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Exhibit 4.5a
EXECUTION COPY
PARTICIPATION AGREEMENT
(▇▇▇▇▇▇▇▇ A-1)
Dated as of May 1, 1999
among
AES EASTERN ENERGY, L.P.,
as Lessee
▇▇▇▇▇▇▇▇ FACILITY TRUST A-1,
as Owner Trust
DCC PROJECT FINANCE FOURTEEN, INC.,
as Owner Participant
BANKERS TRUST COMPANY,
not in its individual capacity, except as expressly provided herein, but
solely as Indenture Trustee
and
BANKERS TRUST COMPANY,
not in its individual capacity, except as expressly provided herein, but
solely as Pass Through Trustees
▇▇▇▇▇▇▇▇
COAL-FIRED GENERATION FACILITY
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TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT................................ 2
SECTION 2 PARTICIPATION; CLOSING DATE; TRANSACTION EXPENSES.......................................... 3
Section 2.1 Agreements to Participate....................................................... 3
Section 2.2 Closing Date; Procedure for Participation....................................... 4
Section 2.3 Transaction Expenses............................................................ 4
SECTION 3 REPRESENTATIONS AND WARRANTIES............................................................. 4
Section 3.1 Representations and Warranties of AEE........................................... 4
Section 3.2 Representations and Warranties of the Owner Trust............................... 17
Section 3.3 Representations and Warranties of the Owner Participant......................... 19
Section 3.4 Representations and Warranties of the Lease Indenture Company................... 21
Section 3.5 Representations and Warranties of the Pass Through Trustee...................... 23
SECTION 4 CLOSING CONDITIONS......................................................................... 25
Section 4.1 Operative Documents............................................................. 25
Section 4.2 Equity Investment............................................................... 25
Section 4.3 Certificates and Loan........................................................... 25
Section 4.4 Entity Documents................................................................ 25
Section 4.5 Representations and Warranties.................................................. 26
Section 4.6 Officer's Certificate Regarding Disclosure...................................... 26
Section 4.7 No Lease Events of Default; Events of Loss; Satisfaction of Conditions.......... 26
Section 4.8 No Threatened Proceedings....................................................... 26
Section 4.9 Consents ....................................................................... 26
Section 4.10 Governmental Actions........................................................... 27
Section 4.11 Insurance ..................................................................... 27
Section 4.12 Engineering Report............................................................. 27
Section 4.13 Environmental Report........................................................... 27
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Section 4.14 Survey ........................................................................ 27
Section 4.15 Appraisal; Condition of the Facility........................................... 27
Section 4.16 Market Report.................................................................. 28
Section 4.17 Fuel Report.................................................................... 28
Section 4.18 Opinions of Counsel............................................................ 28
Section 4.19 Recordings and Filings......................................................... 28
Section 4.20 Funding of Accounts; Payment Undertaking....................................... 29
Section 4.21 Taxes ......................................................................... 29
Section 4.22 No Changes in Applicable Law................................................... 29
Section 4.23 Registered Agent for AEE....................................................... 29
Section 4.24 Off-Balance Sheet Treatment.................................................... 29
Section 4.25 Rent Adjustments............................................................... 29
Section 4.26 Title Insurance................................................................ 30
Section 4.27 Acquisition of Assigned Assets................................................. 30
Section 4.28 Credit Rating.................................................................. 30
Section 4.29 Working Capital Facility....................................................... 30
Section 4.30 Pro Forma Balance Sheet........................................................ 30
Section 4.31 FERC Certification............................................................. 30
Section 4.32 Vibration Agreement............................................................ 30
Section 4.33 Ash Disposal................................................................... 30
Section 4.34 Parent Guaranty................................................................ 31
Section 4.35 Coal Hauling Agreement and Interconnection Agreement........................... 31
SECTION 5 AFFIRMATIVE COVENANTS OF AEE............................................................... 31
Section 5.1 Maintenance of Existence........................................................ 31
Section 5.2 Required Notices................................................................ 31
Section 5.3 Delivery of Financial Statements; No Default Certificate; Annual Operating
Budget; Monthly Operations Report.............................................. 32
Section 5.4 Books and Accounts.............................................................. 34
Section 5.5 Compliance with Law............................................................. 35
Section 5.6 Maintain Licenses and Permits................................................... 35
Section 5.7 Pay Taxes ...................................................................... 35
Section 5.8 Maintain AEE Subsidiaries....................................................... 35
Section 5.9 Annual Operating Budget......................................................... 36
Section 5.10 Further Assurances............................................................. 36
Section 5.11 Public Utility Regulation...................................................... 37
Section 5.12 Certain Tax Treatments......................................................... 37
Section 5.13 Liens ......................................................................... 37
Section 5.14 Indenture ..................................................................... 37
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Section 5.15 Support Agreements............................................................. 39
Section 5.16 Notice of Payment of Supplemental Rent......................................... 39
Section 5.17 Independent Forecast........................................................... 40
Section 5.18 Legally Distinct Parcel........................................................ 40
Section 5.19 Coal Hauling Agreement......................................................... 40
Section 5.20 AEE Revenues................................................................... 41
Section 5.21 Maintenance of Payment Undertaking Agreements.................................. 41
Section 5.22 Assignment of Payment Undertakings............................................. 41
SECTION 6 NEGATIVE COVENANTS OF AEE.................................................................. 41
Section 6.1 Incurrence of Indebtedness...................................................... 41
Section 6.2 Restricted Payments............................................................. 42
Section 6.3 Merger, Consolidation........................................................... 43
Section 6.4 Limitation on Liens............................................................. 44
Section 6.5 Limitations on Activities of AEE................................................ 44
Section 6.6 Prohibited Transactions with Affiliates......................................... 45
Section 6.7 Limitations on Investments...................................................... 45
Section 6.8 No Abandonment.................................................................. 45
Section 6.9 Assignment ..................................................................... 46
Section 6.10 Coal Hauling Agreement......................................................... 48
Section 6.11 Interconnection Agreement...................................................... 48
SECTION 7 COVENANTS OF THE OWNER TRUST............................................................... 48
Section 7.1 Covenants of the Owner Trust.................................................... 48
Section 7.2 ................................................................................. 49
Section 7.3 ................................................................................. 49
SECTION 8 COVENANTS OF THE OWNER PARTICIPANT......................................................... 49
Section 8.1 Restrictions on Transfer of Beneficial Interest................................. 49
Section 8.2 Owner Participant's Liens....................................................... 52
Section 8.3 Amendments or Revocation of Trust Agreement..................................... 52
Section 8.4 Instructions.................................................................... 52
Section 8.5 Appointment of Successor Trustee................................................ 52
Section 8.6 Certain Tax Treatments.......................................................... 53
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SECTION 9 COVENANTS OF THE LEASE INDENTURE COMPANY AND PASS THROUGH TRUSTEES......................... 53
Section 9.1 Indenture Trustee's Liens....................................................... 53
SECTION 10 INDEMNIFICATIONS.......................................................................... 53
Section 10.1 General Indemnity.............................................................. 53
Section 10.2 General Tax Indemnity.......................................................... 60
SECTION 11 AEE RIGHT OF QUIET ENJOYMENT.............................................................. 72
SECTION 12 SUPPLEMENTAL FINANCING.................................................................... 73
Section 12.1 Financing Modifications........................................................ 73
Section 12.2 Optional Refinancing of Pass Through Certificates.............................. 75
SECTION 13 LIMITATIONS OF LIABILITY.................................................................. 76
Section 13.1 Limitation of Liability........................................................ 76
SECTION 14 SPECIAL LESSEE TRANSFER................................................................... 77
Section 14.1 Special Lessee Transfer......................................................... 77
SECTION 15 RIGHT OF FIRST OFFER...................................................................... 79
Section 15.1 Right of First Offer........................................................... 80
SECTION 16 MISCELLANEOUS............................................................................. 80
Section 16.1 Consents....................................................................... 80
Section 16.2 Successor Trustee.............................................................. 80
Section 16.3 Bankruptcy of Trust Estate..................................................... 80
Section 16.4 Amendments and Waivers......................................................... 81
Section 16.5 Notices 81
Section 16.6 Survival 83
Section 16.7 Successors and Assigns......................................................... 83
Section 16.8 Business Day................................................................... 83
Section 16.9 Governing Law.................................................................. 83
Section 16.10 Severability.................................................................. 83
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Section 16.11 Counterparts.................................................................. 84
Section 16.12 Headings and Table of Contents................................................ 84
Section 16.13 Consent to Jurisdiction; Waiver of Trial by Jury.............................. 84
Section 16.14 Further Assurances............................................................ 84
Section 16.15 Effectiveness................................................................. 85
APPENDIX A:
Definitions
SCHEDULES:
Schedule 2 Pricing Assumptions
Schedule 2.3 Transaction Expenses
Schedule 3.1(d)(i) Governmental Approvals Obtained
Schedule 3.1(d)(ii) Governmental Approvals To Be Obtained
Schedule 3.1(f) Material Agreements
Schedule 3.1(j) Projections
Schedule 3.1(u) Environmental Exceptions
Schedule 4.19 Recordings and Filings
Schedule 5.3(a) Ineligible Transferees
Schedule 5.3(f) Form of Monthly Operations Report
Schedule 5.9 Form of Annual Operating Budget
Schedule 8.1(b) Initial Eligible Transferees
Schedule 16.5 Owner Participant Notice
EXHIBITS:
Exhibit A Form of Assignment and Assumption
Exhibit B Form of Owner Participant Parent Guaranty
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PARTICIPATION AGREEMENT
(▇▇▇▇▇▇▇▇ A-1)
This PARTICIPATION AGREEMENT (▇▇▇▇▇▇▇▇ A-1), dated as of May
1, 1999 (as amended, supplemented or otherwise modified from time to time, in
accordance with the provisions hereof, this "Participation Agreement" or this
"Agreement"), among (i) AES EASTERN ENERGY, L.P., a limited partnership
organized under the laws of the State of Delaware (herein, together with its
successors and permitted assigns, called "AEE"), (ii) ▇▇▇▇▇▇▇▇ FACILITY TRUST
A-1, a business trust organized and existing under the laws of the State of
Delaware, (herein, together with its successors and permitted assigns, called
the "Owner Trust"), (iii) DCC PROJECT FINANCE FOURTEEN, INC., a corporation
organized under the laws of the State of Delaware (herein, together with its
successors and permitted assigns, called the "Owner Participant"), (iv) BANKERS
TRUST COMPANY, a banking corporation organized and existing under the laws of
the State of New York, not in its individual capacity, except as expressly
provided herein, but solely as trustee under the Indenture (herein in its
capacity as trustee under the Indenture, together with its successors and
permitted assigns, called the "Indenture Trustee", and herein in its individual
capacity, together with its successors and permitted assigns, called the "Lease
Indenture Company"), and (v) BANKERS TRUST COMPANY, a banking corporation
organized and existing under the laws of the State of New York, not in its
individual capacity, except as expressly provided herein, but solely as trustee
under each of the Pass Through Trust Agreements (herein, together with its
successors and permitted assigns, called the "Pass Through Trustees").
W I T N E S S E T H :
WHEREAS, pursuant to the Asset Purchase Agreement, AES NY has
agreed to purchase certain coal-fired electric generating assets of NYSEG and
NGE, including the Facility and the Facility Site;
WHEREAS, AES NY has assigned to AEE the rights and obligations
of AES NY in its capacity as the "Buyer" under the Asset Purchase Agreement with
respect to the Facility and the Facility Site;
WHEREAS, the Owner Trust will acquire from NYSEG and NGE,
pursuant to the ▇▇▇▇ of Sale and the Deed, the Undivided Interest;
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WHEREAS, AEE desires to lease to the Owner Trust the Ground
Interest (which is a corresponding undivided interest in the Facility Site) and
to grant certain Easements to the Owner Trust pursuant to the Site Lease, and to
lease the Undivided Interest, sublease the Ground Interest and accept the grant
of the Easements from the Owner Trust pursuant to the Lease and the Site
Sublease, respectively;
WHEREAS, the Owner Participant desires to cause the Owner
Trust to take title to the Undivided Interest from NYSEG and NGE pursuant to the
▇▇▇▇ of Sale and the Deed, lease the Ground Interest and accept the grant of the
Easements from AEE pursuant to the Site Lease, and lease the Undivided Interest,
sublease the Ground Interest and grant the Easements to AEE pursuant to the
Lease and the Site Sublease, respectively;
WHEREAS, in connection with the execution and delivery of this
Participation Agreement, the Owner Participant has entered into the Trust
Agreement, pursuant to which the Owner Participant has authorized the Owner
Trust to enter into the Lease Financing; and
WHEREAS, the parties hereto desire to consummate the Lease
Financing.
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; INTERPRETATION OF THIS PARTICIPATION AGREEMENT
Capitalized terms used in this Agreement, including the
recitals, and not otherwise defined herein shall have the respective meanings
set forth in Appendix A hereto, unless the context hereof shall otherwise
require. The general provisions of Appendix A shall apply to the terms used in
this Agreement and specifically defined herein.
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SECTION 2
PARTICIPATION; CLOSING DATE; TRANSACTION EXPENSES
Section 2.1 Agreements to Participate. Subject to the terms
and conditions of this Agreement, and in reliance on the agreements,
representations and warranties made herein, on the Closing Date, the parties
agree to participate in the transactions described in this Section 2.1 as
follows:
(a) the Owner Participant agrees to provide funds in an amount
sufficient to (i) fund the Equity Investment and (ii) pay the
Transaction Expenses which the Owner Trust is responsible to pay
pursuant to Section 2.3(a) (collectively, the "Owner Participant's
Commitment");
(b) AEE agrees to (i) cause NYSEG and NGE to convey to the
Owner Trust the Undivided Interest on the terms and conditions set
forth in the ▇▇▇▇ of Sale and the Deed, (ii) lease the Ground Interest
and grant the Easements to the Owner Trust on the terms and conditions
set forth in the Site Lease and (iii) execute and deliver the Site
Lease; the Owner Trust agrees to (A) acquire the Undivided Interest
from NYSEG and NGE, (B) lease the Ground Interest and accept the grant
of the Easements from AEE and (C) execute and deliver the Site Lease;
(c) the Owner Trust agrees to lease the Undivided Interest,
sublease the Ground Interest and grant the Easements to AEE on the
terms and conditions set forth in the Lease and the Site Sublease,
respectively, AEE agrees to lease the Undivided Interest, sublease the
Ground Interest and accept the grant of the Easements from the Owner
Trust, and each agrees to execute and deliver the Lease and the Site
Sublease;
(d) the Owner Trust agrees to sell the Lessor Notes to the
relevant Pass Through Trustees and to grant the Indenture Trustee, for
the benefit of the Pass Through Trustees, liens and security interests
in the Indenture Estate to secure its obligations thereunder as, and to
the extent, provided in the Indenture;
(e) the Indenture Trustee agrees to act as trustee under and
enter into the Indenture, pursuant to which the Lessor Notes will be
issued;
(f) the Pass Through Trustees agree to use the Proceeds to
purchase the Lessor Notes from the Owner Trust;
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(g) the Owner Trust agrees to use the funds received from the
Owner Participant and the Pass Through Trustees pursuant to clauses
(a)(i) and (f), respectively, of this Section 2.1 on the Closing Date
to pay the Purchase Price;
(h) the Owner Participant and AEE agree to enter into the Tax
Indemnity Agreement; and
(i) the parties agree to enter into the agreements referred to
above and the other Operative Documents.
Section 2.2 Closing Date; Procedure for Participation.
(a) Closing Date. The closing of the transactions contemplated
hereby (the "Closing") shall take place after 11:00 a.m., New York City time, on
May 14, 1999 or such other date as the parties hereto shall mutually agree (the
"Closing Date"), at the offices of ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
(b) Procedures for Funding. Subject to the terms and
conditions of this Participation Agreement, the Owner Participant shall make the
Owner Participant's Commitment available not later than 9:00 a.m., New York City
time, on the Closing Date, by transferring or delivering such amount, in funds
immediately available on the Closing Date to the Owner Trust.
Section 2.3 Transaction Expenses. (a) The Owner Trust (with
funds provided by the Owner Participant) shall pay the Transaction Expenses as
set forth on Schedule 2.3 attached hereto. All Transaction Expenses in excess of
those required to be paid by the Owner Trust and any additional transaction
expenses associated with the Acquisition or the Lease Financing and not included
in Transaction Expenses, substantiated or otherwise supported in reasonable
detail, shall be paid by AEE.
(b) AEE shall also be responsible for, and shall pay as
Supplemental Rent, all annual administration fees and expenses of the Trustee,
the Indenture Trustee, the Pass Through Trustees and the Depositary Agent.
SECTION 3
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of AEE. AEE
represents and warrants to each of the other parties hereto that, as of the
Closing Date:
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(a) Due Organization, etc. (i) AEE is a limited partnership
duly formed, validly existing, and in good standing under the laws of
the State of Delaware, is duly licensed or qualified and in good
standing in each jurisdiction in which the failure to so qualify could
reasonably be expected to result in a Material Adverse Effect, and has
the partnership power and authority to own or hold under lease its
assets and properties, conduct its business as now conducted and as
presently proposed to be conducted and enter into and perform its
obligations under this Agreement and each of the other Operative
Documents to which it is or will be a party. The sole general partner
of AEE is AES NY. The sole limited partner of AEE is AES NY2.
(ii) Each of AES NY, AES NY2, AES NY3 and each AEE
Subsidiary in existence on the Closing Date is a limited
liability company duly organized, validly existing, and in
good standing under the laws of the State of Delaware, is duly
licensed or qualified and in good standing in each
jurisdiction in which the failure to so qualify could
reasonably be expected to result in a Material Adverse Effect,
and has all requisite power and authority to own, or hold
under lease, its assets and properties and conduct its
business as now conducted and as presently proposed to be
conducted.
(b) Due Authorization, Enforceability, etc. The execution,
delivery and performance of this Agreement and each of the other
Operative Documents to which it is or will be a party and the
compliance by it with the terms and provisions hereof and thereof have
been duly authorized by all necessary action of each of AEE and the AEE
Entities, as applicable, and such action does not and will not require
any further action, consent or approval by any trustee or holder of any
Indebtedness of AEE or such AEE Entities, as applicable. This Agreement
and each of the other Operative Documents to which it is or will be a
party has been duly executed and delivered by each of AEE and the AEE
Entities, as applicable. Assuming the due authorization, execution and
delivery by each other party hereto and thereto, this Agreement
constitutes, and when executed and delivered, the other Operative
Documents to which AEE or any AEE Entity is or will be a party will
constitute, the legal, valid and binding obligations of AEE or such AEE
Entity, as applicable, enforceable against AEE or such AEE Entity, as
applicable, in accordance with their respective terms, except as the
same may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium or other laws relating to or
affecting the rights of creditors generally and by general principles
of equity.
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(c) No Conflicts. The execution, delivery and performance by
each of AEE and the AEE Entities, as applicable, of this Agreement and
each of the other Operative Documents to which it is or will be a
party, the consummation by AEE and such AEE Entities of the
transactions contemplated hereby and thereby, and compliance by AEE and
such AEE Entities with the terms and provisions hereof and thereof, do
not and will not (i) conflict with or result in any breach of any
agreement to which AEE or any AEE Entity is a party (including any
Material Agreement), (ii) conflict with any Applicable Law which could
reasonably be expected to result in a Material Adverse Effect, (iii)
conflict with the partnership agreement of AEE or the organizational
documentation of any AEE Entity or (iv) result in the creation of any
Lien (except Permitted Liens) upon any of the property or assets of AEE
and such AEE Entities pursuant to the terms of any indenture, mortgage,
deed of trust, credit agreement or any other agreement, contract or
instrument to which AEE or such AEE Entity is a party or by which any
of their respective property or assets are bound.
(d) Governmental Actions. Except for the Governmental
Approvals set forth on Schedule 3.1(d)(i) and Schedule 3.1(d)(ii), (i)
no Governmental Approval is required to be obtained in the name of AEE
or any AEE Entity or the Owner Trust in connection with (A) the
acquisition, operation and maintenance of the Facility, the Related
Facility and the Additional Facilities, (B) the issuance of the Pass
Through Certificates and the execution, delivery and performance by AEE
of the Operative Documents to which it is or will be a party, or (C)
the leasing of the Undivided Interest, and (ii) no Governmental
Approval (except Governmental Approvals applicable to the Owner
Participant, the Pass Through Trustees, the Owner Trust, or any
Certificateholder as a result of activities by such Person or any of
its Affiliates not contemplated by the Operative Documents and
Governmental Approvals applicable to such parties other than under the
law of the State of New York or the laws of the United States of
America) is or will be required (A) in connection with the
participation by the Owner Participant, the Pass Through Trustees, the
Owner Trust, or any Certificateholder in the consummation of the Lease
Financing or (B) to be obtained by any of such Persons during the Lease
Term, except in the case of either clause (i) or (ii), such
Governmental Approvals (1) as may be required by Applicable Law not now
in effect, (2) as may be required in consequence of any transfer of
ownership of the Undivided Interest by the Owner Trust, (3) as would be
required by Applicable Law upon termination or expiration of the Lease
in connection with taking possession of an interest in any assets of
AEE in accordance with the Support Agreements or any part thereof or
the property purported to be covered by the Site Lease, (4) as may be
required by Applicable Law, if, after termination or
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expiration of the Lease, AEE or any other Person should provide
transmission services for the Owner Trust, (5) as may be required in
consequence of any exercise of remedies or other rights by any such
Person in connection with taking possession of an interest in the
Facility or the property purported to be covered by the Site Lease, or
(6) required as filings pursuant to the terms of a Governmental
Approval (which filings AEE agrees to make promptly when required) and
other types of routine operating plans and filings required under
Applicable Law. All of the Governmental Approvals set forth on Schedule
3.1(d)(i) have been validly issued, are in full force and effect and
are non-appealable (except as indicated on Schedule 3.1(d)(i)) and
there is no proceeding pending, or to the Actual Knowledge of AEE,
threatened, which seeks to, or which may reasonably be expected to,
rescind, terminate, modify, condition, suspend or otherwise alter any
such Governmental Approval (except as are necessary for the transfer or
reissuance of such Governmental Approvals to AEE or any AEE Entity).
Set forth on Schedule 3.1(d)(ii) are those Governmental Approvals which
are required under existing Applicable Law to be obtained, reissued, or
transferred from time to time after the Closing Date and AEE does not
have any reason to believe that it will be unable to obtain such
Governmental Approvals in the ordinary course of business and at such
time or times as may be necessary to avoid any substantial delay in, or
material impairment to, the performance of the transactions
contemplated by the Operative Documents. Each of AEE and the AEE
Entities has obtained and is in compliance with all Governmental
Approvals required to be obtained by it as of the date hereof unless
the failure to obtain such approvals or such non-compliance therewith,
individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
(e) Litigation. There is no pending or, to the Actual
Knowledge of AEE, threatened action, suit, investigation or proceeding
at law or in equity by or before any Governmental Entity, against or
affecting AEE or any property or other assets or rights of AEE or with
respect to any Operative Document, the Undivided Interest, the Ground
Interest, the Facility, the Facility Site, or any of the other Assigned
Assets that, individually or in the aggregate, if determined adversely
could reasonably be expected to result in a Material Adverse Effect.
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(f) No Defaults. Neither AEE nor any AEE Entity is in default,
and no condition exists that with notice or lapse of time or both would
constitute a default, under the Lease or any other Operative Document.
Set forth on Schedule 3.1(f) is a list of all Material Agreements.
Neither AEE nor any AEE Entity is in default under, and neither AEE nor
any AEE Entity, to its Actual Knowledge, is aware of a default by any
other party to, any Material Agreement in any such case where any such
default, individually or in the aggregate, could reasonably be expected
to result in a Material Adverse Effect.
(g) Location of Chief Place of Business and Chief Executive
Office, etc. The chief executive office and principal place of business
of each of AEE and AEE 2 and the office where each of AEE and AEE 2
keeps its corporate records concerning the Facility, the Facility Site
and the Operative Documents is located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇.
(h) Liens. (i) AEE has good record and marketable fee title in
the Facility Site, the Related Facility Site and the site of each of
the Additional Facilities, in each case free and clear of all Liens
other than Permitted Liens.
(ii) Upon execution and delivery of the Operative
Documents and recording of the instruments referred to in Part
I of Schedule 4.19 in accordance with Section 4.19, (A) good
and marketable fee simple title to the Undivided Interest will
be duly, validly and effectively conveyed and transferred to
the Owner Trust, free and clear of all Liens other than
Permitted Liens, (B) a good and valid leasehold interest in
the Ground Interest will be duly, validly and effectively
granted to the Owner Trust upon the terms and conditions in
the Site Lease, free and clear of all Liens other than
Permitted Liens, and (C) a good and valid easement estate in
the Easements will be duly, validly and effectively granted to
the Owner Trust upon the terms and conditions in the Site
Lease, free and clear of all Liens other than Permitted Liens.
(iii) When duly authorized, executed and delivered by
each of the parties thereto, the Indenture will create a valid
Lien in favor of the Indenture Trustee in the Indenture Estate
and no filing, recording, registration or notice with any
federal or state Governmental Entity will be necessary to
establish or, except for such filings and recordings as will
be made pursuant to Section 4.19, to perfect, or give record
notice of, the Lien of the Indenture to the extent such Lien
may be perfected by filings or recordings.
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(iv) When duly authorized, executed and delivered by
each of the parties thereto, the Mortgage will create a valid
Lien in favor of the Mortgagee in the Mortgaged Property and
no filing, recording, registration or notice with any federal
or state Governmental Entity will be necessary to establish
or, except for such filings and recordings as will be made
pursuant to Section 4.19, to perfect, or give record notice
of, the Lien of the Mortgagee to the extent such Lien may be
perfected by filings or recordings.
(v) When duly authorized, executed and delivered by
each of the parties thereto, the Assignment of Leases will
create a valid Lien in favor of the assignee thereof in the
Leases and Income (as defined in the Assignment of Leases) and
no filing, registration or notice with any federal or state
Government Entity will be necessary to establish or, except
for such filings and recordings as will be made pursuant to
Section 4.19, to perfect, or give record notice of, the Lien
of such assignee to the extent such Lien may be perfected by
filings or recordings.
(vi) None of the Permitted Liens shall, on and after
the Closing, materially interfere with the use, operation or
possession of the Facility (as contemplated by the Operative
Documents) or the use of or exercise by the Owner Trust of its
rights under the Site Lease with respect to the Facility or
the Facility Site.
(i) Financial Statements. The Pro Forma Balance Sheet, copies
of which have been delivered to the Owner Participant and the Pass
Through Trustees, and the assumptions used in preparing the Pro Forma
Balance Sheet were made in good faith and are reasonable and fairly
present the financial condition of AEE, as of the date of such Pro
Forma Balance Sheet, and all material assumptions with respect to the
Pro Forma Balance Sheet are set forth therein.
(j) Projections. All projections and budgets (including the
Base Case Projections) which are attached hereto as Schedule 3.1(j) and
which have been furnished to the Owner Participant or the Pass Through
Trustees by or on behalf of AEE (including projections and budgets
furnished by the Independent Engineer at the request of AEE) and the
summaries of significant assumptions related thereto (i) have been
prepared with due care in accordance with Prudent Industry Practices,
(ii) fairly present to the best of AEE's knowledge, AEE's expectations
as to the matters covered thereby as of their date, (iii) are based on
reasonable
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assumptions as to all factual and legal matters material to the
estimates therein (including interest rates and operation and
maintenance costs) and (iv) are, in all material respects,
comprehensive and consistent with the provisions of the Operative
Documents.
(k) Use of Proceeds. All proceeds of the Purchase Price shall
be used for the acquisition of the Facility.
(l) Regulatory Status/Utility Regulation. Each of AEE and AEE
2 is an "Exempt Wholesale Generator" as such term is defined in Section
32 of PUHCA. Neither AEE nor any of the AEE Entities is regulated as a
"public utility company", or a "holding company", a "subsidiary
company" or an "affiliate", in each case, of either a "holding company"
or a "public utility company", as such terms are defined in PUHCA. None
of the Owner Trust, the Owner Participant, AEE, the AEE Entities, any
Certificateholder nor any of their respective Affiliates is nor, solely
by virtue of the execution, delivery or performance of, or the
consummation of the Lease Financing (and in the case of the Owner
Participant and the Owner Trust, assuming that the representations and
warranties of the Owner Participant and the Owner Trust set forth
herein are true and correct at all times), will be regulated as a
"public utility company," or a "holding company," a "subsidiary
company" or an "affiliate," in each case, of either a "holding company"
or a "public utility company," as such terms are defined in PUHCA nor
subject to any electric utility regulation under New York law. Neither
AEE nor any AEE Entity is subject to electric rate regulation under New
York law.
(m) Investment Company Act. Neither AEE nor any AEE Entity is
an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act.
(n) Securities Act. Neither AEE nor any AEE Entity (nor any
Person authorized by any of them) has directly or indirectly offered or
sold any interest in the Beneficial Interest, the Lessor Notes or the
Pass Through Certificates or any part thereof (or in any similar
security or lease, or in any security or lease the offering of which
for the purposes of the Securities Act would be deemed to be part of
the same offering as the offering of the Beneficial Interest, the
Lessor Notes or the Pass Through Certificates or any part thereof), or
solicited any offer to acquire any of the same, in violation of the
registration requirements of Section 5 of the Securities Act.
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(o) Compliance With Laws. Each of AEE and the AEE Entities are
in compliance with all Applicable Laws, including, without limitation,
all Environmental Laws, and none of such parties has received any
written notice from any Governmental Entity of non-compliance with the
need to perform any work, make repairs or make any capital improvements
in order to comply with, or the imposition or threat of the imposition
of penalties under, Applicable Law, except as specified on Schedule
3.1(o) hereto and otherwise, in the case of any Applicable Law other
than Environmental Law, where such non-compliance is the subject of
appropriate proceedings and could not reasonably be expected to result
in a Material Adverse Effect.
(p) Taxes. Each of AEE and the AEE Entities have filed, or
caused to be filed, all tax and information returns that are required
to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and
assessments payable by them, to the extent the same have become due and
payable, other than taxes the payment of which is being contested by
appropriate proceedings, in accordance with Section 5.7 and AEE has no
Actual Knowledge of any actual or proposed deficiency or additional
assessment in connection therewith which, either individually or in the
aggregate, could reasonably be expected to result in a Material Adverse
Effect.
(q) ERISA. (i) AEE and each of its ERISA Affiliates is in
compliance in all material respects with the applicable provisions of
ERISA and the Code and the regulations and published interpretations
thereunder to the extent that they relate to any Plan with respect to
which AEE could have a direct or indirect, actual or contingent
liability except where such non-compliance could not reasonably be
expected to result in a Material Adverse Effect. None of AEE or any
ERISA Affiliate maintains or has maintained a Plan subject to Title IV
of ERISA within the last six years with respect to which any liability
continues to exist; provided, however, that pursuant to the Asset
Purchase Agreement, AEE is obligated to establish a Plan subject to
Title IV of ERISA effective as of the Closing Date. AEE is not (A) a
plan described in Section 3(3) of ERISA or Section 4975 of the Code or
(B) a "foreign person" as defined in Section 1445 of the Code.
(ii) Assuming the correctness of the representations of
the other parties hereto and of the Certificateholders in the
Certificates, the Lease Financing will not constitute a
non-exempt "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975(c)(1) of the Code
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(or in the case of a governmental plan or church plan (each as
defined in ERISA) any substantially similar federal, state or
local law).
(r) Adequate Rights. (i) Based upon the reasonable
expectations of AEE, and subject to obtaining any necessary licenses,
permits and approvals from Governmental Entities, which under any
Applicable Law on the Closing Date the Owner Trust will be able to
obtain upon or before the expiration or earlier termination of the
Lease Term, (A) the rights and interests made available to the Owner
Trust or its permitted transferees pursuant to the Support Agreements
and the other Operative Documents, together with (B) all materials,
supplies and services, including, but not limited to, all natural gas,
electrical, telephone, water, sanitary waste disposal, ash disposal,
rail, coal supply, septic or water treatment system or services and all
other utility services necessary for the present use, operation and
maintenance of the Facility (currently available at the Facility, which
to the Actual Knowledge of AEE are connected under valid permits and in
working order, in all material respects) permit on a commercially
practicable basis commencing with the expiration or sooner termination
of the Lease Term, (1) the occupation, maintenance and repair of the
Facility and the Facility Site, (2) the use, operation, leasing and
possession of the Facility and the Facility Site, (3) the use,
operation, leasing, possession, maintenance, replacement, renewal and
repair of all alterations, modifications, additions, accessions,
improvements, appurtenances, replacements and substitutions thereof and
thereto, subject to the provisions of the Operative Documents, (4)
appropriate ingress to and egress from the Facility for any reasonable
purpose in connection with the exercise of rights under the Support
Agreements and with the Owner Trust's interest in the Facility and the
Facility Site, including, without limitation, access to dedicated
public roads and to the Actual Knowledge of AEE, all other material
roads, easements, servitude, rights-of-way and other rights of ingress
and egress as are necessary for the present operation, maintenance and
use of the Facility, (5) the procurement of other rights and services
necessary or appropriate to utilize the Facility in a commercial
manner, (6) transmission services from the Facility sufficient to
enable the Owner Trust to sell its share of the output of the Facility,
and (7) the operation of the Facility as an independent unit.
(ii) To the Actual Knowledge of AEE, in all material
respects (A) the electrical, plumbing, heating, drainage, air
conditioning, ventilation and other mechanical and electrical
systems on and in the Facility are in good working order and
repair and are adequate in quantity and quality for present
operation of the Facility by AEE under the Lease; and (B) the
Facility is otherwise in safe condition and there are no
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structural or other patent defects in the roofs, and other
structural portions of the Facility, including walls, pillars,
supporting columns and foundations.
(iii) To the Actual Knowledge of AEE, other than
Permitted Liens, the use of the Facility does not in any
material respect depend on any variance, special exception or
other municipal approval, permit or consent that has not been
obtained for its present use, and all material building,
construction and use related permits, approvals and consents
necessary for such use have been issued and are in full force
and effect; provided, that no representation is made herein
regarding zoning ordinances or regulations.
(iv) To the Actual Knowledge of AEE, no default or
breach exists under any covenant, condition, restriction,
right-of-way, easement or other agreement affecting all or any
portion of the Facility which is to be performed or complied
with by the owner or occupant of all or any portion of the
Facility the nonperformance of which could reasonably be
expected to result in a Material Adverse Effect.
(v) As of the Closing Date, there are no subleases,
rental agreements or other agreements conferring on any Person
other than AEE the right to use or occupy all or any portion
of the Facility or the Facility Site except those, if any,
reflected in the Title Policies.
(vi) To the Actual Knowledge of AEE, there are no
public improvements pending or intended that would result in
any charge or special assessment against the Facility, except
those, if any, reflected in the Title Policies delivered
pursuant to Section 4.26. To the Actual Knowledge of AEE, the
Facility is not subject to any material utility "tap-in" fees,
except those, if any, reflected in such Title Policies.
(s) Qualification to do Business. The qualification of the
Owner Participant, the Owner Trust, the Trustee, the Indenture Trustee
or the Pass Through Trustees to do business under the laws of the State
of New York or any political subdivision thereof is not required solely
as a consequence of the execution and delivery of the Operative
Documents, the making of the Equity Investment or the Loans or, prior
to expiration or termination of the Lease, the performance by the Owner
Participant, the Owner Trust, the Trustee, the Indenture Trustee or the
Pass Through Trustees of this Agreement or any other
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Operative Document to which it is or will be a party, prior to the
exercise of dispossessing remedies under the Lease or the Indenture.
(t) Jurisdiction. In accordance with Section 16.13 hereof, AEE
has validly submitted to the jurisdiction of the Supreme Court of the
State of New York, New York County and the United States District Court
for the Southern District of New York.
(u) Environmental Matters. For purposes of this Section 3.1(u)
only, "Actual Knowledge" shall include actual knowledge that would have
been obtained after reasonable inquiry in light of the circumstances
prior to signing the Asset Purchase Agreement and the limitations in
the Asset Purchase Agreement.
(i) Except as specifically disclosed in the
Environmental Report and Schedule 3.1(u), neither AEE, nor any
AEE Entity, nor, to the Actual Knowledge of AEE, NYSEG or NGE
has received from any Governmental Entity any written notice,
letter, citation, order, warning, complaint, inquiry, claim or
demand that: (A) there has been a release, or there is a
threat of release, of any Hazardous Substance in, on, under or
from the Facility or the Facility Site except for releases
authorized under or in compliance with Applicable Laws,
including Environmental Laws; (B) AEE, NYSEG or NGE have or
has any material liability for the costs of cleaning up,
remedying or responding to a release of any Hazardous
Substance pertaining to the Facility or the Facility Site or
(C) either the Facility or the Facility Site is subject to a
Lien in favor of any Governmental Entity in response to a
release of any Hazardous Substance;
(ii) Except as specifically disclosed in the
Environmental Report and Schedule 3.1(u), AEE, and to the
Actual Knowledge of AEE, each of NYSEG and NGE have taken all
required or necessary response actions, including any removal
or remedial or other response action, in respect of any
release, emission, discharge or disposal, or threat of
release, discharge, disposal or emission of any Hazardous
Substance, in, on, under or from the Facility or the Facility
Site, so as to be in material compliance with all Applicable
Laws, including Environmental Laws.
(iii) to the Actual Knowledge of AEE, except as
specifically disclosed in the Environmental Report and
Schedule 3.1(u):
(A) the Facility and the Facility Site and
the ownership, use, maintenance, modification and
operation of the Facility and
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the Facility Site are now in compliance with
applicable Environmental Laws in all material
respects;
(B) all Hazardous Substances generated,
maintained, produced, manufactured, processed,
distributed, used, treated, managed, stored,
contained, recycled, transported or handled on, to,
at or from the Facility or the Facility Site have
been disposed of in compliance with applicable
Environmental Laws in all material respects;
(C) no material Hazardous Substances are
located in, on, at or under the Facility or the
Facility Site, except to the extent incidental to the
current use of the Facility or the Facility Site, and
AEE, and to the Actual Knowledge of AEE, each of
NYSEG and NGE has not and is not currently
maintaining, producing, manufacturing, processing,
distributing, handling, treating, managing,
containing, recycling, transporting, releasing,
emitting, discharging, depositing, generating,
storing, disposing of or creating any Hazardous
Substances in its ownership, alteration,
modification, construction, use, operation or
maintenance of the Facility or the Facility Site
other than in compliance with applicable
Environmental Laws in all material respects;
(D) there are no material Environmental
Conditions with respect to the Facility or the
Facility Site;
(E) no Hazardous Substances have been
released at, to, under, about or from the Facility or
the Facility Site other than in compliance with all
Environmental Laws in all material respects;
(F) there are not any leaking underground
storage or treatment tanks, sumps, water, gas or oil
▇▇▇▇▇, or associated piping located at on or under
any of the Facility or the Facility Site;
(G) (1) there is no friable asbestos or urea
formaldehyde insulation contained in, forming any
part of, or contaminating any part of the Facility or
the Facility Site, and (2) no polychlorinated
biphenyls (PCBs) are used, stored, located at or
contaminate any part of the Facility or the Facility
Site; and
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(H) no Lien has attached to the Facility by
reason of any Environmental Condition.
(v) Subsidiaries. The AEE Subsidiaries in existence on the
Closing Date are the sole subsidiaries of AEE. AEE owns 100% of the
membership interests of each such AEE Subsidiary.
(w) No Brokers' Fees. Neither AEE nor any AEE Entity, nor any
Person acting on their behalf, has taken any actions the effect of
which would be to cause any party hereto to be liable for any brokers',
finders' or agents' fees or commissions or costs of any nature or kind
claimed by or on behalf of brokers, finders or agents in respect of the
Lease Financing except to the extent included in Transaction Expenses
or otherwise paid by AEE.
(x) Property. Each of AEE and the AEE Entities shall, upon
consummation of the transactions contemplated by the Asset Purchase
Agreement, have good and marketable title to and possession of, or a
good and valid leasehold interest in, the Assigned Assets (and AEE
shall have good and marketable fee simple title to the Facility Site)
free and clear of all Liens (except Permitted Liens), including all
intellectual property or rights to use intellectual property and other
rights required for the conduct of its respective business, but only to
the extent such intellectual property and other rights are required and
the failure to obtain such property could reasonably be expected to
result in a Material Adverse Effect. AEE is not a party to any contract
or agreement to sell any interest in the Facility other than pursuant
to the Operative Documents and the operative documents executed in
connection with the lease financings contemplated by the Other Leases.
(y) No Event of Loss. No Event of Loss has occurred, and, to
the Actual Knowledge of AEE, no event giving rise to an Event of Loss
is threatened, in each case with the respect to the Facility.
(z) Sales Taxes. Other than any Taxes included within
Transaction Expenses, all Taxes due and payable on the Closing Date in
connection with the sale of the Facility, the Lease of the Undivided
Interest and the Site Lease (and subsequent Site Sublease) of the
Facility Site, the issuance of the Lessor Notes and the Lease Financing
shall have been paid by or on behalf of AEE, and all filings,
reportings or other requirements with respect to such Taxes shall have
been satisfied by AEE. There are no ongoing use taxes applicable to the
foregoing except as set forth in the Base Case Projections.
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23
(aa) Year 2000 Compliant. Each of AEE and the AEE Entities has
reviewed its operations with a view to assessing whether their business
or operations will, in the receipt, transmissions, processing,
manipulation, storage, retrieval, retransmission or other utilization
of data, be vulnerable to any significant risk that computer hardware,
software or any equipment containing embedded microchips used in their
business or operations will not in the case of dates or time periods
occurring after December 31, 1999 function at least as effectively as
in the case of dates or time periods occurring prior to January 1, 2000
(the -Year 2000 Issue"). AEE has no reason to believe that the risks
associated with the Year 2000 Issue are reasonably likely to result in
a Material Adverse Effect.
Section 3.2 Representations and Warranties of the Owner Trust.
The Owner Trust represents and warrants to each of the other parties hereto
that, as of the Closing Date:
(a) Due Incorporation, etc. The Owner Trust is a business
trust duly organized, validly existing and in good standing under the
laws of the State of Delaware, has the power and authority to enter
into and perform its obligations under the Trust Agreement, this
Agreement and each of the other Operative Documents to which it is or
will be a party.
(b) Due Authorization, Enforceability, etc. (i)(A) The
execution, delivery and performance of the Trust Agreement has been
duly authorized by all necessary action of the Trustee and the Trust
Agreement has been duly executed and delivered by the Trustee in its
individual capacity and on behalf of the Owner Trust and (B) assuming
the due authorization, execution and delivery of the Trust Agreement by
the Owner Participant, the Trust Agreement constitutes the legal, valid
and binding obligation of the Trustee and the Owner Trust, enforceable
against the Trustee and Owner Trust, in each case in accordance with
its terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, arrangement, moratorium or other
laws relating to or affecting the rights of creditors generally and by
general principles of equity.
(ii) (A) The execution, delivery and performance of
this Agreement has been duly authorized by all necessary
action, and this Agreement has been duly executed and
delivered by the Trustee on behalf of the Owner Trust and (B)
assuming the due authorization, execution and delivery of this
Agreement by each party hereto other than the Owner Trust,
this Agreement constitutes the legal, valid and binding
obligation of
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the Owner Trust, enforceable against the Owner Trust in
accordance with its terms, except as the same may be limited
by bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium or other laws relating
to or affecting the rights of creditors generally and by
general principles of equity.
(iii) (A) The execution, delivery and performance of
each of the other Operative Documents to which the Owner Trust
is or will be a party has been duly authorized by all
necessary action, and each of such other Operative Documents
has been or will be duly executed and delivered by the Trustee
on behalf of the Owner Trust and (B) assuming the due
authorization, execution and delivery of each of the other
Operative Documents by each party thereto other than the Owner
Trust, each of the other Operative Documents to which the
Owner Trust is or will be a party constitutes or when executed
and delivered will constitute the legal, valid and binding
obligation of the Owner Trust, enforceable against the Owner
Trust in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium or other laws relating
to or affecting the rights of creditors generally and by
general principles of equity.
(c) No Conflicts. The execution and delivery by the Owner
Trust of the Lease, this Agreement and the other Operative Documents to
which it is or will be a party, the consummation by the Owner Trust of
the transactions contemplated hereby and thereby, and the compliance by
the Owner Trust with the terms and provisions hereof and thereof, do
not and will not (i) contravene any Applicable Law of the United States
of America or the State of Delaware, or any provision of the Trust
Agreement or the organizational documents of the Owner Trust, or (ii)
contravene the provisions of, or constitute a default by the Owner
Trust under, or result in the creation of any Lessor's Lien upon the
Trust Estate under any indenture, mortgage or other material contract,
agreement or instrument to which the Owner Trust is a party or by which
the Owner Trust or its property is bound; provided, however, that no
representation is made with respect to the right, power or authority of
the Owner Trust to act as an operator of the Facility following a Lease
Event of Default.
(d) Governmental Actions. No authorization or approval or
other action by, and no notice to or filing or registration with, any
Governmental Entity is required for the due execution, delivery or
performance by the Trustee or the Owner Trust, as applicable, of the
Trust Agreement, this Agreement or the other
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Operative Documents to which the Owner Trust is or will be a party,
other than any such authorization or approval or other action or notice
or filing as has been duly obtained, taken or given.
(e) Litigation. There is no pending or, to the Actual
Knowledge of the Owner Trust, threatened action, suit, investigation or
proceeding at law or in equity against the Owner Trust before any
Governmental Entity which, if determined adversely to it, would
materially adversely affect the ability of the Owner Trust to perform
its obligations under the Trust Agreement, this Agreement or the other
Operative Documents to which it is or will be a party or would
materially adversely affect the Facility, the Facility Site or any
interest therein or part thereof or the security interest of the
Indenture Trustee in the Indenture Estate.
(f) Liens. The Trust Estate and the Mortgaged Property are
free of any Lessor's Liens attributable to the Owner Trust.
(g) Location of Chief Place of Business and Chief Executive
Office, etc. The chief executive office and principal place of business
of the Owner Trust, where the Owner Trust will keep its corporate
records concerning the Facility, the Facility Site and the Operative
Documents, is located at ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇.
Section 3.3 Representations and Warranties of the Owner
Participant. The Owner Participant represents and warrants to each of the other
parties hereto that, as of the Closing Date:
(a) Due Organization, etc. The Owner Participant is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite power and
authority to enter into and perform its obligations under this
Agreement, the Trust Agreement and the Tax Indemnity Agreement.
(b) Due Authorization, Enforceability, etc. The execution,
delivery and performance of this Agreement, the Trust Agreement and the
Tax Indemnity Agreement have been duly authorized by all necessary
action of the Owner Participant. This Agreement and each of the Trust
Agreement and the Tax Indemnity Agreement have been or will be duly
executed and delivered by the Owner Participant and assuming the due
authorization, execution and delivery by each other party hereto or
thereto, this Agreement, the Trust Agreement and the Tax Indemnity
Agreement constitute or when executed and delivered will
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constitute the legal, valid and binding obligations of the Owner
Participant, enforceable against the Owner Participant in accordance
with their respective terms, except as the same may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
arrangement, moratorium or other laws relating to or affecting the
rights of creditors generally and by general principles of equity.
(c) No Conflicts. The execution and delivery by the Owner
Participant of this Agreement, the Trust Agreement and the Tax
Indemnity Agreement, the consummation by the Owner Participant of the
transactions contemplated hereby and thereby, and the compliance by the
Owner Participant with the terms and provisions hereof and thereof, do
not and will not conflict with any Applicable Law binding on the Owner
Participant which could reasonably be expected to result in a Material
Adverse Effect, or its organizational documents or by-laws, or
contravene the provisions of, or constitute a default under, or result
in the creation of any Owner Participant's Lien upon the Trust Estate
under any indenture, mortgage or other material contract, agreement or
instrument to which the Owner Participant is a party or by which the
Owner Participant or its property is bound (it being understood that no
representation or warranty is being made as to any Applicable Laws
relating to the Facility or the Facility Site) or the use thereof or
activity thereon by AEE or any AEE Entity.
(d) Governmental Actions. No authorization or approval or
other action by, and no notice to or filing or registration with, any
Governmental Entity is required for the due execution, delivery or
performance by the Owner Participant of this Agreement, the Trust
Agreement or the Tax Indemnity Agreement, other than any authorization
or approval or other action or notice or filing as has been duly
obtained, taken or given (it being understood that no representation or
warranty is being made as to any Applicable Laws relating to the
Facility or the Facility Site or the use thereof or activity thereon by
AEE or any AEE Entity).
(e) Litigation. There is no pending or, to the Actual
Knowledge of the Owner Participant, threatened action, suit,
investigation or proceeding at law or in equity against the Owner
Participant before any Governmental Entity which, if determined
adversely to it, would materially adversely affect the Owner
Participant's ability to perform its obligations under this Agreement,
the Trust Agreement or the Tax Indemnity Agreement or would materially
adversely affect the Facility, the Facility Site or any interest
therein or part thereof or the Lien of the Indenture.
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(f) Liens. The Trust Estate is free of any Owner Participant's
Liens.
(g) ERISA. No part of the funds to be used by the Owner
Participant to acquire the interests to be acquired by it under the
Trust Agreement or this Agreement constitutes assets of any Plan
subject to Part 4 of Subtitle B of Title I of ERISA or a plan or
individual retirement account subject to Section 4975(e) of the Code;
provided, that no representation is made as to the source of the funds
used to purchase the Pass Through Certificates.
(h) Acquisition for Investment. The Owner Participant is
purchasing the Beneficial Interest to be acquired by it for its own
account with no present intention of distributing such Beneficial
Interest or any part thereof in any manner which would require
registration under the Securities Act, but without prejudice, however,
to the right of the Owner Participant at all times to sell or otherwise
dispose of all or any part of such Beneficial Interest.
(i) Securities Act. Neither the Owner Participant nor any
Person authorized by it has directly or indirectly offered or sold any
interest in the Beneficial Interest, the Lessor Notes or the Pass
Through Certificates or any part thereof (or in any similar security or
lease, or in any security or lease the offering of which for the
purposes of the Securities Act would be deemed to be part of the same
offering as the offering of the Beneficial Interest, the Lessor Notes
or the Pass Through Certificates or any part thereof) or solicited any
offer to acquire any of the same, in violation of the registration
requirements of Section 5 of the Securities Act.
(j) Regulatory Status. Immediately prior to executing this
Agreement, the Owner Participant is not an "electric utility" or a
"public utility" or a "public utility holding company" under the
Federal Power Act or PUHCA.
Section 3.4 Representations and Warranties of the Lease
Indenture Company. The Lease Indenture Company hereby represents and warrants
that, as of the Closing Date:
(a) Due Organization, etc. The Lease Indenture Company is a
banking corporation duly organized, validly existing and in good
standing under the laws of the State of New York, has the power and
authority, as Indenture Trustee, to enter into and perform its
obligations under the Indenture, this Agreement and each of the other
Operative Documents to which it is or will be a party.
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(b) Due Authorization; Enforceability, etc. (i)(A) The
execution, delivery and performance of this Agreement and the Indenture
have been duly authorized by all necessary action of the Lease
Indenture Company and this Agreement and the Indenture have been duly
executed and delivered by it and (B) assuming the due authorization,
execution and delivery of this Agreement and the Indenture by each
party hereto or thereto other than the Lease Indenture Company, this
Agreement and the Indenture each constitutes the legal, valid and
binding obligation of the Lease Indenture Company, enforceable against
the Lease Indenture Company in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium or other laws relating to or
affecting the rights of creditors generally and by general principles
of equity.
(ii) The execution, delivery and performance of each of
the other Operative Documents to which the Indenture Trustee
is or will be a party has been duly authorized by all
necessary action of the Indenture Trustee and each of such
other Operative Documents has been or will be duly executed
and delivered by the Indenture Trustee.
(c) No Conflicts. The execution and delivery by the Lease
Indenture Company, in its individual capacity or as Indenture Trustee,
as the case may be, of this Agreement and the other Operative Documents
to which it is or will be a party, the consummation by the Lease
Indenture Company, in its individual capacity or as Indenture Trustee,
as the case may be, of the transactions contemplated hereby and
thereby, and the compliance by the Lease Indenture Company, in its
individual capacity or as Indenture Trustee, as the case may be, with
the terms and provisions hereof and thereof, do not and will not
contravene any Applicable Law of the United States of America governing
the Lease Indenture Company or the banking or trust powers of the Lease
Indenture Company, or the Indenture, or its organizational documents or
by-laws, or contravene the provisions of, or constitute a default by
the Lease Indenture Company under, or result in the creation of any
Lien attributable to it upon the Indenture Estate or any indenture,
mortgage or other material contract, agreement or instrument to which
the Lease Indenture Company is a party or by which the Lease Indenture
Company or its property is bound; provided, however, that no
representation is made with respect to the right, power or authority of
the Lease Indenture Company or the Indenture Trustee to act as operator
of the Facility following a Lease Event of Default.
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(d) Governmental Actions. No authorization or approval or
other action by, and no notice to or filing or registration with, any
Governmental Entity governing its banking or trust powers is required
for the due execution, delivery or performance by the Lease Indenture
Company or the Indenture Trustee, as the case may be, of this Agreement
or the other Operative Documents to which the Indenture Trustee is or
will be a party, other than any such authorization or approval or other
action or notice or filing as has been duly obtained, taken or given.
(e) Litigation. There is no pending or, to the Actual
Knowledge of the Lease Indenture Company, threatened action, suit,
investigation or proceeding at law or in equity against the Lease
Indenture Company, before any Governmental Entity which, if determined
adversely to it, would materially adversely affect the ability of the
Lease Indenture Company to perform its obligations under this Agreement
or the other Operative Documents to which it is or will be a party or
would materially adversely affect the Facility, the Facility Site or
any interest therein or part thereof or the security interest of the
Indenture Trustee in the Indenture Estate.
Section 3.5 Representations and Warranties of Each Pass
Through Trustee . Each Pass Through Trustee hereby represents and warrants that,
as of the Closing Date:
(a) Due Organization, etc. Such Pass Through Trustee is a
banking corporation duly organized, validly existing and in good
standing under the laws of the State of New York, has the power and
authority, as Pass Through Trustee and/or in its individual capacity to
the extent expressly provided herein or in the applicable Pass Through
Trust Agreement, to enter into and perform its obligations under such
Pass Through Trust Agreement, this Agreement and each of the other
Operative Documents to which it is a party.
(b) Due Authorization; Enforceability; etc. (i) (A) The
execution, delivery and performance of this Agreement and the
applicable Pass Through Trust Agreement have been duly authorized by
all necessary action of such Pass Through Trustee and this Agreement
and the applicable Pass Through Trust Agreement have been duly executed
and delivered by it, and (B) assuming the due authorization, execution
and delivery of this Agreement and the applicable Pass Through Trust
Agreement by each party hereto other than such Pass Through Trustee,
each of this Agreement and the applicable Pass Through Trust Agreement
constitutes a legal, valid and binding obligation of such Pass Through
Trustee, enforceable against such Pass Through Trustee, in accordance
with its
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terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, arrangement, moratorium or other
laws relating to or affecting the rights of creditors generally and by
general principles of equity.
(ii) The execution, delivery and performance of each of
the other Operative Documents to which such Pass Through
Trustee is or will be a party has been duly authorized by all
necessary action of such Pass Through Trustee and each of such
other Operative Documents has been or will be duly executed
and delivered by such Pass Through Trustee.
(c) No Conflicts. The execution and delivery by such Pass
Through Trustee of this Agreement and the other Operative Documents to
which it is or will be a party, the consummation by such Pass Through
Trustee of the transactions contemplated hereby and thereby, and the
compliance by such Pass Through Trustee with the terms and provisions
hereof and thereof, do not and will not contravene any Applicable Law
of the United States of America or the State of New York governing such
Pass Through Trustee or the banking or trust powers of such Pass
Through Trustee, or the applicable Pass Through Trust Agreement or its
organizational documents or by-laws, or contravene the provisions of,
or constitute a default by such Pass Through Trustee under, or result
in the creation of any Lien attributable to it upon the Certificates or
any indenture, mortgage or other material contract, agreement or
instrument to which such Pass Through Trustee is a party or by which
such Pass Through Trustee or its property is bound; provided, however,
that no representation is made with respect to the right, power or
authority of such Pass Through Trustee to act as operator of the
Facility following a Lease Event of Default.
(d) Governmental Actions. No authorization or approval or
other action by, and no notice to or filing or registration with, any
Governmental Entity governing its banking or trust powers is required
for the due execution, delivery or performance by such Pass Through
Trustee of this Agreement or the other Operative Documents to which
such Pass Through Trustee is or will be a party, other than any such
authorization or approval or other action or notice or filing as has
been duly obtained, taken or given.
(e) Litigation. There is no pending or, to the Actual
Knowledge of such Pass Through Trustee, threatened action, suit,
investigation or proceeding at law or in equity against such Pass
Through Trustee before any Governmental Entity which, if determined
adversely to it, would materially adversely affect the ability of such
Pass Through Trustee to perform its obligations under this
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Agreement or the other Operative Documents to which it is a party or
would materially adversely affect the Facility, the Facility Site or
any interest therein or part thereof or the security interest of such
Pass Through Trustee in the Indenture Estate.
SECTION 4
CLOSING CONDITIONS
The obligations of the Owner Participant, the Owner Trust, the
Indenture Trustee, the Pass Through Trustees and AEE to consummate the
transactions contemplated hereby on the Closing Date shall be subject to the
satisfaction of the following conditions, except that the obligations of any
Person shall not be subject to such Person's (or any Affiliate of such Person's)
own performance or compliance.
Section 4.1 Operative Documents. On or before the Closing
Date, each of the Operative Documents to be delivered at the Closing, in form
and substance satisfactory to the Owner Participant and AEE, shall have been
duly authorized, executed and delivered by the parties hereto and thereto, shall
each be in full force and effect, and executed counterparts of each shall have
been delivered to each of the parties hereto. No event or condition shall have
occurred that, with or without the lapse of time or the giving of notice, shall
give any of the parties hereto the right to terminate any of the Operative
Documents.
Section 4.2 Equity Investment. The Owner Participant shall
have made the Equity Investment to the Owner Trust at the place and in the
manner contemplated by Section 2.
Section 4.3 Certificates and Loan. The Certificate Purchase
Agreement in respect of the Pass Through Certificates shall have been entered
into and delivered by AEE and the Lead Underwriter and all conditions precedent
therein to the issuance of the Pass Through Certificates shall have been
satisfied or waived by the Initial Purchasers and such Initial Purchasers shall
have purchased the Certificates pursuant to and in accordance with the terms of
the Certificate Purchase Agreement and the Proceeds shall have been provided to
the Owner Trust through the purchase by the Pass Through Trustees of the
applicable Lessor Notes.
Section 4.4 Entity Documents. Each of the Transaction Parties
shall have received certified copies of the organizational documents, by-laws or
other governing documents of each of the other parties hereto and resolutions of
the board of directors or
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comparable governing body of each such other party duly authorizing the Lease
Financing and such documents and such evidence as each party may reasonably
request in order to establish the authority of each such other party to
consummate the transactions contemplated by this Agreement and the Lease
Financing, the taking of all requisite actions and other proceedings in
connection therewith and the receipt of all internal approvals, including the
satisfactory completion of all due diligence and receipt of all required credit
approval by the Owner Participant and compliance with the conditions herein or
therein set forth and the incumbency of all officers signing any of the
Operative Documents. Each of the foregoing documents shall be reasonably
satisfactory to the recipient.
Section 4.5 Representations and Warranties. The
representations and warranties set forth in Section 3 shall be true and correct
on and as of the Closing Date with the same effect as though made on and as of
the Closing Date and each of the Transaction Parties shall have received an
Officer's Certificate of each of the other parties hereto, dated the Closing
Date, to such effect.
Section 4.6 Officer's Certificate Regarding Disclosure. The
Owner Participant and the Owner Trust shall have received an Officer's
Certificate of AEE, dated the Closing Date, in form, scope and substance
satisfactory to the Owner Participant and the Owner Trust confirming the truth
and accuracy of the information specified in such Officer's Certificate.
Section 4.7 No Lease Events of Default; Events of Loss;
Satisfaction of Conditions. No Lease Event of Default or Event of Loss or event
that with the passage of time or giving of notice or both would constitute a
Lease Event of Default or an Event of Loss or other material damage to the
Facility or the other Assigned Assets shall have occurred and be continuing and
all conditions under all Operative Documents that are required to be satisfied
on the Closing Date shall have been either satisfied or waived.
Section 4.8 No Threatened Proceedings. No action, suit,
investigation or proceeding shall have been instituted nor shall any
governmental action be threatened before any Governmental Entity, nor shall any
order, judgment or decree have been issued or proposed to be issued by any
Governmental Entity as of the Closing Date, to set aside, restrain, enjoin or
prevent the consummation of the Operative Documents or the Lease Financing.
Section 4.9 Consents. All third party consents and filings
specified in the Asset Purchase Agreement necessary to consummate the Lease
Financing shall have been duly obtained and shall be in full force and effect
and in form and substance satisfactory
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to each of the Transaction Parties and each such party shall have received a
copy of each such consent and all necessary filings shall have been made,
including, but not limited to, the filings referred to in Section 4.19.
Section 4.10 Governmental Actions. All actions, if any,
required to have been taken by any Governmental Entity on or prior to the
Closing Date in connection with the transactions contemplated by any Operative
Documents shall have been taken and all Governmental Approvals listed on
Schedule 3.1(d)(i) shall have been issued and shall be in full force and effect
on the Closing Date; and each of the Transaction Parties shall have received a
copy of each such Governmental Approval.
Section 4.11 Insurance. Insurance (including all related
endorsements) complying with the requirements of Section 11 of the Lease shall
be in full force and effect and all premiums thereon shall be current. The Owner
Participant, the Owner Trust, the Indenture Trustee and the Pass Through
Trustees shall each have received a certificate or certificates dated the
Closing Date of the Insurance Consultant stating that such insurance is in full
force and effect and shall be satisfactory in form and substance to the Owner
Participant and the Reviewing Insurance Consultant.
Section 4.12 Engineering Report. The Owner Participant shall
have received a copy of the Engineering Report prepared by the Independent
Engineer, in form and substance satisfactory to the Owner Participant.
Section 4.13 Environmental Report. The Owner Participant and
the Owner Trust shall each have received a copy of the Environmental Report and
the Phase I and Phase II reports upon which the Environmental Report is based
and the report of the Environmental Consultant, which reports shall each be
satisfactory in form and substance to the Owner Participant and the Reviewing
Environmental Consultant and the Owner Participant shall be satisfied with the
environmental risk and indemnities associated with the Facility and the Facility
Site.
Section 4.14 Survey. The Owner Participant shall have received
a survey of the Facility Site in form satisfactory to the Owner Participant and
the Owner Participant shall be satisfied with the adequacy of the Facility Site
and any other lists of equipment and plans and drawings, as reasonably requested
by the Owner Participant.
Section 4.15 Appraisal; Condition of the Facility. The Owner
Participant shall have received the Closing Appraisal prepared by the Appraiser
and related tax opinion, each in form and substance satisfactory to the Owner
Participant, and the Owner Participant shall be satisfied that the Facility
shall be in the condition described in such Closing Appraisal. AEE shall have
received an appraisal from the Appraiser in form and
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substance satisfactory to it and a copy of such appraisal shall be given to the
Owner Participant.
Section 4.16 Market Report. The Owner Participant shall have
received a copy of the Market Report prepared by the Market Consultant, which
report shall be addressed to the Owner Participant and otherwise be satisfactory
in form and substance to the Owner Participant and the Reviewing Market
Consultant.
Section 4.17 Fuel Report. The Owner Participant shall have
received a copy of the Fuel Report prepared by the Fuel Consultant addressed to
the Owner Participant which shall be satisfactory in form and substance to the
Owner Participant.
Section 4.18 Opinions of Counsel. Each of the Transaction
Parties shall have received an opinion, dated the Closing Date, in form, scope
and substance satisfactory to such party, of the following counsel:
(a) ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, special counsel and special tax
counsel to AEE;
(b) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, special counsel to AEE;
(c) Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, special counsel to
the Owner Participant;
(d) Morris, James, Hitchens & ▇▇▇▇▇▇▇▇, special Delaware
counsel to the Owner Trust and the Trustee; and
(e) Winthrop, Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, special counsel to
the Indenture Trustee, the Lease Indenture Company, the Pass Through
Trustees, and the Depositary Agent.
Each such Person expressly consents to the rendering by its
counsel of the opinion referred to in this Section 4.18 and acknowledges that
such opinion shall be deemed to be rendered at the request and upon the
instructions of such Person.
Section 4.19 Recordings and Filings. All filings and
recordings listed on Schedule 4.19 hereto shall have been duly made and all
filing, recordation, transfer and other fees payable in connection therewith
shall have been paid; and the filing of all precautionary financing statements
under the Uniform Commercial Code of New York and any other documents as may be
reasonably requested by counsel to the Owner Participant, the Owner Trust, the
Indenture Trustee or the Pass Through Trustees to
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perfect the right, title and interest of the Owner Trust in the Lessor's
Interest or any part thereof or interest therein, and the Lien of the Indenture,
shall have been made.
Section 4.20 Funding of Accounts; Payment Undertaking. AEE
shall have funded the Rent Reserve Account with an amount equal to the Rent
Reserve Account Required Balance or shall have provided the Rent Reserve Payment
Undertaking Agreement in such amount, in form and substance satisfactory to the
Indenture Trustee and the Owner Trust, and shall have deposited into the
Additional Liquidity Account the Additional Liquidity Initial Deposit.
Section 4.21 Taxes. All Taxes (including any sales tax or
transfer tax), if any, due and payable on or before the Closing Date in
connection with the acquisition of the Assigned Assets, the execution, delivery,
recording and filing of any Operative Document, or any document or instrument
contemplated thereby and the Lease Financing shall have been duly paid in full.
Section 4.22 No Changes in Applicable Law. No change shall
have occurred in any Applicable Law that would make it illegal for the Owner
Participant or any Other Owner Participant, the Owner Trust, the Indenture
Trustee, the Pass Through Trustees, AEE, AEE 2 or AES NY3 to participate in or
take any action contemplated by the Lease Financing or which would otherwise
subject the Owner Participant or the Owner Trust to any public utility
regulation of any Governmental Entity or Applicable Law that in the reasonable
opinion of the Owner Participant is burdensome, or would subject its interest in
the Lease to any rate of return regulation by any Governmental Entity, in either
case by reason of the participation of the Owner Trust or such Owner Participant
in the Lease Financing.
Section 4.23 Registered Agent for AEE. CT Corporation System
shall have been appointed by AEE as registered agent for service of process in
the State of New York as provided in the Operative Documents and CT Corporation
System shall have accepted such appointment.
Section 4.24 Off-Balance Sheet Treatment. The net present
value of Basic Rent during the Lease Fixed Term discounted at the Lessee's
incremental borrowing rate shall satisfy the 90% test for off-balance sheet
treatment under FAS 13.
Section 4.25 Rent Adjustments. As to AEE, no rent adjustment
made or contemplated on the Closing Date (other than adjustments to reflect a
change in the actual interest rate on the Pass Through Certificates or a change
in the Closing Date) shall cause the net present value of Basic Rent on a
percentage basis discounted at the Discount Rate to increase by more than 100
basis points from the amount set forth in the Pricing
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Assumptions. As to the Owner Participant, no rent adjustment made or
contemplated on the Closing Date shall cause a material adverse change in the
projected Coverage Ratios from those set forth in the Base Case Projections.
Section 4.26 Title Insurance. The Title Policies shall have
been delivered to AEE, the Owner Trust and the Indenture Trustee.
Section 4.27 Acquisition of Assigned Assets. AEE and/or the
Owner Trust and/or each Other Lessor and Related Lessor shall have acquired all
of the Assigned Assets. AES NY3 shall have acquired all of the capital stock of
Somerset Railroad.
Section 4.28 Credit Rating. The Pass Through Certificates
shall be rated at least Ba1 by ▇▇▇▇▇'▇ and BBB- by S&P.
Section 4.29 Working Capital Facility. AEE shall have entered
into the Working Capital Facility with the Working Capital Provider.
Section 4.30 Pro Forma Balance Sheet. AEE shall have delivered
an updated Pro Forma Balance Sheet to the Owner Participant, in form and
substance satisfactory to the Owner Participant, which Pro Forma Balance Sheet
shall demonstrate, among other things, that AEE has the financial capacity to
construct and pay for the SCR to be installed at the Related Facility.
Section 4.31 FERC Certification. All notices and related
filings (a) complying with the requirements of 18 C.F.R. Part 365 have been duly
filed with the FERC and (b) complying with the requirements of 17 C.F.R. Section
250.7(d) have been duly filed with the Securities and Exchange Commission; and
copies of all such notices and filings shall have been delivered to the Owner
Participant, the Owner Trust and the Indenture Trustee, and neither the FERC nor
the Securities and Exchange Commission shall have rescinded any of their
respective orders or otherwise imposed a burdensome requirement on the Owner
Participant, the Owner Trust or the Indenture Trustee.
Section 4.32 Vibration Agreement. AEE shall have entered into
an agreement, in form, scope and substance reasonably satisfactory to the Owner
Trust and the Owner Participant evidencing resolution of any issues relating to
the turbine vibrations observed in the number 9 bearing of the turbine-generator
at the Related Facility.
Section 4.33 Ash Disposal. Each of the New York Public Service
Commission and the New York Department of Environmental Conservation shall have
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executed and delivered a Memorandum of Understanding in form and substance
satisfactory to the Owner Trust and the Owner Participant regarding the removal
and disposal of ash from the Related Facility and resolution of jurisdictional
claims between such agencies.
Section 4.34 Parent Guaranty. The Owner Participant shall have
caused its parent to execute and deliver to the other Transaction Parties an
Owner Participant Guaranty.
Section 4.35 Coal Hauling Agreement and Interconnection
Agreement. On or before the Closing Date, each of the Coal Hauling Agreement and
the Interconnection Agreement shall have been duly authorized, executed and
delivered by each of the parties thereto, shall be in full force and effect, and
executed counterparts of each shall have been delivered to each of the parties
hereto.
SECTION 5
AFFIRMATIVE COVENANTS OF AEE
AEE covenants and agrees with each of the other parties hereto
that:
Section 5.1 Maintenance of Existence. Except as permitted by
Section 6.3, AEE will at all times, at its expense, do or cause to be done all
things necessary to preserve and keep in full force and effect its and each of
the AEE Entities' legal existence and qualification to do business in any state
in which the conduct of their respective business or ownership or leasing of
assets used in such business requires such qualification and where the failure
to be so qualified could reasonably be expected to result in a Material Adverse
Effect.
Section 5.2 Required Notices. AEE will provide the Owner
Participant, the Owner Trust and, so long as the Lien of the Indenture shall not
have been terminated or discharged, the Indenture Trustee and the Pass Through
Trustees prompt written notice of any of the following (i) the execution or
termination of any PPA (or a related series of PPAs with the same third party
purchaser) with a term in excess of 12 months, for the sale at a scheduled price
of more than 25% of the aggregate capacity and energy of the Facility, the
Related Facility and the Additional Facilities; (ii) the initiation, filing or
settlement of a significant litigation matter by or against any AEE Entity;
(iii) any anticipated change in its chief executive office, its principal place
of business, its name or the place where AEE maintains its business records
(which notice shall, in the event contemplated by this clause (iii), be provided
no later than 10 business days prior to such
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change); and (iv) immediately upon obtaining Actual Knowledge of (a) any Lease
Material Default, Lease Event of Default, Event of Loss or other material damage
to the Facility, the Related Facility or either of the Additional Facilities;
(b) any litigation, change in its or any AEE Entity's business or financial
condition or event of force majeure, if it could reasonably be expected to
result in a Material Adverse Effect; (c) the existence of any Lessee Liens; (d)
any labor strike that directly affects AEE or AEE 2; and (e) the incurrence of
any Permitted Indebtedness in a principal amount in excess of $20 million.
Section 5.3 Delivery of Financial Statements; No Default
Certificate; Annual Operating Budget; Monthly Operations Report. (a) AEE shall
deliver to the Owner Participant, the Owner Trust and, so long as the Lien of
the Indenture shall not have been terminated or discharged, the Indenture
Trustee and the Pass Through Trustees, as soon as practicable after the end of
each fiscal year but in no event later than 120 days after the end of such year,
(i) a consolidated balance sheet of AEE and its Consolidated Subsidiaries as of
the end of such fiscal year and the related consolidated statements of income,
retained earnings and cash flows for such fiscal year (together with footnotes
thereto and a discussion and analysis), setting forth in each case in
comparative form the figures for the previous fiscal year, to the extent
available, all prepared in accordance with GAAP and reported on and audited by
an independent public accountant of nationally recognized standing, together
with any other information required to be filed with the Securities and Exchange
Commission in respect of the Pass Through Certificates under applicable
securities laws, (ii) an Officer's Certificate of AEE stating that (A) the
signer has made, or caused to be made under its supervision, a review of this
Agreement and the other Operative Documents; and (B) such review has not
disclosed the existence during such fiscal year (and the signer does not have
knowledge of the existence as of the date of such certificate) of any condition
or event constituting a Lease Material Default or Lease Event of Default or an
Event of Loss or, if any such condition or event existed or exists, specifying
the nature thereof, the period of existence thereof and what action AEE has
taken or proposes to take with respect thereto, (iii) an Officer's Certificate
of AEE stating whether any change in Applicable Law has occurred during the
previous fiscal year that would result in a Material Adverse Effect and if such
Applicable Law has been enacted what action AEE has taken or proposes to take
with respect thereto including establishing a plan to implement such action
(which plan shall be reasonably satisfactory to the Owner Participant); AEE
shall update the Owner Participant annually on the implementation of such plan
(including any changes to such plan), (iv) a copy of FERC Form No. 1 to the
extent filed with FERC pursuant to 18 C.F.R. Section 141.1, and (v) a list of
Ineligible Transferees (it being the understanding of the parties that, if such
a list is not delivered in any fiscal year, the previous such list delivered
pursuant hereto shall apply for such fiscal year).
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(b) AEE shall deliver to the Owner Participant, the Owner
Trust and, so long as the Lien of the Indenture shall not have been terminated
or discharged, the Indenture Trustee and the Pass Through Trustees, as soon as
reasonably practicable after the end of each fiscal quarter but in no event
later than 60 days after the end of such quarter (i) an unaudited consolidated
balance sheet of AEE and its Consolidated Subsidiaries as of the end of such
quarter and the related consolidated statements of income for such quarter and
for the portion of AEE's fiscal year ended at the end of such quarter, and the
related consolidated statements of cash flows for such quarter and for the
portion of the fiscal year ended at the end of such quarter, in each case
setting forth comparative figures for previous dates and periods, to the extent
available, and prepared in accordance with GAAP (subject to normal year-end
adjustments), and (ii) an Officer's Certificate of AEE stating that (A) the
signer has made, or caused to be made under its supervision, a review of this
Agreement and the other Operative Documents; and (B) such review has not
disclosed the existence during such fiscal quarter (and the signer does not have
knowledge of the existence as of the date of such certificate) of any condition
or event constituting a Lease Material Default or Lease Event of Default or an
Event of Loss or, if any such condition or event existed or exists, specifying
the nature thereof, the period of existence thereof and what action AEE has
taken or proposes to take with respect thereto.
(c) AEE shall, at least 30 days prior to the commencement of
any fiscal year of AEE, provide to the Owner Participant and, upon the written
request, of a holder of a beneficial interest in the Pass Through Certificates
and subject to such holder entering into a confidentiality agreement covering
the matters set forth in Section 16.16, such holder the final Annual Operating
Budget for such fiscal year, together with confirmation by the Independent
Engineer that such budget is based on reasonable assumptions and is prepared in
accordance with Section 5.9 (including taking into account the applicable "AEE
Life Extension Forecast" described in the Engineering Report). The Annual
Operating Budgets shall be deemed Confidential Information for purposes of
Section 16.16. Such Annual Operating Budget shall include Pro Forma projections
and projections indicating updated projected Coverage Ratios (taking the
Independent Forecast into account for such rental period) through the end of the
Lease Term and shall indicate projected changes, if any, in the Rent Reserve
Account and the Additional Liquidity Account.
(d) AEE shall furnish to the Owner Participant and, subject to
a holder of a beneficial interest in the Pass Through Certificates entering into
a confidentiality agreement covering the matters set forth in Section 16.16,
such holder from time to time such information as it shall reasonably request
concerning the Facility and the Facility Site, including information concerning
the condition, operation, maintenance and use of
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the Facility and the Facility Site and such other financial or operating
information as it shall reasonably request and which are routinely made
available to creditors of AEE or AES, to the extent AEE or AES possesses such
information or can reasonably obtain such information. To the extent such
information consists of information contained in records kept by AEE, AES or its
Affiliates, such information shall be furnished by AEE without cost to the
recipient. Such information shall be deemed Confidential Information for
purposes of Section 16.16.
(e) For any period that AEE is subject to the periodic
reporting and informational requirements of the Exchange Act, AEE shall deliver
to the Owner Participant, the Owner Trust and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Indenture Trustee
and the Pass Through Trustees (for distribution to the Certificateholders),
copies of all such periodic reports and information required under the Exchange
Act and any other applicable securities laws within a reasonable period of time.
(f) As soon as practicable following the end of each month,
AEE shall deliver to the Owner Participant and, upon the written request, of a
holder of a beneficial interest in the Pass Through Certificates and subject to
such holder entering into a confidentiality agreement covering the matters set
forth in Section 16.16, such holder a Monthly Operations Report for each of the
Facility and the Additional Facilities. AEE agrees to amend the Monthly
Operations Report to include such additional operation and maintenance
information as the Owner Participant may reasonably request. The Monthly
Operations Reports shall be deemed Confidential Information for purposes of
Section 16.16.
Section 5.4 Books and Accounts. AEE will keep proper books of
record and account adequate to reflect truly and fairly the financial condition
and results of operation of AEE (including of the Facility) and the AEE Entities
in which full, true, correct and complete entries in conformity with GAAP
consistently applied and all Applicable Laws shall be made of all dealings and
transactions in relation to its business and activities. AEE will create and
maintain its books, records, accounts and financial statements and those of the
AEE Entities separately from any of their other Affiliates and shall be
responsible for its own expenses and other liabilities. AEE shall, unless
otherwise directed by a court of competent jurisdiction, keep books of account
or records concerning the accounts, inventory, contract rights, equipment and
proceeds of AEE and the AEE Entities at its chief executive office and principal
place of business or such other address of which all other Transaction Parties
shall have received written notice.
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Section 5.5 Compliance with Law. AEE shall, and shall cause
each of the AEE Entities to, comply in all material respects with Applicable
Laws including, without limitation, all Applicable Laws in respect of (a) the
conduct of its business as currently conducted and as proposed to be conducted
and the ownership, operation and use of its property (including those relating
to environmental standards and controls), (b) the production and sale of
electric energy, (c) the performance of its obligations under the Operative
Documents, and (d) ERISA and the regulations and published interpretations
thereunder, in each case except where such non-compliance is the subject of a
Permitted Contest.
Section 5.6 Maintain Licenses and Permits. AEE shall, and, as
applicable, shall cause each AEE Entity to, obtain and maintain all necessary
Governmental Approvals required to operate the Facility, the Related Facility
and the Additional Facilities and sell the energy and capacity therefrom at
wholesale (including all such licenses and approvals needed to maintain its
status as an "Exempt Wholesale Generator" pursuant to PUHCA) except where (a)
the failure to so obtain or maintain could not reasonably be expected to result
in a Material Adverse Effect, or (b) the Governmental Approvals, licenses,
authorizations or permits are anticipated to be routinely granted at a later
date in the ordinary course.
Section 5.7 Pay Taxes. AEE shall, and shall cause each of the
AEE Subsidiaries to, before delinquency, file all required tax returns and pay
all taxes, assessments, and governmental charges or levies, lawfully imposed on
it or upon its income or profits due and payable prior to the date on which
penalties attach thereto. AEE shall have the right, however, to diligently
contest in good faith the validity or amount of any such tax by proper
proceedings timely instituted, and may permit the taxes so contested to remain
unpaid during the period of such contest if (a) AEE diligently prosecutes such
contest, (b) during the period of such contest, the enforcement of any contested
tax is effectively stayed, (c) AEE sets aside adequate cash reserves with
respect to the contested tax, (d) such contest is a Permitted Contest and (e)
such contest does not delay the ultimate imposition of the consequences of an
adverse determination beyond expiration of the Lease Term (without regard to any
further extensions or renewals thereof). AEE shall promptly pay or cause to be
paid any valid, final judgment enforcing any such tax, assessment, charge, levy
or claim and cause the same to be satisfied of record unless such judgment is
then being appealed and enforcement thereof is stayed pending appeal.
Section 5.8 Maintain AEE Subsidiaries; Insurance on Additional
Facilities. AEE shall take all actions required to cause each of the AEE
Subsidiaries (a) to remain as a wholly-owned subsidiary of AEE and (b)
collectively to operate and
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maintain (i) the Facility and each of the Additional Facilities for so long as
the Lease is in effect and (ii) the Related Facility for so long as any Related
Lease is in effect. AEE agrees to cause the Additional Facilities to be insured
(and subject to adjustments) to the same extent as the Facility is required to
be insured under the Lease; any insurance proceeds thereof shall be paid to AEE
for application in repair or replacement of the affected property.
Section 5.9 Annual Operating Budget. AEE shall cause each of
the Facility, the Related Facility and the Additional Facilities to be operated
and maintained in accordance with the Annual Operating Budget and shall not
permit the aggregate expenditures in any year for Operating and Maintenance
Costs to exceed 125% of the amount set forth in the Annual Operating Budget.
Copies of the Annual Operating Budget for each calendar year shall be furnished
by AEE to the Independent Engineer at least 30 days before final adoption
thereof. Any amendment, modification or reallocation of the Annual Operating
Budget by AEE that would cause a change of more than 25% (positive or negative)
in the amounts set forth in the Annual Operating Budget, shall be accompanied by
confirmation of the Independent Engineer that such amendment, modification or
reallocation is based on reasonable assumptions. For purposes of this Section
5.9, fuel costs shall not be included in the calculation of the percentage
change (positive or negative) in the amounts specified in the Annual Operating
Budget.
Section 5.10 Further Assurances. AEE, at its own expense and
liability, shall cause to be promptly and duly taken, executed, acknowledged and
delivered all such further acts, documents and assurances within its control as
may be necessary in order to carry out the intent and purposes of this
Participation Agreement and the other Operative Documents, and the transactions
contemplated hereby and thereby. AEE, at its own cost, expense and liability,
will cause such financing statements, fixture filings (and continuation
statements with respect thereto) and mortgage amendments as may be necessary and
such other documents as the Owner Trust, the Owner Participant and, so long as
the Lien of the Indenture shall not have been terminated or discharged, the
Indenture Trustee and the Pass Through Trustees shall reasonably request to be
recorded or filed at such places and times in such manner, and will take all
such other actions or cause such actions to be taken, as may be necessary in
order to establish, preserve, protect and perfect the right, title and interest
of the Owner Trust in and to the Undivided Interest, the Ground Interest or the
Easements under the Site Lease, or any portion thereof or interest therein, and
the interest of the Mortgagee in the Mortgaged Property, and AEE will record or
cause to be recorded the Memorandum of Lease, the Memorandum of Site Lease and
the Memorandum of Site Sublease within 30 days after the Closing Date. AEE shall
promptly from time to time furnish to the Owner Trust, the Owner Participant,
or, so long as the Lien of the Indenture shall not have been terminated or
discharged, the Indenture Trustee or any Pass Through Trustee such information
with respect to the Facility, the Facility Site or the Lease Financing to which
AEE is a party or a recipient as may be required to enable the Owner Trust, the
Owner Participant, or, so long as the Lien of the Indenture shall not have been
terminated or discharged, the
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Indenture Trustee or any Pass Through Trustee such information with respect to
the Facility, the Facility Site or the Lease Financing to which AEE is a party
or a recipient as may be required to enable the Owner Trust, the Owner
Participant, or, so long as the Lien of the Indenture shall not have been
terminated or discharged, the Indenture Trustee or any Pass Through Trustee, as
the case may be, to timely file with any Governmental Entity any reports and
obtain any licenses or permits required to be filed or obtained by the Owner
Trust under any Operative Document or the Owner Participant as the owner of the
Beneficial Interest.
Section 5.11 Public Utility Regulation. AEE agrees to
cooperate with the Owner Participant, the Owner Trust and the Indenture Trustee
and to take reasonable measures to alleviate the source or consequence of any
regulation constituting a Regulatory Event of Loss; provided, that AEE shall not
be required to take any action (other than any action that it otherwise is
required to take pursuant to the Operative Documents) which causes AEE to incur
any cost or expense not indemnified by such Person.
Section 5.12 Certain Tax Treatments. In filing all federal,
and to the extent applicable, state and local, income tax returns, AEE will
accrue Rent pursuant to and in accordance with Section 467(b)(1) of the Code
except to the extent such accrual is inconsistent with a Final Determination
binding on AEE with respect to this issue.
Section 5.13 Liens. AEE shall promptly notify the Owner Trust
and, so long as the Lien of the Indenture shall not have been terminated or
discharged, the Indenture Trustee of the imposition of any Lessee Lien, of which
the 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 Lessee
Lien.
Section 5.14 Indenture. (a) AEE acknowledges receipt of a copy
of the Indenture, the Mortgage and the Assignment of Leases. In order to secure
the indebtedness evidenced by the Lessor Notes and the other obligations
referred to in and secured by the Indenture, the Mortgage and the Assignment of
Leases, the Owner Trust has provided in the Indenture, the Mortgage and the
Assignment of Leases, among other things, for the creation in favor of the
Indenture Trustee (for the benefit of the Noteholders) of a first mortgage lien
and first priority security interest in and assignment of the Indenture Estate
and for the assignment by the Owner Trust to the Indenture Trustee of all right,
title and interest of the Owner Trust in and to the Assigned Documents, to the
extent provided in the Indenture, the Mortgage and the Assignment of Leases.
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(b) AEE agrees and consents:
(i) to the assignment to the Indenture Trustee
pursuant to the Indenture, the Mortgage and the Assignment of
Leases of the Lease and all Rents (other than Excepted
Payments) payable by AEE thereunder and (except as otherwise
provided in the Indenture and the Mortgage) all rights of the
Owner Trust thereunder;
(ii) that, without limiting any other provision of the
Operative Documents that expressly vests the same in the
Indenture Trustee for the benefit of the Certificateholders,
the Indenture Trustee shall have the right to exercise all
rights of the Owner Trust under the Lease (including without
limitation, the right to consent to the taking of any action,
the making of any determination or election or the granting of
any waiver, in each case by the Owner Trust thereunder) and
the right to receive notices given or required to be given to
the Owner Trust thereunder except, in each case, for Excepted
Rights and as otherwise provided in the Indenture and the
Mortgage;
(iii) that all Rent (other than Excepted Payments) due
and to become due and payable by the Lessee under the Lease
has been assigned by the Owner Trust pursuant to the
Indenture, the Mortgage and the Assignment of Leases and that,
pursuant to such assignment, will be duly and promptly paid to
the Indenture Trustee when due by AEE without notice, demand,
counterclaim, setoff, deduction or defense, and without
abatement, suspension, deferment, diminution or reduction for
any reason whatsoever (including, without limitation, the
circumstances described in Section 9.1 of the Lease);
(iv) subject to the Indenture, the Mortgage and the
Assignment of Leases, and the Excepted Rights, that any
notice, consent, election, determination, waiver or other
action given or taken as to AEE by the Indenture Trustee as
assignee of the Owner Trust's rights under the Lease shall
have the same force and effect as a notice, consent, election,
determination, waiver or other action given or taken by the
Owner Trust under the Lease and that in the event of an
inconsistent notice, consent, election, determination, waiver
or other action given or taken from or by the Owner Trust and
from or by the Indenture Trustee, the notice, consent,
election, determination, waiver or other action given or taken
from or by the Indenture Trustee shall control;
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(v) that the Indenture Trustee shall not, by reason of
the Indenture and the Mortgage or any other Operative
Document, be subject to any obligation, duty or liability
under the Lease, except (A) as provided in Section 4.12 of the
Indenture, (B) that when the Indenture Trustee is exercising
rights under the Lease it shall do so in accordance with the
terms and conditions thereof and (C) if the Indenture Trustee
has foreclosed on the Owner Trust (or exercised a comparable
remedy) and acquired the position of the Owner Trust under the
Lease; and
(vi) to all of the terms and conditions of the
Indenture, the Mortgage and the Assignment of Leases.
Section 5.15 Support Agreements. AEE agrees that, to the
extent that the rights described in the Support Agreements, which have already
been made available to the Owner Trust prior to the expiration or termination of
the Lease Term, are insufficient to permit on a commercially practicable basis,
during the period following the expiration or termination of the Lease Term, (a)
the location, occupation, interconnection, maintenance and repair of the
Facility, (b) the use, operation and possession of the Facility, (c) the
construction, use, operation, possession, maintenance, replacement, renewal and
repair of all Modifications to the Facility, (d) appropriate ingress to and
egress from the Facility and the Facility Site for any reasonable purpose in
connection with the exercise of rights under the Operative Documents and such
Person's interest in the Undivided Interest or (e) the procurement of
transmission services from the Facility Site to enable such Person to deliver
the portion of the net electrical output of the Facility to the extent of the
Undivided Interest in a commercially efficient manner and on commercially
reasonable terms, AEE will arrange to provide the Owner Trust, promptly upon the
written request of the Owner Trust, with any services relating to the ownership
and operation of the Facility (to the extent AEE is capable of and remains in
the business of providing such services and such services cannot reasonably and
timely be obtained from third parties) necessary to permit the Owner Trust to
use the Facility as described in (a) through (e) above. Except as otherwise
provided in any Support Agreement, any such services provided by AEE will
provide for fair market value compensation to AEE (as determined by agreement
or, absent agreement, by an appraisal conducted according to the Appraisal
Procedure) and will terminate upon the expiration or termination of the Site
Lease, or will provide for some or all of such services to be earlier terminated
at the option of the Owner Trust. The cost of an appraisal conducted pursuant to
this Section shall be borne equally by the Owner Trust (and the Other Lessors)
and AEE.
Section 5.16 Notice of Payment of Supplemental Rent. AEE
agrees that if and when it shall be required to make any payment in respect of
Supplemental Rent
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pursuant to the Operative Documents, it shall provide along with such payment a
notice setting forth the reason for and amount of such payment.
Section 5.17 Independent Forecast. AEE shall furnish or cause
to be furnished to the Owner Trust, the Owner Participant and, so long as the
Lien of the Indenture shall not have been terminated or discharged, the
Indenture Trustee and the Pass Through Trustees no later than 30 days following
January 1, 2001 and biennially thereafter, a report (an "Independent Forecast")
prepared by a qualified independent consultant experienced in forecasting power
prices and coal prices, respectively (selected by AEE and reasonably acceptable
to the Owner Participant, provided that AEE shall notify the Owner Participant
of its selection of consultant and unless the Owner Participant shall object to
such selection by AEE within 10 Business Days of receipt of notice thereof, such
consultant shall be deemed acceptable by the Owner Participant), which sets
forth projections of (A) electricity prices (and the basis on which such prices
are to be applied (e.g., energy and capacity)) for the NYPP market applicable to
the Facility, the Related Facility and the Additional Facilities (or if such
market no longer exists in the form contemplated as of the Closing Date, any
successor market or substitute market as determined in good faith by AEE which
approximates, to the extent practicable, such region) and (B) coal prices on a
delivered basis to the Assigned Assets, in each case on at least an annual basis
through the Lease Expiration Date. For purposes of calculating the projected
revenues and expenses under the Operative Documents, AEE shall use (1) for
electricity prices either (x) the electricity prices forecast in the most
recently furnished Independent Forecast, in each case, during the relevant
period of calculation, or (y) if and to the extent that electricity sales during
the relevant period of calculation are made pursuant to one or more power sales
agreements at prices other than prices which are by their terms pool-based
market prices, the electricity prices under such power sales agreements and (2)
for coal prices, either (x) to the extent that coal is not purchased pursuant to
one or more purchase agreements, the coal prices forecasted in the most recently
furnished Independent Forecast, in each case, during the relevant period of
calculation, or (y) if and to the extent that coal purchases during the relevant
period of calculation are made pursuant to one or more purchase agreements, the
coal prices under such coal purchase agreements.
Section 5.18 Legally Distinct Parcel. AEE shall take all
necessary actions within 12 months of the Closing Date to ensure that the
Facility Site shall constitute a legally distinct parcel or parcels that is (or
are) separately taxed and can be independently and validly conveyed, to the
extent that the foregoing is permitted under Applicable Law.
Section 5.19 Coal Hauling Agreement. AEE shall comply with
all of the terms of the Coal Hauling Agreement applicable to it, the
non-performance of which
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could result in a Material Adverse Effect and shall take all necessary actions
to enforce the Coal Hauling Agreement in the event of any non-compliance with
any of the terms thereof by Somerset Railroad or AES NY3, as the case may be.
Section 5.20 AEE Revenues. AEE shall, and shall cause each AEE
Subsidiary to, cause all AEE Revenues to be deposited directly into the Revenue
Account (except, to the extent provided in the Depositary Agreement, for any
revenues received by any AEE Entity under any Operation and Maintenance
Agreement).
Section 5.21 Maintenance of Payment Undertaking Agreements. So
long as the Lien of the Indenture shall not have been terminated or discharged,
AEE shall, to the extent commercially reasonable, maintain the portion of the
Rent Reserve Account Required Balance and the Special Rent Reserve Account
Required Balance that is to be applied to the payment of Basic Rent in the form
of a Payment Undertaking Agreement and shall replenish any amounts drawn
thereunder as soon as it is commercially reasonable to do so; provided, however,
that AEE shall be obligated to (a) maintain or replenish a Special Rent Reserve
Account Payment Undertaking Agreement only if such amount is more than
$15,000,000, (b) maintain a Rent Reserve Account Payment Undertaking Agreement
only if such amount is more than $5,000,000 and (c) replenish a Rent Reserve
Account Payment Undertaking Agreement only if such amount is more than
$1,000,000.
Section 5.22 Assignment of Payment Undertakings. With the
exception of the Additional Liquidity Account, or amounts in respect of the
Additional Liquidity Required Balance, AEE shall assign its interest in any
Payment Undertaking Agreement to the Owner Trust for further assignment to the
Indenture Trustee.
SECTION 6
NEGATIVE COVENANTS OF AEE
AEE covenants and agrees with each of the parties hereto that:
Section 6.1 Incurrence of Indebtedness. AEE will not, and will
not permit any AEE Subsidiary to, create, incur, issue, assume, suffer to exist,
guarantee or otherwise become directly or indirectly liable with respect to any
Indebtedness except for Permitted Indebtedness. Any incurrence of Permitted
Indebtedness shall constitute a representation and warranty of AEE that all
conditions to such incurrence have been satisfied. For the avoidance of doubt,
the parties hereto agree that nothing in this Section 6.1 shall require AEE or
any AEE Subsidiary to discharge or otherwise prepay
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any Indebtedness properly incurred at the time of issuance. Neither AES NY3 nor
Somerset Railroad will incur any Indebtedness without the prior written consent
of the Owner Participant except that no such written consent shall be required
in respect of (a) the Rail Credit Facility or (b) any operating leases in
respect of Rail Assets.
Section 6.2 Restricted Payments. (a) Notwithstanding any
provision to the contrary set forth in the Depositary Agreement, AEE will not
make any Distribution (and AEE will not permit any AEE Subsidiary to make any
Distribution other than to AEE or any other AEE Subsidiary) unless such
Distribution is made on or within 5 Business Days after a Rent Payment Date
(commencing with the Rent Payment Date occurring July 2, 2000 as specified in
clause (vii) below) and at the time of such Distribution the following
conditions are satisfied:
(i) all Rent, including Deferrable Payments, shall
have been paid to date;
(ii) amounts on deposit or deemed on deposit pursuant
to Section 3.1 of the Depositary Agreement in the Rent Reserve
Account, the Additional Liquidity Account and the Special Rent
Reserve Account shall be equal to or greater than the Rent
Reserve Account Required Balance, the Additional Liquidity
Required Balance or the Special Rent Reserve Account Required
Balance, as applicable;
(iii) no Lease Material Default, Lease Event of
Default or event of default under any Permitted Indebtedness
shall have occurred and be then continuing;
(iv) no amounts shall be outstanding under the
Working Capital Facility;
(v) AEE has no indemnity currently due and payable
under Section 10 of the Participation Agreement or under any
other Operative Document or any obligation to fund the
Indemnity Account pursuant to Section 5.5(e) or Section 5.6 of
the Lease;
(vi) the Coverage Ratios for each of the two
semi-annual Rent Payment Periods immediately preceding such
Rent Payment Date (based on actual operating history) shall be
equal to or greater than the Required Coverage Ratio and the
Pro Forma Coverage Ratios for each of the four semi-annual
periods immediately succeeding such Rent Payment Date
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(based on Pro Forma) shall be equal to or greater than the
Required Coverage Ratio;
(vii) notwithstanding the foregoing, the first Rent
Payment Date on which AEE shall be entitled to make a
Distribution shall be July 2, 2000; on such date for the
purpose of determining the satisfaction of the condition in
clause (vi) above, only the semi-annual period immediately
preceding such date shall be relevant;
(viii) with respect to the Rail Credit Facility, no
event of default shall have occurred and be then continuing
thereunder and the remaining term of the Rail Credit Facility
shall not be less than 30 days; and
(ix) AEE shall have delivered an Officer's
Certificate certifying that all conditions specified in this
Section 6.2(a) have been satisfied.
(b) For purposes of Section 6.1 and this Section 6.2, all
calculations of Coverage Ratios shall be Pro Forma for any Permitted
Indebtedness, including the effects of such Permitted Indebtedness, and any
assets reasonably expected to be acquired in connection therewith and the
consummation of any related transactions.
(c) The making of a Distribution by AEE shall be deemed to be
a representation by AEE at the time of such transaction that the conditions
permitting such transaction shall have been satisfied.
Section 6.3 Merger, Consolidation. (a) AEE will not, and will
not permit AES NY or any AEE Subsidiary, to consolidate or merge with or into
any other Person, unless AEE shall have provided 10 Business Days prior written
notice to the Owner Trust, the Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Indenture Trustee
and the Pass Through Trustees and immediately after giving effect to such
transaction:
(i) no Lease Material Default or Lease Event of
Default shall have occurred and be continuing;
(ii) the entity resulting from such consolidation or
surviving in such merger shall be (A) in the case of AEE, AEE
(B) in the case of AES NY, AES NY and (C) in the case of any
AEE Subsidiary, AEE or any such AEE Subsidiary;
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(iii) the Rating Agencies shall have confirmed in
writing that, after giving effect to such merger or
consolidation, the credit rating of the Pass Through
Certificates shall not be less than (A) Baa2 by ▇▇▇▇▇'▇ and
BBB by S&P in the case of a consolidation or merger involving
AEE and (B) that rating then in effect in the case of a
consolidation or merger involving AES NY or any AEE
Subsidiary; and
(iv) AEE shall have delivered to the Owner Trust and,
so long as the Lien of the Indenture shall not have been
terminated or discharged, the Indenture Trustee a certificate
of a Responsible Officer of AEE certifying that the provisions
of this Section 6.3(a) have been complied with together with
such other documentation as the Owner Participant may
reasonably require to determine compliance with this Section
6.3.
(b) All costs and expenses of any transaction contemplated
under this Section 6.3 incurred by any Transaction Party shall be the
responsibility of AEE, payable on an After-Tax Basis.
(c) Except as otherwise expressly permitted under Section 6.9
(Assignment), or under Section 7.1 (Maintenance) or 19 (Lessee's Right to
Sublease) of the Lease, AEE shall not, and shall not permit AEE 2 or any other
AEE Subsidiary (i) to liquidate, wind up or dissolve or (ii) to transfer or
otherwise dispose of its property, assets or business or to purchase, lease or
acquire property or other assets, to or from any Person or Persons in one or a
series of transactions, except that in the case of clause (ii) the foregoing
shall not apply to any of the following: (A) any such transaction in the
ordinary course of business of AEE or any AEE Subsidiary, (B) any transfer or
other disposition of emission allowances or the Additional Land to a third party
purchaser, (C) any Permitted Affiliate Transaction and (D) subject to the prior
written consent of the Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Indenture Trustee,
the transfer or other disposition of the Related Facility (at any time when it
is owned by AEE or any Affiliate thereof, unless acquired by AEE or such
Affiliate as a result of an "Event of Loss" as defined in the Related Lease) or
either of the Additional Facilities.
Section 6.4 Limitation on Liens. AEE will not, and will not
permit any AEE Subsidiary to, create, incur, assume or suffer to exist any
Lessee Liens other than Permitted Liens.
Section 6.5 Limitations on Activities of AEE. AEE will not,
and will not permit any AEE Entity to, engage in any business other than the
lease, acquisition,
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ownership, operation, repowering or expansion of the Assigned Assets and the
capital stock of Somerset Railroad and the sale of electricity or capacity
generated by, and products derived from, and waste generated by, the Facility
(including emission allowances) and related activities.
Section 6.6 Prohibited Transactions with Affiliates. (a) AEE
will not, and will not permit any AEE Subsidiary to, enter into any transactions
with an Affiliate, other than Permitted Affiliate Transactions, without the
prior written consent of the Owner Participant.
(b) Notwithstanding the foregoing, in the event any Rent
(including Deferrable Payments) then due is not paid or the Rent Reserve
Account, the Additional Liquidity Account or the Special Rent Reserve Account,
if applicable, is not fully funded or any Lease Material Default or Lease Event
of Default shall have occurred and be then continuing, the Owner Participant
shall have the right (but not the obligation) to appoint a qualified independent
consultant, at the expense of AEE, to review the terms (including pricing, terms
and conditions) of any or all of the Permitted Affiliate Transactions described
in clause (c) of the definition thereof. In the event that such consultant
determines that the Market Certification previously delivered with respect to
such Permitted Affiliate Transaction is no longer valid, at no price reduction,
cost or penalty to AEE, AEE shall cause such Permitted Affiliate Transaction to
be amended to reflect market terms (as such Consultant shall confirm).
Section 6.7 Limitations on Investments. AEE shall not make or
authorize any investments other than Permitted Investments as set forth in
Section 2.12 of the Depositary Agreement. AEE shall be permitted to direct the
investment of amounts in all Accounts in Permitted Investments so long as no
Material Lease Default or Lease Event of Default shall have occurred and be then
continuing.
Section 6.8 No Abandonment. Except as contemplated by the
Lease, AEE shall not, and shall not permit any AEE Entity to, abandon or agree
to abandon the operation or maintenance of the Facility or otherwise cease to
diligently pursue the operation and maintenance of the Facility in accordance
with Prudent Industry Practice or voluntarily reduce the operations of the
Facility in any material respect (except to the extent required by customary
maintenance procedures) prior to the end of the Lease Term. Subject to the prior
written consent of the Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Indenture Trustee,
AEE shall not, and shall not permit any AEE Entity to, abandon or agree to
abandon the operation or maintenance of either of the Additional Facilities or
otherwise cease to diligently pursue the operation and maintenance of such
Additional Facilities in
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accordance with Prudent Industry Practice (except to the extent required by
customary maintenance procedures), during the expected useful life of such
Additional Facility.
Section 6.9 Assignment. (a) Except as set forth in clause (b)
hereof or Section 19 of the Lease, AEE may not Transfer the Lease or any other
Operative Document or any interests therein without the prior written consent of
the Owner Trust, the Owner Participant or, so long as the Lien of the Indenture
shall not have been terminated or discharged, the Indenture Trustee and the Pass
Through Trust Trustees (which may be withheld in each of their respective sole
discretion).
(b) AEE may, without the consent of the Owner Trust, the Owner
Participant, or, so long as the Lien of the Indenture shall not have been
terminated or discharged, the Indenture Trustee or any Pass Through Trustees,
Transfer the Lease and the other Operative Documents (in whole, but not in
part), but only in connection with a concurrent Transfer of all of AEE's assets
to a wholly-owned Affiliate of AES; provided, that such Affiliate is not a
tax-exempt entity within the meaning of Code Section 168(h)(2) and such
Affiliate is a "United States Person" within the meaning of Code Section
7701(a)(30); and provided, further, that, each of the Rating Agencies shall have
confirmed in writing that such Transfer shall not result in a downgrade of the
then existing credit rating of the Pass Through Certificates.
(i) Any Transfer under this clause (b) shall also be
subject to satisfaction of the following conditions:
(A) The Owner Trust, the Owner Participant
and, so long as the Lien of the Indenture shall not
have been terminated or discharged, the Indenture
Trustee and the Pass Through Trustees shall have
received opinions satisfactory to such recipients of
an independent nationally recognized counsel selected
by AEE (at AEE's expense) prior to the effectiveness
of such Transfer, (1) to the effect that all
regulatory approvals required in connection with such
Transfer or necessary to assume AEE's obligations
under the Operative Documents shall have been
obtained, (2) as to the assignment and assumption
agreement referred to below and (3) as to such other
matters as any such party may reasonably require;
(B) Such Transfer shall be pursuant to an
assignment and assumption agreement in form and
substance reasonably satisfactory to the Owner Trust,
Owner Participant and, so long as
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the Lien of the Indenture shall not have been
terminated or discharged, the Indenture Trustee and
Pass Through Trustees;
(C) No Lease Material Default or Lease Event
of Default shall have occurred and be then
continuing;
(D) Such Transfer shall not cause the
regulation of the Owner Participant or the Owner
Trust as a public utility or public utility holding
company;
(E) Such Transfer shall not result in a
Regulatory Event of Loss;
(F) Whether or not such Transfer is
consummated, AEE shall pay all expenses of any such
Transfer including payment, on an After-Tax Basis, of
all reasonable documented out-of-pocket expenses of
the Owner Trust, the Trustee, the Owner Participant,
the Indenture Trustee and the Pass Through Trustees
incurred in connection with such Transfer;
(G) AEE shall give the Owner Trust, the
Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or
discharged, the Indenture Trustee and the Pass
Through Trustees 45 days prior written notice of any
such Transfer, specifying the name and address of the
proposed transferee and such additional information
as shall be necessary to determine whether the
proposed Transfer satisfies the requirements of this
Section 6.9;
(H) Such Transfer shall not result in any
adverse regulatory consequences on the Facility, the
Undivided Interest or the Facility Site or otherwise
adversely affect the Owner Trust or the Owner
Participant or, so long as the Lien of the Indenture
shall not have been terminated or discharged, the
Indenture Trustee and the Pass Through Trustees;
(I) The Owner Trust, the Owner Participant
and, so long as the Lien of the Indenture shall not
have been terminated or discharged, the Indenture
Trustee and the Pass Through Trustees, each shall
have received a certificate executed by a Responsible
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Officer of AEE that all of the conditions set forth
in this Section 6.9(b) have been satisfied; and
(J) AEE shall continue to remain secondarily
liable under the Lease and the other Operative
Documents.
Section 6.10 Coal Hauling Agreement. AEE will not modify,
amend or terminate the Coal Hauling Agreement without the prior written consent
of the Owner Trust, the Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Indenture Trustee.
Section 6.11 Interconnection Agreement. AEE will not modify,
amend or terminate the Interconnection Agreement (or any alternative arrangement
as permitted below) without the prior written consent of the Owner Participant,
provided that AEE shall have the right, without the consent of any party hereto,
to amend or terminate the Interconnection Agreement (or such alternate
arrangement), if (a) AEE delivers to the Owner Participant a certificate of the
Independent Engineer that alternate arrangements are in place to transmit power
to the grid, (b) that such alternate arrangements, considered in their entirety,
are no more expensive to AEE than the Interconnection Agreement and (c) it is
reasonable to expect that such alternate arrangements would continue to be
useable by the Lessor on substantially the same terms and conditions upon
expiration or termination of the Lease.
SECTION 7
COVENANTS OF THE OWNER TRUST
Section 7.1 Covenants of the Owner Trust. The Owner Trust
hereby covenants and agrees with each of the Parties hereto that it will:
(a) comply with all of the terms of this Participation
Agreement applicable to it, the non-performance of which would
adversely affect AEE, the Trust Estate or the Indenture Estate; and
(b) not amend, supplement, or otherwise modify Section 2,
Section 6.06, Section 8, Section 9.01, Section 10.01, Section 10.02,
Section 11, Section 12.02, Section 12.04 or Section 12.11 of the Trust
Agreement without the prior written consent of AEE (so long as no Lease
Bankruptcy Default or Lease Event of Default shall have occurred and be
then continuing) and of the Indenture
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Trustee (so long as the Lien of the Indenture shall not have been
terminated or discharged).
Section 7.2 The Owner Trust covenants with each of the Parties
hereto that it will not directly or indirectly create, incur, assume or suffer
to exist any Lessor's Lien and will promptly notify AEE, the Owner Participant
and the Indenture Trustee of the imposition of any such Lessor's Lien of which
it has Actual Knowledge and shall promptly, at its own expense, take such action
as may be necessary to duly discharge such Lessor's Lien.
Section 7.3 The Owner Trust covenants with each of the Parties
hereto that it will not, unless such action is expressly contemplated by the
Operative Documents, (a) through its own action, terminate any Operative
Document to which it is a party, (b) amend, supplement, waive or modify (or
consent to any such amendment, supplement, waiver or modification of) any
Operative Document in any manner or (c) except as required in Section 2.10 of
the Indenture, take any action to prepay or refund the Lessor Notes or amend any
of the payment terms of the Lessor Notes without, in each case, the prior
written consent of AEE (so long as no Lease Event of Default shall have occurred
and be continuing) and, in the case of clause (a) or (b), the Indenture Trustee
(so long as the Lien of the Indenture shall not have been terminated or
discharged.)
SECTION 8
COVENANTS OF THE OWNER PARTICIPANT
The Owner Participant covenants and agrees with each of the
Parties hereto that:
Section 8.1 Restrictions on Transfer of Beneficial Interest.
(a) The Owner Participant may Transfer all or any part of the Beneficial
Interest to (i) an Affiliate of the Owner Participant (provided that the Owner
Participant shall remain secondarily liable if such Affiliate does not meet the
net worth standard set forth in Section 8.1(a)(ii)(B), or (ii) subject to
Section 15.1 (Right of First Offer), to any other Person (an "Owner Participant
Transferee"), provided, however, that so long as no Lease Event of Default shall
have occurred and be then continuing:
(A) AEE shall have received an opinion of counsel, which
opinion and counsel are reasonably satisfactory to AEE, to the effect
that all regulatory approvals required in connection with such Transfer
or necessary for the Owner
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Participant Transferee to assume the Owner Participant's obligations
under the Operative Documents shall have been obtained;
(B) the Owner Participant Transferee, or a guarantor thereof
under an Owner Participant Parent Guaranty, (1) shall have a tangible
net worth of at least $75,000,000, (2) shall be a United States person
within the meaning of Section 7701(a)(30) of the Code (unless AEE shall
have received an opinion of its tax counsel (in form, scope and
substance satisfactory to it) that such Transfer shall not result in
any material incremental adverse tax consequences to AEE), and (3)
shall have agreed to be bound by the terms of the Operative Documents
pursuant to an Assignment and Assumption Agreement; and
(C) so long as no Lease Bankruptcy Default shall have occurred
and be then continuing, neither the Owner Participant Transferee nor
any Affiliate thereof shall be an Ineligible Transferee.
(b) Unless the Owner Participant was a Competitor at the time
it became an Owner Participant in compliance with Section 8.1, if the Owner
Participant (or any Affiliate thereof) becomes a Competitor, then unless the
Owner Participant has transferred its Beneficial Interest to an Affiliate of the
Owner Participant (in the case where the Owner Participant becomes such a
Competitor) and has put in place sufficient policies and procedures (reasonably
satisfactory to AEE) to prevent the Owner Participant (or such Affiliate of the
Owner Participant that has become such a Competitor) from acquiring any
confidential information relating to AEE, the Facility, the Related Facility and
the Additional Facilities, so long as no Lease Bankruptcy Default or Lease Event
of Default shall have occurred and be then continuing, AEE shall have the right
to purchase all (but not less than all) of the Beneficial Interest and each
other beneficial interest then held by the Owner Participant in connection with
any Other Lease or Related Lease, at any time within six months after AEE
obtains Actual Knowledge of such event. The purchase price payable by AEE in
connection with any such Transfer shall be an amount equal to the greater of (i)
the Equity Portion of Termination Value and (ii) (2) the then current fair
market value of the Beneficial Interest (assuming AEE is in full compliance with
the Lease).
(c) AEE shall not be responsible for any adverse tax
consequence to the Owner Trust or the Owner Participant resulting from any
Transfer pursuant to this Section 8.1 and the Pricing Assumptions shall not be
changed as a result of any such Transfer.
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(d) The Owner Participant shall give the Owner Trust and AEE
and, so long as the Lien of the Indenture shall not have been terminated or
discharged, the Indenture Trustee (i) at least 30 days prior written notice of
such Transfer (except in the case of a Transfer to an Affiliate of the Owner
Participant), which notice need only state that the Owner Participant is
considering a Transfer of the Beneficial Interest, and (ii) a subsequent notice,
not less than 10 days prior to any such Transfer, specifying the name and
address of any proposed Owner Participant Transferee and such additional
information as shall be reasonably necessary to determine whether the proposed
Transfer satisfies the requirements of this Section 8.1. If requested by the
Owner Participant or the Indenture Trustee, AEE will acknowledge a qualifying
Transfer within 10 days of any request with respect thereto, provided that such
Transfer satisfies the requirement of this Section 8.1. All reasonable
out-of-pocket expenses of AEE and the other Transaction Parties (including
reasonable attorneys' fees and expenses) incurred in connection with any such
Transfer (or proposed Transfer), including any of the foregoing, relating to any
amendments to the Operative Documents required in connection therewith, shall be
paid by the Owner Participant; provided, however, that the Owner Participant
shall have no obligation to pay any expenses as a result of any Transfer while a
Lease Bankruptcy Default or Lease Event of Default is continuing, in which case
AEE shall be obligated to pay all such expenses.
(e) Upon any Transfer in compliance with this Section 8.1, (i)
the Owner Participant Transferee shall be deemed the "Owner Participant" for all
purposes, and shall enjoy the rights and privileges and perform the obligations
of the Owner Participant hereunder and under each other Operative Document to
which the Owner Participant is a party, and each reference in this Agreement and
each other Operative Document to the "Owner Participant" shall thereafter be
deemed to include such Owner Participant Transferee for all purposes and (ii)
the transferor Owner Participant shall be released from all obligations
hereunder and under each other Operative Document arising after such Transfer to
the extent such obligations are expressly assumed by such Owner Participant
Transferee.
(f) The Owner Participant will not Transfer all or any part of
the Beneficial Interest unless the proposed transferee thereof first provides
the Owner Trust, the Indenture Trustee and AEE with both of the following:
(i) a written representation and covenant that no part
of the funds it uses to purchase, acquire or hold such
Beneficial Interest constitute assets of any Plan subject to
Part 4 of Subtitle B of Title I of ERISA or a plan or
individual retirement account subject to Section 4975(e) of
the Code; and
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(ii) a written covenant that it will not transfer any
Beneficial Interest unless the subsequent transferee also
makes the representation described in clause (i) above and
agrees to comply with this Section 8.
(g) Notwithstanding the foregoing, no Transfer shall be
permitted hereunder if, after giving effect to such Transfer, there shall be
more than an aggregate of two unaffiliated owner participants holding beneficial
interests in the Trust Estate relating to the Lease and the trust estates
relating to the Other Leases and the Related Leases in which the Owner
Participant or its Affiliates hold a beneficial interest as of the Closing Date.
Section 8.2 Owner Participant's Liens. The Owner Participant
covenants that it will not, directly or indirectly, create, incur, assume or
suffer to exist any Owner Participant's Lien and the Owner Participant shall
promptly notify AEE and the Indenture Trustee of the imposition of any such
Owner Participant's Lien of which the Owner Participant has Actual Knowledge and
shall promptly, at its own expense, take such action as may be necessary to duly
discharge such Owner Participant's Lien; provided, however, that the Owner
Participant shall not be required to so discharge any such Owner Participant's
Lien while the same is being contested in good faith and by appropriate
proceedings pursuant to a Permitted Contest.
Section 8.3 Amendments or Revocation of Trust Agreement. The
Owner Participant covenants that it will not (a) amend, supplement, or otherwise
modify Section 2, 6.06, 8, 9.01, 10.01, 11, 12.02, 12.04 or 12.11 of the Trust
Agreement without the prior written consent of AEE (so long as no Lease
Bankruptcy Default or Lease Event of Default shall have occurred and be then
continuing), and the Indenture Trustee (so long as the Lien of the Indenture
shall not have been terminated or discharged), or (b) revoke, or otherwise waive
compliance with or terminate the Trust Agreement without the prior written
consent of AEE (so long as no Lease Bankruptcy Default or Lease Event of Default
shall have occurred and be then continuing), and the Indenture Trustee (so long
as the Lien of the Indenture shall not have been terminated or discharged).
Section 8.4 Instructions. The Owner Participant agrees that it
will not instruct the Trustee or the Owner Trust to take any action prohibited
by this Agreement or any other Operative Document.
Section 8.5 Appointment of Successor Trustee. Notwithstanding
any other provision of this Agreement, a successor Trustee shall not be
appointed without the consent of AEE, so long as no Lease Bankruptcy Default or
Lease Event of Default shall have occurred and be then continuing, and, so long
as the Lien of the Indenture shall not
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have been terminated or discharged, the Indenture Trustee unless (a) such
successor Trustee meets the requirements of the Trust Agreement, (b) such
successor Trustee has a combined capital and surplus of at least $150 million,
and (c) AEE and the Indenture Trustee shall have received (i) an opinion or
opinions of counsel, such counsel and such opinions to be reasonably acceptable
to such parties, to the effect that no regulatory consents or approvals are
required or (ii) such other evidence thereof reasonably satisfactory to AEE and
the Indenture Trustee, as the case may be. The Owner Participant shall pay all
expenses associated with obtaining any opinion pursuant to clause (c) above;
provided, however, that if the Trustee resigns, is terminated for cause, or
shall become incapable of acting, or shall be adjudged a bankrupt or insolvent,
or a receiver of the Trustee or its properties shall be appointed, or any public
officer shall take charge of or control the Trustee or its properties or affairs
for the purpose of rehabilitation, conservation or liquidation, in any such
case, the opinion and additional evidence required by clause (c) shall be at the
sole expense of AEE.
Section 8.6 Certain Tax Treatments. In filing all federal and,
to the extent applicable, state and local, income tax returns, the Owner
Participant will accrue Rent pursuant to and in accordance with Section
467(b)(1) of the Code except to the extent such accrual is inconsistent with a
Final Determination binding on the Owner Participant with respect to this issue.
SECTION 9
COVENANTS OF THE LEASE INDENTURE COMPANY
Section 9.1 Indenture Trustee's Liens. The Lease Indenture
Company covenants that it will not directly or indirectly create, incur, assume
or suffer to exist any Indenture Trustee's Lien and will promptly notify the
Owner Participant, the Owner Trust and AEE of the imposition of any such Lien of
which it has Actual Knowledge and shall promptly, at its own expense, take such
action as may be necessary to duly discharge such Indenture Trustee's Lien.
SECTION 10
INDEMNIFICATIONS
Section 10.1 General Indemnity.
(a) Claims Indemnified. Subject to the exclusions stated in
paragraph (b) below, AEE agrees, whether or not the Lease Financing is
consummated, to
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indemnify, protect, defend and hold harmless, and does hereby indemnify the
Owner Participant, the Owner Trust, the Trustee, the Trust Company, the
Indenture Trustee, the Lease Indenture Company, the Trust Estate, the Pass
Through Trustees and the Depositary Agent and their respective Affiliates,
successors, assigns, agents, directors, officers, managers, members or employees
(each an "Indemnitee") from and against any and all Claims incurred or suffered
by or asserted against any Indemnitee in any way relating to or resulting from
or arising out of or attributable to:
(i) the Facility or any part thereof, the
construction, financing, refinancing, acquisition, operation,
rebuilding, warranty, ownership, possession, maintenance,
repair, lease, condition, alteration, modification,
restoration, refurbishing, return, purchase, sale or other
disposition, insuring, sublease, or other use or non-use of
the Facility, the Facility Site, the Undivided Interest, the
Ground Interest, or any Component or any portion of any
thereof or any interest therein, the Related Facility, the
Related Site Lease, the undivided interests held by each Other
Lessor and Related Lessor, the Additional Facilities or the
other Assigned Assets;
(ii) the conduct of the business or affairs of AEE, or
any AEE Entity and the Facility, the Facility Site, the
Related Facility, the Related Facility Site, the Additional
Facilities, the respective sites of each of the Additional
Facilities and any other business or affairs conducted thereon
or thereat, as applicable;
(iii) the manufacture, design, purchase, acceptance,
rejection, delivery or condition of or improvement to the
Facility, the Facility Site, the Undivided Interest, the
Ground Interest or any Component or any portion thereof or any
interest therein, the Related Facility, the Related Site
Lease, the undivided interests held by each Other Lessor and
Related Lessor, the Additional Facilities or the other
Assigned Assets;
(iv) the Lease, or any other Operative Document or any
Support Agreement, the execution or delivery thereof or the
performance, enforcement, attempted enforcement or amendment
of any terms thereof, or the transactions contemplated thereby
or resulting therefrom;
(v) the environmental condition at, related to or
caused by the operation or maintenance of the Facility and the
Facility Site;
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(vi) the offer, issuance, sale, acquisition or delivery
of the Lessor Notes, any Additional Lessor Notes, the Pass
Through Certificates or any refinancing thereof;
(vii) the reasonable costs and expenses of the
Transaction Parties in connection with amendments or
supplements to the Operative Documents;
(viii) any violation by, or liability relating to, AEE or
any AEE Entity of, or under, any Applicable Law, whether now
or hereafter in effect (including Environmental Laws), or any
action of any Governmental Entity or other Person taken with
respect to the Facility, the Facility Site, the Undivided
Interest or the Ground Interest, the Related Facility, the
Related Site Lease, the undivided interests held by each Other
Lessor and Related Lessor, the Additional Facilities or the
other Assigned Assets, the Operative Documents or the
interests of the Owner Participant, the Owner Trust, the
Depositary Agent, the Indenture Trustee or the Pass Through
Trustees under the Operative Documents or the presence, use,
storage, transportation, treatment or manufacture of any
Hazardous Substance in, at, under or from the Facility or the
Facility Site;
(ix) the non-performance or breach by AEE or any AEE
Entity of any obligation contained in this Agreement or any
other Operative Document or the falsity or inaccuracy of any
representation, warranty or obligation of AEE or any AEE
Entity contained in this Agreement or any other Operative
Document;
(x) the continuing fees (if any) and expenses of each
of the Trustee, the Depositary Agent, the Indenture Trustee,
and the Pass Through Trustees (including the reasonable
compensation and expenses of their respective counsel,
accountants and other professional persons) arising out of
each such parties discharge of its duties under or in
connection with the Operative Documents; and
(xi) in any other way relating to the Lease Financing
and the other lease financings contemplated by any Other Lease
or Related Lease.
(b) Claims Excluded. AEE shall not be required to indemnify
any Indemnitee under this Section 10.1 for any of the following:
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(i) as to any Indemnitee, unless occurring in
connection with a Lease Event of Default and the exercise of
remedies in connection therewith, any Claim to the extent
attributable to acts taken, or omissions or events occurring,
arising or to be performed, after (A) the expiration or early
termination of the Lease and, where required by the Lease,
surrender to the Owner Trust or its successor of AEE's
interest in the Undivided Interest in compliance with the
provisions of the Lease (including, without limitation, the
requirements of Section 5.5 of the Lease) or (B) (other than
the Indenture Trustee, the Lease Indenture Company, the
Depositary Agent and the Pass Through Trustees) the purchase
of the Beneficial Interest by AEE in compliance with the
provisions of Section 14 or 15;
(ii) as to any Indemnitee, any Claim to the extent
attributable to any Transfer (voluntary or involuntary) by or
on behalf of such Indemnitee of any part of its interest under
any of the Operative Documents unless such Transfer is
required by the terms of the Operative Documents or occurs in
connection with a Lease Event of Default or the exercise of
remedies in connection therewith;
(iii) as to any Indemnitee, any Claim to the extent
arising from the gross negligence or willful misconduct of
such Indemnitee or a Related Party;
(iv) as to any Indemnitee, any Claim to the extent
attributable to the noncompliance of such Indemnitee with any
of the terms of, or any misrepresentation or breach of any
warranty by such Indemnitee contained in any Operative
Document or any breach by such Indemnitee of any covenant
contained in any Operative Document unless attributable to (A)
any breach by AEE or any AEE Entity of any covenant,
representation or warranty contained in any Operative Document
or Support Agreements, (B) any breach by any other Transaction
Party of any covenant, representation or warranty made by it
in any Operative Document or (C) any breach by AES NY3 or
Somerset Railroad of any covenant, representation or warranty
made by it in the Coal Hauling Agreement;
(v) as to the Owner Trust, any Claim to the extent
attributable to a Lessor's Lien, as to the Indenture Trustee
and Lease Indenture Company, any Claim to the extent
attributable to an Indenture Trustee's Lien and, as to the
Owner Participant, any Claim to the extent attributable to an
Owner Participant's Lien;
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(vi) any Claim relating to the payment of any amount
which constitutes Transaction Expenses which the Owner
Participant is obligated to pay pursuant to Section 2.3(a)
hereof or any other amount to the extent such Indemnitee has
expressly agreed in any Operative Document to pay such amount
without express right of reimbursement;
(vii) any Claim in respect of Taxes, other than a
payment necessary to make payments under this Section 10.1 on
an After-Tax Basis;
(viii) in the case of the Trustee, any failure on the
part of the Trustee to distribute in accordance with the Trust
Agreement any amounts indefeasibly received by it under the
Operative Documents and distributable by it thereunder;
(ix) any Claim that constitutes principal and/or
interest on the Lessor Notes or any Additional Lessor Notes;
(x) as to any Indemnitee, amendments to the Operative
Documents that are requested by such Indemnitee (and are not
requested or consented to by AEE or any Affiliate thereof) or
are not required by the Operative Documents or by Applicable
Law or in connection with a Lease Event of Default; and
(xi) as to any Indemnitee, any Claim to the extent
arising out of or relating to an inspection of the Facility or
the Facility Site by or on behalf of such Indemnitee, unless
at the time of such inspection a Lease Event of Default shall
have occurred and be then continuing.
For purposes of this Section 10.1(b) the terms "omission,"
"gross negligence" and "willful misconduct," when applied with respect to any
Indemnitee, shall not include any liability to the extent imputed as a matter of
law to such Indemnitee by reason of such Person's interest in the Facility or
the Facility Site or such Indemnitee's failure to act in respect of matters
which are or were the obligation of AEE or another party under this Agreement or
any other Operative Document.
(c) Insured Claims. Subject to the provisions of Section
10.1(e), in the case of any Claim indemnified by AEE hereunder which is covered
by a policy of insurance maintained by AEE, each Indemnitee agrees, unless it
and each other Indemnitee shall waive its rights to indemnification (for itself
and each Related Party) in a manner reasonably acceptable to AEE and unless a
Lease Bankruptcy Default or Lease
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Event of Default shall have occurred and be then continuing, to cooperate in a
reasonable manner, at the sole expense of AEE, with insurers in exercise of
their rights to investigate, defend or compromise such Claim.
(d) After-Tax Basis. AEE agrees that any payment or indemnity
pursuant to this Section 10.1 shall be made to the relevant Indemnitee on an
After-Tax Basis.
(e) Claims Procedure. (i) Each Indemnitee shall promptly after
such Indemnitee shall have Actual Knowledge thereof notify AEE of any Claim as
to which indemnification is sought; provided, however, that the failure so to
notify AEE shall not reduce or affect AEE's liability which it may have to such
Indemnitee under this Section 10.1.
(ii) Any amount payable to any Indemnitee pursuant to
this Section 10.1 shall be paid within 15 days after receipt
of such written demand therefor from such Indemnitee,
accompanied by a certificate of such Indemnitee stating in
reasonable detail the basis for the indemnification thereby
sought and (if such Indemnitee is not a party hereto) an
agreement to be bound by the terms hereof as if such
Indemnitee were such a party. The foregoing shall not,
however, constitute an obligation to disclose confidential
information of any kind.
(iii) Promptly after AEE receives notification of such
Claim accompanied by a written statement describing in
reasonable detail the Claims which are the subject of and
basis for such indemnity and the computation of the amount so
payable, AEE shall notify such Indemnitee whether it intends
to pay, object to, compromise or defend any matter involving
the asserted liability of such Indemnitee.
(iv) AEE shall have the right to investigate and, so
long as no Lease Bankruptcy Default or Lease Event of Default
shall have occurred and be then continuing, AEE shall have the
right, in its sole discretion, to defend or compromise any
Claim for which indemnification is sought under this Section
10.1; provided, however, that AEE shall have acknowledged in
writing to the relevant Indemnitee its undertaking to
indemnify such Indemnitee pursuant hereto and; provided,
further, however, that such defense or compromise constitutes
a Permitted Contest. To the extent that other Claims unrelated
to the Lease Financing are part of the same proceeding
involving such Claim, AEE may assume
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responsibility for the contest or compromise of such Claim
only if the same may be and is severed from such other Claims
(and each Indemnitee agrees to use reasonable efforts to
obtain such a severance).
(v) If AEE elects, subject to the foregoing, to
compromise or defend any such asserted liability, it may do so
at its own expense and by counsel selected by it. Upon AEE's
election to compromise or defend such asserted liability and
prompt notification to such Indemnitee of its intent to do so,
such Indemnitee shall cooperate at AEE's expense with all
reasonable requests of AEE in connection therewith and will
provide AEE with all information not within the control of AEE
as is reasonably available to such Indemnitee which AEE may
reasonably request; provided, however, that such Indemnitee
shall not be obligated to disclose to AEE or any other Person,
or permit AEE or any other Person to examine (A) any income
tax returns or (B) any confidential information or pricing
information not generally accessible by the public (and, in
the event that any such information is made available, AEE
shall treat such information as confidential and shall take
all actions reasonably requested by such Indemnitee for
purposes of obtaining a stipulation from all parties to the
related proceeding providing for the confidential treatment of
such information from all such parties).
(vi) Subject to clause (e)(i) of this Section 10.1,
where AEE, or the insurers under a policy of insurance
maintained by AEE, undertake the defense of such Indemnitee
with respect to a Claim (with counsel reasonably satisfactory
to such Indemnitee and without reservation of rights against
such Indemnitee), no additional legal fees or expenses of such
Indemnitee in connection with the defense of such Claim shall
be indemnified hereunder unless such fees or expenses were
incurred at the request of AEE or such insurers.
Notwithstanding the foregoing, an Indemnitee may participate
at its own expense in any judicial proceeding controlled by
AEE pursuant to the preceding provisions; provided, however,
that such party's participation does not constitute a waiver
of the indemnification provided in this Section 10.1;
provided, further, however, that if and to the extent that (A)
such Indemnitee is advised by counsel that an actual or
potential conflict of interest exists where it is advisable
for such Indemnitee to be represented by separate counsel or
(B) there is any risk that such Indemnitee may be indicted or
otherwise have any criminal liability imposed on it and such
Indemnitee informs AEE that such Indemnitee desires to be
represented by separate counsel, such Indemnitee
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shall have the right to control its own defense of such Claim
and the reasonable fees and expenses of such defense
(including, without limitation, the reasonable fees and
expenses of such separate counsel) shall be borne by AEE.
(vii) So long as no Lease Bankruptcy Default or Lease
Event of Default shall have occurred and be continuing, no
Indemnitee shall enter into any settlement or other compromise
with respect to any Claim without the prior written consent of
AEE unless the Indemnitee waives its rights to indemnification
hereunder. Nothing contained in this Section 10.1(e) shall be
deemed to require an Indemnitee to contest any Claim or to
assume responsibility for or control of any judicial
proceeding with respect thereto.
(f) Subrogation. To the extent that a Claim indemnified by AEE
under this Section 10.1 is in fact paid in full by AEE or an insurer under an
insurance policy maintained by AEE, so long as no Lease Bankruptcy Default or
Lease Event of Default shall have occurred and be then continuing, AEE or such
insurer shall be subrogated to the rights and remedies of the Indemnitee on
whose behalf such Claim was paid to the extent of such payment (other than
rights of such Indemnitee under insurance policies maintained at its own
expense) with respect to the transaction or event giving rise to such Claim.
Should an Indemnitee receive any refund, in whole or in part, with respect to
any Claim paid by AEE hereunder, so long as no Lease Material Default or Lease
Event of Default shall have occurred and be then continuing, it shall promptly
pay over to AEE for deposit with the Depositary Agent in the Revenue Account the
lesser of (i) the amount refunded reduced by the amount of any Tax incurred by
reason of the receipt or accrual of such refund and increased by the amount of
any Tax (but not in excess of the amount of such reduction) saved as a result of
such payment and (ii) the amount AEE or any of its insurers has paid in respect
of such Claim; provided, however, that so long as any Lease Material Default or
Lease Event of Default shall have occurred and be then continuing, such amount
may be held by the Owner Trust as security for AEE's obligations under the Lease
and the other Operative Documents.
Section 10.2 General Tax Indemnity.
(a) Indemnity. Except as provided in paragraph (b), AEE agrees
to indemnify on an After-Tax Basis each of the Owner Participant, the Lessor,
the Owner Trust, the Trustee, the Trust Company, the Lease Indenture Company,
the Indenture Trustee, the Trust Estate, the Depositary Agent and the Pass
Through Trustees, their respective successors and assigns, and the Affiliates of
each of the foregoing (each a "Tax
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Indemnitee") and to hold each Tax Indemnitee harmless from and defend against
all Taxes that are imposed upon or with respect to or borne by or asserted
against any Tax Indemnitee, the Facility, the Facility Site or any portion or
Component thereof or any interest therein, or upon any Operative Document or
interest therein, or otherwise arising out of, in connection with or relating
to, any of the following:
(i) the construction, financing, refinancing,
acquisition, operation, warranty, ownership, possession,
maintenance, repair, lease, condition, alteration,
modification, restoration, refurbishing, return, purchase,
sale or other disposition, insuring, sublease, or other use or
non-use of the Facility or the Facility Site, or any portion
or Component thereof or any interest therein;
(ii) the manufacture, design, purchase, acceptance,
rejection, delivery, redelivery or condition of, or
improvement to, the Facility, the Facility Site, or any
portion or Component thereof, or any interest therein;
(iii) the Lease, the Site Lease, the Site Sublease or
any other Operative Document (or any document contemplated
thereby or therein) or any other Support Agreement, the
execution or delivery thereof, or the performance, enforcement
or amendment of any terms thereof;
(iv) the payment or receipt of Basic Rent and
Supplemental Rent or any other payment, receipt or earnings
under the Lease or arising from the Facility (or any portion
thereof or interest therein), the Facility Site (or any
portion thereof or interest therein), or with respect to the
property held by the Trustee as part of the Trust Estate or by
the Indenture Trustee under the Trust Indenture or a Pass
Through Trustee under a Pass Through Trust Agreement; or
(v) otherwise relating to the transactions
contemplated by the Operative Documents.
(b) Excluded Taxes. The indemnity provided for in paragraph
(a) above shall not extend to any of the following Taxes (the "Excluded Taxes"):
(i) federal income Taxes imposed under Subtitle A of
the Code (including minimum taxes); provided, however, that
this exclusion shall not apply to the computation of the
gross-up amounts necessary to make a payment on an After-Tax
Basis;
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(ii) Taxes, including franchise Taxes, imposed on,
based on or measured by gross or net income or receipts,
capital or net worth, excess profits, capital gain,
accumulated earnings, personal holding company, succession or
estate, preference, conduct of business or other similar Taxes
(including minimum taxes) (other than Taxes that are in the
nature of sales, use, rental, ad valorem, stamp, transfer,
excise, withholding, license, value added (to the extent such
taxes are not in lieu of an income tax) or property taxes)
("Income Taxes") imposed by (A) New York State (or any local
jurisdiction or taxing authority located therein), (B) any
foreign government or any foreign taxing authority, (C) a
taxing authority in any jurisdiction in which the Tax
Indemnitee is organized, incorporated or has its principal
place of business or is otherwise subject to Income Taxes as a
result of income, assets or activities that are unrelated to
the subject transaction, and (D) any other government or
taxing authority; provided, however, that the exclusion in
(b)(ii)(D) shall not apply to Income Taxes imposed as a result
of (w) the use, location, operation or registration of the
Facility in the jurisdiction imposing such tax, (x) the
execution or delivery of any Operative Document in such
jurisdiction, (y) the identity, organization, incorporation,
activities or presence of the Lessee or any Lessee Person or
(z) the making of any payment under the Operative Documents by
or on behalf of the Lessee or any related person;
(iii) Taxes imposed with respect to any period or event
occurring after expiration or earlier termination of the Lease
and surrender of the Facility to the Lessor in accordance with
the Lease (or, in the case of the Indenture Trustee, after the
repayment of the Lessor Notes) other than Taxes (A) relating
to or arising from events occurring prior to, or
simultaneously with, the expiration or earlier termination of
the Lease or (B) imposed with respect to any payments due
under the Operative Documents;
(iv) Taxes imposed on a Tax Indemnitee to the extent
such Taxes result from (A) the gross negligence, willful
misconduct or fraud of such Tax Indemnitee or any Related
Party or (B) the breach or inaccuracy by such Tax Indemnitee
of any of its representations, warranties, covenants or
obligations under the Operative Documents, unless the breach
or inaccuracy is the direct result of a Lease Event of
Default;
(v) Taxes that would not be imposed had there not been
(A) any voluntary assignment, sale, transfer or other
disposition by the Owner
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Participant of any of its Beneficial Interest, the Lessor of
all or any of its interest in the Facility or the Facility
Site, the Indenture Trustee of any interest in the Lessor
Notes or the Indenture Estate, or any interest in the Tax
Indemnitee, unless such assignment, sale, transfer or other
disposition occurs pursuant to the exercise of remedies during
the continuance of a Lease Event of Default or in connection
with the exercise by Lessee of any right to purchase the
Undivided Interest, as permitted by the Operative Documents;
or (B) any involuntary assignment, sale, transfer or other
disposition by the Owner Participant of any of its Beneficial
Interest, the Lessor of all or any of its interest in the
Facility or the Facility Site, the Indenture Trustee of any
interest in the Lessor Notes or the Indenture Estate, or any
interest in the Tax Indemnitee resulting from a bankruptcy or
similar proceeding for relief of debtors in which any of the
foregoing is a debtor, or a foreclosure by a creditor of any
of the foregoing;
(vi) Taxes that would not occur but for an Owner
Participant's Liens or Owner Trust's Liens, unless a Lease
Event of Default shall have occurred and be then continuing;
(vii) Taxes imposed on any assignee or transferee of a
Tax Indemnitee (including any transfer by merger,
consolidation, liquidation, reorganization or otherwise by
operation of law) to the extent any such Taxes exceed the
Taxes that would have been imposed had no assignment or
transfer taken place (determined under the law as in effect on
the date of transfer); provided, however, that this exclusion
shall not apply to the computation of the gross-up amounts
necessary to make a payment on an After-Tax Basis, nor to a
transferee, assignee or successor in interest that acquires
the interest of a Tax Indemnitee (A) pursuant to the exercise
of remedies by such Tax Indemnitee during the continuance of a
Lease Event of Default, (B) at Lessee's request or direction
or (C) during the year ending on the first anniversary of the
Closing Date;
(viii) Taxes that are included as a part of Transaction
Expenses; provided, however, that this exclusion shall not
apply to any increase in such Taxes imposed by any taxing
authority after the Closing Date;
(ix) Taxes imposed on, based on, or measured by any fee
for services performed by the Trustee, Indenture Trustee or
Pass Through Trustees in connection with the transactions
contemplated by the Operative Documents;
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(x) with respect to the Owner Participant, Taxes for
which AEE is obligated to indemnify the Owner Participant
under the Tax Indemnity Agreement (or which are expressly
excluded from indemnification thereunder);
(xi) Taxes imposed on any Indemnitee that would not
have been imposed but for the Owner Trust being organized
outside the United States or being treated as other than (A) a
U.S. Person (as defined in Section 7701(a)(30) of the Code) or
(B) a grantor trust, disregarded entity or pass-through entity
for U.S., foreign, state or local income tax purposes;
(xii) Taxes that would not be imposed but for the
failure of a Tax Indemnitee to comply with certification,
information, documentation, reporting or other similar
requirements of the jurisdiction imposing such Taxes if (A)
such Tax Indemnitee was legally eligible to comply with such
requirement and such compliance is required by statute or
regulation of the jurisdiction imposing such Taxes as a
precondition to relief or exemption from such Taxes and (B)
such failure is not caused by the failure of the Lessee to
provide timely to such Tax Indemnitee any information or
document that the Lessee is required to provide pursuant to
the Operative Documents;
(xiii) Taxes imposed on a Tax Indemnitee where the Tax
Indemnitee's breach of its contest obligations adversely
affects AEE's ability to contest the Taxes (but only to the
extent of such adverse effect);
(xiv) Taxes imposed on any Tax Indemnitee resulting from
an amendment, modification, supplement or waiver to any
Operative Document which was not requested by AEE and as to
which AEE is not a party and the Tax Indemnitee (or any
Related Party) is a party unless such amendment, modification,
supplement or waiver (A) is required by applicable law or the
Operative Documents, (B) may be necessary to, and is in
conformity with, any amendment to any Operative Document
requested or consented to by AEE in writing, or (C) is made
pursuant to the exercise of remedies by such Tax Indemnitee
while a Lease Event of Default shall have occurred and be
continuing;
(xv) Taxes imposed on a Tax Indemnitee as a result of
such Tax Indemnitee having engaged in a prohibited transaction
within the meaning of Section 4975 of the Code or under
subtitle B of Title I of ERISA;
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(xvi) Taxes that are being contested in good faith
accordance with the terms of Section 10.2(g), but only so long
as AEE is complying with its obligations under Section
10.2(g);
(xvii) Taxes in the nature of an intangible or similar
tax, other than such Taxes imposed (A) by New York State or
any jurisdiction located therein or (B) as a result of the
organization or incorporation, or the location of the
principal place of business, of AEE or AES in the jurisdiction
imposing such Tax;
(xviii) Taxes imposed by any jurisdiction that would not
have been imposed on a Tax Indemnitee but for its activities
in such jurisdiction unrelated to the transactions
contemplated by the Operative Documents; and
(xix) value added Taxes imposed on a Tax Indemnitee to
the extent such value added Taxes are imposed in lieu of an
income tax.
(c) Payment. Each payment required to be made by AEE to a Tax
Indemnitee pursuant to this Section 10.2 shall be paid either (i) when due on or
prior to such due date directly to the applicable taxing authority by AEE if it
is permitted to do so, or (ii) in immediately available funds to such Tax
Indemnitee by the later of (A) 30 days following AEE's receipt of the Tax
Indemnitee's written demand for the payment (which demand shall be accompanied
by a statement of the Tax Indemnitee describing in reasonable detail the Taxes
for which the Tax Indemnitee is demanding indemnity and the computation of such
Taxes), (B) subject to paragraph (g) below, in the case of amounts which are
being contested pursuant to such paragraph (g), at the time and in accordance
with a final determination of such contest or (C) in the case of any indemnity
demand for which AEE has requested review and determination pursuant to
paragraph (d) below, the completion of such review and determination; provided,
however, that with respect to a payment pursuant to clause (ii) in no event
shall any such payment be made to the Tax Indemnitee later than the date which
is three Business Days prior to the date on which such Taxes are required to be
paid to the applicable taxing authority. Within 30 days after the date of each
payment by AEE pursuant to clause (i) above, AEE shall furnish the Tax
Indemnitee with the original or a certified copy of a receipt for AEE's Sections
payment of such Taxes or, if a receipt from the taxing authority is not obtained
within such 30 day period, or if such receipt includes references to other AEE
taxes unrelated to the transactions contemplated by this Agreement, such other
evidence of payment of such Taxes as is acceptable to the Tax Indemnitee.
Subject to the terms of Sections (e) and (f) below, as applicable, any amount
payable to AEE pursuant to paragraph (e) or (f) below
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shall be paid promptly after the Tax Indemnitee realizes a Tax Benefit giving
rise to a payment under paragraph (e) or receives a refund or credit giving rise
to a payment under paragraph (f), as the case may be, and shall be accompanied
by a statement of the Tax Indemnitee computing in reasonable detail the amount
of such payment. Upon the final determination of any contest pursuant to
paragraph (g) below in respect of any Taxes for which AEE has made a Tax Advance
(as defined in Section 10.2(g)(iii)(D)), the amount of AEE's obligation under
paragraph (a) above shall be determined as if such Tax Advance had not been made
and any obligation of AEE under this Section 10.2 and the Tax Indemnitee's
obligation to repay the Tax Advance shall be satisfied first by set off against
each other, and any difference owing by either party shall be paid within 10
days of such final determination.
(d) Independent Examination. Within 15 days after AEE receives
any computation from the Tax Indemnitee, AEE may request in writing that an
independent public accounting firm (selected by the Tax Indemnitee and
reasonably acceptable to AEE) review and determine on a confidential basis the
amount of any indemnity payment by AEE to the Tax Indemnitee pursuant to this
Section 10.2 or any payment by a Tax Indemnitee to AEE pursuant to paragraph (e)
or (f) below. The Tax Indemnitee shall cooperate with such accounting firm and
supply it with all information reasonably necessary for the accounting firm to
conduct such review and determination; provided that such accounting firm shall
agree in writing in a manner satisfactory to the Tax Indemnitee to maintain the
confidentiality of such information. The parties hereto agree that the
independent public accounting firm's sole responsibility shall be to verify the
computation of any payment pursuant to this Section 10.2 and that matters of
interpretation of this Participation Agreement or any other Operative Document
are not within the scope of the independent accountant's responsibility. The
fees and disbursements of such accounting firm shall be paid by AEE; provided
that such fees and disbursements shall be paid by the Tax Indemnitee if the
verification results in an adjustment in AEE's favor of five percent or more of
the indemnity payment or payments computed by the Tax Indemnitee.
(e) Tax Benefit. If, as the result of any Taxes paid or
indemnified against by AEE under this Section 10.2, the aggregate Taxes actually
paid by the Tax Indemnitee for any taxable year and not subject to
indemnification pursuant to this Section 10.2 are less (whether by reason of a
deduction, credit, allocation or apportionment of income or otherwise) than the
amount of such Taxes that otherwise would have been payable by such Tax
Indemnitee (a "Tax Benefit"), then to the extent such Tax Benefit was not taken
into account in determining the amount of indemnification payable by AEE under
paragraph (a) above and provided no Lease Material Default or Lease Event of
Default shall have occurred and be continuing (in
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which event the payment provided under this Section 10.2(e) shall be deferred
until the Lease Material Default or Lease Event of Default has been cured), such
Tax Indemnitee shall pay to AEE the lesser of (A)(y) the amount of such Tax
Benefit, plus (z) an amount equal to any federal, state or local income tax
benefit resulting to the Tax Indemnitee from the payment under clause (y) above
and this clause (z) (determined using the same assumptions as set forth in the
second sentence under the definition of After-Tax Basis) and (B) the amount of
the indemnity paid pursuant to this Section 10.2 giving rise to such Tax
Benefit; provided, that, in either case, the Tax Indemnitee may offset any
amount due under this Section 10.2(e) against payments or indemnitees then due
by AEE pursuant to the Operative Documents. If it is subsequently determined
that the Tax Indemnitee was not entitled to such Tax Benefit, the portion of
such Tax Benefit that is repaid or recaptured shall be treated as Taxes for
which AEE must indemnify the Tax Indemnitee pursuant to this Section 10.2,
without regard to Sections 10.2(b).
(f) Refund. If a Tax Indemnitee obtains a refund or credit of
all or part of any Taxes paid, reimbursed or advanced by AEE pursuant to this
Section 10.2, the Tax Indemnitee promptly shall pay to AEE (x) the amount of
such refund or credit plus (y) an amount equal to any federal, state or local
income tax benefit realized by such Tax Indemnitee by reason of such payment to
AEE (determined using the same assumptions as set forth in the second sentence
under the definition of After-Tax Basis); provided, however, that (A) if at the
time such payment is due to AEE a Lease Material Default or Lease Event of
Default shall have occurred and be then continuing, such amount shall not be
payable until such Lease Material Default or Lease Event of Default has been
cured and (B) the amount payable to AEE pursuant to this sentence shall not
exceed the amount of the indemnity payment in respect of such refunded or
credited Taxes that was made by AEE; provided, further, that the Tax Indemnitee
may offset any amount due under this Section 10.2(f) against payments or
indemnitees then due by AEE pursuant to the Operative Documents. If it is
subsequently determined that the Tax Indemnitee was not entitled to such refund
or credit, the portion of such refund or credit that is repaid or recaptured
shall be treated as Taxes for which AEE must indemnify the Tax Indemnitee
pursuant to this Section 10.2, without regard to Sections 10.2 (b). If, in
connection with a refund or credit of all or part of any Taxes paid, reimbursed
or advanced by AEE pursuant to this Section 10.2, a Tax Indemnitee receives or
is credited with an amount representing interest on such refund or credit, the
Tax Indemnitee promptly shall pay to AEE the amount of such interest that shall
be fairly attributable to such Taxes paid, reimbursed or advanced by AEE prior
to the receipt of such refund or credit (less any Taxes paid or accrued with
respect to the receipt of such amounts).
(g) Contest.
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(i) Notice of Contest. If a written claim for payment
is made by any taxing authority against a Tax Indemnitee for
any Taxes with respect to which AEE may be liable for
indemnity hereunder (a "Tax Claim"), such Tax Indemnitee shall
give AEE written notice of such Tax Claim as soon as
practicable after its receipt, and shall furnish AEE with
copies of such Tax Claim and all other writings received from
the taxing authority to the extent relating to such claim;
provided that failure to so notify AEE shall not relieve AEE
of any obligation to indemnify the Tax Indemnitee hereunder
except as provided in clause (xiii) of Section 10.2(b). After
giving of such notice, so long as no Lease Material Default or
Lease Event of Default shall have occurred and be then
continuing, the Tax Indemnitee shall not pay such Tax Claim
until at least 30 days after providing AEE with such written
notice, unless required to do so by law or regulation.
(ii) Control of Contest. Subject to subsection (g)(iii)
below, AEE shall be entitled to contest at its own expense
(acting through counsel selected by AEE and reasonably
satisfactory to the Tax Indemnitee), and control the contest
of, any Tax Claim if (i) such Tax Claim may be segregated
procedurally from tax claims for which AEE is not obligated to
indemnify the Tax Indemnitee or (ii) the Tax Indemnitee
requests that AEE control such contest; provided that in the
case of any such contest pursuant to (i) or (ii) AEE shall use
all reasonable efforts to contest such Tax Claim in its own
name, but if such contest is in the Tax Indemnitee Sections
name, the Tax Indemnitee shall have the right to participate
in all proceedings. In the case of all other Tax Claims, (A)
unless, in the opinion of counsel selected by Tax Indemnitee
and reasonably satisfactory to AEE (but delivered at AEE's
expense) there is no Reasonable Basis to contest or (B) the
matter at issue was subject to a prior unsuccessful contest
(unless AEE shall have previously delivered an opinion of
counsel selected by Tax Indemnitee and reasonably satisfactory
to AEE that there has been a change in law which would affect
the outcome of a new contest in favor of Tax Indemnitee), if
AEE shall request that the Tax be contested (in accordance
with subsection (g)(iii) below)), the Tax Indemnitee shall
contest the Tax Claim and the following rules shall apply with
respect to such contest:
(A) the Tax Indemnitee shall control the
contest of such Tax Claim in good faith (acting
through counsel selected by the Tax Indemnitee and
reasonably satisfactory to AEE),
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(B) at AEE's written request, if payment is
made to the applicable taxing authority, the Tax
Indemnitee shall use all reasonable efforts to obtain
a refund thereof in appropriate administrative or
judicial proceedings,
(C) the Tax Indemnitee shall consult with
and keep reasonably informed AEE and its designated
counsel with respect to such Tax Claim, shall use
commercially reasonable efforts to allow AEE to
review any written submission to be made to a taxing
authority or a court to the extent that such
submission relates to the contest and shall consider
and consult in good faith with AEE concerning (i) any
suggestions made with respect to such submission or
(ii) any request by AEE to (a) resist payment of
Taxes demanded by the taxing authority in connection
with such Tax Claim if practical and (b) not pay such
Taxes except under protest if protest is necessary
and proper,
(D) Tax Indemnitee shall, if requested by
Lessee in a timely written request, seek judicial
review of any adverse administrative determination
and, upon receipt of an opinion from independent tax
counsel selected by Tax Indemnitee and reasonably
acceptable to Lessee (delivered at Lessee's expense)
that it is more likely than not that an adverse
judicial determination will be reversed or
substantially modified upon appeal in a manner
favorable to Tax Indemnitee, appeal such adverse
judicial determination, and
(E) the Tax Indemnitee shall not otherwise
settle, compromise or abandon such contest without
AEE's prior written consent except as provided in
paragraph (g)(iv) below.
(iii) Conditions of Contest. Notwithstanding the
foregoing, no contest with respect to a Tax Claim shall be
required or permitted pursuant to this Section 10.2, and AEE
shall be required to pay the applicable Taxes without contest,
unless:
(A) within 30 days after notice by the Tax
Indemnitee to AEE of such Tax Claim, AEE requests in
writing that such Tax Claim be contested; provided
that if a shorter period is required for taking
action with respect to such Tax Claim and the Tax
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Indemnitee notifies AEE of such requirement, AEE
requests such contest within such shorter period,
(B) no Lease Bankruptcy Default or Lease
Event of Default shall have occurred and be then
continuing,
(C) in cases of Tax Claims to be contested
by the Tax Indemnitee only, the amount of the
potential indemnity that would be payable under this
Section 10.2 in respect of the matter in controversy
(which shall include any prospective exposure in
future tax years attributable to the position being
challenged as well as any similarly and logically
related adjustments in respect of the transactions
contemplated by the Operative Documents) shall exceed
$25,000,
(D) if such contest involves payment of such
Tax, AEE either advances to the Tax Indemnitee on an
interest-free basis and with no after tax cost to
such Tax Indemnitee (a "Tax Advance"), or pays such
Tax Indemnitee, the amount payable by AEE pursuant to
Section 10.2(a) above with respect to such Tax,
(E) AEE agrees to pay (and pays on demand)
and with no after tax cost to such Tax Indemnitee all
reasonable costs and expenses incurred by the Tax
Indemnitee in connection with the contest of such
claim (including, without limitation, reasonable
legal, accounting and investigatory fees,
disbursements, penalties, interest and additions to
Tax),
(F) AEE acknowledges in writing its
responsibility to indemnify such Tax Indemnitee in
respect of the matter at issue; provided, that such
acknowledgment of liability will not be binding if
the contest is resolved on a basis from which it can
clearly and unambiguously be determined that AEE
would not have been liable to Tax Indemnitee in the
absence of such acknowledgment of liability, and
(G) Tax Indemnitee determines in good faith
that there is no material risk that action taken will
result in sale, forfeiture of, or creation of Lien
on, the Facility, the Undivided Interest, or any
portion thereof (unless AEE has provided to the Tax
Indemnitee a
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bond or other sufficient protection against the
foregoing risks reasonably satisfactory to the Tax
Indemnitee).
(iv) Waiver of Indemnification. Notwithstanding
anything to the contrary contained in this Section 10.2, the
Tax Indemnitee at any time may elect to decline to take any
action or any further action with respect to a Tax Claim and
may in its sole discretion settle or compromise any contest
with respect to such Tax Claim without AEE's consent if the
Tax Indemnitee:
(A) waives its right to any indemnity
payment by AEE pursuant to this Section 10.2 in
respect of such Tax Claim (and any other claim for
Taxes with respect to any other taxable year the
contest of which is effectively precluded by the Tax
Indemnitee's declination to take action with respect
to the Tax Claim), and
(B) promptly repays to AEE any Tax Advance
and any amount paid to such Tax Indemnitee under
Section 10.2(a) above in respect of such Taxes, but
not any costs or expenses with respect to any such
contest.
Except as provided in the preceding sentence, any such waiver
shall be without prejudice to the rights of the Tax Indemnitee with respect to
any other Tax claim.
(h) Reports.
(i) If any report, statement or return is required to
be filed by a Tax Indemnitee with respect to any Tax that is
subject to indemnification under this Section 10.2, AEE shall
(1) notify the Tax Indemnitee in writing of such requirement
not later than 30 days prior to the date such report,
statement or return is required to be filed (determined
without regard to extensions) and (2) either (y) if permitted
by applicable law, prepare such report, statement or return
for filing, send a copy of such report, statement or return to
the Tax Indemnitee and timely file such report, statement or
return with the appropriate taxing authority, or (z) if AEE is
not permitted by law to file such report, statement or return,
or if so directed by the Tax Indemnitee, prepare and furnish
to such Tax Indemnitee not later than 30 days prior to the
date such report, statement or return is required to be filed
(determined without regard to extensions) a proposed form of
such report, statement or return for filing by the Tax
Indemnitee; provided, however, that if such report, statement
or return
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requires information particularly within the control of the
Tax Indemnitee that is not provided to AEE within a reasonable
amount of time of AEE's request, AEE shall prepare (and
furnish to Tax Indemnitee within the time frame discussed
above) a draft of such report, statement or return by
completing those portions of such report, statement or return
which can completed based upon the information then available
to AEE.
(ii) Each of the Tax Indemnitee or AEE, as the case may
be, shall timely provide the other, at AEE's expense, with all
information in its possession that the other party may
reasonably require and request to satisfy its obligations
under this paragraph (h).
(i) Non-Parties. If a Tax Indemnitee is not a party to this
Agreement, AEE may require such Tax Indemnitee to agree in writing, in a form
reasonably acceptable to AEE, to the terms of this Section 10 prior to making
any payment to such Tax Indemnitee under this Section.
SECTION 11
AEE RIGHT OF QUIET ENJOYMENT
Each party to this Agreement acknowledges notice of, and
consents in all respects to, the terms of the Lease and the Site Sublease and
expressly, severally and as to its own actions only, agrees that, so long as no
Lease Event of Default shall have occurred and be then continuing and the Lease
has not been declared (or deemed declared) in default, it shall not take or
cause to be taken any action contrary to AEE's rights under the Lease and the
Site Sublease, including the right to quiet enjoyment of the use, operation and
possession by AEE of the Facility and the Undivided Interest and the Ground
Interest.
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SECTION 12
SUPPLEMENTAL FINANCING
Section 12.1 Financing Modifications. Upon the request of AEE
delivered to the Indenture Trustee at least 120 days prior to the proposed
financing of the Lessor's Percentage of the cost of any Nonseverable
Modification or Required Modification to the Facility, the Owner Trust, the
Owner Participant and the Indenture Trustee agree to cooperate with AEE to (1)
issue Additional Lessor Notes under the Indenture to finance such Modification
which will rank pari passu with the Lessor Notes then outstanding as to the
Indenture Estate; (2) execute and deliver one or more supplements to the
Indenture and the Mortgage for purpose of subjecting any such Modifications to
the Liens thereof; and (3) execute and deliver an amendment to the Lease to
reflect the adjustments required by clause (iii) below; provided, however, that
(a) the Owner Participant shall have been given the opportunity, but shall have
no obligation, to provide all or part of the funds required to finance the
Lessor's Percentage of the cost of any such Modification by making an Additional
Equity Investment in such amount, if any, as it may determine in its sole and
absolute discretion, but AEE shall have no obligation to accept such Additional
Equity Investment and (b) the conditions set forth below and in Section 2.12 of
the Indenture shall have been satisfied. The obligation to finance such
Modifications through the issuance of Additional Lessor Notes under Section 2.12
of the Indenture (any financing of Modifications through the issuance of such
Additional Lessor Notes under the Indenture being called a "Supplemental
Financing") is subject to the following additional conditions:
(i) there shall be no more than one such financing in
any calendar year (except for Required Modifications);
(ii) the Additional Lessor Notes shall have a final
maturity no later than the final maturity of the Lessor Notes
and will be fully repaid out of additional Rent during the
Lease Term;
(iii) appropriate adjustments to Basic Rent and
Termination Values (determined without regard to any tax
benefits associated with such Modifications, unless the Owner
Participant is making an Additional Equity Investment) shall
be made in accordance with Section 3.6 of the Lease;
(iv) AEE shall have paid, on an After-Tax Basis, all
costs and expenses of the Transaction Parties (including the
reasonable fees and
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expenses of counsel to the Owner Participant, the Owner Trust
and the Indenture Trustee and the Pass Through Trustees) to
the extent incurred in connection with any financing pursuant
to this Section 12 whether or not such financing is
consummated;
(v) no Lease Bankruptcy Default or Lease Event of
Default shall have occurred and be then continuing unless the
Modifications to be constructed with the proceeds of the
Additional Lessor Notes shall cure such Lease Bankruptcy
Default or Lease Event of Default and such Modifications shall
be made in compliance with the Operative Documents;
(vi) such Additional Lessor Notes represent an
aggregate amount not less than the Lessor's Percentage of $20
million, nor greater than 100% of the Lessor's Percentage of
the costs of such Modifications being financed; provided, that
the aggregate balance of the Lessor Notes never exceeds 85% of
the Fair Market Sales Value of the Undivided Interest taking
into account the Lessor's Percentage of all such
Modifications;
(vii) At AEE's expense, the Owner Participant shall
have received an opinion of independent tax counsel selected
by the Owner Participant and reasonably acceptable to AEE (in
form, scope and substance reasonably satisfactory to the Owner
Participant) that no material adverse tax consequences to the
Owner Participant will result from such financing (and in the
case of any such material adverse tax consequences AEE shall
provide appropriate financial assurance reasonably
satisfactory to the Owner Participant), and AEE shall have
indemnified the Owner Participant in accordance with Section
10 of the Participation Agreement and the Tax Indemnity
Agreement against all tax risk arising from such financing;
(viii) AEE shall have made or delivered such
representations, warranties, covenants, opinions or
certificates as the Owner Participant may reasonably request;
(ix) the Rating Agencies shall have confirmed that
such financing shall not result in a downgrade of the rating
on the Pass Through Certificates below the higher of (1) the
rating in effect on the Closing Date and (2) the rating then
in effect (except that in respect of Required Modifications,
this clause (ix) shall not be applicable);
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(x) the Owner Participant shall have received a fee
from AEE in an amount equal to the Lessor's Percentage of
$100,000 (or of $50,000 in the event that the Owner
Participant or any Affiliate thereof has received a fee with
respect to a similar financing of a similar modification to
the Related Facility being made concurrently) for each such
financing subsequent to the first such financing; and
(xi) the issuance of any such Additional Notes
constitutes the incurrence of Permitted Indebtedness pursuant
to clause (b) or (c) of the definitions thereof, as
applicable.
Notwithstanding anything to the contrary contained herein, so long as no Lien on
the Facility or such Modification is created and subject to the restrictions on
incurring Indebtedness set forth in Section 6.1, AEE shall at all times have the
right to fund Modifications to the Facility other than through the Lease;
provided, however, that Required Modifications and Nonseverable Modifications
may only be financed (other than through the Lease) on an unsecured basis.
Section 12.2 Optional Refinancing of Pass Through
Certificates. AEE shall have the right, at its option and expense, exercisable
on three occasions at any time following the seventh anniversary of the Closing
Date, to request the Owner Trust or the Pass Through Trusts to refund or
refinance the Pass Through Certificates either in the public or private market,
in whole or in part; provided, that all conditions to the issuance of Additional
Lessor Notes contained in Section 2.12 of the Indenture shall have been
satisfied.
Any refinancing under this Section 12.2 shall also be subject
to the following additional conditions:
(i) the Owner Trust shall be able to issue and sell
debt in an amount adequate to accomplish such refunding or
refinancing;
(ii) the Additional Lessor Notes shall have a final
maturity no later than the six months following the scheduled
final maturity of the Lessor Notes and shall be fully repaid
out of Basic Rent (as adjusted pursuant to Section 3.6 of the
Lease) during the Lease Basic Term;
(iii) appropriate adjustments to Basic Rent and
Termination Values shall have been made in accordance with
Section 3.6 of the Lease;
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(iv) no Lease Bankruptcy Default or Lease Event of
Default shall have occurred and be then continuing;
(v) At AEE's expense, the Owner Participant shall
have received an opinion of independent tax counsel selected
by the Owner Participant and reasonably acceptable to AEE (in
form, scope and substance reasonably satisfactory to the Owner
Participant) that no material adverse tax consequences to the
Owner Participant will result from such refinancing (and in
the case of any such material adverse tax consequences AEE
shall provide appropriate financial assurance reasonably
satisfactory to the Owner Participant), and AEE shall have
indemnified the Owner Participant in accordance with Section
10 of the Participation Agreement and the Tax Indemnity
Agreement against all tax risk arising from such refinancing;
(vi) the Owner Participant shall suffer no adverse
accounting effects under GAAP;
(vii) AEE shall have made or delivered such
representation, warranties, covenants, opinions or
certificates as the Owner Participant may reasonably request;
(viii) the terms of such refinancing shall be
reasonably satisfactory to the Owner Trust and the Owner
Participant; and
(ix) the Owner Participant shall have received a fee
from AEE in an amount equal to the Lessor's Percentage of
$100,000 (or of $50,000 in the event that the Owner
Participant or any Affiliate thereof shall have received a
related fee with respect to a similar refinancing or refunding
of the Pass Through Certificates being made concurrently).
SECTION 13
LIMITATIONS OF LIABILITY; ACTION BY INDENTURE TRUSTEE
Section 13.1 Limitation of Liability. (a) None of the Owner
Participant, the Owner Trust, the Trustee, the Indenture Trustee, the Lease
Indenture Company or the Pass Through Trustees shall have any obligation or duty
to AEE or to others with respect to the transactions contemplated hereby, except
those obligations or duties expressly set
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forth in this Agreement and the other Operative Documents, and none of the Owner
Trust, the Trustee, the Trust Company, the Indenture Trustee, the Lease
Indenture Company or the Pass Through Trustees shall be liable for performance
by any other party hereto of such other party's obligations or duties hereunder.
Without limitation of the generality of the foregoing, under no circumstances
whatsoever shall the Owner Participant be liable to AEE for any action or
inaction on the part of the Trustee in connection with the transactions
contemplated herein, whether or not such action or inaction is caused by willful
misconduct or gross negligence of the Trustee, unless such action or inaction is
at the express written instructions of the Owner Participant.
(b) The Trustee is executing on behalf of the Owner Trust the
Operative Documents to which the Owner Trust is a party solely as trustee of the
Owner Trust under the Trust Agreement and not in its individual capacity, except
as expressly provided herein or therein, and in no case whatsoever shall the
Trustee be personally liable for, or for any loss in respect of, any of the
statements, representations, warranties, agreements or obligations of the Owner
Trust hereunder or under any other Operative Document, as to all of which the
other parties hereto agree to look solely to the Trust Estate; provided,
however, that the Trustee shall be liable under the Operative Documents to which
it is a party for its own gross negligence or willful misconduct.
Section 13.2 Action by Indenture Trustee. The parties hereto
acknowledge that any notice, consents or any other action by the Indenture
Trustee is limited by the terms of the Indenture.
SECTION 14
SPECIAL LESSEE TRANSFER
Section 14.1 Special Lessee Transfer. Upon the occurrence and
during the continuance of a Special Lessee Transfer Event, AEE (or its designee
as provided below) may, in lieu of performing its obligation to purchase the
Lessor's Interest pursuant to Section 10.2 of the Lease (in the case of a
Regulatory Event of Loss) or exercising its right to purchase the Lessor's
Interest pursuant to Section 13.1 or 13.2 of the Lease (in the case of a
Burdensome Buyout Event) and notwithstanding the limitations set forth in
Section 8.1, upon not less than 30 days' written notice to the Owner Participant
and the Indenture Trustee, purchase all (but not less than all) of the Owner
Participant's Beneficial Interest (the "Special Lessee Transfer") on the
applicable Termination Date at a price equal to the Special Lessee Transfer
Amount determined as of the date of such transfer and keep the Lease in effect.
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On the applicable Termination Date, AEE shall pay to the Owner
Participant the Special Lessee Transfer Amount determined as of such date, plus
all amounts due and payable to the Owner Participant on such date (including,
without limitation, all costs and expenses of the Owner Participant and all
sales, use, value added and other Taxes covered by Section 10.2 hereof
associated with the Special Lessee Transfer pursuant to this Section 14.1, to
the extent such amounts have not otherwise been reimbursed pursuant to this
Section 14.1). Concurrently with the payment of all sums required to be paid
pursuant to this Section 14.1 (or on such later date of transfer of the Owner
Participant's Beneficial Interest in accordance with clause (ii) below) (i) AEE
shall cease to have any liability to the Owner Participant with respect to the
Operative Documents, except for obligations (including, without limitation,
Sections 10.1 and 10.2 hereof and the Tax Indemnity Agreement) surviving
pursuant to the express terms of any Operative Document or which have otherwise
accrued but not been paid as of such date and (ii) the Owner Participant will
transfer (by an appropriate instrument of transfer) the Owner Participant's
Beneficial Interest to AEE; provided, however, that if the Lien of the Indenture
has not been terminated or discharged, such transfer shall not be made to AEE,
but shall be made to AEE's designee promptly upon AEE's designation of such
designee and such designee will agree not to transfer the Owner Participant's
Beneficial Interest to AEE until such Lien is terminated or discharged. In
connection with any transfer under this Section 14.1 the Owner Participant shall
transfer the Beneficial Interest on an "as is" "where is" basis without
representation and warranty other than a warranty of the Owner Trust as to the
absence of Lessor's Liens and a warranty of the Owner Participant as to the
absence of Owner Participant's Liens. It is understood and agreed among the
parties hereto that the transaction contemplated by this Section 14.1 shall not
effect a merger of AEE's ownership interest in the Facility and the Facility
Site with the Lessor's Interest. AEE will pay all reasonable costs and expenses
of the parties (including reasonable attorneys' fees and disbursements) in
connection with any transfer pursuant to this Section 14.1
Notwithstanding the foregoing, in the event that the Lessee
shall have failed to either purchase the Beneficial Interest in accordance with
this Section 14.1 or the Lessor's Interest in accordance with Section 10.2 of
the Lease, in each case only in connection with a Regulatory Event of Loss (and
only to the extent the transfer hereinafter described shall eliminate such
Regulatory Event of Loss), then the Owner Participant shall have the option
(exercisable in its sole discretion) to transfer the Beneficial Interest to AEE
(or its designee) on an "as is", "where is" basis, without recourse,
representation or warranty, but free and clear of Owner Participant's Liens and
Lessor's Liens, for a purchase price equal to the Special Lessee Transfer Amount
(together with all other amounts due and payable to the Owner Participant
hereunder or under the other Operative Documents); provided, however, that such
purchase price shall
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be payable in installments and evidenced by a note of AEE (or its designee),
subordinated (in the case of any obligation of AEE) in right of payment to any
senior Permitted Indebtedness of AEE (including Basic Rent) and payable in
installments only to the extent amounts that would otherwise be payable to the
Owner Participant in accordance with the Operative Documents; provided further,
however, that, if the Lien of the Indenture shall not have been terminated or
discharged, (i) such transfer shall (A) not be made to AEE, but shall be made to
AEE's designee (and AEE shall promptly designate such designee) and such
designee shall agree not to transfer the Beneficial Interest to AEE until such
Lien shall have been terminated or discharged and (B) not limit or otherwise
alter any of the rights or remedies of the Indenture Trustee under any of the
Operative Documents including, without limitation, the exercise of remedies by
the Indenture Trustee under the Lease in respect of any Lease Event of Default
and (ii) AEE (or such designee) shall have no right to exercise any rights or
remedies as Owner Participant under the Lease or the other Operative Documents.
Section 14.2 Non-Regulatory Event of Loss. In the event a
Regulatory Event of Loss would have occurred but for the circumstance set forth
in clause (i) or (ii) of the definition thereof, then the Owner Participant
shall have the option (exercisable in it sole discretion) to transfer the
Beneficial Interest to the Lessee on an "as is", "where is" basis, without
recourse, representation or warranty, but free and clear of Owner Participant's
Liens and Lessor's Liens, for a purchase price of $1.
SECTION 15
RIGHT OF FIRST OFFER
Section 15.1 Right of First Offer. So long as no Lease
Bankruptcy Default or Lease Event of Default shall have occurred and be then
continuing, in the event that the Owner Participant desires to Transfer its
Beneficial Interest (other than to an Affiliate of the Owner Participant) at any
time after the later to occur of (i) the date five years prior to the scheduled
expiration of the Lease Basic Term and (ii) the date on which the Lien of the
Indenture shall have been terminated or discharged, the Owner Participant shall
first offer to sell such Beneficial Interest to AEE on the terms and conditions
set forth in this Section 15.1. Such offer shall be made to AEE in the form of a
proposed term sheet, which proposed term sheet shall include a full and complete
statement of the price and all of the material terms, conditions and provisions
upon which the Owner Participant would be willing to Transfer its Beneficial
Interest or any part thereof, and such proposed term sheet shall be deemed
Confidential Information for purposes of Section 16.16. AEE shall thereafter
have the right within a period of 30 days
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from and after the receipt by AEE of such proposed term sheet to notify the
Owner Participant of its intent to exercise its right to purchase hereunder. If
AEE elects to exercise the right provided in the preceding sentence, it shall
within ninety (90) days of such notice execute a contract on the same terms and
conditions as the offer giving rise to such right. If AEE does not give such
notice to the Owner Participant within such 30-day period or execute a contract
within such 90-day period (and complete such sale within 30 days of the date of
the execution of such contract), the Owner Participant may consummate a sale on
terms which are not substantially less favorable to the Owner Participant (taken
as a whole) than reflected in its offer to AEE (other than the stated purchase
price of the Beneficial Interest, which shall be not less than 98% of that
offered to AEE) without first offering such less favorable terms to AEE. If AEE
timely executed such contract and, through no fault of the Owner Participant,
failed to consummate such sale, the Owner Participant shall thereafter be free
of any obligations under this Section 15.1. Notwithstanding any contrary term in
such offer, AEE shall be entitled, as part of its payment of the purchase price,
to assume the Lessor Notes to the extent permitted in Section 2.10(b) of the
Indenture.
SECTION 16
MISCELLANEOUS
Section 16.1 Consents. When the Owner Participant is deciding
whether to direct the Owner Trust to grant or withhold a consent that may be
requested of the Owner Trust in respect of any Operative Documents, the Owner
Participant shall make such decision pursuant to the same standard as is imposed
on the Owner Trust (such as "reasonably," "in its sole discretion" or
otherwise). The Owner Participant agrees to promptly consider any consent
requested of it or the Owner Trust under any of the Operative Documents and will
not unreasonably delay the granting or withholding of such consent in light of
the circumstances.
Section 16.2 Successor Trustee. The parties hereto agree that
the transfer or assignment pursuant to the terms of the Trust Agreement by the
Trustee to a successor Trustee, will not violate the terms of any Operative
Document.
Section 16.3 Bankruptcy of Trust Estate. If (i) all or any
part of the Trust Estate becomes the property of a debtor subject to the
reorganization provisions of Title 11 of the United States Code, as amended from
time to time, (ii) pursuant to such reorganization provisions the Owner
Participant is required, by reason of the Owner Participant being held to have
recourse liability to the debtor or the trustee of the debtor
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directly or indirectly, to make payment on account of any amount payable as
principal or interest on the Lessor Notes, and (iii) the Indenture Trustee
actually receives any Excess Amount, as defined below, which reflects any
payment by the Owner Participant on account of clause (ii) above, the Indenture
Trustee shall promptly refund to the Owner Participant such Excess Amount. For
purposes of this Section 16.3, "Excess Amount" means the amount by which such
payment exceeds the amount which would have been received by the Indenture
Trustee if the Owner Participant had not become subject to the recourse
liability referred to in clause (ii) above. Nothing contained in this Section
16.3 shall prevent the Indenture Trustee from enforcing any personal recourse
obligations (and retaining the proceeds thereof) of the Owner Participant as
contemplated by this Participation Agreement (other than referred to in clause
(ii)).
Section 16.4 Amendments and Waivers. No term, covenant,
agreement or condition of this Agreement may be terminated, amended or
compliance therewith waived (either generally or in a particular instance,
retroactively or prospectively) except by an instrument or instruments in
writing executed by each party hereto.
Section 16.5 Notices. Unless otherwise expressly specified or
permitted by the terms hereof all communications and notices provided for herein
shall be in writing or by a telecommunications device capable of creating a
written record, and any such notice shall become effective (a) upon personal
delivery thereof, including, without limitation, by overnight mail or courier
service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by such a telecommunications device, upon transmission
thereof; provided, that such transmission is promptly confirmed by either of the
methods set forth in clause (a) or (b) above, in each case addressed to each
party hereto at its address set forth below or, in the case of any such party
hereto, at such other address as such party may from time to time designate by
written notice to the other parties hereto:
If to AEE:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Project Manager
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If to the Owner Trust:
▇▇▇▇▇▇▇▇ Facility Trust A-1
c/o Wilmington Trust Company, as Trustee
▇▇▇▇▇▇ Square North
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Corporate Trust Administration
If to the Owner Participant:
As set forth on Schedule 16.5
If to the Indenture Trustee:
BANKERS TRUST COMPANY
Mailbox #MS 5041
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Assistant Vice President
If to the Pass Through Trustee:
BANKERS TRUST COMPANY
Mailbox #MS 5041
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Assistant Vice President
A copy of all notices provided for herein shall be sent by the party giving such
notice to each of the other parties hereto.
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Section 16.6 Survival. All warranties, representations,
indemnities and covenants made by any party hereto, herein or in any certificate
or other instrument delivered by any such party or on the behalf of any such
party under this Agreement shall be considered to have been relied upon by each
other party hereto and shall survive the consummation of the transactions
contemplated hereby and in the other Operative Documents regardless of any
investigation made by any such party or on behalf of any such party. In
addition, the indemnifications by AEE under Sections 10.1 and 10.2 of this
Agreement and the confidentiality provisions set forth in Section 16.16 shall
expressly survive the expiration or early termination (for whatever reason) of
the Lease and the transfer or other disposition of the respective interests of
the Owner Participant, the Owner Trust, the Indenture Trustee, the Lease
Indenture Company, the Pass Through Trustees in, to and under this Agreement and
the other Operative Documents and the resignation or removal of the Trustee.
Section 16.7 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of, and shall be enforceable by, the
parties hereto and their respective successors and assigns as permitted by and
in accordance with the terms hereof, including each successive holder of the
Beneficial Interest permitted under Section 8.1. Except as expressly provided
herein or in the other Operative Documents, no party hereto may assign its
interests herein without the consent of the other parties hereto.
Section 16.8 Business Day. Notwithstanding anything herein or
in any other Operative Document to the contrary, if the date on which any
payment is to be made pursuant to this Agreement or any other Operative Document
is not a Business Day, the payment otherwise payable on such date shall be
payable on the next succeeding Business Day with the same force and effect as if
made on such scheduled date and (provided such payment is made on such
succeeding Business Day) and no interest shall accrue on the amount of such
payment from and after such scheduled date to the time of such payment on such
next succeeding Business Day.
Section 16.9 Governing Law. This Agreement has been delivered
in the State of New York and shall be in all respects governed by and construed
in accordance with the laws of the State of New York including all matters of
construction, validity and performance.
Section 16.10 Severability. If any provision hereof shall be
invalid, illegal or unenforceable under Applicable Law, the validity, legality
and enforceability of the remaining provisions hereof shall not be affected or
impaired thereby.
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Section 16.11 Counterparts. This Agreement may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together only one Agreement.
Section 16.12 Headings and Table of Contents. The headings of
the sections of this Agreement and the Table of Contents are inserted for
purposes of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
Section 16.13 Consent to Jurisdiction; Waiver of Trial by
Jury. (a) Each of AEE, the Owner Trust and the Owner Participant (i) hereby
irrevocably submits to the nonexclusive jurisdiction of the Supreme Court of the
State of New York, New York County (without prejudice to the right of any party
to remove to the United States District Court for the Southern District of New
York) and to the nonexclusive jurisdiction of the United States District Court
for the Southern District of New York for the purposes of any suit, action or
other proceeding arising out of this Agreement, the other Operative Documents,
or the subject matter hereof or thereof or any of the transactions contemplated
hereby or thereby brought by any of the parties hereto or their successors or
assigns; (ii) hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such New York State court,
or in such federal court; and (iii) to the extent permitted by Applicable Law,
hereby irrevocably waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding any claim that it
is not personally subject to the jurisdiction of the above-named courts, that
the suit, action or proceeding is brought in an inconvenient forum, that the
venue of the suit, action or proceeding is improper or that this Agreement, the
other Operative Documents, or the subject matter hereof or thereof may not be
enforced in or by such court.
(b) To the extent permitted by applicable law, each of the
parties hereto hereby irrevocably waives the right to demand a trial by jury, in
any such suit, action or other proceeding arising out of this Agreement, the
other Operative Documents, or the subject matter hereof or thereof or any of the
transactions contemplated hereby or thereby brought by any of the parties hereto
or their successors or assigns.
Section 16.14 Further Assurances. Each party hereto will
promptly and duly execute and deliver such further documents to make such
further assurances for and take such further action reasonably requested by any
party to whom such first party is obligated, all as may be reasonably necessary
to carry out more effectively the intent and purpose of this Participation
Agreement and the other Operative Documents.
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Section 16.15 Effectiveness. The Participation Agreement has
been dated as of the date first above written for convenience only. This
Participation Agreement shall be effective on the date of execution and delivery
by each of the parties hereto.
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Section 16.16 Confidential Information. (a) Any information
regarding the Lease Financing, or otherwise regarding the Facility, the Related
Facility or either of the Additional Facilities and the use and operation
thereof which is proprietary or of competitive value to any Transaction Party
hereto and which is expressly identified in writing as confidential, including
the information provided pursuant to Section 5, shall be deemed "Confidential
Information". Each Transaction Party hereto receiving information (a "Receiving
Party") from any other Transaction Party hereto (a "Furnishing Party") agrees
not to use such Confidential Information for any purpose other than in
connection with the Lease Financing. Each of the Receiving Parties further
agrees to keep the Confidential Information confidential and not to disclose the
Confidential Information to any Person; provided, however, that each of the
Receiving Parties may make any disclosure of any portion of the Confidential
Information (1) to which the Furnishing Party gives its prior written consent or
(2) to any Related Party of such Receiving Party as such Receiving Party
determines has a need to know and who is informed by such Receiving Party of the
confidentiality obligations with respect to the Confidential Information, or (3)
to any auditors, accountants, counsel or professional advisors of such Receiving
Party as is related to such Person's respective duties or (4) to any of the
Rating Agencies in order to rate the Pass Through Certificates and to any
purchasers of the Pass Through Certificates which agrees to execute an agreement
agreeing to be bound by the provisions of this Section 16.16 or (5) to any
prospective or actual transferee of all or any part of the Indenture Estate in
connection with the enforcement of remedies or a sale of the Undivided Interest,
in each case, under the Operative Documents, provided, that prior to such
disclosure (i) such prospective or actual transferee is informed in writing by
the disclosing Receiving Party of the confidential nature of the Confidential
Information and the existence of this confidentiality provision and (ii) such
prospective or actual transferee agrees to execute an agreement agreeing to be
bound by the provisions of this Section 16.16 or (6) to any Owner Participant
Transferee or any potential transferee of all or any portion of the Owner
Participant's interests hereunder; provided, that prior to its disclosure (i)
such transferee is informed by the Owner Participant of the confidential nature
of the Confidential Information and the existence of this confidentiality
provision and (ii) such transferee agrees to execute an agreement agreeing to be
bound by the provisions of this Section 16.16 or (7) which is a reference to the
Lease Financing only published by any Transaction Party hereto in internal
publications that are not to be generally disseminated to the public or in
annual reports of such Transaction Party or any of its Affiliates. From and
after the date the transferee contemplated by clause (4), (5)(ii) or (6)(ii) of
the immediately preceding sentence executes the agreement required therein, such
transferee shall, for purposes of this Section 16.16, be included within term
"Receiving Party".
(b) Each Receiving Party will be responsible for any breach of this
Section by
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any of its respective Related Parties and such Receiving Party agrees to take
all reasonable measures (including, but not limited to, court proceedings) to
restrain its respective Related Parties from unauthorized disclosure or use of
Confidential Information (including, but not limited to, any notes, analyses,
compilations, studies or interpretations based upon or derived from the
Confidential Information, in whole or in part) and to ensure compliance with
this Section.
(c) Notwithstanding the foregoing paragraphs of this Section 16.16, no
Receiving Party shall be prohibited from using or disclosing Confidential
Information which (i) is or becomes generally available to the public other than
as a result of disclosure by such Receiving Party, (ii) was within such
Receiving Party's possession prior to its disclosure by the Furnishing Party,
(iii) is or was independently developed by the Receiving Party without the use
of the Confidential Information, (iv) becomes available to the Receiving Party
on a non-confidential basis after the date hereof from any third party which is
not known by such Receiving Party to be bound by a confidentiality agreement
with the Furnishing Party or any other Person, (v) is necessary for the
enforcement of such Receiving Party's rights or under any other Operative
Document during the continuance of a Lease Event of Default, (vi) is necessary
to comply with such Receiving Party's obligations under Applicable Laws, or
(vii) is properly required to be disclosed to any Government Entity having
jurisdiction over the Receiving Party so affected, provided that in the event of
disclosure under clause (vi) and (vii), the Receiving Party so affected shall
promptly notify the Furnishing Party of such requirement prior to such
disclosure so that the Furnishing Party may seek an appropriate protective order
or otherwise seek to protect the confidentiality of such Confidential
Information, it being understood that under such circumstances, only such
portion of the Confidential Information as is specifically and properly required
shall be disclosed under Applicable Law or to such Government Entity, as the
case may be.
(d) No failure or delay by any Transaction Party in exercising any
right, power or privilege under this Section 16.16, shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
future exercise thereof or the exercise of any other right, power or privilege
under this Section 16.16.
(e) Each of the Transaction Parties agrees that money damages would not
be a sufficient remedy for any breach of the provisions of this Section 16.16,
and that any affected Transaction Party shall be entitled to specific
performance and injunctive relief as remedies for any such breach. Such remedies
shall not be deemed to be the exclusive remedies for any breach of the
provisions of this Section 16.16 and shall be in addition to all other remedies
available at law or in equity, provided, that no Transaction Party hereto shall
be entitled to consequential damages.
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(f) As between AEE and the Owner Participant, this Section 16.16 shall
supersede any prior confidentiality agreement entered into by such parties
relating to the Lease Financing and such confidentiality agreement shall be of
no further force and effect.
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IN WITNESS WHEREOF, the parties hereto have caused this
Participation Agreement to be executed and delivered by their respective
officers thereunto duly authorized.
AES EASTERN ENERGY, L.P.
By:
Name:
Title:
Date:
▇▇▇▇▇▇▇▇ FACILITY TRUST A-1,
By: WILMINGTON TRUST COMPANY, not in its
individual capacity, but solely as Trustee
under the Trust Agreement
By:
Name:
Title:
Date:
DCC PROJECT FINANCE FOURTEEN, INC.
By:
Name:
Title:
Date:
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96
BANKERS TRUST COMPANY, not in its
individual capacity, except as
expressly set forth herein, but as
Indenture Trustee under the
Indenture
By:
Name:
Title:
Date:
BANKERS TRUST COMPANY, not in its
individual capacity, except as
expressly set forth herein, but as
Pass Through Trustees under the Pass
Through Trust Agreements
By:
Name:
Title:
Date:
90
97
SCHEDULE 16.5
OWNER PARTICIPANT NOTICE
DCC Project Finance Fourteen, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Capital Markets Group
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Phone No: (▇▇▇) ▇▇▇-▇▇▇▇