING ON ALLOCATED RENT SECTION 467 LOAN
----------------------- -------------- ----------------
(LAST DAY OF TERM)
------------------
Schedule 1-2-2
SCHEDULE 1-3
TO
FACILITY LEASE
PROPORTIONAL RENT AND SECTION 467 INTEREST
RENTAL PERIOD
RENTAL PERIOD ENDING ON (BUT LESSOR SECTION LESSEE SECTION
BEGINNING ON NOT INCLUDING) PROPORTIONAL RENT 467 INTEREST 467 INTEREST
------------ -------------- ----------------- ------------ ------------
Schedule 1-3-1
SCHEDULE 2
TO
FACILITY LEASE
TERMINATION VALUES
-------------------
Schedule 2-1