Exhibit 4.3
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FACILITY LEASE AGREEMENT
OL1
Dated as of December ___, 2001
between
▇▇▇▇▇ CITY OL1 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 AND SECURITY AGREEMENT, DATED AS OF
DECEMBER __, 2001 AMONG SAID LEASE INDENTURE TRUSTEE AND SECURITY AGENT, AS
SECURED PARTIES, 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
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SECTION 2 LEASE OF THE UNDIVIDED INTEREST.....................................................................2
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SECTION 3 FACILITY LEASE TERM AND RENT........................................................................2
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SECTION 3.1 BASIC LEASE TERM.................................................................2
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SECTION 3.2 RENT.............................................................................2
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SECTION 3.3 SUPPLEMENTAL LEASE RENT..........................................................4
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SECTION 3.4 ADJUSTMENT OF BASIC LEASE RENT AND TERMINATION VALUE.............................4
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SECTION 3.5 MANNER OF PAYMENTS...............................................................6
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SECTION 4 DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT..................................................7
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SECTION 4.1 DISCLAIMER OF WARRANTIES.........................................................7
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SECTION 4.2 QUIET ENJOYMENT..................................................................9
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SECTION 5 RETURN OF UNDIVIDED INTEREST........................................................................9
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SECTION 5.1 RETURN...........................................................................9
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SECTION 5.2 CONDITION UPON RETURN............................................................9
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SECTION 5.3 EXPENSES........................................................................13
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SECTION 6 LIENS..............................................................................................13
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SECTION 7 MAINTENANCE; REPLACEMENTS OF COMPONENTS............................................................13
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SECTION 7.1 MAINTENANCE.....................................................................13
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SECTION 7.2 REPLACEMENT OF COMPONENTS.......................................................14
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SECTION 7.3 ENVIRONMENTAL MATTERS...........................................................15
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SECTION 8 IMPROVEMENTS.......................................................................................17
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SECTION 8.1 REQUIRED IMPROVEMENTS...........................................................17
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SECTION 8.2 OPTIONAL IMPROVEMENTS...........................................................17
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SECTION 8.3 TITLE TO IMPROVEMENTS...........................................................18
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SECTION 8.4 FINANCING OF IMPROVEMENTS.......................................................18
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SECTION 9 NET LEASE..........................................................................................19
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SECTION 10 EVENTS OF LOSS.....................................................................................20
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SECTION 10.1 OCCURRENCE OF EVENTS OF LOSS....................................................20
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SECTION 10.2 PAYMENT UPON TERMINATION; SPECIAL LESSEE
TRANSFER PAYMENT UPON TERMINATION; SPECIAL LESSEE TRANSFER....................21
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SECTION 10.3 APPLICATION OF PROCEEDS.........................................................24
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SECTION 10.4 REBUILDING OR REPLACEMENT.......................................................25
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SECTION 10.5 APPLICATION OF PAYMENTS NOT RELATING TO AN EVENT OF LOSS........................26
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SECTION 10.6 PARTIAL CASUALTIES..............................................................26
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SECTION 11 INSURANCE..........................................................................................27
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SECTION 11.1 GENERAL.........................................................................27
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SECTION 11.2 APPLICATION OF INSURANCE PROCEEDS...............................................27
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SECTION 12 INSPECTION.........................................................................................28
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SECTION 13 TERMINATION OPTION FOR BURDENSOME EVENTS...........................................................28
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SECTION 13.1 ELECTION TO TERMINATE...........................................................28
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SECTION 13.2 SOLICITATION OF QUALIFYING BIDS; PAYMENTS UPON TERMINATION......................30
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SECTION 13.3 PROCEDURE FOR EXERCISE OF TERMINATION OPTION....................................31
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SECTION 13.4 ASSUMPTION OF THE LESSOR NOTES; SPECIAL LESSEE TRANSFERS........................32
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SECTION 13.5 CERTAIN CONDITIONS TO TERMINATION...............................................32
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SECTION 14 TERMINATION FOR OBSOLESCENCE; PARTIAL RELEASE OF INTEREST..........................................33
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SECTION 14.1 TERMINATION.....................................................................33
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SECTION 14.2 SOLICITATION OF OFFERS..........................................................33
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SECTION 14.3 RIGHT OF OWNER LESSOR TO RETAIN THE UNDIVIDED INTEREST..........................34
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SECTION 14.4 PROCEDURE FOR EXERCISE OF TERMINATION OPTION....................................35
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SECTION 14.5 CERTAIN CONDITIONS TO TERMINATION...............................................36
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SECTION 15 LEASE RENEWAL......................................................................................36
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SECTION 15.1 RENEWAL LEASE TERMS.............................................................36
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SECTION 15.2 FAIR MARKET VALUE RENEWAL LEASE TERMS...........................................37
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SECTION 15.3 RENEWAL RENT AND TERMINATION VALUE FOR RENEWAL LEASE TERM.......................38
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SECTION 15.4 DETERMINATION OF FAIR MARKET RENTAL VALUE.......................................38
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SECTION 15.5 TERMINATION VALUE DURING RENEWAL LEASE TERMS....................................39
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SECTION 16 EVENTS OF DEFAULT..................................................................................39
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SECTION 17 REMEDIES...........................................................................................43
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SECTION 17.1 REMEDIES FOR LEASE EVENT OF DEFAULT.............................................43
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SECTION 17.2 CUMULATIVE REMEDIES.............................................................46
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SECTION 17.3 NO DELAY OR OMISSION TO BE CONSTRUED AS WAIVER..................................46
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SECTION 18 SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS.................................................47
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SECTION 19 RIGHT TO SUBLEASE..................................................................................47
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SECTION 19.1 SUBLEASE........................................................................47
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SECTION 20 OWNER LESSOR'S RIGHT TO PERFORM....................................................................48
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SECTION 21 SECURITY FOR OWNER LESSOR'S OBLIGATION TO THE LEASE INDENTURE TRUSTEE..............................49
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SECTION 22 MISCELLANEOUS......................................................................................49
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SECTION 22.1 AMENDMENTS AND WAIVERS..........................................................49
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SECTION 22.2 NOTICES.........................................................................49
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SECTION 22.3 SURVIVAL........................................................................50
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SECTION 22.4 SUCCESSORS AND ASSIGNS..........................................................50
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SECTION 22.5 TRUE LEASE; SEPARATE LEGAL OBLIGATIONS..........................................53
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SECTION 22.6 GOVERNING LAW...................................................................53
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SECTION 22.7 SEVERABILITY....................................................................53
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SECTION 22.8 COUNTERPARTS....................................................................53
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SECTION 22.9 HEADINGS AND TABLE OF CONTENTS..................................................53
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SECTION 22.10 FURTHER ASSURANCES..............................................................53
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SECTION 22.11 EFFECTIVENESS...................................................................54
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SECTION 22.12 LIMITATION OF LIABILITY.........................................................54
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SECTION 22.13 MEASURING LIFE..................................................................54
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EXHIBITS AND SCHEDULES
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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
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FACILITY LEASE AGREEMENT
This
FACILITY LEASE AGREEMENT, dated as of December __, 2001
(as amended, supplemented or otherwise modified from time to time and in
accordance with the provisions hereof, this "FACILITY LEASE"), between ▇▇▇▇▇
CITY OL1 LLC, a Delaware limited liability company (together with its successors
and permitted assigns, the "OWNER LESSOR") created for the benefit of [General
Electric Capital Corporation][Full Service Lease Corp.], 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, 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 Bondholder Trustee, the Lender, the
Security Agent and the Lease Indenture Trustee (the "PARTICIPATION AGREEMENT"),
unless the context hereof shall otherwise require. The general provisions of
Appendix A to the Participation Agreement shall apply to the this Facility
Lease.
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 eight
months, to and including _______ ___, 2034, subject to earlier termination
pursuant to SECTIONS 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 ss.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 ss.1.467-1(c)(2)(ii)(A) with the effect that
pursuant to Treasury Regulation ss.ss.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") and shall include such amounts in income for each taxable
year in accordance with Treasury Regulation ss. 1.467-1(d)(1). 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 based on 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 adjusted to account for
an interest component, as provided in Treasury Regulation ss.1.467-4(b)(1) and
the amount of which is 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 Facility Lessee is otherwise required to pay Termination Value
(or amounts computed
3
by reference thereto) (A) the Owner Lessor shall make a payment to the Facility
Lessee on the applicable Termination Date equal to the Lessor Section 467 Loan
Balance on such date, if any, and (B) the Facility Lessee shall make a payment
to the Owner Lessor on the applicable 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 Facility Lessee against the amount of Termination Value (or
amounts computed by reference thereto) due and payable by the Facility Lessee to
the Owner Lessor on such date, and the Facility 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 Facility 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 in connection with a refinancing pursuant to Section 12.2 of the
Participation Agreement and pursuant to SECTION 2.6 of the Lease Indenture, (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
4
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 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 and 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 Component A 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 Component A 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 Component A 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 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
5
adjustment is in accordance with this SECTION 3.4, and the adjustment to 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 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 that such adjustment is not in accordance
with this SECTION 3.4, and the adjustments to 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 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
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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 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
7
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 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
8
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
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
SECTION 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 SECTION 14), the Facility Lessee agrees that the
following conditions (the "RETURN CONDITIONS") shall be satisfied or waived,
whereupon this Facility Lease 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 Owner Lessor
shall be entitled to exercise its right pursuant to the Designated
Representative Agreement to appoint itself or a party of its choosing, in its
sole discretion, as the designated account representative on file with the EPA
or DEP (as the case may be) to be allocated any emission allowances granted by
such agencies with respect to the Facility on or after the Termination Date, and
all such emission allowances 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
9
Owner Lessor deems necessary to obtain such 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, 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
be in the same condition as required under 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
10
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 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 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 from 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, HOWEVER, 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.
11
(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 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
practicable 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, then the Facility Lessee
shall complete such action as promptly thereafter as is reasonably practicable
and shall provide financial assurance in the form of a 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 twelve (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
12
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 (a) time and (b) 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.
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
13
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 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
14
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 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
15
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 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
16
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
Security Agent, 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, 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 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 Security Agent, 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
17
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 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
18
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 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 of purpose, (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 its 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,
19
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 accrual
and payment 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 accordance with SECTIONS 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
20
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.
(c) 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
(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) 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 (c) 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 plus (d) any Lessee Section 467 Loan
Balance (such sum, the "EVENT OF LOSS PAYMENT"). 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; (ii) the Bondholder Trustee
shall use such funds to repay the Lease Debt; (iii) this Facility Lease 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)
21
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 and (v) Owner Lessor
shall repay to the Facility Lessee the Lessor Section 467 Loan Balance, if any,
determined as of the relevant Termination Value Payment Date (the obligations to
make such payments shall be subject to the provisions of Section 3.2(d)).
(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 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. In either case, upon payment
of such amounts, (a) Allocated Rent shall cease to accrue, this Facility Lease,
and the Facility Lessee's obligation to pay Basic Lease Rent or Renewal Lease
Rent hereunder, as the case may be, shall terminate, except for covenants that
survive pursuant to the express terms of any Operative Document and (c) the
Owner Lessor shall pay to the Facility Lessee the Lessor Section 467 Loan
Balance, if any, determined as of the Termination Value Payment 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,
22
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 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 plus any Lessee Section 467 Loan Balance 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 shall terminate. Upon payment of such amounts due
under this paragraph
23
by the Facility Lessee, Allocated Rent shall cease to accrue and this Facility
Lease, and the Facility Lessee's obligation to pay Basic Lease Rent or Renewal
Lease Rent, as the case may be, shall terminate and the Owner Lessor shall pay
to the Facility Lessee the Lessor Section 467 Loan Balance, if any, determined
as of the Termination Value Payment 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 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
24
more in respect 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, then the Facility
Lessee shall pay to the Owner Lessor as Supplemental Rent an amount equal to the
Owner Lessor's 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 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 of 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 was 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 of Rev. Proc. 2001-28, 2001-19 I.R.B. 1156;
(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 of 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 to avoid a
Material Adverse Effect;
25
(d) commencement of such rebuilding or replacement as soon as
reasonably practicable and, in any event, within twelve (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.
(a) 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 of
determining the current value, residual value, utility and remaining economic
useful life of the Facility, that no Severable Improvements that are not
26
Required Improvements or Improvements financed through this Facility Lease 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.
SECTION 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 a 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 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
27
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
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
28
(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 such event or condition.
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SECTION 13.2 SOLICITATION OF QUALIFYING BIDS; PAYMENTS UPON
TERMINATION. (a) 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 purchased the Facility pursuant to Section
13.2(a) 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 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.
30
SECTION 13.3 PROCEDURE FOR EXERCISE OF TERMINATION OPTION. (a) 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 as of the Termination Date; 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 shall cease to accrue and the
Facility Lessee's obligation to pay Basic Lease Rent or Renewal Lease Rent, as
the case may be, shall terminate, (B) this Facility Lease 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 (including 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 the Relevant Termination 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 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
31
hereunder) pay the amounts set forth in clause (i) of the first sentence of
SECTION 13.3(A).
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 2.21 of the Lease Indenture, (ii) all other conditions contained in such
SECTION 2.21 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 its right of first refusal or right
of offer as set forth in Section 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) 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. The
Owner Lessor shall pay to the Facility Lessee the Lessor Section 467 Loan
Balance, if any, determined as of such Termination 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, if, in connection with a Burdensome Buyout Event, the Facility
Lessee elects to purchase the Facility in accordance with SECTION 13 of the
Facility Lease, 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, 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.
SECTION 13.5 CERTAIN CONDITIONS TO TERMINATION. Anything to the
contrary in this Section 13 notwithstanding, the Facility Lessee and the Owner
Lessor agree for the
32
benefit of the Lease Indenture Trustee (without relieving the Owner Lessor of
any liability hereunder) that, so long as the Lien of the Lease Indenture shall
not have been terminated or discharged, no termination pursuant to this Section
13 shall be effective and the Facility Lessee's rights and obligations under
this Facility Lease immediately prior to the election to terminate this Facility
Lease pursuant to this Section 13 shall remain in full force and effect in all
respects unless and until the Facility Lessee shall have assumed the Lessor
Notes pursuant to Section 13.4 or the Owner Lessor shall have paid all
outstanding principal and accrued interest on the Lessor Notes with respect to
such Undivided Interest or the Facility, as the case may be, and all other
amounts due under the Lease Indenture as of such proposed date of termination.
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
33
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) 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. Upon the payment
of all sums required to be paid pursuant to this SECTION 14.3 and SECTION 14.4
below, (i) Allocated Rent shall cease to accrue, and the Facility Lessee's
obligation to pay Basic Lease Rent or Renewal Lease Rent, as the case may be,
shall terminate, (ii) this Facility Lease 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 Obsolescence Termination 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.
34
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 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 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,
if any, 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 the Obsolescence Termination
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
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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 14.5 CERTAIN CONDITIONS TO TERMINATION. Anything to the
contrary in this Section 14 notwithstanding, the Facility Lessee and the Owner
Lessor agree for the benefit of the Lease Indenture Trustee (without relieving
the Owner Lessor of any liability hereunder) that, so long as the Lien of the
Lease Indenture shall not have been terminated or discharged, no termination
pursuant to this Section 14 shall be effective and the Facility Lessee's rights
and obligations under this Facility Lease immediately prior to the election to
terminate this Facility Lease pursuant to this Section 14 shall remain in full
force and effect in all respects (regardless of whether the Owner Lessor shall
elect to retain or sell such Undivided Interest or the Facilities, as
applicable, in connection with such proposed termination) unless and until the
Owner Lessor shall have paid all outstanding principal and accrued interest on
the Lessor Notes with respect to such Undivided Interest or the Facility and all
other amounts due under the Lease Indenture as of such proposed date of
termination.
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 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
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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.
(c) 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
37
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 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.
38
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 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
39
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 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
(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,
40
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 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 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 or the Lender is a party or the Liens created
thereunder are declared unenforceable, are terminated, or cease to be in full
force and effect and such condition shall remain unremedied for a period of 10
days; 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
41
(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
(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.
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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 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) and in which event the Owner Lessor shall pay to the Facility Lessee
the Lessor Section 467 Loan Balance, if any, determined as of such date,
PROVIDED, HOWEVER, that the obligation of the Owner Lessor to make such payments
shall be subject to the provisions of Section 3.2(d);
(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
43
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 and
in which event the Owner Lessor shall pay to the Facility Lessee the Lessor
Section 467 Loan Balance, if any, determined as of such date, PROVIDED, HOWEVER,
that the obligation of the Owner Lessor to make such payments shall be subject
to the provisions of Section 3.2(d);
(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 sum of the Termination Value plus any Lessee Section 467 Loan
Balance plus any Basic Lease Rent or Renewal Rent due and unpaid, in each case,
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 the
sum of the Termination Value plus any Lessee Section 467 Loan Balance plus any
Basic Lease Rent or Renewal Rent due and unpaid, in each case, 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 such 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
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
44
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 any Lessee Section 467 Loan Balance, determined as of
the Termination Date 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 any
Lessee Section 467 Loan Balance determined as of the Termination Date 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, as the case may be, 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 the relevant Termination 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 Relevant
Termination Date plus (ii) any Lessee Section 467 Loan
45
Balance plus (iii) the amount, if any, by which the Termination Value computed
as of the Termination Date next preceding the date of such sale or, if such sale
occurs on a Rent Payment Date or a Termination Date then computed as of such
date, exceeds the net proceeds of such sale, and, upon payment of such amount,
this Facility Lease and the Facility Lessee's obligation to pay Basic Lease Rent
or Renewal Rent for any periods subsequent to the date of such payment shall
terminate, Allocated Rent shall cease to accrue and the Owner Lessor shall pay
to the Facility Lessee the Lessor Section 467 Loan Balance, if any, determined
as of the relevant Termination 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 4.6(b) 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.
46
SECTION 18 SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS
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, the Security Agent 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;
47
(f) the sublease prohibits further assignment or subletting;
(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 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
48
entitled to exercise all of its remedies pursuant to SECTION 17 upon the
occurrence of any such event.
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:
49
If to the Owner Lessor:
▇▇▇▇▇ Fargo Bank Minnesota, N.A.
Corporate Trustee Services
MAC; N2691-090
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇ Fargo Bank Northwest, N.A.
Corporate Trust Services
MAC; ▇▇▇▇▇-▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
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,"
50
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 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 Facility Lessee offers to assign
the Facility Lease and the corresponding Operative
Documents pursuant to Article XIII of the
Participation Agreement;
(2) 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 ▇▇▇▇▇'▇ (ii) shall be
organized under the laws of the United States, any
state thereof or the District of Columbia, (iii)
shall be a corporation, limited liability company or
limited partnership; and (iv) shall be substantially
engaged in the wholesale power generating business,
experienced in coal-fired electricity generation,
and, together with its Affiliates, own and operate
facilities with not less than 5,000 MW of capacity;
(3) such transfer occurs subsequent to the
seventh year of the Lease Term;
(4) 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;
(5) 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);
(6) the Owner Lessor and the Owner
Participant (and, so long as the Lessor Notes are
outstanding and the Lien of the
51
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;
(7) 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;
(8) no Lease Event of Default shall have
occurred and be continuing, or shall be created by
such transfer;
(9) such transfer by the Facility Lessee
shall not result in a Regulatory Event of Loss;
(10) the transferee shall not be involved in
material litigation with the Owner Participant or any
of its Affiliates;
(11) 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;
(12) concurrently with such transfer, the
Facility Lessee assigns to the transferee each Other
Facility Lease and, in each such case, the
corresponding Operative Documents;
(13) 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
(14) 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.
52
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 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
53
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.
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.
54
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: ▇▇▇▇▇ Fargo Bank Northwest, National
Association, not in its individual
capacity but solely as Owner Manager
By:
-------------------------------------
Name:
Title:
EME HOMER CITY GENERATION, L.P.
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 BASIC COMPONENT B OF BASIC
RENT PAYMENT DATE LEASE RENT 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