Exhibit 10.95
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FACILITY LEASE AGREEMENT
(T1)
Dated as of December 15, 1999
between
XXXXXXX TRUST I,
as Owner Lessor
and
XXXXXXX HOLDINGS EME, LLC,
as Facility Lessee
XXXXXXX STATION
FOSSIL-FUEL-FIRED ELECTRIC GENERATING FACILITY
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CERTAIN OF THE RIGHT, TITLE AND INTEREST OF THE OWNER LESSOR IN AND TO THIS
LEASE AND THE RENT DUE AND TO BECOME DUE HEREUNDER HAVE BEEN ASSIGNED AS
COLLATERAL SECURITY TO, AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF
CITIBANK, N.A. NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS HOLDER
REPRESENTATIVE UNDER A LESSOR LOAN AGREEMENT, DATED AS OF DECEMBER
FACILITY LEASE (T1)
15,1999 BETWEEN SAID HOLDER REPRESENTATIVE, AS SECURED PARTY, FOR THE BENEFIT
OF THE HOLDERS THEREUNDER, MIDWEST FUNDING LLC, AS INITIAL HOLDER AND THE
OWNER LESSOR, AS DEBTOR. SEE SECTION 21 HEREOF FOR INFORMATION CONCERNING THE
RIGHTS OF THE ORIGINAL HOLDER AND THE HOLDERS OF THE VARIOUS COUNTERPARTS
HEREOF.
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TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS.............................................................................2
SECTION 2. LEASE OF THE UNDIVIDED INTEREST.........................................................2
SECTION 3. FACILITY LEASE TERM AND RENT............................................................2
SECTION 3.1. BASIC LEASE TERM..............................................................2
SECTION 3.2. RENT..........................................................................3
SECTION 3.3. SUPPLEMENTAL LEASE RENT.......................................................3
SECTION 3.4. ADJUSTMENT OF BASIC LEASE RENT AND TERMINATION VALUE..........................3
SECTION 3.5. MANNER OF PAYMENTS............................................................5
SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOY-
MENT................................................................................................6
SECTION 4.1. DISCLAIMER OF WARRANTIES......................................................6
SECTION 4.2. QUIET ENJOYMENT...............................................................7
SECTION 5. RETURN OF UNDIVIDED INTEREST............................................................8
SECTION 5.1. RETURN........................................................................8
SECTION 5.2. CONDITION UPON RETURN.........................................................8
SECTION 5.3. EXPENSES.....................................................................10
SECTION 5.4. FREIGHT AND CRATE............................................................10
SECTION 6. LIENS..................................................................................10
SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS................................................10
SECTION 7.1. MAINTENANCE..................................................................10
SECTION 7.2. REPLACEMENT OF COMPONENTS....................................................10
SECTION 7.3. ENVIRONMENTAL MATTERS........................................................11
SECTION 8. IMPROVEMENTS...........................................................................12
SECTION 8.1. REQUIRED IMPROVEMENTS........................................................12
SECTION 8.2. OPTIONAL IMPROVEMENTS........................................................12
SECTION 8.3. TITLE TO IMPROVEMENTS........................................................13
SECTION 8.4. FINANCING OF IMPROVEMENTS....................................................13
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TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 9. NET LEASE..............................................................................13
SECTION 10. EVENTS OF LOSS........................................................................15
SECTION 10.1. OCCURRENCE OF EVENTS OF LOSS............................................15
SECTION 10.2. PAYMENT UPON TERMINATION; SPECIAL LESSEE TRANSFER.......................15
SECTION 10.3. APPLICATION OF PROCEEDS.................................................17
SECTION 10.4. REBUILD.................................................................18
SECTION 10.5. APPLICATION OF PAYMENTS NOT RELATING TO AN EVENT OF LOSS................20
SECTION 11. INSURANCE.............................................................................20
SECTION 11.1. PROPERTY INSURANCE......................................................20
SECTION 11.2. LIABILITY INSURANCE.....................................................20
SECTION 11.3. PROVISIONS WITH RESPECT TO INSURANCE....................................21
SECTION 11.4. REPORTS.................................................................21
SECTION 11.5. ADDITIONAL INSURANCE....................................................22
SECTION 11.6. AMENDMENT OF INSURANCE REQUIREMENTS.....................................22
SECTION 11.7. APPLICATION OF INSURANCE PROCEEDS.......................................23
SECTION 12. INSPECTION............................................................................24
SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS..............................................24
SECTION 13.1. TERMINATION FOR ILLEGALITY..............................................24
SECTION 13.2. TERMINATION FOR BURDENSOME INDEMNITY....................................25
SECTION 13.3. PROCEDURE FOR EXERCISE OF TERMINATION OPTION............................25
SECTION 13.4. ASSUMPTION OF THE LESSOR NOTES; SPECIAL LESSEE TRANSFERS................26
SECTION 14. TERMINATION FOR OBSOLESCENCE..........................................................27
SECTION 14.1. TERMINATION.............................................................27
SECTION 14.2. SOLICITATION OF OFFERS..................................................28
SECTION 14.3. RIGHT OF OWNER LESSOR TO RETAIN THE UNDIVIDED INTEREST..................28
SECTION 14.4. PROCEDURE FOR EXERCISE OF TERMINATION OPTION............................29
SECTION 15. LEASE RENEWAL.........................................................................30
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TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 15.1. WINTERGREEN RENEWAL LEASE TERMS.........................................30
SECTION 15.2. FAIR MARKET VALUE RENEWAL LEASE TERMS...................................32
SECTION 15.3. BASIC LEASE RENT AND TERMINATION VALUE FOR RENEWAL TERM.................32
SECTION 15.4. DETERMINATION OF FAIR MARKET RENTAL VALUE...............................32
SECTION 16. EVENTS OF DEFAULT.....................................................................33
SECTION 17. REMEDIES..............................................................................37
SECTION 17.1. REMEDIES FOR LEASE EVENT OF DEFAULT.....................................37
SECTION 17.2. CUMULATIVE REMEDIES.....................................................40
SECTION 17.3. NO DELAY OR OMISSION TO BE CONSTRUED AS WAIVER..........................40
SECTION 18. SECURITY INTEREST AND INVESTMENT OF SECURITY
FUNDS..............................................................................................40
SECTION 19. RIGHT TO SUBLEASE.....................................................................40
SECTION 20. OWNER LESSOR'S RIGHT TO PERFORM.......................................................42
SECTION 21. SECURITY FOR OWNER LESSOR'S OBLIGATION TO THE
HOLDER REPRESENTATIVE.......................................................42
SECTION 22. MISCELLANEOUS.........................................................................43
SECTION 22.1. AMENDMENTS AND WAIVERS..................................................43
SECTION 22.2. NOTICES.................................................................43
SECTION 22.3. SURVIVAL................................................................44
SECTION 22.4. SUCCESSORS AND ASSIGNS..................................................45
SECTION 22.5. "TRUE LEASE"............................................................46
SECTION 22.6. GOVERNING LAW...........................................................47
SECTION 22.7. SEVERABILITY............................................................47
SECTION 22.8. COUNTERPARTS............................................................47
SECTION 22.9. HEADINGS AND TABLE OF CONTENTS..........................................47
SECTION 22.10. FURTHER ASSURANCES......................................................47
SECTION 22.11. EFFECTIVENESS...........................................................48
SECTION 22.12. LIMITATION OF LIABILITY.................................................48
SECTION 22.13. MEASURING LIFE..........................................................48
EXHIBITS AND SCHEDULES
Exhibit A Description of Facility Site
Exhibit B Description of Facility
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Schedule 1-1 Basic Lease Rent
Schedule 1-2 Allocation of Basic Lease Rent
Schedule 1-3 467 Rent Allocation
Schedule 2 Termination Values
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FACILITY LEASE AGREEMENT
(T1)
This FACILITY LEASE AGREEMENT (T1), dated as of December 15, 1999 (as
amended, supplemented or otherwise modified from time to time and in accordance
with the provisions hereof, this "FACILITY LEASE"), between Xxxxxxx Trust I, a
Delaware business trust (the "OWNER LESSOR" or the "OWNER TRUST") created for
the benefit of Xxxxxxx Generation I, LLC, a Delaware limited liability company
(the "OWNER PARTICIPANT"), and Xxxxxxx Holdings EME, LLC, a Delaware limited
liability company (the "FACILITY LESSEE").
WITNESSETH:
WHEREAS, the Owner Lessor is governed by the Amended and Restated Trust
Agreement (T1), dated as of December 15, 1999 (the "TRUST AGREEMENT"), between
Wilmington Trust Company (the "OWNER TRUSTEE") and the Owner Participant;
WHEREAS, pursuant to the Land Deed and the Xxxx of Sale and Instrument
of Assignment, Midwest Generation, LLC ("MIDWEST") has acquired, INTER ALIA, the
Facility Site from ComEd;
WHEREAS, the Facility Site is more particularly described in Exhibit A
hereto, such Exhibit A being attached to this Facility Lease as a part hereof;
WHEREAS, pursuant to the Facility Site Lease, Midwest has leased the
Ground Interest to the Owner Lessor;
WHEREAS, pursuant to the Facility Site Sublease, the Owner Lessor has
leased the Ground Interest to Xxxxxxx Holdings for the term equal to the term of
this Facility Lease, including any renewals hereof;
WHEREAS, pursuant to the Facility Site Sub-Sublease, Xxxxxxx Holdings
has leased the Ground Interest to Midwest for a term equal to the term of this
Facility Lease, including any renewals hereof;
WHEREAS, the Facility is located on the Facility Site and is more
particu larly described in Exhibit B hereto, such Exhibit B being attached to
this Facility Lease as a part hereof;
WHEREAS, pursuant to the Facility Deed and the Xxxx of Sale, the Owner
Lessor has acquired from ComEd a 25% undivided ownership interest in the
Facility
as joint tenant with the other owners of the Facility, with the right to
nonexclusive possession of the Facility (the "UNDIVIDED INTEREST");
WHEREAS, the Facility does not include the Facility Site or any part
thereof, and no part of the Facility Site is being leased to the Facility Lessee
hereunder; and
WHEREAS, pursuant to this Facility Lease, the Owner Trust will lease
the Undivided Interest to Xxxxxxx Holdings for the Basic Lease Term and the
Renewal Lease Terms, if any, provided herein.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
Capitalized terms used in this Facility Lease, including the recitals,
and not otherwise defined herein shall have the respective meanings set forth in
Appendix A to the Participation Agreement (T1), dated as of December 15, 1999
(the "PARTICIPA TION AGREEMENT"), among the Facility Lessee, the Owner Lessor,
the Owner Trustee, the Owner Participant, Edison Mission Midwest Holdings Co.
("HOLDINGS"), Midwest, Midwest Funding LLC, Citibank, N.A., as Holder
Representative, Bayerische Landesbank Girozentrale as RCE LC Issuer (as defined
therein) and Bayerische Landesbank International S.A. as Midwest LC Issuer (as
defined therein) unless the context hereof shall otherwise require. The general
provisions of Appendix A to the Participation Agreement shall apply to the terms
used in this Facility Lease and not specifically defined herein.
SECTION 2. LEASE OF THE UNDIVIDED INTEREST
Upon the terms and conditions set forth herein, the Owner Lessor hereby
leases the Undivided Interest to the Facility Lessee, and the Facility Lessee
hereby leases the Undivided Interest from the Owner Lessor, for the Basic Lease
Term and, subject to the Facility Lessee's exercise of any of the Renewal
Options as provided in Section 15, one or more Renewal Lease Terms. The Facility
Lessee and the Owner Lessor understand and agree that this Facility Lease is
subject to those encumbrances set forth in the Title Policies. The Undivided
Interest shall be subject to the terms of this Facility Lease from the date on
which this Facility Lease is executed and delivered.
SECTION 3. FACILITY LEASE TERM AND RENT
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SECTION 3.1. BASIC LEASE TERM. The basic lease term of this Facility
Lease (the "BASIC LEASE TERM") shall commence on the Closing Date and shall end
on September 14, 2033, subject to earlier termination pursuant to Section 10,
13, 14 or 17 hereof.
SECTION 3.2. RENT. The Facility Lessee hereby agrees to pay to the
Owner Lessor pursuant to Section 3.5 hereof, basic rent for the lease of the
Undivided Interest during the Basic Lease Term ("BASIC LEASE RENT") in
installments in the amounts shown on Annex I to Schedule 1-1 hereto (as adjusted
in accordance with such Schedule 1-1) on each Rent Payment Date and in amounts
calculated in accordance with Schedule 1-1 hereto on each other date referred to
in Part B of Schedule 1-1 hereto (each such other date, an "ADDITIONAL RENT
PAYMENT DATE"). Basic Lease Rent is allocable in arrears over the Basic Lease
Term as set forth in Schedule 1-2 hereto. The Facility Lessee shall notify the
Facility Lessor and the Holder Representative in writing on or before the date
two Business Days prior to each Rent Payment Date and each Additional Rent
Payment Date of the amount of the installment of Basic Lease Rent to be paid on
such Rent Payment Date or such Additional Rent Payment Date as computed as of
such date. Basic Lease Rent may be adjusted from time to time in accordance with
Section 3.4 hereof.
SECTION 3.3. SUPPLEMENTAL LEASE RENT. The Facility Lessee also agrees
to pay to the Owner Lessor, or to any other Person entitled thereto as expressly
provided herein or in any other Operative Document, as appropriate, any and all
Supplemental Lease Rent, promptly as the same shall become due and owing, or
where no due date is specified, promptly after demand by the Person entitled
thereto, and in the event of any failure on the part of the Facility Lessee to
pay any Supple mental Lease Rent, the Owner Lessor shall have all rights, powers
and remedies provided for herein or by law or equity or otherwise for the
failure to pay Basic Lease Rent. The Facility Lessee will also pay as
Supplemental Lease Rent, to the extent permitted by Requirement of Law, an
amount equal to interest at the applicable Overdue Rate on any part of any
payment of Basic Lease Rent not paid when due for any period for which the same
shall be overdue and on any Supplemental Lease Rent not paid when due (whether
on demand or otherwise) for the period from such due date until the same shall
be paid. All Supplemental Lease Rent to be paid pursuant to this Section 3.3
shall be payable in the manner set forth in Section 3.5.
SECTION 3.4. ADJUSTMENT OF BASIC LEASE RENT AND TERMINATION VALUE. (a)
The Facility Lessee and the Owner Lessor agree that Basic Lease Rent,
Termination Values, the Equity Portion of Basic Lease Rent and the Equity
Portion of Termination Value may be adjusted, either upwards or downwards, at
the request of the Facility Lessee, Midwest, the Owner Lessor or the Owner
Participant in the following situations: to reflect (A) the principal amount,
amortization and interest rate on any New Lessor Notes issued pursuant to
Section 2.03 of the Lessor Loan Agreement in connection with a refinancing or
refunding of the Lessor Notes pursuant to
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Section 16.2 of the Participation Agreement, (B) the principal amount,
amortization and interest rate on any Additional Lessor Notes issued pursuant to
Section 2.03 of the Lessor Loan Agreement in connection with the financing of
Improvements to the Facility pursuant to Section 8 herein and (C) the principal
amount of the Lessor Notes outstanding following, and to the extent that, a draw
is made under each of the RCE Letter of Credit and the Midwest Letter of Credit
(or otherwise) and the allocation of such proceeds results in a discharge the
Lessor Notes as contemplated by the last sentence of Section 2.06 of the Lessor
Loan Agreement.
Any adjustments pursuant to this Section 3.4 shall be calculated, FIRST
so as not to negatively impact the Owner Participant's Expected Return through
the end of the Basic Lease Term and, SECOND at the option of the Facility Lessee
(x) to minimize, to the extent possible, the average annual Basic Lease Rent
over the Basic Lease Term for GAAP accounting purposes of the Facility Lessee or
the Facility Sublessee, as may be applicable, and/or (y) to minimize, to the
extent possible, the present value to the Facility Lessee of the Basic Lease
Rent; PROVIDED, that no adjustment pursuant to this Section 3.4 shall result in
a book loss to the Owner Participant in the year such adjustment is made.
Adjustments shall be computed by the Owner Participant, or, if prior to the
Closing Date the Equity Investor, using the same method of computation,
assumptions and pricing constraints originally used (other than those that have
changed as the result of the event giving rise to the adjustment) in the
calculation of Basic Lease Rent and Termination Values set forth in Schedule 1-1
and Schedule 2 hereto and shall be subject to the verification procedure
described in Section 3.4(c). Adjustments to Basic Lease Rent contemplated by
this Section 3.4 shall result in corresponding adjustments to Termination
Values. All Basic Lease Rent adjustments shall comply with Revenue Procedures
75-21 and 75-28 and Section 467 of the Code and any proposed, temporary, or
final regulations thereunder, in each case as modified and in effect on the date
of such adjustment and shall be calculated in such a manner so that, if the
Facility Lease were determined to be a "disqualified leaseback or long-term
agreement" within the meaning of Section 467 of the Code, the result would be an
increase in the Owner Participant's Expected Return (when contrasted with the
Owner Participant's Expected Return computed on the assumption that the
Facility Lease is not a "disqualified leaseback or long-term agreement").
(b) Anything herein or in any other Operative Document to the
contrary notwithstanding, each installment of Basic Lease Rent (excluding any
Equity Portion of Basic Lease Rent included in such installment) payable
hereunder, whether or not adjusted in accordance with this Section 3.4, shall be
in an amount at least sufficient to pay in full principal and interest payable
on the Lessor Notes on each Rent Payment Date. Anything herein or in any other
Operative Document to the contrary notwithstanding, Termination Values
(excluding the Equity Portion of Termination Value) payable on any date under
this Facility Lease, whether or not adjusted in accordance with this Section
3.4, shall, together with all other Rent due
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and owing on such date, exclusive of any portion thereof that is an Excepted Pay
ment, be in an amount at least sufficient to pay in full the principal of,
premium, if any, and accrued interest on the Lessor Notes payable on such date.
(c) Any adjustment pursuant to this Section 3.4 shall
initially be computed by the Owner Participant or, if prior to the Closing Date,
by the Equity Investor, subject to the verification procedure described in this
Section 3.4(c). Once computed, the results of such computation shall promptly be
delivered by the Owner Participant or, if prior to the Closing Date, the Equity
Investor to the Facility Lessee. Within 20 days after the receipt of the results
of any such adjustment, the Facility Lessee may request that Xxxxxx & Xxxxxxx,
Inc. or a nationally recognized firm of accountants or lease advisors selected
by the Owner Participant, or if prior to the Closing Date, the Equity Investor,
and reasonably satisfactory to the Facility Lessee (the "VERIFIER") verify, on a
confidential basis, after consultation with the Owner Participant or the Equity
Investor, as the case may be, and the Facility Lessee, the accuracy of such
adjustment in accordance with this Section 3.4. The Owner Participant or the
Equity Investor, as the case may be, hereby agrees, subject to the execution of
an appropriate confidentiality agreement, to provide the Verifier with all
necessary information and materials (other than the Owner Participant's income
tax returns and accounting records) as shall be necessary in connection with
such verification. Each of the Owner Participant or the Equity Investor, as the
case may be, and the Facility Lessee shall have the right to communicate with
the Verifier and to submit supporting information and data. If the Verifier
confirms that such adjustment is in accordance with this Section 3.4, it shall
so certify to the Facility Lessee, the Owner Lessor and the Owner Participant or
the Equity Investor, as the case may be, and such certification shall be final,
binding and conclusive on the Facility Lessee, the Owner Participant or the
Equity Investor, as the case may be, and the Owner Lessor. If the Verifier
concludes that such adjustment is not in accordance with this Section 3.4, and
the adjustments to Basic Lease Rent and Termination Value calculated by the
Verifier are different from those calculated by the Owner Participant or the
Equity Investor, as the case may be, then it shall so certify to the Facility
Lessee, the Owner Lessor and the Owner Participant or the Equity Investor, as
the case may be, and the Verifier's calculation shall be final, binding and
conclusive on the Facility Lessee, the Owner Lessor and the Owner Participant or
the Equity Investor, as the case may be. The final determination of any
adjustment hereunder shall be set forth in an amendment to this Facility Lease,
executed and delivered by the Owner Lessor and the Facility Lessee and consented
to by the Owner Participant or the Equity Investor, as the case may be. The
reasonable costs of the Verifier in verifying an adjustment pursuant to this
Section 3.4 shall be paid by the Facility Lessee; PROVIDED, HOWEVER, that in the
event that such Verifier determines that the present value of the remaining
Basic Lease Rent to be made under this Facility Lease as calculated by the Owner
Participant or the Equity Investor, as the case may be, is greater than the
present value of the correct Basic Lease Rent as certified by the Verifier, in
each case, discounted annually at the Discount Rate, by
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more than ten basis points, then such reasonable costs of the Verifier shall be
paid by the Owner Participant or the Equity Investor, as the case may be.
Notwithstanding anything herein to the contrary, the sole responsibility of the
Verifier shall be to verify the calculations hereunder and matters of
interpretation of this Facility Lease or any other Operative Document shall not
be within the scope of the Verifier's responsibilities.
SECTION 3.5. MANNER OF PAYMENTS. All Rent (whether Basic Lease Rent or
Supplemental Lease Rent) and all Termination Value payments shall be paid by the
Facility Lessee in lawful currency of the United States of America in
immediately available funds to the recipient not later than 11:00 a.m. (New York
City time) on the date due. All Rent (including Contingent Prepaid Rent) and all
Termination Value payments payable to the Owner Lessor (other than Excepted
Payments) shall be paid by the Facility Lessee to the Owner Lessor at its
account at Wilmington Trust Company (Account No. 50356-0), or to such other
place as the Owner Lessor shall notify the Facility Lessee in writing; PROVIDED,
HOWEVER, that so long as the Lessor Notes are outstanding and the Lien created
under the Lessor Security Documents has not been discharged, the Owner Lessor
hereby irrevocably directs (it being agreed and understood that such direction
shall be deemed to have been revoked after the Lien created under the Lessor
Security Documents shall have been fully discharged in accordance with its
terms), and the Facility Lessee agrees, that all payments of Rent (other than
Excepted Payments) and all Termination Value payments payable to the Owner
Lessor shall be paid by "wire" transfer directly to the Holder Representative's
Account or to such other place as the Holder Representative shall notify the
Facility Lessee in writing pursuant to the Participation Agreement, provided,
that for as long as the Initial Lessor Notes are outstanding, all Rent payments
(other than Excepted Payments) shall be deposited into the Rent Payment Account
on the Business Day immediately preceding the Rent Payment Date or Additional
Rent Payment Date, as the case may be, and such deposit shall remain the
property of the Facility Lessee until transferred into the Holder
Representative's Account pursuant to the following sentence. On each Rent
Payment Date or Additional Rent Payment Date, as the case may be, Rent shall be
paid by transferring the funds on deposit in the Rent Payment Account in the
amount equal to the Rent payment (in the amount notified by the Facility Lessee
to the Owner Lessor and the Holder Representative) into the Holder
Representative's Account. Payments constituting Excepted Payments shall be made
to the Person entitled thereto at the address for such Person set forth in the
Participation Agreement, or to such other place as such Person shall notify the
Facility Lessee in writing.
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SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT
SECTION 4.1. DISCLAIMER OF WARRANTIES. (a) Without waiving any claim
the Facility Lessee may have against any manufacturer, vendor or contractor, THE
FACILITY LESSEE ACKNOWLEDGES AND AGREES SOLELY FOR THE BENEFIT OF THE OWNER
LESSOR AND THE OWNER PARTICIPANT THAT (i) THE FACILITY AND EACH COMPONENT
THEREOF ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE ACCEPTABLE TO THE FACIL-
ITY LESSEE, (ii) THE FACILITY LESSEE IS SATISFIED THAT THE FACILITY AND EACH
COMPONENT THEREOF ARE SUITABLE FOR THEIR RESPECTIVE PURPOSES, (iii) NEITHER THE
OWNER LESSOR NOR THE OWNER PARTICIPANT IS A MANUFACTURER OR A DEALER IN PROP-
ERTY OF SUCH KIND, (iv) THE UNDIVIDED INTEREST IS LEASED HEREUNDER TO THE
EXTENT PROVIDED HEREBY FOR THE BASIC LEASE TERM AND THE RENEWAL LEASE TERMS, IF
ANY, SPECIFIED HEREIN SUBJECT TO ALL REQUIREMENTS OF LAW NOW IN EFFECT OR
HEREAFTER ADOPTED, INCLUDING WITHOUT LIMITATION (1) ZONING REGULATIONS, (2)
ENVIRONMENTAL LAWS OR (3) BUILDING RESTRICTIONS, AND IN THE STATE AND CONDITION
OF EVERY PART THEREOF "WHEN" THE SAME FIRST BECAME SUBJECT TO THIS FACILITY
LEASE WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE OWNER LESSOR OR THE
OWNER PARTICIPANT AND (v) THE OWNER LESSOR LEASES FOR THE BASIC LEASE TERM AND
THE RENEWAL LEASE TERMS, IF ANY, SPECIFIED HEREIN AND THE FACILITY LESSEE TAKES
THE UNDIVIDED INTEREST UNDER THIS FACILITY LEASE "AS-IS", "WHERE-IS" AND "WITH
ALL FAULTS", AND THE FACILITY LESSEE ACKNOWLEDGES THAT NEITHER THE OWNER LESSOR,
NOR THE OWNER PARTICIPANT MAKES NOR SHALL BE DEEMED TO HAVE MADE, AND EACH
EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS, WARRANTIES OR REPRESENTATIONS,
EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, CONDITION, FITNESS FOR ANY
PARTICULAR PURPOSE, DESIGN, OPERATION, MERCHANTABILITY THEREOF OR AS TO THE
TITLE OF THE FACILITY, THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREOF OR
CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM FROM PATENT, COPYRIGHT OR
TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR OTHER DEFECT, WHETHER OR
NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY OBLIGATIONS BASED ON STRICT
LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY
WHATSOEVER WITH RESPECT THERETO, except that the Owner Lessor represents and
warrants that on the Closing Date, the Undivided Interest will be free of Owner
Lessor's Liens. It is agreed that all such risks, as between the Owner Lessor
and the Owner Participant on
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the one hand and the Facility Lessee on the other hand are to be borne by the
Facility Lessee with respect to acts, occurrences or omissions during the
Facility Lease Term. Neither of the Owner Lessor nor the Owner Participant shall
have any responsibility or liability to the Facility Lessee or any other Person
with respect to any of the following: (x) any liability, loss or damage caused
or alleged to be caused directly or indirectly by the Facility or any Component
or by any inadequacy thereof or deficiency or defect therein or by any other
circumstances in connection therewith; (y) the use, operation or performance of
the Facility or any Component or any risks relating thereto; or (z) the
delivery, operation, servicing, maintenance, repair, improvement, replacement or
decommissioning of the Facility or any Component. The provisions of this
paragraph (a) of this Section 4.1 have been negotiated, and, except to the
extent otherwise expressly stated, the foregoing provisions are intended to be a
complete exclusion and negation of any representations or warranties of the
Owner Lessor, express or implied, with respect to the Facility, any Component
thereof or the Undivided Interest that may arise pursuant to any Requirement of
Law now or hereafter in effect, or otherwise.
(b) During the Facility Lease Term, so long as no Lease Event
of Default shall have occurred and be continuing, the Owner Lessor hereby
appoints irrevocably and constitutes the Facility Lessee its agent and
attorney-in-fact, coupled with an interest, to assert and enforce, from time to
time, in the name and for the account of the Owner Lessor and the Facility
Lessee, as their interests may appear, but in all cases at the sole cost and
expense of the Facility Lessee, whatever claims and rights the Owner Lessor may
have in respect of the Facility, any Component or the Undivided Interest
against any manufacturer, vendor or contractor, or under any express or implied
warranties relating to the Facility, any Component or the Undivided Interest.
SECTION 4.2. QUIET ENJOYMENT. The Owner Lessor agrees that,
notwithstanding any provision of any other Operative Document, so long as no
Lease Event of Default shall have occurred and be continuing, neither it nor any
party acting by, through or under the Owner Lessor shall interfere with or
interrupt the quiet enjoyment of the use, operation and possession by the
Facility Lessee of the interest in the Facility or the Undivided Interest
conveyed by this Facility Lease subject to the terms of this Facility Lease.
SECTION 5. RETURN OF UNDIVIDED INTEREST
SECTION 5.1. RETURN. Unless the Undivided Interest is being transferred
to the Facility Lessee (or its designee) pursuant to Section 10 or 13 of this
Facility Lease, the Facility Lessee shall return the Undivided Interest
(together with all Required Improvements and Non-Severable Improvements, if any,
title to which shall vest in the Owner Lessor) to the Owner Lessor or any
permitted transferee or assignee of the Owner Lessor at the expiration of the
Facility Lease Term (or earlier
8
than such date if required pursuant to the provisions of this Facility Lease) by
surrendering the Undivided Interest into the possession of the Owner Lessor or
such transferee or assignee at the location of the Facility on the Facility
Land.
SECTION 5.2. CONDITION UPON RETURN. At the time of any return of the
Undivided Interest by the Facility Lessee pursuant to Section 5.1, the Facility
Lessee agrees that:
(a) the Facility Lease, the Facility Site Sublease and the
Facility Site Sub-Sublease shall cease and terminate;
(b) the Facility will be in at least as good condition as if
it had been maintained during the Facility Lease Term in compliance with the
provisions of this Facility Lease (including, without limitation the provisions
of Section 7) ordinary wear and tear excepted as determined in accordance with
the Return Acceptance Tests;
(c) the Facility Lessee shall assign an undivided interest
equal to the Owner Lessor's Percentage in any and all licenses and permits of
any Governmental Entities or other Persons that are required to be obtained in
connection with the use, operation or maintenance of the Undivided Interest that
are not already in the name of the Owner Lessor to the Owner Lessor or a
transferee or designee of the Owner Lessor, to the extent permitted by
Requirements of Law and the provisions of such license or permit;
(d) the Facility Lessee, at the request of the Owner Lessor,
shall sell to the Owner Lessor or its designee or transferee at the then fair
market value thereof, determined by agreement between the Facility Lessee and
the Owner Lessor or, absent such agreement, by an appraisal conducted according
to the Appraisal Procedure, an undivided interest equal to the Owner Lessor's
Percentage in any or each Severable Improvement made to the Facility that is
owned by the Facility Lessee, subject to any existing encumbrances. The fees and
expenses incurred in connection with the appraisal required by this subsection
(d) shall be paid by the Owner Lessor;
(e) the Facility Lessee, or an Affiliate thereof, shall enter
into an agreement or other arrangements reasonably acceptable to the Owner
Lessor (the "SUPPORT ARRANGEMENTS") to provide the Facility Lessor with the
Support Services; PROVIDED, that the Facility Lessee shall be bound to provide
Support Services only to the extent the Facility Lessee is capable of, and is
still in the business of, providing such Support Services, and only to the
extent that such services are necessary for the operation of the Facility and
cannot reasonably and timely be obtained from third parties. Support
Arrangements shall provide for the provision of all Support Services during and
after expiration of the Facility Lease, and will provide for fair
9
market value compensation to the Facility Lessee, or an Affiliate thereof for
such Support Services, payable periodically in advance on no less than a monthly
basis, for such rights and other services provided under such arrangements and
shall terminate upon expiration or early termination of the Facility Site Lease
or at the Facility Lessor's option; and
(f) the Facility Lessee shall arrange, at its sole cost and
expense, for a Phase I Environmental Survey of the Facility and the Facility
Land, which shall be in form, scope and substance reasonably satisfactory to the
Owner Participant, not later than 180 days prior to a return of the Undivided
Interest pursuant to Section 5.1 or, in connection with a return other than
pursuant to Section 5.1, not later than the date of return; PROVIDED that, if as
a result of the Phase I Environmental Survey, facts are revealed that would
reasonably necessitate a Phase II Environmental Survey, such Phase I
Environmental Survey shall be expanded to a Phase II Environmental Survey, which
shall be in form, scope and substance reasonably satisfactory to the Owner
Participant. Each such survey shall be conducted, with appropriate diligence and
good faith, by an environmental consulting firm selected by the Facility Lessee
and reasonably acceptable to the Owner Participant. Any reports prepared by such
consulting firm documenting the surveys shall be provided promptly upon receipt
by the Facility Lessee to the Owner Participant. If, as a result of the
environmental surveys conducted pursuant to this Section 5.2(f), further
investigation, or abatement, corrective action, removal, monitoring, clean-up,
remediation or other response actions relating to Environmental Conditions at,
on, under or migrating from the Facility or the Facility Land are required to
ensure that the Facility and the Facility Land comply in all material respects
with all applicable Environmental Laws, the Facility Lessee shall, at its sole
cost and expense, as promptly as is reasonably practical and without materially
affecting the continued operation of the Facility or the Facility Site, make
arrangements reasonably satisfactory to the Owner Participant for conducting and
completing any such clean-up, remediation or other response action in relation
to the Environmental Conditions identified in such environmental surveys as
required to ensure that the Facility and the Facility Land comply with all
applicable Environmental Laws. Nothing in this Section 5.2(f) shall relieve the
Facility Lessee of its indemnification obligations under the Participation
Agreement. The obligations of the Facility Lessee set forth in this Section
5.2(f) shall survive the termination of this Facility Lease and the expiration
of the Facility Lease Term.
SECTION 5.3. EXPENSES. Except as provided in Section 5.2(d), the
Facility Lessee agrees to pay or reimburse or to cause to be paid or reimbursed,
on an After-Tax Basis, on demand, all costs and expenses incurred in connection
with any return contemplated by this Section 5.
SECTION 5.4. FREIGHT AND CRATE. At the expiration of the Facility Site
Lease, the Owner Lessor shall have the right to require the Facility Lessee (i)
at the Facility Lessee's sole risk and expense, to dismantle the Facility, to
remove the dismantled
10
components of the Facility from the Facility Land and to cause such components
to be delivered to a railhead or other suitable common carrier or (ii) at the
Owner Lessor's risk and expense, to dismantle the Facility and keep and store
such components at the Facility Land for a period not to exceed 180 days;
PROVIDED, HOWEVER, the Facility Lessee shall not be so required if it has chosen
to purchase the Facility from the Owner Lessor at a price equal to the greater
of (a) $1.00 and (b) the Fair Market Sales Value thereof (MINUS the estimated
costs of such decommissioning, dismantling, removal and shipment and the
estimated cost of restoring the Facility Land to its original condition). The
Facility Lessee's obligation to dismantle the Facility under this Section 5.4
shall survive the termination of the Facility Lease.
SECTION 6. LIENS
The Facility Lessee hereby covenants that it will not directly or
indirectly create, incur, assume or suffer to exist any Lien or other
encumbrance on or with respect to the Undivided Interest, the Facility, the
Facility Site or any Component, or on the Owner Lessor's or the Owner
Participant's interest in or under any Operative Document, except Permitted
Liens.
SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS
SECTION 7.1. MAINTENANCE. The Facility Lessee, at its own expense, will
(i) cause the Facility to be maintained in as good condition, repair and working
order as when delivered on the Closing Date, ordinary wear and tear excepted,
without discrimination as compared to other facilities of similar type owned or
operated by the Facility Lessee or any of its Affiliates, and in any event, in
all material respects (a) in accordance with Prudent Industry Practice, (b) in
compliance with all Requirements of Law, including without limitation, all
Environmental Laws and (c) in accordance with the terms of all insurance
policies required to be maintained pursuant to Section 11 and (ii) cause to be
made all repairs, renewals, replacements, betterments and improvements to the
Facility, all as in the reasonable judgment of the Facility Lessee may be
necessary to operate the Facility in accordance with the Operative Documents.
SECTION 7.2. REPLACEMENT OF COMPONENTS. In the ordinary course of
maintenance, service, repair or testing the Facility or any Component, the
Facility Lessee, at no cost to the Owner Lessor, may remove or cause to be
removed from the Facility any Component; PROVIDED, HOWEVER, that the Facility
Lessee shall cause such Component to be replaced by a replacement Component
which shall be free and clear of all Liens (except Permitted Liens) and shall be
in as good operating condition as that of the Component replaced, assuming such
replaced Component was maintained in accordance with the terms of this Facility
Lease, and does not diminish, other than in an immaterial respect, the current
and residual value, remaining useful life or utility of the Facility as measured
immediately prior to such replacement, assuming
11
the Facility shall then be in the condition required to have been maintained by
the terms of this Facility Lease, or cause the Facility to become "limited use"
property within the meaning of Rev. Proc. 75-28, 1975-1 C.B. 752 or Rev. Proc.
76-30, 1976- 2 C.B. 647 (each such replacement Component being herein referred
to as a "REPLACEMENT COMPONENT"). An undivided interest equal to the Owner
Lessor's Percentage in each Component at any time removed from the Facility
shall remain subject to this Facility Lease, wherever located, until such time
as such Component shall be replaced by a Replacement Component which has been
incorporated in the Facility and which meets the requirements for Replacement
Components specified above. Immediately upon any Replacement Component becoming
incorporated in the Facility, without further act (and with no adjustment to the
Purchase Price or Basic Lease Rent), (i) the replaced Component shall no longer
be subject to this Facility Lease, (ii) title to the Owner Lessor's undivided
interest in the removed Component shall thereupon vest in the Facility Lessee or
such other Person as shall be designated by the Facility Lessee, free and clear
of all rights of the Owner Lessor and the Holder Representative, (iii) title to
an undivided interest equal to the Owner Lessor's Percentage in the Replacement
Component shall thereupon vest with the Owner Lessor and such undivided interest
shall (a) become subject to this Facility Lease and the Lien of the Security
Documents, and (b) be deemed a part of the Undivided Interest for all purposes
of this Facility Lease. Notwithstanding anything in this Section 7.2 to the
contrary, if the Facility Lessee has determined that any part, Component or
portion of the Facility is surplus or obsolete, it shall have the right to
remove such part, Component or portion of the Facility without replacing it if
such removal would not, other than in an immaterial respect, diminish the
current or residual value, the utility or the remaining useful life of the
Facility, as measured immediately prior to such replacement, assuming the
Facility shall then be in the condition required to have been maintained by the
terms of this Facility Lease or cause the Facility to become "limited use"
property within the meaning of Rev. Proc. 75-28, 1975-1 C.B. 752 or Rev. Proc.
76-30, 1976-2 C.B. 647.
SECTION 7.3. ENVIRONMENTAL MATTERS. The Facility Lessee will
(i) comply in all material respects and make all
reasonable efforts to cause all other Persons to comply in all material
respects with all Environmental Laws applicable to the Facility or the
Facility Site, and the Facility Lessee shall have the sole
responsibility for any and all costs and expenses associated with such
compliance;
(ii) obtain, comply in all material respects with and
maintain all necessary Governmental Approvals required under any
applicable Environmental Law in connection with the use, operation and
maintenance of the Facility and the Facility Site;
12
(iii) conduct and complete, at its sole cost and
expense, any investigation, study, sampling, monitoring and testing and
undertake any cleanup, removal, remedial, corrective, mitigation,
response or other action necessary or advisable to xxxxx, correct,
remove and clean up or remediate all Hazardous Materials Released at,
on, in, under or from the Facility or the Facility Site, to the extent
required by and in material compliance with applicable Environmental
Laws; and
(iv) as soon as possible and in any event within
fifteen Business Days of Midwest obtaining knowledge thereof, provide
the Owner Lessor with written notice of, and copies of all written
communications relating to, any pending or threatened material
Environmental Claim involving the Facility or the Facility Site. To
the extent possible, all such notices shall describe in reasonable
detail the nature of the Environmental Claim.
SECTION 8. IMPROVEMENTS
SECTION 8.1. REQUIRED IMPROVEMENTS. The Facility Lessee, without
expense to the Owner Lessor and without the consent of any other Lease Financing
Party, shall make or cause to be made any Improvements to the Facility as it
relates to the Undivided Interest as are required (w) by Requirements of Law or
any Governmental Entity having jurisdiction thereon, (x) by any insurance
policies required to be maintained by the Facility Lessee under any Operative
Document, (y) by the Operative Documents or (z) to meet Return Acceptance Tests
as set forth in Section 5.1 (each, a "REQUIRED IMPROVEMENT"); PROVIDED, HOWEVER,
that the Facility Lessee may, in good faith and by appropriate proceedings,
diligently contest the validity or application of any Requirement of Law in any
reasonable manner which does not involve any risk of (i) foreclosure, sale,
forfeiture or loss of, or imposition of a Lien (other than a Permitted Lien) on
any part of the Facility or impair the use, operation or maintenance of the
Facility in any material respect, or (ii) any criminal liability being incurred
by, or any material adverse effect on the interests of, the Owner Participant,
the Owner Lessor, the Lender, the Holders, the Holder Representative, any
Funding LLC Financing Party, the Facility Lessee or the Facility Sublessee,
including, without limitation, subjecting any such Person (except the Facility
Sublessee) to regulation as a public utility (or similar regulation) under
Requirement of Law; PROVIDED FURTHER, that no such contest may extend beyond the
expiration or earlier termination of this Facility Lease.
SECTION 8.2. OPTIONAL IMPROVEMENTS. The Facility Lessee at any time
may, without expense to the Owner Lessor and without the consent of any other
Lease Financing Party, make or cause to be made any Improvement to the Facility
as the Facility Lessee considers necessary or desirable in the proper conduct of
its business (any such non-Required Improvement being referred to as an
"OPTIONAL IMPROVEMENT"); PROVIDED that no Optional Improvement to the Facility
shall, other than in an
13
immaterial respect, diminish the current or residual value, remaining useful
life or utility of the Facility below the current or residual value, remaining
useful life or utility thereof immediately prior to such Optional Improvement,
assuming the Facility shall then be in the condition required to have been
maintained by the terms of this Facility Lease, or cause the Undivided Interest
to become "limited use" property, within the meaning of Rev. Proc. 75-28, 1975-1
C.B. 752 or Rev. Proc. 76-30, 1976-2 C.B. 647.
SECTION 8.3. TITLE TO IMPROVEMENTS. Title to an undivided interest
equal to the Owner Lessor's Percentage in (i) all Required Improvements and (ii)
all Non-Severable Improvements shall automatically vest in the Owner Lessor
upon being affixed to or incorporated into the Facility, and such undivided
interest shall immediately (a) become subject to this Facility Lease, and (b)
be deemed part of the Undivided Interest for all purposes of this Facility
Lease. No interest in any Optional Improvement which is a Severable Improvement
(other than Severable Improvements which are financed by the Owner Lessor by an
Additional Equity Investment or a Supplemental Financing pursuant to Section
16.1 of the Participation Agreement) shall vest in the Owner Lessor or become
subject to this Facility Lease; PROVIDED, HOWEVER, that if the Facility Lessee
shall, at its cost and expense, cause such Optional Improvements which are
Severable Improvements to be made to the Facility, the Owner Lessor shall have
the right, prior to the return of the Undivided Interest to the Owner Lessor
hereunder, to purchase an undivided interest equal to the Owner Lessor's
Percentage in any such Optional Improvements which are Severable Improvements.
The purchase price for such undivided interest shall be the then Fair Market
Sales Value of such undivided interest. If the Owner Lessor does not elect to
purchase such Optional Improvements which are Severable Improvements, the
Facility Lessee may, and at the request of the Owner Lessor shall, remove such
Improvements at the end of the Facility Lease Term.
SECTION 8.4. FINANCING OF IMPROVEMENTS. The Facility Lessee shall,
subject to limitations on the incurrence of Indebtedness contained in other
Operative Documents, at all times have the right to finance Improvements other
than through the Facility Lease, so long as no Liens on the Facility, the
Facility Site or any portion thereof are granted or created in connection with
such financing; PROVIDED, HOWEVER that, in the case of a financing of a
Severable Improvement which is not a Required Improvement, a Lien on such
Severable, non-Required Improvement may be granted or created in connection with
such financing. The Facility Lessee may elect to finance Improvements to the
Facility through the Facility Lease in accordance with Section 16.1 of the
Participation Agreement.
SECTION 9. NET LEASE
This Facility Lease is a "net lease". The Facility Lessee's obligation
to make all payments payable hereunder (and all amounts, including, without
limitation,
14
Termination Value, following termination of this Facility Lease) shall be
absolute and unconditional under any and all circumstances and shall not be
terminated, extinguished, diminished, lost or otherwise impaired by any
circumstance of any character, including, without limitation, by (i) any setoff,
counterclaim, recoupment, defense or other right which the Facility Lessee may
have against the Owner Lessor, the Owner Participant, the Holder Representative
or any other Person, including, without limitation, any claim as a result of any
breach by any of said parties of any covenant or provision in this Facility
Lease or any other Operative Document, (ii) any lack or invalidity of title or
any defect in the title, condition, design, operation, merchantability or
fitness for use of the Facility or any Component, or any eviction by paramount
title or otherwise, or any unavailability of the Facility, the Facility Site,
any Component, any other portion of the Undivided Interest, or any part thereof,
(iii) any loss or destruction of, or damage to, the Facility or any Component or
interruption or cessation in the use or possession thereof or any part thereof
by the Facility Lessee for any reason whatsoever and of whatever duration, (iv)
the condemnation, requisitioning, expropriation, seizure or other taking of
title to or use of the Facility, the Facility Site, any Component, or any other
portion of the Undivided Interest by any Governmental Entity or otherwise, (v)
the invalidity or unenforceability or lack of due authorization or other
infirmity of this Facility Lease or any other Operative Document, (vi) the lack
of right, power or authority of the Owner Lessor to enter into this Facility
Lease or any other Operative Document, (vii) any ineligibility of the Facility
or any Component for any particular use, whether or not due to any failure of
the Facility Lessee to comply with any Requirement of Law, (viii) any event of
"force majeure" or any frustration, (ix) any legal requirement similar or
dissimilar to the foregoing, any present or future law to the contrary
notwithstanding, (x) any insolvency, bankruptcy, reorganization or similar
proceeding by or against the Facility Lessee or any other Person, (xi) any Lien
of any Person with respect to the Facility, the Facility Site, any Component,
any other portion of the Undivided Interest or any part thereof, or (xii) any
other cause, whether similar or dissimilar to the foregoing, any present or
future law notwithstanding, except as expressly set forth herein or in any other
Operative Document, it being the intention of the parties hereto that all Basic
Lease Rent (and all amounts, including, without limitation, Termination Value,
in lieu of Basic Lease Rent following termination of this Facility Lease)
payable by the Facility Lessee hereunder shall continue to be payable in all
events in the manner and at times provided for herein. Such Basic Lease Rent
(and all amounts, including, without limitation, Termination Value, in lieu of
Basic Lease Rent following termination of this Facility Lease) shall not be
subject to any abatement and the payments thereof shall not be subject to any
setoff or reduction for any reason whatsoever, including any present or future
claims of the Facility Lessee or any other Person against the Owner Lessor or
any other Person under this Facility Lease or otherwise. To the extent permitted
by Requirements of Law, the Facility Lessee hereby waives any and all rights
which it may now have or which at any time hereafter may be conferred upon it,
by statute or otherwise, to terminate, cancel, quit or surrender this Facility
Lease with respect to the Undivided
15
Interest except in accordance with Section 10, 13, 14 or 17. If for any reason
whatsoever this Facility Lease shall be terminated in whole or in part by
operation of law or otherwise, except as specifically provided herein, the
Facility Lessee nonetheless agrees, to the extent permitted by Requirements of
Law, to pay to the Owner Lessor an amount equal to each installment of Basic
Lease Rent and all Supplemental Lease Rent due and owing, at the time such
payment would have become due and payable in accordance with the terms hereof
had this Facility Lease not been so terminated. Nothing contained herein shall
be construed to waive any claim which the Facility Lessee might have under any
of the Operative Documents or otherwise or to limit the right of the Facility
Lessee to make any claim it might have against the Owner Lessor or any other
Person or to pursue such claim in such manner as the Facility Lessee shall deem
appropriate.
SECTION 10. EVENTS OF LOSS
SECTION 10.1. OCCURRENCE OF EVENTS OF LOSS.
(a) Each of the Owner Participant and the Owner Lessor will
promptly notify the Facility Lessee of any event of which it is aware that would
result in a Regulatory Event of Loss; PROVIDED, HOWEVER, that the failure to
provide such notice shall not result in any liability with respect to the Owner
Participant or the Owner Lessor and shall not in any way relieve the Facility
Lessee of any of its obligations under this Facility Lease, including the
obligations under this Section 10.
(b) If an Event of Loss described in clauses (i) or (ii) of
the definition of Event of Loss shall occur, then, no later than six months
following the date that the Facility Lessee has actual knowledge of such
occurrence, the Facility Lessee shall notify the Owner Lessor and the other
Lease Financing Parties of its election to either (1) subject to the
satisfaction of the conditions set forth in Section 10.3 and the terms of the
other Operative Documents, rebuild the Facility so that the Facility shall have
a current and residual value, remaining useful life and utility at least equal
to that of the Facility prior to such Event of Loss, assuming the Facility was
in the condition and repair required to be maintained by this Facility Lease, or
(2) terminate this Facility Lease and purchase the Facility from the Owner
Lessor by paying to the Owner Lessor an amount equal to the applicable
Termination Value and paying to the parties entitled thereto all other amounts
payable pursuant to Section 10.2. If the Facility Lessee fails to make an
election as provided above, the Facility Lessee will be deemed to have made the
election to terminate this Facility Lease pursuant to clause (2) of this Section
10.1(b) as of the end of the six month period referred to in the first sentence
of this Section 10.1(b).
SECTION 10.2. PAYMENT UPON TERMINATION; SPECIAL LESSEE TRANSFER.
(a) If either of the following shall occur:
16
(x) the Facility Lessee shall elect (or be
deemed to have elected) to terminate this
Facility Lease pursuant to clause (2) of
Section 10.1(b) following an Event of Loss
described in clause (i) or (ii) of the
definition of Event of Loss, or
(y) an Event of Loss described in clause (iii)
or (iv) of the definition of Event of Loss
shall occur,
then in the case of either (x) or (y), the Facility
Lessee shall pay to the Owner Lessor the sum of (A) the
Termination Value determined as of the relevant Termination
Date, PLUS (B) all reasonable documented out-of-pocket costs
and expenses of the other Lease Financing Parties incurred in
connection with such Event of Loss, PLUS (C) any unpaid Basic
Lease Rent or Renewal Lease Rent, as the case may be, payable
on such Termination Date, PLUS (D) all other payments of Rent
under this Facility Lease which are due and unpaid on the
Termination Date, including reimbursement of Incidental Costs,
under any other Operative Document (the "EVENT OF LOSS
PAYMENT"). The Facility Lessee shall pay such Event of Loss
Payment, in the case of clause (x) above, on the next
Termination Date immediately following the earlier of (1) the
date of the Facility Lessee's notice of its election to
terminate this Facility Lease and (2) the date which is six
months following the occurrence of such Event of Loss, and in
the case of clause (y) above, on a Termination Date occurring
no later than six months following the earlier of the date
that the Facility Lessee (i) acquires actual knowledge of the
occurrence of such Event of Loss or (ii) receives notice
pursuant to Section 10.1(a).
Concurrently with the payment of all amounts required to be paid pursuant to
this Section 10.2(a), (i) Basic Lease Rent for the Undivided Interest shall
cease to accrue, (ii) the Facility Lessee shall cease to have any liability to
the Owner Lessor with respect to the Undivided Interest, except for Supplemental
Lease Rent and other obligations (including those under Sections 14.1 and 14.2
of the Participation Agreement) surviving pursuant to the express terms of any
Operative Document, (iii) the Owner Lessor will prepay the Lessor Notes,
pursuant to Section 2.13 of the Lessor Loan Agreement, (iv) the Owner Lessor
shall transfer (by an appropriate instrument of transfer in form and substance
reasonably satisfactory to the Owner Lessor and prepared and recorded at the
Facility Lessee's expense) the Undivided Interest to the Facility Lessee (or its
designee), on an "as is", "where is" basis, without warranty other than a
warranty as to the absence of Owner Lessor's Liens and Owner Participant's
Liens, (v) each of this Facility Lease, the Facility Sublease,
17
the Facility Site Lease, the Facility Site Sublease and the Facility Site
Sub-Sublease shall terminate and (vi) the Owner Lessor shall execute and deliver
appropriate releases and other documents or instruments necessary or reasonably
requested by the Facility Lessee to effect the foregoing (including, but not
limited to, termination of this Facility Lease) all to be prepared, filed and
recorded (if appropriate) at the cost and expense of the Facility Lessee.
(b) Notwithstanding the foregoing provisions of Section
10.2(a), in the case of a Regulatory Event of Loss, at the option of the
Facility Lessee, if (i) the Facility Lessee shall have executed and delivered an
assumption agreement to assume the Lessor Notes as permitted by and in
accordance with Section 2.14 of the Lessor Loan Agreement, (ii) all other
conditions contained in such Section 2.14 of the Lessor Loan Agreement shall
have been satisfied and (iii) no Lease Event of Default shall have occurred and
be continuing and shall not be cured by such assumption, the obligation of the
Facility Lessee to make the Event of Loss Payment shall be reduced by the
outstanding principal amount of the Lessor Notes so assumed by the Facility
Lessee; PROVIDED, HOWEVER, for so long as the Lessor Notes are outstanding, if
the Facility Lessee shall have chosen to assume the Lessor Notes pursuant to
this Section 10.2(b), the Facility Lessee (or its designee) shall acquire the
Undivided Interest from the Owner Lessor subject to the Lien of the Lessor
Security Documents.
(c) Notwithstanding the foregoing provisions of Sections
10.2(a) and (b) to the contrary, in the case of a Regulatory Event of Loss, the
Facility Lessee (or its designee) so long as the Facility Lessee shall remain
liable under the Facility Lease to pay Basic Lease Rent and all other payments
hereunder in full, and in all respects in accordance with Section 19 of the
Participation Agreement, may purchase the Owner Participant's Beneficial
Interest in lieu of purchasing the Undivided Interest pursuant to Sections 10.2
(a) and (b) and keep the Facility Lease (and Lessor Loan) in place.
SECTION 10.3. APPLICATION OF PROCEEDS. Any payments with respect to the
Undivided Interest received at any time by the Owner Lessor or the Facility
Lessee from any Governmental Entity or from insurance proceeds as a result of
the occurrence of an Event of Loss shall be applied as follows:
(a) all such payments received at any time by the Facility
Lessee shall be promptly paid to the Owner Lessor or, so long as the Lessor
Notes are outstanding, to the Holder Representative, for application pursuant to
the following provisions of this Section 10.3, except that, the Facility Lessee
may retain any amounts that the Owner Lessor would at the time be obligated to
pay to the Facility Lessee as reimbursement pursuant to Section 10.3(b);
18
(b) so much of such payments as shall not exceed the Event of
Loss Payment required to be paid by the Facility Lessee pursuant to Section 10.3
(a) shall be applied in reduction of the Facility Lessee's obligation to pay
such amount if not already paid by the Facility Lessee or, if already paid by
the Facility Lessee, shall be applied to reimburse the Facility Lessee for its
payment of such amount; and
(c) the balance, if any, of such payments remaining thereafter
shall be apportioned between the Owner Lessor and the Facility Lessee in
accordance with their respective interests in the Facility.
Notwithstanding the foregoing, if the Facility Lessee shall have
elected to rebuild the Facility pursuant to Section 10.1(a), any insurance
proceeds received by the Owner Lessor, Holder Representative or the Facility
Lessee as a result of the occurrence of an Event of Loss described in clause (i)
or (ii) of the definition of Event of Loss shall be applied as provided in
Section 11.7.
SECTION 10.4. REBUILD. The Facility Lessee's right to rebuild the
Facility pursuant to Section 10.1 (b) shall be subject to the fulfillment, at
the Facility Lessee's sole cost and expense, in addition to the conditions
contained in Section 10.1(b), of the following conditions:
(a) no Material Lease Default or Lease Event of Default shall
have occurred and be continuing;
(b) on the date the Facility Lessee shall give notice pursuant
to Section 10.1(b) of its election to rebuild the Facility in accordance with
this Section 10.4, either (i) the Owner Participant shall have received an
opinion reasonably satisfactory to it from Hunton & Xxxxxxxx, or from a
nationally recognized tax counsel selected by the Owner Participant and
reasonably acceptable to Midwest, to the effect that, assuming the proposed
rebuilding is accomplished in the manner and within the time proposed, such
rebuilding would not result in any material indemnified, or any unindemnified
incremental tax risk to the Owner Participant or (ii) the Owner Participant
shall have received an opinion of Hunton & Xxxxxxxx, or another nationally
recognized tax counsel selected by the Owner Participant and reasonably
acceptable to Midwest to the effect that it is more likely than not that such
proposed rebuilding would not result in any unindemnified incremental tax risk
or any material indemnified incremental tax risk and the Owner Participant shall
have received collateral or other security for the indemnification obligations
with respect to any such incremental tax risk, such collateral or other security
to be acceptable to the Owner Participant in its sole discretion exercised in
good faith;
(c) on the date the Facility Lessee shall give notice pursuant
to Section 10.1(b) of its election to rebuild the Facility in accordance with
this Section 10.4, the Facility Lessee shall deliver to the Owner Participant
and, so long as the
19
Lessor Notes are outstanding, the Holder Representative (i) a report of the
Engineering Consultant, or such other independent engineer reasonably
satisfactory to the Owner Participant and, so long as the Lessor Notes are
outstanding, the Holder Representative, to the effect that it is reasonable to
expect that such rebuilding of the Facility is technologically feasible and
economically viable and that such rebuilding can be completed by a date that is
36 months prior to the end of the Basic Lease Term or any Renewal Lease Term
then in effect or already elected by the Facility Lessee, and (ii) an appraisal
of an Independent Appraiser reasonably acceptable to the Owner Participant, and,
so long as the Lessor Notes are outstanding, the Holder Representative to the
effect that the rebuilt Facility will have at least the same value, residual
value, utility and useful life as the Facility immediately prior to the Event of
Loss, assuming the Facility was then in the condition required to have been
maintained by the terms of the Facility Lease;
(d) on the date the Facility Lessee shall notify the Owner
Lessor pursuant to Section 10.1(b) of its election to rebuild the Facility in
accordance with this Section 10.4, the Facility Lessee shall demonstrate to the
reasonable satisfaction of the Owner Participant and, so long as the Lessor
Notes are outstanding, the Holder Representative, adequate financial resources,
from insurance proceeds or otherwise, to complete such rebuilding and to pay
Basic Lease Rent while the Facility is being rebuilt;
(e) the Facility Lessee shall cause the rebuilding of the
Facility to commence as soon as reasonably practicable after notifying the Owner
Participant and, so long as the Lessor Notes are outstanding, the Holder
Representative, of its election to rebuild the Facility in accordance with this
Section 10.4 and in all events within 18 months of the occurrence of the event
that caused such Event of Loss and will cause work on such rebuilding to proceed
diligently thereafter. As the rebuilding of the Facility progresses, title to
an undivided interest equal to the Owner Lessor's Percentage in such rebuilt
Facility shall vest in the Owner Lessor and such Undivided Interest shall become
subject to this Facility Lease and, so long as the Lessor Notes are outstanding,
the Lien of the Security Documents, and be deemed a part of the Undivided
Interest for all purposes of this Facility Lease and the other Operative
Documents, automatically and without any further act by any Person;
(f) on the date of the completion of such rebuilding of the
Facility (the "REBUILDING CLOSING DATE") the following documents shall be duly
authorized, executed and delivered and, if appropriate, filed for recordation by
the respective party or parties thereto and shall be in full force and effect,
and an executed counterpart of each shall be delivered to the Owner Lessor, the
Owner Participant and the Holder Representative: (i) supplements to this
Facility Lease subjecting an undivided interest equal to the Owner Lessor's
Percentage in the rebuilt Facility to this Facility Lease (with no change in
Purchase Price or the Basic Lease Rent as a result of such rebuilding), (ii) so
long as the Lessor Notes are outstanding, supplements to the
20
Security Documents subjecting such undivided interest in the Facility to the
Lien of the Security Documents, (iii) such recordings and filings, as may be
reasonably requested by the Owner Participant or the Holder Representative to be
made or filed, (iv) an opinion of counsel to the Facility Lessee, such counsel
and such opinion to be reasonably satisfactory to the Owner Participant and, so
long as the Lessor Notes are outstanding, the Holder Representative, to the
effect that (x) the supplements to this Facility Lease required by clause (i)
above constitute effective instruments for subjecting such undivided interest in
the rebuilt Facility to this Facility Lease, (y) the supplements to the Security
Documents required by clause (ii) above, if any, constitute effective
instruments for subjecting such undivided interest in the rebuilt Facility to
the Lien of the Security Documents and (z) all filings and other action
necessary to perfect and protect the Owner Lessor's interest in an undivided
interest equal to the Owner Lessor's Percentage in the rebuilt Facility have
been accomplished, (v) an appraisal by an Independent Appraiser, certifying that
the Facility as so rebuilt has a current and residual value, remaining useful
life and utility at least equal to the current and residual value, remaining
useful life and utility of the Facility immediately prior to such rebuilding
(assuming the Facility was in the condition and repair required to be maintained
by the terms of this Facility Lease), (vi) a report by the Independent Engineer
certifying that the Facility as so rebuilt is in a state of repair and condition
required by this Facility Lease, (vii) an Officer's Certificate of the Facility
Lessee as to compliance with this Section 10.4 and certifying that no Lease
Event of Default shall have occurred as a result of the rebuilding, and (viii)
satisfactory evidence as to the compliance with Section 11 of this Facility
Lease with respect to the Facility, as so rebuilt; and
(g) there shall be no material adverse accounting effect under
GAAP on the Owner Participant as a result of such rebuilding and the other
transactions contemplated by this Section 10.4.
SECTION 10.5. APPLICATION OF PAYMENTS NOT RELATING TO AN EVENT
OF LOSS. (a) In the event that during the Facility Lease Term title to, or the
use of, all or any portion of the Undivided Interest, the Facility or the
Facility Site is requisitioned or taken by or pursuant to a request of any
Governmental Entity under the power of eminent domain or otherwise for a period
or in a manner which does not constitute an Event of Loss, the Facility Lessee's
obligation to pay all installments of Basic Lease Rent shall continue for the
duration of such requisitioning or taking. The Facility Lessee shall be entitled
to receive and retain for its own account all sums payable for any such period
by such Governmental Entity as compensation for such requisition or taking of
possession; PROVIDED, THAT if at the time of such payment a Material Lease
Default or a Lease Event of Default shall have occurred and be continuing, such
amounts shall be paid to and held by the Owner Lessor unless the Lessor Loans
are outstanding, in which case such amounts shall be paid to and held by the
Holder Representative, as security for the obligations of the Facility Lessee
21
under this Facility Lease until such time as no Material Lease Default or Lease
Event of Default is continuing.
(b) Any insurance proceeds with respect to the Undivided
Interest received at any time by the Owner Lessor, the Holder Representative or
the Facility Lessee under any of the insurance policies required to be
maintained by the Facility Lessee under Section 11 as a result of any damage to
the Facility or any part thereof which does not constitute an Event of Loss
shall be applied as follows: (i) in accordance with Section 11.7, and (ii) the
balance, if any, of such insurance proceeds remaining thereafter shall be paid
to the Facility Lessee.
SECTION 11. INSURANCE
SECTION 11.1. PROPERTY INSURANCE. Subject to Section 11.6, the Facility
Lessee will maintain (or cause to be maintained) all risk property insurance,
including coverage for boiler and machinery and the peril of flood and the
peril of earthquake, customarily carried by prudent operators of coal-fired and
oil/gas-fired electric generating facilities of comparable size and risk as the
Facility, and, in any case, subject to availability of said insurance on
commercially reasonable terms and in an amount equal to the Probable Maximum
Loss of the Facility.
SECTION 11.2. LIABILITY INSURANCE. Subject to Section 11.6, the
Facility Lessee will maintain (or caused to be maintained) liability insurance,
including contractual liability coverage, insuring against claims for bodily
injury (including death) and property damage to third parties arising out of the
ownership, operation, maintenance, condition and use of the Facility and the
Facility Site, with limits of not less than (i) $35,000,000 in the aggregate per
occurrence if such insurance also covers any of the Other Facilities and (ii)
$25,000,000 if such insurance covers solely the Facility and the Facility Site.
The Facility Lessee will at least annually review the liability insurance
maintained by it or on its behalf and will, if necessary, increase such coverage
in order that the liability insurance maintained by it or on its behalf is
consistent with that maintained by prudent operators of similar facilities of
comparable size and risk to the Facility. Such liability insurance may be
purchased either in a single limit or in combination with a general and an
excess policy.
SECTION 11.3. PROVISIONS WITH RESPECT TO INSURANCE. Subject to Section
11.6, the Facility Lessee will place the insurance maintained pursuant to this
Section 11 with companies having an A.M. Best rating of at least "A-7" or, if
not so rated, with comparable financial strength. All insurance policies
required to be maintained pursuant to Sections 11.1 and 11.2 shall name each of
the Owner Participant, the Equity Investor, the Owner Lessor, the Owner Trustee,
the Holder Representative and the Lender as additional insureds, as their
respective interests may appear (the "ADDITIONAL INSUREDS"). All insurance
policies required to be maintained pursuant to the terms hereof shall also
provide for at least 30 days' prior written notice (10 days
22
if as a result of non-payment) by the insurance carrier to each Additional
Insured in the event of cancellation, non-renewal, termination, expiration or
material change. The Facility Lessee will place the insurance required by the
terms of this Section 11 with insurance companies which agree to waive all
claims for premiums from, and all subrogation rights against, the Additional
Insureds. All the insurance maintained pursuant to this Section 11 shall be
primary without right of contribution of any other insurance carried by or on
behalf of each of the Additional Insureds with respect to its interests in the
Facility and the Facility Site.
Subject to Section 11.6, to the extent available on commercially
reasonable terms, the Facility Lessee will use its best efforts to provide that
the respective interests of the Additional Insureds shall not be invalidated by
any act or neglect of the Facility Lessee, or any breach or violation by the
Facility Lessee of any warranties, declarations or conditions contained in such
policies or by the use of the Facility for purposes more hazardous than
permitted by such policies. Additionally, to the extent available on
commercially reasonable terms, the Facility Lessee will use its best efforts to
provide that such policies shall be endorsed to provide that, inasmuch as the
policies are written to cover more than one insured, all terms, conditions,
insuring agreements and endorsements, with the exception of limits of liability,
shall operate in the manner as if there were a separate policy covering each
insured. The Facility Lessee shall, at its own expense, make or cause to be made
all proofs of loss and take all other steps necessary to collect the proceeds of
such insurance.
SECTION 11.4. REPORTS. Within 15 days after the expiration and renewal
of any insurance policy required to be maintained pursuant to the terms of this
Section 11, the Facility Lessee shall furnish each Additional Insured with an
executed broker letter identifying all insurance coverage in place and
certifying that all premiums in respect of such policies are current.
Certificates of insurance shall accompany said letter documenting insurance
coverage and the Additional Insured status as required.
SECTION 11.5. ADDITIONAL INSURANCE. At any time any Additional Insured
may at its own expense and for its own account carry insurance with respect to
its interest in the Undivided Interest, PROVIDED, that such insurance does not
in any way interfere with the Facility Lessee's ability to obtain insurance with
respect thereto as required in this Section 11. Any insurance payments received
from policies maintained by an Additional Insured pursuant to the previous
sentence shall be retained by such Additional Insured without reducing or
otherwise affecting the Facility Lessee's obligations hereunder.
SECTION 11.6. AMENDMENT OF INSURANCE REQUIREMENTS.
(a) If any insurance required to be maintained by the Facility
Lessee pursuant to the Operative Documents (including the limits or deductibles
or any other terms under policies for such insurance) ceases to be available on
a
23
commercially reasonable basis at the time of renewal, the Facility Lessee shall
provide written notice to each Additional Insured accompanied by a letter from
the Facility Lessee's insurance broker stating that such insurance is
unavailable on a commercially reasonable basis. Such notice shall be given not
less than 30 days prior to the scheduled date for renewal of any such policy.
Upon receipt of such notice, the Facility Lessee and each Additional Insured
shall immediately enter into good faith negotiations in order to agree upon an
alternative to such insurance.
(b) In the event that a resolution acceptable to the Facility
Lessee and all Additional Insureds cannot be reached within 10 days from the
date of the notice referred to in paragraph (a) above, the Additional Insureds
shall make arrangements for the formation of an insurance panel consisting of
the Facility Lessee's insurance advisor (or broker), the Facility Lessor's
insurance advisor (or broker), and an independent insurance expert from an
internationally recognized insurance brokerage firm, chosen by the Facility
Lessee and reasonably acceptable to the Additional Insureds. Such independent
expert shall conduct a separate review of the relevant insurance requirements of
the Operative Documents and the market for such insurance at the time, giving
due consideration to the representations of both insurance advisors, and upon
conclusion of such review shall issue a written report stating whether such
insurance is available, or unavailable, on a commercially reasonable basis.
(c) If the insurance expert concludes that such insurance is
not available on a commercially reasonable basis, the insurance expert shall
provide a written recommendation (which shall include the amount and type of
insurance which is available upon a commercially reasonable basis) not less than
15 days before the date for renewal of such insurance. The Facility Lessee
shall, prior to the expiration of the insurance then in effect, obtain such
insurance that is available on a commercially reasonable basis. The
recommendation of the insurance expert shall be conclusive and binding upon the
Additional Insureds, and the Facility Lessee shall, for the immediately
succeeding one-year policy period, only be required to carry the insurance that
the expert has certified is available on a commercially reasonable basis.
(d) All fees, costs and expenses associated with the insurance
panel (including review by the insurance expert) shall be paid by the Facility
Lessee.
SECTION 11.7. APPLICATION OF INSURANCE PROCEEDS. (a) All insurance
proceeds up to $5,000,000 on account of any damage to or destruction of the
Facility or any part thereof (in each case less the actual costs, fees and
expenses incurred in the collection thereof), shall, subject to Section 11.7(d),
be paid to or retained by the Facility Lessee for application in repair or
replacement of the affected property. If the insurance proceeds on account of
such damage or destruction to the Facility exceed $5,000,000 but are less than
$25,000,000, then all such insurance proceeds
24
shall, subject to Section 11.7(d), be paid to or retained by the Facility Lessee
for application in repair or replacement of the affected property for so long as
the Holdings long-term unsecured indebtedness shall be rated at least BBB- and
Baa3 by S&P and Xxxxx'x, respectively. In all other situations, all insurance
proceeds on account of such damage or destruction to the Facility, shall be paid
to the Owner Lessor or, if the Lessor Notes are outstanding, the Holder
Representative and be applied and dealt with as provided in Section 11.7(b)
below.
(b) All such proceeds actually received on account of any such
damage or destruction other than in connection with an Event of Loss shall,
unless a Material Lease Default or a Lease Event of Default shall have occurred
and continuing, be paid over to the Facility Lessee or as it may direct from
time to time as restoration progresses, to pay (or reimburse the Facility Lessee
for) the cost of restoration, if the amount of such proceeds received by the
Holder Representative or the Owner Lessor, together with such additional
amounts, if any, theretofore expended by the Facility Lessee out of its own
funds for such restoration, are sufficient to pay the estimated cost of
completing such restoration, but only upon receipt by the Owner Lessor and, so
long as the Lessor Notes are outstanding, the Holder Representative of a
written application of the Facility Lessee accompanied by an Officer's
Certificate of the Facility Lessee setting forth in reasonable detail the nature
of such restoration, the actual cash expenditures made to date for such
restoration and the estimated cost to complete such restoration and stating that
no Lease Event of Default has occurred and is continuing.
(c) All such proceeds received or payable on account of an
Event of Loss shall, unless the Facility Lessee has elected to rebuild or
restore the Facility pursuant to Section 10.2, be dealt with in accordance with
Section 10.3.
(d) Notwithstanding the foregoing provisions of this Section
11 or Section 10, so long as a Material Lease Default or a Lease Event of
Default shall have occurred and be continuing, the proceeds of any insurance
required to be maintained pursuant to this Section 11 that would otherwise be
payable to or for the account of, or that would otherwise be retained by, the
Facility Lessee pursuant to this Section 11 or Section 10.3 will be held as
security for the obligations of the Facility Lessee under this Facility Lease by
the Owner Lessor or, so long as the Lessor Notes are outstanding, the Holder
Representative and at such time thereafter as no Material Lease Default or a
Lease Event of Default shall be continuing, such amount shall be paid promptly
to the Facility Lessee.
SECTION 12. INSPECTION
During the Facility Lease Term, each of the Lease Financing Parties and
their respective representatives shall have the right, during normal business
hours, upon reasonable notice to the Facility Lessee and at no expense (except
when a Material
25
Lease Default or a Lease Event of Default has occurred and is continuing) or
risk to the Facility Lessee, to inspect the Facility and the records with
respect to the operations and maintenance thereof in the Facility Lessee's
custody or to which the Facility Lessee has access; PROVIDED, HOWEVER, that any
such inspection shall be conducted in accordance with the Operative Documents
and so as not to interfere with the operation or maintenance of the Facility or
the conduct by the Facility Lessee of its business and shall be in accordance
with the Facility Lessee's safety and insurance programs. The Lease Financing
Parties shall attempt to conduct their inspections at the same time and, except
during the continuance of a Material Lease Default or a Lease Event of Default
or during the last 24 months of the Facility Lease Term (unless the Facility
Lessee shall have exercised its option to renew the Facility Lease), no more
than one inspection a year shall be conducted by any Lease Financing Party.
SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS
SECTION 13.1. TERMINATION FOR ILLEGALITY. If, as a result of change in
Requirements of Law, it shall have become illegal for the Facility Lessee to
continue this Facility Lease or for the Facility Lessee to make payments under
this Facility Lease or any other Operative Document, and the transactions
contemplated by the Operative Documents cannot be restructured to comply with
such change in law in a manner reasonably acceptable to the Lease Financing
Parties, the Facility Lessee shall have the right, at its option, by giving
notice to the Owner Lessor no later than twelve months after the date the
Facility Lessee receives notice or first has actual knowledge of such
illegality, to terminate this Facility Lease on the Termination Date specified
in such notice (which shall be a date occurring not more than 60 days after the
date of such notice) and purchase the Undivided Interest by paying to the Owner
Lessor the Termination Value determined as of such Termination Date and paying
to the Persons entitled thereto all other amounts required to be paid under
Section 13.3. It shall be a condition to the termination of this Facility Lease
pursuant to this Section 13.1 that each Other Facility Lessee which is an
Affiliate of the Facility Lessee, or is the Facility Lessee itself, shall also
exercise its right to terminate any and all Other Facility Leases to which each
such Facility Lessee is a party to the extent that the "Owner Lessor" with
respect to such Other Facility Lease is the Owner Lessor itself or an Affiliate
thereof and to the extent the Facility Lessee is then entitled to exercise such
termination right under such Other Facility Leases.
SECTION 13.2. TERMINATION FOR BURDENSOME INDEMNITY. If (i) one or more
events outside the control of the Facility Lessee or its Affiliates shall have
occurred which will, or could reasonably be expected to, give rise to an
obligation by the Facility Lessee to pay or incur an indemnity obligation under
Section XIV of the Participation Agreement (except for tax indemnity obligations
expected on the Closing Date to be incurred) or pursuant to the Tax Indemnity
Agreement, (ii) such payment or indemnity obligation (and the underlying cost or
tax) can be avoided in
26
whole or in part if the Facility Lessee purchases the Undivided Interest and
(iii) the amount of such avoided payments, together with the amount of any
indemnity payments made during the Burdensome Buyout Period that could have been
avoided if the Facility had been purchased by the Facility Lessee would exceed
(on a present value basis, discounted at the Discount Rate, compounded on an
annual basis to the date of the termination) 2.5% of the Purchase Price (unless
the Owner Participant has waived its right to indemnity payments in excess of
2.5% of the Purchase Price or arranged for its own account for the payment
thereof), the Facility Lessee shall have the right, at its option, no later than
24 months after the date the Facility Lessee receives notice or actual knowledge
of such event referred to in clause (i) above, to terminate this Facility Lease
on the Termination Date specified in the notice provided pursuant to Section
13.1 (which shall be a date occurring not more than 60 days after the date of
such notice), and purchase the Undivided Interest by paying to the Owner Lessor
the Termination Value determined as of such Termination Date and paying to the
Persons entitled thereto all other amounts required to be paid under Section
13.3. It shall be a condition to the termination of this Facility Lease pursuant
to this Section 13.2 that each Other Facility Lessee which is an Affiliate of
the Facility Lessee, or is the Facility Lessee itself, shall also exercise its
right to terminate any and all Other Facility Leases to which each such
Facility Lessee is a party to the extent that the "Owner Lessor" with respect to
such Other Facility Lease is the Owner Lessor itself or an Affiliate thereof and
to the extent the Facility Lessee is then entitled to exercise such termination
right under such Other Facility Leases.
SECTION 13.3. PROCEDURE FOR EXERCISE OF TERMINATION OPTION. If the
Facility Lessee shall have exercised its option under Section 13.1 or 13.2
(each, a "BURDENSOME BUYOUT OPTION"), on the Termination Date specified in the
Facility Lessee's notice of such exercise, the Facility Lessee shall pay the
Termination Value to the Owner Lessor, and shall pay the following amounts to
the Owner Lessor or the Person entitled thereto, without duplication, (a) all
amounts of Basic Lease Rent or Renewal Lease Rent, as the case may be, due and
payable on or prior to such Termination Date PLUS (b) all reasonable documented
out-of-pocket costs and expenses incurred by the Lease Financing Parties, other
than Affiliates of the Facility Lessee, in connection with the exercise of the
Burdensome Buyout Option due and payable on or prior to the Termination Date
PLUS (c) any other Rent payments under the Facility Lease due and unpaid on such
Termination Date, including reimbursement of Incidental Costs under the Lessor
Loan Agreement, under any other Operative Document. Concurrently with the
payment of all sums specified in Section 13.1 or 13.2, as the case may be, and
this Section 13.3, (1) Basic Lease Rent for the Undivided Interest shall cease
to accrue, (2) the Facility Lessee shall cease to have any liability to the
Owner Lessor with respect to the Undivided Interest, except for Supplemental
Lease Rent and other obligations (including those under Sections 14.1 and 14.2
of the Participation Agreement) surviving pursuant to the express terms of any
Operative Document, (3) the Owner Lessor will in connection with a sale of the
Facility pursuant to Section 13.1 or 13.2 transfer (by an appropriate instrument
of
27
transfer in form and substance reasonably satisfactory to the Owner Lessee and
prepared and recorded at the Facility Lessee's expense), the Undivided Interest
to the Facility Lessee (or its designee) on an "as is"and "where is" basis,
without representations or warranties other than a warranty as to the absence
of Owner Lessor's Liens and the Owner Participant's Liens, (4) this Facility
Lease shall terminate and (5) the Owner Lessor shall deliver appropriate
releases and other documents or instruments necessary or desirable to effect the
foregoing, all to be prepared, filed and recorded (if appropriate) at the cost
and expense of the Facility Lessee. It shall be a condition of the termination
of this Facility Lease pursuant to this Section 13 that the Facility Lessee
shall pay all amounts it is obligated to pay under Section 13.1 or 13.2, as the
case may be, and this Section 13.3 and all other amounts due by the Facility
Lessee under this Facility Lease and the other Operative Documents. The
Burdensome Buyout Option must be exercised within the 24 month period (the
"BURDENSOME BUYOUT PERIOD") after actual knowledge by the Facility Lessee of the
event or illegality, as the case may be, giving rise thereto, and if the
Burdensome Buyout Option is not exercised within the Burdensome Buyout Period,
the Facility Lessee shall be deemed to have irrevocably waived its right to
exercise the Burdensome Buyout Option with respect to such event. If the
Facility Lessee fails to consummate the Burdensome Buyout Option under this
Section 13 after giving notice of its intention to do so (other than in
consequence of a failure of the Owner Lessor or Owner Participant to fulfill
their obligations, if any, under Section 13), (i) the Facility Lease shall
continue, (ii) such failure to consummate shall not constitute a default under
the Facility Lease, and (iii) the Facility Lessee will lose its right to
terminate this Facility Lease pursuant to this Section 13.3 as a result of the
event or condition giving rise to such Burdensome Buyout Option during the
remainder of the Facility Lease Term. The Facility Lessee hereby acknowledges
the Lien of the Lessor Security Documents and agrees for the benefit of the
Holder Representative that any transfer effected pursuant to this Section 13.3
will be subject to said Lien unless the same has been released or discharged in
accordance with the terms of the Lessor Security Documents.
SECTION 13.4. ASSUMPTION OF THE LESSOR NOTES; SPECIAL LESSEE TRANSFERS.
(a) Notwithstanding the foregoing provisions of Section 13.3
to the contrary, at the option of the Facility Lessee, if (i) the Facility
Lessee shall have executed and delivered an assumption agreement to assume the
Lessor Notes as permitted by and in accordance with Section 2.13 of the Lessor
Loan Agreement, (ii) all other conditions contained in such Section 2.13 of the
Lessor Loan Agreement shall have been satisfied, (iii) no Lease Event of Default
shall have occurred and be continuing and shall not be cured by such assumption,
(iv) the Facility Lessee shall remain liable under the Facility Lease to pay
Basic Lease Rent and to make other payments under the Facility Lease in full and
(v) the Facility Lessee shall purchase the Facility pursuant to Section 13.1 or
13.2, as the case may be, then, the obligation of the Facility Lessee to pay
Termination Value shall be reduced by the outstanding
28
principal amount of the Lessor Notes so assumed by the Facility Lessee;
PROVIDED, HOWEVER, for so long as the Lessor Notes are outstanding, if the
Facility Lessee shall have chosen to assume the Lessor Notes pursuant to this
Section 13.4(a), the Facility Lessee (or its designee) shall acquire the
Undivided Interest from the Owner Lessor subject to the Lien of the Lessor
Security Documents.
(b) Notwithstanding the foregoing provisions of Sections 13.3
to the contrary, in the case of a Burdensome Buyout Event, the Facility Lessee
(or its designee) so long as the Facility Lessee shall remain liable under the
Facility Lease to pay Basic Lease Rent and all other payments hereunder in full,
and in all respects in accordance with Section 19 of the Participation
Agreement, may purchase the Owner Participant's Beneficial Interest or all of
the outstanding membership interests in the Owner Participant, in lieu of
purchasing the Undivided Interest pursuant to Sections 13.1 and 13.2, and keep
the Facility Lease (and Lessor Loan) in place.
SECTION 14. TERMINATION FOR OBSOLESCENCE
SECTION 14.1. TERMINATION. Upon at least six months' prior written
notice to the Owner Lessor, (which notice shall be accompanied by a
certification by the board of directors of Midwest as to one or more of the
matters described in clauses (a) and (b) below), the Facility Lessee shall have
the option, so long as no Material Lease Default or Lease Event of Default shall
have occurred and be continuing on the date of such notice or the proposed
Obsolescence Termination Date (as defined below), to terminate this Facility
Lease on any Termination Date occurring on or after the seventh anniversary of
the Closing Date and not less than 180 days after such notice (the date of
termination selected by the Facility Lessee being the "OBSOLESCENCE TERMINATION
DATE") which proposed Obsolescence Termination Date shall be set forth in the
notice, on the terms and conditions set forth in this Section 14, if (a) the
Facility is economically or technologically obsolete as a result of (i) a change
in Requirements of Law, regulation or tariff of general application or
imposition by the FERC or any other Governmental Entity having or claiming
jurisdiction over the Facility Lessee or the Facility of any conditions or
requirements (including, without limitation, requiring significant capital
improvements to the Facility) relating to the availability, continued
effectiveness or renewal of any license or permit required for the operation or
ownership of the Facility, or (ii) as a result of any change in the markets for
the wholesale purchase and/or sale of energy or any material abrogation of power
purchase agreements; (b) an event has occurred that, in the Facility Lessee's
good faith judgment, will cause the Facility to become obsolete; or (c) the
Facility is surplus to the Facility Lessee's needs or is no longer useful in its
trade or business. It shall be a condition to the termination of this Facility
Lease pursuant to this Section 14.1 that each Other Facility Lessee which is an
Affiliate of the Facility Lessee, or is the Facility Lessee itself, shall also
exercise its right to terminate any and all Other Facility Leases to which such
Facility Lessee is a party to the extent that the "Owner Lessor" with respect to
such Other Facility Lease is the Owner Lessor itself or an
29
Affiliate thereof and to the extent the Facility Lessee is then entitled to
exercise such termination right under such Other Facility Leases.
SECTION 14.2. SOLICITATION OF OFFERS. If the Facility Lessee shall give
the Owner Lessor notice pursuant to Section 14.1 and the Owner Lessor shall not
have elected to retain the Undivided Interest pursuant to Section 14.3 hereof,
the Facility Lessee shall (i) as non-exclusive agent for the Owner Lessor, use
commercially reasonable efforts to obtain bids from third parties unaffiliated
with the Facility Lessee and sell the Owner Lessor's Interest on the
Obsolescence Termination Date and (ii) covenant that it will not sell the Owner
Lessor's Interest to any third party with whom the Facility Lessee or an
Affiliate thereof has an arrangement to use or operate the Facility to generate
power for the benefit of the Facility Lessee, the Facility Sublessee or any
Affiliate thereof after the termination of this Facility Lease. All of the
proceeds of any such sale will be for the account of the Owner Lessor; PROVIDED
that, so long as the Lessor Notes are outstanding, the proceeds of such sale
shall be paid directly to the Holder Representative.
SECTION 14.3. RIGHT OF OWNER LESSOR TO RETAIN THE UNDIVIDED INTEREST.
The Owner Lessor may irrevocably elect to retain, rather than sell, the
Undivided Interest by giving notice to the Facility Lessee at least 90 days
prior to the Obsolescence Termination Date. If the Owner Lessor elects to retain
the Undivided Interest pursuant to this Section 14.3, on the Obsolescence
Termination Date the Facility Lessee shall pay to the Owner Lessor (i) any Basic
Lease Rent or Renewal Lease Rent, as the case may be, payable on the
Obsolescence Termination Date, PLUS (ii) the amount set forth under the column
headed "Excess of the Cumulative Allocated 467 Fixed Rent and Interest on 467
Fixed Rent over Basic Lease Rent Paid" set forth in Schedule 2 for such
Obsolescence Termination Dates (provided that the amount, if any, set forth in
Schedule 2 under the column headed "Excess of Basic Lease Rent Paid over the
Cumulative Allocated 467 Fixed Rent and Interest on 467 Fixed Rent" shall be
credited against the amount payable under this Section 14.3 and any excess
payable under this Section 14.3 after such crediting shall be payable by the
Owner Lessor to the Facility Lessee), PLUS (iii) all reasonable documented
out-of-pocket costs and expenses incurred in connection with exercise by the
Owner Lessor of the termination option pursuant to this Section 14 by the other
Lease Financing Parties (but excluding the fees and costs of any broker unless
engaged by the Facility Lessee on behalf of the Owner Lessor), PLUS (iv) any
other Rent payments under the Facility Lease due and unpaid on the Obsolescence
Termination Date, including the reimbursement of Incidental Costs under the
Lessor Loan Agreement, but not including the outstanding amount of the Lessor
Loan on such date, under any other Operative Document. Concurrently with the
payment of all sums required to be paid pursuant to this Section 14.3, (i) Basic
Lease Rent for the Undivided Interest shall cease to accrue, (ii) the Facility
Lessee shall cease to have any liability hereunder or any other Operative
Document with respect to the Undivided Interest, except for Supplemental Lease
Rent and other obligations (including, without limitation, those under Sections
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14.1 and 14.2 of the Participation Agreement) surviving pursuant to the express
terms of any Operative Document, (iii) the Owner Lessor shall pay all
outstanding principal and accrued interest on the Lessor Notes and all other
amounts due under the Lessor Loan Agreement, including reimbursement of
Incidental Costs under the Lessor Loan Agreement, (iv) the Facility Lessee will
return the Undivided Interest to the Owner Lessor in accordance with Section
5.1, (v) this Facility Lease shall terminate and (vi) the Owner Lessor shall
execute and deliver appropriate releases and other documents or instruments
necessary or desirable to effect the foregoing, all to be prepaid, filed and
recorded (if appropriate) at the cost and expense of the Facility Lessee. It
shall be a condition precedent to the termination of this Facility Lease
pursuant to this Section 14.3, that the Owner Lessor and the Facility Lessee
shall each pay all amounts that each is obligated to pay under this Section
14.3.
SECTION 14.4. PROCEDURE FOR EXERCISE OF TERMINATION OPTION. If the
Owner Lessor has not elected to retain the Undivided Interest in accordance with
Section 14.3 hereof, on the Obsolescence Termination Date the Owner Lessor shall
sell the Owner Lessor's Undivided Interest under this Section 14.4 and its
interest in the Ground Interest under Section 6 of the Facility Site Lease,
Section 6 of the Facility Site Sublease and Section 6 of the Facility Site
Sub-Sublease to the bidder or bidders (which shall not be the Facility Lessee,
any Affiliate thereof or any third party with whom the Facility Lessee or an
Affiliate thereof has an arrangement to use or operate the Facility to generate
power for the benefit of the Facility Lessee, the Facility Sublessee or any
Affiliate after the termination of this Facility Lease), that shall have
submitted the highest cash bid or bids with respect to the Owner Lessor's
Interest. On the Obsolescence Termination Date, the Facility Lessee shall pay to
the Owner Lessor (a) the excess, if any, of Termination Value determined as of
such Obsoles cence Termination Date over the proceeds of the sale of the
Undivided Interest paid to or retained by the Owner Lessor in connection with
such sale, PLUS (b) if such Obsolescence Termination Date shall be a Rent
Payment Date, any Basic Lease Rent or Renewal Lease Rent due and payable on such
Rent Payment Date, PLUS (c) all reasonable out-of-pocket costs and expenses of
the Lease Financing Parties (excluding the fees and costs of any broker unless
engaged by the Facility Lessee on the Owners Lessor's behalf) incurred in
connection with the exercise of the termination option pursuant to this Section
14 due and payable on such Obsolescence Termination Date, PLUS (d) any other
Rent payments under the Facility Lease due and unpaid on the Obsolescence
Termination Date, including reimbursement of the Owner Lessor for Incidental
Costs with respect to the Lessor Notes. If the proceeds from the sale of the
Owner Lessor's Interest paid to or retained by the Owner Lessor exceeds the
Termination Value as determined as of the Obsolescence Termination Date, the
Owner Lessor shall reimburse the Facility Lessee for the amount of the
Termination Value paid by the Facility Lessee, if any. Concurrently with the
payment of all sums required to be paid pursuant to this Section 14.4, (i) Basic
Lease Rent for the Undivided Interest shall cease to accrue, (ii) the Facility
Lessee shall cease to have any liability hereunder to the Owner Lessor with
respect to the Undivided Interest,
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except for Supplemental Lease Rent and other obligations (including Sections
14.1 and 14.2 of the Participation Agreement) surviving pursuant to the express
terms of any Operative Document, (iii) the Owner Lessor will transfer (by an
appropriate instrument of transfer in form and substance reasonably satisfactory
to the Owner Lessor and prepared and recorded at the Facility Lessee's expense)
the Owner Lessor's Interest under this Section 14.4, to the purchaser on an "as
is" and "where is" basis, without representations or warranties other than a
warranty as to the absence of Owner Lessor's Liens and Owner Participant's
Liens, (iv) this Facility Lease shall terminate and (v) the Owner Lessor shall
execute and deliver appropriate releases and other documents or instruments
necessary or desirable to effect the foregoing, all to be prepaid, filed and
recorded (if appropriate) at the cost and expense of the Facility Lessee. The
Facility Lessee may, at its election, revoke its notice of termination on at
least 30 days' prior notice to the Owner Lessor, in which event this Facility
Lease shall continue with respect to the Undivided Interest; PROVIDED, HOWEVER,
that the Facility Lessee shall not be permitted to reissue a notice to terminate
pursuant to Section 14.1 more than once in any five year period. The Owner
Lessor shall be under no duty to solicit bids, to inquire into the efforts of
the Facility Lessee to obtain bids or otherwise take any action in arranging any
such sale of the Owner Lessor's Interest other than, if the Owner Lessor has not
elected to retain the Undivided Interest, to transfer the Owner Lessor's
Interest in accordance with clause (iv) of the second preceding sentence. It
shall be a condition of the Owner Lessor's obligation to consummate a sale of
the Owner Lessor's Interest that the Facility Lessee shall pay all amounts it is
obligated to pay under this Section 14.4. If no sale shall occur on the
Obsolescence Termination Date, the notice of termination shall be deemed revoked
and this Facility Lease shall continue as to the Undivided Interest in full
force and effect in accordance with its terms (without prejudice to the Facility
Lessee's right to exercise its rights under this Section 14). It shall be a
condition to the termination of this Facility Lease pursuant to this Section
14.4 that each Other Facility Lessee which is an Affiliate of the Facility
Lessee, or is the Facility Lessee itself, shall also exercise its right to
terminate any and all Other Facility Leases to which each such Facility Lessee
is a party to the extent that the "Owner Lessor" with respect to such Other
Facility Lease is the Owner Lessor itself or an Affiliate thereof and to the
extent the Facility Lessee is then entitled to exercise such termination right
under such Other Facility Leases. The Facility Lessee hereby acknowledges the
Lien of the Lessor Security Documents and agrees for the benefit of the Holder
Representative that any transfer effected pursuant to this Section 14.4 will be
subject to said Lien unless the same has been released or discharged in
accordance with the terms of the Lessor Security Documents.
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SECTION 15. LEASE RENEWAL
SECTION 15.1. WINTERGREEN RENEWAL LEASE TERMS.
(a) Not earlier than 42 months prior to, but not less than 18
months prior to, the expiration of the Basic Lease Term, so long as no Lease
Event of Default shall have occurred and be continuing on the date any notice is
given pursuant to this Section 15.1(a) and no Lease Event of Default or Material
Lease Default shall have occurred and be continuing on the date the lease
renewal proposed pursuant to this Section 15.1(a) is to commence, the Facility
Lessee may deliver to the Owner Lessor a notice (which notice may be in addition
to a notice of the Facility Lessee's interest in electing a FMV Renewal Lease
Term under Section 15.2) of the Facility Lessee's interest in renewing this
Facility Lease at the end of the Basic Lease Term for a term (the "FIRST
WINTERGREEN RENEWAL LEASE TERM") selected by the Facility Lessee, which term
shall satisfy the following criteria: (i) on the last date of such proposed
First Wintergreen Renewal Lease Term, the estimated Fair Market Sales Value of
the Facility shall be no less than 20% of the Purchase Price (without taking
into account inflation or deflation subsequent to the Closing Date) and (ii) the
aggregate of the proposed First Wintergreen Renewal Lease Term and the Basic
Lease Term shall be no greater than 80% of the estimated remaining useful life
of the Facility, measured from the Closing Date and both (i) and (ii) determined
not more than 36 months prior to the expiration of the Basic Lease Term by an
Independent Appraiser selected by the Facility Lessee and reasonably acceptable
to the Owner Lessor. The Facility Lessee may withdraw any notice given in
accordance with this Section 15.1(a) by written notice of such withdrawal to the
Owner Lessor, on or prior to the date which is 18 months before the commencement
of the proposed First Wintergreen Renewal Lease Term and if such notice is not
so withdrawn, the Facility Lessee shall be deemed to have irrevocably elected to
renew the Facility Lease for the First Wintergreen Renewal Term. It shall be a
condition to the renewal of this Facility Lease pursuant to this Section 15.1(a)
that each Other Facility Lessee shall also exercise its rights to renew any and
all Other Facility Leases to which such Other Facility Lessee is a party.
(b) Not earlier than 42 months prior to, but not less than 18
months prior to, the expiration of the First Wintergreen Renewal Term, so long
as no Lease Event of Default shall have occurred and be continuing on the date
any notice is given pursuant to this Section 15.1(b) and no Lease Event of
Default or Material Lease Default shall have occurred and be continuing on the
date the lease renewal proposed pursuant to this Section 15.1(b) is to commence,
the Facility Lessee may deliver to the Owner Lessor a notice (which notice may
be in addition to a notice of the Facility Lessee's interest in electing a FMV
Renewal Lease Term under Section 15.2) of the Facility Lessee's interest in
renewing this Facility Lease at the end of the First Wintergreen Renewal Lease
Term for a term (the "SECOND WINTERGREEN RENEWAL LEASE TERM") selected by the
Facility Lessee, which term shall satisfy the
33
following criteria: (i) on the last date of such proposed Second Wintergreen
Renewal Lease Term, the estimated Fair Market Sales Value of the Facility shall
be no less than 20% of the Purchase Price (without taking into account inflation
or deflation subsequent to the Closing Date) and (ii) the aggregate of the
proposed Second Wintergreen Renewal Lease Term, the First Wintergreen Renewal
Lease Term and the Basic Lease Term shall be no greater than 80% of the
estimated remaining useful life of the Facility, measured from the Closing Date
and both (i) and (ii) determined not more than 36 months prior to the expiration
of the First Wintergreen Renewal Lease Term by an Independent Appraiser selected
by the Facility Lessee and reasonably acceptable to the Owner Lessor. The
Facility Lessee may withdraw any notice given in accordance with this Section
15.1(b) by written notice of such withdrawal to the Owner Lessor on or prior to
18 months before commencement of the proposed Second Wintergreen Renewal Lease
Term and if such notice is not so withdrawn, the Facility Lessee shall be deemed
to have irrevocably elected to renew the Facility Lease for the Second
Wintergreen Renewal Term. It shall be a condition to the renewal of this
Facility Lease pursuant to this Section 15.1(b) that each Other Facility Lessee
shall also exercise its right to renew any and all Other Facility Leases to
which each such Other Facility Lessee is a party.
SECTION 15.2. FAIR MARKET VALUE RENEWAL LEASE TERMS. Not earlier than
42 months prior to, but not less than 18 months prior to, the expiration of the
Basic Lease Term or any Renewal Lease Term, so long as no Lease Event of Default
shall have occurred and be continuing on the date any notice is given pursuant
to this Section 15.2 and no Lease Event of Default or Material Lease Default
shall have occurred and be continuing on the date the lease renewal proposed
pursuant to this Section 15.2 is to commence, the Facility Lessee may deliver to
the Owner Lessor notice (which notice may be in addition to a notice of the
Facility Lessee's interest in electing the First Wintergreen Renewal Lease Term
or the Second Wintergreen Renewal Lease Term) of the Facility Lessee's interest
in renewing this Facility Lease for a term (each such term, a "FMV RENEWAL LEASE
TERM") commencing upon expiration of the Basic Lease Term or the Renewal Lease
Term otherwise expiring and extending for no less than two years and no more
than five years; PROVIDED that, unless such FMV Renewal Lease Term extends to
the end of the useful life of the Facility, no Renewal Lease Term shall extend
beyond the date that is 36 months prior to the end of the useful life of the
Facility (as set forth in the most recent of the Closing Date Appraisal, the
appraisal obtained by the Facility Lessee in connection with the determination
of the First Wintergreen Renewal Lease Term and the appraisal obtained by the
Facility Lessee in connection with the determination of the Second Wintergreen
Renewal Lease Term). The Facility Lessee may withdraw any notice given in
accordance with this Section 15.2 by written notice of such withdrawal to the
Owner Lessor and if such notice is not so withdrawn, the Facility Lessee shall
be deemed to have irrevocably elected to renew the Facility Lease for the FMV
Renewal Term. It shall be a condition to the renewal of this Facility Lease
pursuant to this Section 15.2 that each Other Facility Lease shall be renewed.
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SECTION 15.3. BASIC LEASE RENT AND TERMINATION VALUE FOR RENEWAL TERM.
During each Renewal Lease Term, Renewal Lease Rent shall be paid on the Rent
Payment Dates. The installment of Renewal Lease Rent payable on each such Rent
Payment Date during the First Wintergreen Renewal Lease Term and the Second
Wintergreen Renewal Lease Term shall be equal to the lesser of (i) the Fair
Market Rental Value of the Undivided Interest determined not more than 36 months
prior to the expiration of the Basic Lease Term, in case of rent payable during
the First Wintergreen Renewal Term, or the First Wintergreen Renewal Lease Term,
in the case of rent payable during the Second Wintergreen Renewal Term, and (ii)
50% of the average Basic Lease Rent payable with respect to the Basic Lease
Term. Renewal Lease Rent payable on each Rent Payment Date during any FMV
Renewal Lease Term for the Undivided Interest shall be equal to the Fair Market
Rental Value of the Undivided Interest determined not more than 36 months before
the commencement of such FMV Renewal Lease Term.
SECTION 15.4. DETERMINATION OF FAIR MARKET RENTAL VALUE. The Fair
Market Rental Value of the Undivided Interest as of the commencement of any
Renewal Lease Term shall be determined by agreement of the Owner Lessor and the
Facility Lessee within six months after receipt by the Owner Lessor of the
notice from the Facility Lessee of its election to renew pursuant to Section
15.1 or 15.2 (but not more than 36 months before the commencement of such
Renewal Lease Term) or, if they shall fail to agree within such six month
period, shall be determined by an appraisal conducted by an Independent
Appraiser according to the Appraisal Procedure. The Facility Lessee shall be
responsible for such Independent Appraiser's fees and expenses.
SECTION 16. EVENTS OF DEFAULT
Each of the following events shall constitute a "LEASE EVENT OF
DEFAULT" hereunder (whether any such event shall be voluntary or involuntary or
come about or be effected by operation of law or pursuant to or in compliance
with any judgment, decree or order of any court or any order, rule or
regulation of any Governmental Authority):
(a) the Facility Lessee shall fail to make any payment of
Basic Lease Rent, Renewal Lease Rent, Incidental Costs payable as Supplemental
Lease Rent, Termination Value or other costs (but in no event interest or
principal), fees and expenses associated with the Lessor Notes (other than
costs, fees and expenses in respect of the Lessor Notes incurred as a result of
the Lessor Loan Event of Default which is not a Lease Event of Default) when
due, and such failure shall continue unremedied for five (5) Business Days; or
35
(b) the Facility Lessee shall fail to make any other payment
under this Facility Lease, or under any other Operative Document (other than
Excepted Payments, unless the Owner Participant shall have declared a default
with respect thereto) when due, and such failure shall have continued unremedied
for 30 days after receipt by the Facility Lessee of written notice of such
failure; or
(c) the Facility Lessee or Facility Sublessee shall fail to
maintain insurance in the amounts and on the terms set forth in the Operative
Documents, including Section 11 hereof, and such failure shall continue
unremedied for 10 Business Days after receipt by the Facility Lessee of written
notice thereof; or
(d) the Facility Lessee, Facility Sublessee, or Holdings,
shall fail to perform or observe any other material covenant set forth in this
Facility Lease or any other covenant set forth in the Participation Agreement
(other than the covenant set forth in Section 5.9 of the Participation
Agreement) or in any other Operative Document and such failure shall continue
unremedied for 30 days after receipt by the Facility Lessee of written notice
thereof; PROVIDED, HOWEVER, that if such failure cannot be remedied within such
30-day period, then the period within which to remedy such failure shall be
extended up to an additional 180 days, so long as the Facility Lessee diligently
pursues such remedy, such failure is reasonably capable of being remedied within
such additional 180-day period and the continuation of such failure during the
period of such extension would not have a Material Adverse Effect on the
Facility Lessee, Facility Sublessee or Holdings, as the case may be; PROVIDED,
FURTHER, that in the case of the Facility Lessee's obligation set forth in
clause (b) of Section 7.1, to the extent and for so long as a test, challenge,
appeal or proceeding to review with respect to such non-compliance shall be
prosecuted in good faith by the Facility Lessee, the failure by the Facility
Lessee to comply with the requirements thereof shall not constitute a Lease
Event of Default if such test, challenge, appeal or proceeding shall not involve
(i) a risk of foreclosure, sale, forfeiture or loss of, or imposition of a Lien
on, the Facility or any part thereof or of impairment of the use, operation or
maintenance of the Facility, or (ii) a risk of criminal liability being incurred
by, or of a material adverse effect on the interests of, the Lender, the Funding
LLC Notes, the Owner Lessor, the Owner Participant, the Facility Lessee or the
Facility Sublessee (or any Affiliate thereof), including, without limitation,
subjecting any such person (except the Facility Sublessee) to regulation as a
public utility under Requirements of Law; and PROVIDED, FURTHER, also in the
case of the Facility Lessee's obligation set forth in clause (b) of Section 7.1,
if such noncompliance is not a type that can be immediately remedied, the
failure to comply shall not be a Lease Event of Default if the Facility Lessee
is taking all reasonable action to remedy such noncompliance and if, but only
if, such noncompliance shall not involve any danger described in clause (i) or
(ii) of the preceding proviso; and PROVIDED, FURTHER, such noncompliance, or
such test, challenge, appeal or proceeding to review with respect to such
noncompliance shall not extend beyond the date that is
36
36 months prior to the scheduled expiration of the Basic Lease Term or any
Renewal Lease Term then in effect or already elected by the Facility Lessee; or
(e) any representation or warranty of the Facility Lessee,
Facility Sublessee or Holdings set forth in the Operative Documents (other than
a Tax Representation set forth in of the Tax Indemnity Agreement) shall prove to
have been incorrect in any material respect when made and the facts or
circumstances upon which such breach of representation or warranty is based
continue to be material and unremedied for a period of 30 days after receipt by
the Facility Lessee of written notice thereof; PROVIDED, HOWEVER, that if such
condition cannot be remedied within such 30-day period, then the period within
which to remedy such condition shall be extended up to an additional 60 days, so
long as the Facility Lessee diligently pursues such remedy, such condition is
reasonably capable of being remedied within such additional 60-day period and
the continuation of such condition during the period of such extension would
not have a Material Adverse Effect on the Facility Lessee, Facility Sublessee or
Holdings, as the case may be; or
(f) any of the Facility Lessee, the Facility Sublessee or
Holdings shall (i) commence a voluntary case or other proceeding seeking relief
under Title 11 of the Bankruptcy Code or liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect, or apply for or consent to the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or (ii) consent to, or
fail to controvert in a timely manner, any such relief or the appointment of or
taking possession by any such official in any voluntary case or other proceeding
commenced against it, or (iii) file an answer admitting the material allegations
of a petition filed against it in any such proceeding, or (iv) make a general
assignment for the benefit of creditors; or
(g) an involuntary case or other proceeding shall be commenced
against any of the Facility Lessee, the Facility Sublessee or Holdings, seeking
(i) liquidation, reorganization or other relief with respect to it or its debts
under Title 11 of the Bankruptcy Code or any bankruptcy, insolvency or other
similar law now or hereafter in effect, or (ii) the appointment of a trustee,
receiver, liquidator, custodian or other similar official with respect to it or
any substantial part of its property or (iii) the winding-up or liquidation of
either of the Facility Lessee, the Facility Sublessee or Holdings, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of 90 days; or
(h) default under any bond, debenture, note or other evidence
of Indebtedness (but excluding obligations arising under the Operative Documents
and non-recourse Indebtedness) for money borrowed by the Facility Lessee, the
Facility Sublessee or Holdings under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness
37
of the Facility Lessee, the Facility Sublessee or Holdings, respectively,
whether such indebtedness now exists or shall hereafter be created, which
Indebtedness is in an aggregate principal amount exceeding (i) $20,000,000 so
long as the Funding LLC Notes are outstanding and so long as no Lessor Note or
Lessor Notes (or participation interests therein) shall have been assigned or
otherwise transferred to the APA Purchasers pursuant to Section 18(n) of the APA
and remain outstanding, and (ii) $50,000,000 at all other times and which
default shall have resulted in such Indebtedness becoming or being declared due
and payable prior to the date on which it would otherwise have become due and
payable, without such Indebtedness having been discharged, or such acceleration
having been rescinded or annulled; or
(i) failure by the Facility Lessee to comply in all material
respects with the restrictions on transfer imposed on it by Section 22.4 herein;
or
(j) any of the Operative Documents (including the Security
Documents) to which the Facility Lessee, Midwest or Holdings is a party are
declared unenforceable, are terminated, cease to be in full force and effect or
fail to constitute valid and perfected first priority security interests (in
each case, other than in accordance with their terms) or the Facility Lessee,
Midwest or Holdings fails to comply with their respective obligations under
Sections 5.8, 7.6 and 9.5 of the Participation Agreement; or
(k) so long as the Funding LLC Notes are outstanding and so
long as no Lessor Note or Lessor Notes (or participation interests therein)
shall have been assigned or otherwise transferred to the APA Purchasers pursuant
to Section 18(n) of the APA and remain outstanding, EME shall cease to own,
directly or indirectly, 50% of the economic equity interests in Midwest free and
clear of Liens except Permitted Liens or cease to maintain equivalent voting
control of Midwest, or EME shall cease, directly or through a Subsidiary, to be
in control of the operations of Midwest's power plants; or
(l) so long as the Funding LLC Notes are outstanding and so
long as no Lessor Note or Lessor Notes (or participation interests therein)
shall have been assigned or otherwise transferred to the APA Purchasers pursuant
to Section 18(n) of the APA and remain outstanding, MGE shall cease to own,
directly or indirectly, 50% of the voting and economic equity interests in
Holdings free and clear of Liens except Liens under the Holdings Credit
Documentation or cease to maintain equivalent voting control of Holdings, or
MGE shall cease, directly or through a Subsidiary, to be in control of the
operations of Midwest's power plants; or
(m) so long as the Funding LLC Notes are outstanding and so
long as no Lessor Note or Lessor Notes (or participation interests therein)
shall have been assigned or otherwise transferred to the APA Purchasers pursuant
to Section 18(n) of the APA and remain outstanding, MGE shall cease to own,
directly or indirectly,
38
100% of the economic membership or equity interests in the Facility Lessee, as
the case may be, free and clear of Liens except Liens under the Holdings Credit
Docu mentation or cease to maintain equivalent voting control of the Facility
Lessee; or
(n) occurrence of a Regulatory Violation with respect to the
Facility Lessee, the Facility Sublessee or Holdings; or
(o) default under any bond, debenture, note or other evidence
of Indebtedness for money borrowed by Holdings under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness of Holdings, respectively, whether such indebtedness
now exists or shall hereafter be created, which Indebtedness is (i) in an
aggregate principal amount exceeding (x) $20,000,000 so long as the Funding LLC
Notes are outstanding and so long as no Lessor Note or Lessor Notes (or
participation interests therein) shall have been assigned or otherwise
transferred to the APA Purchasers pursuant to Section 18(n) of the APA and
remain outstanding, and (y) $50,000,000 at all other times, and such default
shall have resulted in such Indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise have become due and
payable, or (ii) in any amount incurred in respect of the Tranche C Loans and
such default shall have resulted in a termination of commitments in respect
thereof or in such Indebtedness becoming or being declared due and payable prior
to the date on which it would otherwise have become due and payable, in each
case without such Indebtedness having been discharged or such acceleration or
termination, as the case may be, having been rescinded or annulled; or
(p) (i) any Reportable Event shall occur; (ii) there shall be
initiated any action by the Facility Lessee, the Facility Sublessee or any
member of the Controlled Group to terminate a Plan; (iii) there shall be
initiated proceedings by the PBGC under Section 4042 of ERISA to terminate a
Plan or to appoint a trustee to administer a Plan; (iv) any Plan shall incur an
"accumulated funding deficiency" (as defined in Section 412 of the Code or
Section 302 of ERISA), unless waived; (v) the imposition upon the Facility
Lessee, the Facility Sublessee or any member of the Controlled Group or any Plan
fiduciary of a material liability resulting from either the engagement by any
such party in a transaction prohibited under Section 4975 of the Code or Section
406 of ERISA or any other violation of Title I of ERISA; (vi) the Facility
Lessee, the Facility Sublessee or any member of the Controlled Group suffers a
partial or complete withdrawal from a Multiemployer Plan, which, with respect to
clauses (i) through (vi) above, results in a liability, individually or in the
aggregate, of at least $20,000,000; or
(q) judgments or orders for the payment of money against the
Facility Lessee, the Facility Sublessee or Holdings, which judgments or orders,
as the case may be, are in excess of (x) $20,000,000 in the aggregate so long as
the Funding LLC Notes are outstanding and so long as no Lessor Note or Lessor
Notes
39
(or participation interests therein) shall have been assigned or otherwise
transferred to the APA Purchasers pursuant to Section 18(n) of the APA and
remain outstanding, and (y) $50,000,000 in the aggregate at all other times (in
both situations taking into account any insurance proceeds payable under a
policy where the insurer has accepted coverage without reservation) and which
are not vacated, discharged or effectively stayed or bonded within 60 days from
the entry thereof; or
(r) Holdings shall cease to own, directly or indirectly, 100%
of the economic equity interest in Midwest free and clear of Liens except
Permitted Liens or cease to maintain equivalent voting control of Midwest; or
(s) a Sublease Event of Default shall occur and be continuing;
or
(t) Midwest shall fail to comply with the covenant set forth
in Section 5.9 of the Participation Agreement, PROVIDED, HOWEVER, that the
Facility Lessee can remedy such failure by making a payment in the amount of $3,
870,000 in accordance with the provisions of Section 3.5 hereof ("CONTINGENT
PREPAID RENT") to be credited against the last installment of the Basic Lease
Rent.
SECTION 17. REMEDIES
SECTION 17.1. REMEDIES FOR LEASE EVENT OF DEFAULT. Upon the occurrence
of any Lease Event of Default and at any time thereafter so long as the same
shall be continuing, the Owner Lessor may, at its option, declare this Facility
Lease to be in default by written notice to the Facility Lessee; and at any time
thereafter, so long as the Facility Lessee shall not have remedied all
outstanding Lease Events of Default, the Owner Lessor may do one or more of the
following as the Owner Lessor in its sole discretion shall elect, to the extent
permitted by, and subject to compliance with any mandatory Requirements of Law
then in effect:
(a) proceed by appropriate court action or actions, either at
law or in equity, to enforce performance by the Facility Lessee of the
applicable covenants and terms of this Facility Lease or to recover damages for
breach thereof;
(b) by notice in writing to the Facility Lessee, terminate
this Facility Lease whereupon all right of the Facility Lessee to the possession
and use of the Undivided Interest under this Facility Lease shall absolutely
cease and terminate but the Facility Lessee shall remain liable as hereinafter
provided; and thereupon, the Owner Lessor may demand that the Facility Lessee,
and the Facility Lessee shall, upon written demand of the Owner Lessor ,
forthwith return possession of the Undivided Interest to the Owner Lessor in the
manner and condition required by, and otherwise in accordance with all of the
provisions of Section 5, except those provisions relating to periods of notice;
and the Owner Lessor may thenceforth hold,
40
possess and enjoy the same free from any right of the Facility Lessee, or its
successor or assigns, to use the Undivided Interest for any purpose whatever;
(c) sell the Owner Lessor's Interest at public or private
sale, as the Owner Lessor may determine, free and clear of any rights of the
Facility Lessee under this Facility Lease and without any duty to account to the
Facility Lessee with respect to such sale or for the proceeds thereof (except to
the extent required by paragraph (f) below if the Owner Lessor elects to
exercise its rights under said paragraph and by Requirements of Law), in which
event the Facility Lessee's obligation to pay Basic Lease Rent hereunder due for
any periods subsequent to the date of such sale shall terminate (except to the
extent that Basic Lease Rent is to be included in computations under paragraph
(f) below if the Owner Lessor elects to exercise its rights under said
paragraph);
(d) hold, keep idle or lease to others the Owner Lessor's
Interest as the Owner Lessor in its sole discretion may determine, free and
clear of any rights of the Facility Lessee under this Facility Lease and without
any duty to account to the Facility Lessee with respect to such action or
inaction or for any proceeds with respect thereto, except that the Facility
Lessee's obligation to pay Basic Lease Rent with respect to the Undivided
Interest due for any periods subsequent to the date upon which the Facility
Lessee shall have been deprived of possession and use of the Undivided Interest
pursuant to this Section 17 shall be reduced by the net proceeds, if any,
received by the Owner Lessor from leasing the Undivided Interest to any Person
other than the Facility Lessee;
(e) whether or not the Owner Lessor shall have exercised, or
shall thereafter at any time exercise, any of its rights under paragraph (b)
above with respect to the Undivided Interest, the Owner Lessor, by written
notice to the Facility Lessee specifying a Termination Date that shall be not
earlier than 10 days after the date of such notice, may demand that the Facility
Lessee pay to the Owner Lessor, and the Facility Lessee shall pay to the Owner
Lessor, on the Termination Date specified in such notice, any unpaid Basic Lease
Rent due before such Termination Date and, if such Termination Date shall be a
Rent Payment Date, any Basic Lease Rent due and payable on such Rent Payment
Date, any Supplemental Lease Rent due and unpaid as of the payment date
specified in such notice, plus as liquidated damages for loss of a bargain and
not as a penalty (in lieu of the Basic Lease Rent due after the Termination Date
specified in such notice), (i) an amount equal to the excess, if any, of the
Termination Value computed as of the Termination Date specified in such notice
over the Fair Market Sales Value of the Owner Lessor's Interest as of the
Termination Date specified in such notice; or (ii) an amount equal to the
excess, if any, of Termination Value computed as of the Termination Date
specified in such notice over the Fair Market Rental Value of the Owner Lessor's
Interest until the end of the Basic Lease Term or the then current Renewal Lease
Term, after discounting such Fair Market Rental Value quarterly to present value
as
41
of the Termination Date specified in such notice at a rate equal to the Discount
Rate; or (iii) an amount equal to the Termination Value computed as of the
Termination Date specified in such notice and, upon payment of such Termination
Value by the Facility Lessee pursuant to this clause (iii) and all other Rent
then due and unpaid by the Facility Lessee, the Owner Lessor will forthwith
transfer to the Facility Lessee (or its designee) in accordance with this
Section 17.1(e) and Section 6 of the Facility Site Lease on an "as is", "where
is" and "with all faults" basis, without representation or warranty other than a
warranty as to the absence of Owner Lessor's Liens accompanied by a warranty of
the Owner Participant as to the absence of the Owner Participant's Liens, all of
its interest in the Owner Lessor's Interest and execute, acknowledge and
deliver, and record and file (as appropriate), appropriate releases, including a
release from the Lien of the Security Documents, and all other documents or
instructions necessary or desirable to effect the foregoing all in form and
substance reasonably satisfactory to the Owner Lessor and at the cost and
expense of the Facility Lessee, and upon payment of such amounts under either
clauses (i) and (ii) of this paragraph (e), this Facility Lease, and the
Facility Lessee's obligation to pay Basic Lease Rent hereunder due for any
periods subsequent to the date of such payment shall terminate; and
(f) if the Owner Lessor shall have sold the Owner Lessor's
Interest pursuant to paragraph (c) above, the Owner Lessor may, if it shall so
elect, demand that the Facility Lessee pay to the Owner Lessor, and the Facility
Lessee shall pay to the Owner Lessor, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Basic Lease Rent due for any
periods subsequent to the date of such sale), an amount equal to (A) any unpaid
Basic Lease Rent due before the date of such sale PLUS (B) if that date is a
Rent Payment Date, the Basic Lease Rent due on that date, PLUS (C) the amount,
if any, by which the Termination Value computed as of the Termination Date next
preceding the date of such sale or, if such sale occurs on a Rent Payment Date
or a Termination Date then computed as of such date, exceeds the net proceeds of
such sale, and, upon payment of such amount, this Facility Lease and the
Facility Lessee's obligation to pay Basic Lease Rent for any periods subsequent
to the date of such payment shall terminate.
In addition, the Facility Lessee shall be liable, except as otherwise
provided above, for (i) any and all unpaid Basic Lease Rent due hereunder
before, or during the exercise of any of the foregoing remedies, (ii) the amount
of any Incidental Costs payable under Section 2.15 of the Lessor Loan Agreement,
and (iii) on an After-Tax Basis, for legal fees and other costs and expenses
incurred by reason of the occurrence of any Lease Event of Default or the
exercise of the Owner Lessor's remedies with respect thereto, including the
repayment in full of any costs and expenses necessary to be expended in
connection with the return of the Undivided Interest in accordance with Section
5.2 hereof, including, without limitation, any costs and expenses incurred by
the Owner Lessor, the Owner Participant, the Holder Representative and other
Lease Financing Parties in connection with retaking constructive
42
possession of, or in repairing, the Undivided Interest in order to cause it to
be in compliance with all maintenance standards imposed by this Facility Lease.
SECTION 17.2. CUMULATIVE REMEDIES. The remedies in this Facility Lease
provided in favor of the Owner Lessor shall not be deemed exclusive, but shall
be cumulative and shall be in addition to all other remedies in its favor
existing at law or in equity; and the exercise or beginning of exercise by the
Owner Lessor of any one or more of such remedies shall not preclude the
simultaneous or later exercise by the Owner Lessor of any or all of such other
remedies. To the extent permitted by Requirements of Law, the Facility Lessee
hereby waives any rights now or hereafter conferred by statute or otherwise
which may require the Owner Lessor to sell, lease or otherwise use the Undivided
Interest or any Component thereof in mitigation of Owner Lessor's damages as set
forth in this Section 17 or which may otherwise limit or modify any of Owner
Lessor's rights and remedies in this Section 17.
SECTION 17.3. NO DELAY OR OMISSION TO BE CONSTRUED AS WAIVER. No delay
or omission to exercise any right, power or remedy accruing to the Owner Lessor
upon any breach or default by the Facility Lessee under this Facility Lease
shall impair any such right, power or remedy of the Owner Lessor, nor shall any
such delay or omission be construed as a waiver of any breach or default, or of
any similar breach or default hereafter occurring; nor shall any waiver of a
single breach or default be deemed a waiver of any subsequent breach or default.
SECTION 18. SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS
Any moneys received by the Owner Lessor or the Holder Representative
pursuant to Section 10.3, 10.5 or 11.7 shall, until paid to the Facility Lessee
as provided in accordance with such Sections, be held by the Owner Lessor or the
Holder Representative, as the case may be, as security for the Facility Lessee's
obligations under this Facility Lease and be invested in Permitted Investments
by the Owner Lessor or the Holder Representative, as the case may be, at the
sole risk of the Facility Lessee, from time to time as directed in writing by
the Facility Lessee if such investments are reasonably available for purchase.
Any gain (including interest received) realized as the result of any such
Permitted Investment (net of any fees, commissions, taxes and other expenses, if
any, incurred in connection with such Permitted Investment) shall be applied or
remitted to the Facility Lessee in the same manner as the principal invested.
SECTION 19. RIGHT TO SUBLEASE
SECTION 19.1. SUBLEASE TO MIDWEST. Except as provided in Section 19.2,
the Facility Lessee shall not assign, transfer or sublease all or any portion of
its
43
rights in the Owner Lessor's Undivided Interest under this Facility Lease,
except that the Facility Lessee shall have the right to sublease the Undivided
Interest without the consent of any Lease Financing Party to Midwest, upon the
terms and subject to the conditions set forth in the Facility Sublease. The
parties hereto acknowledge and consent to the Facility Sublease, and nothing
contained in this Section 19 shall limit the terms or the effect of or render
the Facility Sublease to Midwest ineffective.
SECTION 19.2. OTHER SUBLEASE. In the event the Facility Sublease is
terminated, pursuant to the provisions of the Operative Documents, the Facility
Lessee shall have the right to sublease the Undivided Interest without the
consent of any other Lease Financing Party if:
(a) the Midwest Lease Guarantee remains in full force and
effect;
(b) the sublessee (i) is a solvent corporation, partnership,
business trust, limited liability company or other entity (but not individuals)
not subject to bankruptcy proceedings, (ii) is not involved in material
litigation with the Owner Participant, and (iii) is, or its operating,
maintenance and use obligations under the sublease are guaranteed by, or such
obligations are contracted to be performed by, an experienced, reputable
operator of similar electric generating assets;
(c) the sublease does not extend beyond the scheduled
expiration of the applicable Basic Lease Term or any Renewal Lease Term then in
effect or already elected by the Facility Lessee (and may be terminated upon
early termination of the Facility Lease) and is expressly subject and
subordinate to the Facility Lease;
(d) all terms and conditions of the Facility Lease and the
other Operative Documents remain in effect and the Facility Lessee remains fully
and primarily liable for its obligations thereunder;
(e) no Lease Event of Default under the Facility Lease shall
have occurred and be continuing;
(f) the sublease prohibits further assignment or subletting;
(g) the sublease requires the sublessee to operate and
maintain the Undivided Interest in a manner not less favorable than that
required under the Facility Lease and the other Operative Documents;
(h) the sublessee does not cause the Facility to become
"tax-exempt use property" within the meaning of Section 168(h) of the Code
(unless the Facility sublessee shall make a payment to the Owner Participant
contemporaneously with the execution of the sublease that, in reasonable
judgement of the Owner
44
Participant, compensates such Owner Participant for the adverse tax consequences
resulting from the classification of the Facility as "tax-exempt use property");
(i) the Owner Lessor (and so long as the Lessor Notes are
outstanding, the Lender and the Holder Representative) shall have received an
opinion of counsel, which opinion of counsel shall be reasonably acceptable to
each such recipient, to the effect that all regulatory approvals required to
enter into such sublease shall have been obtained;
(j) the Facility sublessee shall pay all reasonable documented
out-of-pocket expenses incurred by the other Lease Financing Parties in
connection with such sublease; and
(k) the Owner Participant shall have received an opinion
reasonably satisfactory to it from Hunton & Xxxxxxxx or from a nationally
recognized tax counsel selected by the Owner Participant and reasonably
acceptable to the Facility Lessee, to the effect that such sublease would not
result in any material indemnified, or any unindemnified, incremental tax risk
to the Owner Participant.
As a condition precedent to such sublease, the Facility Lessee shall
provide the Owner Lessor, the Owner Participant, and, so long as the Lessor
Notes are outstanding, the Holder Representative with all documentation in
respect of such sublease and an opinion of counsel to the effect that such
sublease complies with the provisions of this Section 19.2 (such documentation,
counsel and opinion to be reasonably satisfactory to such recipients).
SECTION 20. OWNER LESSOR'S RIGHT TO PERFORM
If the Facility Lessee fails to make any payment required to be made by
it hereunder or fails to perform or comply with any of its other agreements
contained herein after notice to the Facility Lessee and failure of the Facility
Lessee to so perform or comply within 10 days thereafter, the Owner Lessor or
the Owner Participant may itself make such payment or perform or comply with
such agreement in a reasonable manner, but shall not be obligated hereunder to
do so, and the amount of such payment and of the reasonable expenses of the
Owner Lessor or the Owner Participant incurred in connection with such payment
or the performance of or compliance with such agreement, as the case may be,
together with any Incidental Costs of the Owner Lessor that the Facility Lessee
is obligated to pay pursuant to Section 3.3 herein, shall be deemed to be
Supplemental Lease Rent, payable by the Facility Lessee to the Owner Lessor on
demand.
SECTION 21. SECURITY FOR OWNER LESSOR'S OBLIGATION TO THE HOLDER REPRESENTATIVE
45
In order to secure the Lessor Notes, the Owner Lessor will assign and
xxxxx x Xxxx to the Holder Representative of all of the Owner Lessor's right,
title and interest in, to and under this Facility Lease, and the Undivided
Interest (other than Excepted Payments and Excepted Rights). The Facility Lessee
hereby consents to such assignment and to the creation of such Lien and security
interest and acknowledges receipt of copies of the Lessor Security Documents, it
being understood that such consent shall not affect any requirement or the
absence of any requirement for any consent of the Facility Lessee under any
other circumstances. Unless and until the Facility Lessee shall have received
written notice from the Holder Representative that the Lien of the Security
Documents has been fully terminated, the Holder Representative shall have the
right to exercise the rights of the Owner Lessor under this Facility Lease
(other than Excepted Rights) to the extent set forth in and subject in each case
to the exceptions set forth in the Lessor Security Documents. TO THE EXTENT, IF
ANY, THAT THIS FACILITY LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED
IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO
SECURITY INTEREST IN THIS FACILITY LEASE MAY BE CREATED THROUGH THE TRANSFER OR
POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN THE ORIGINAL COUNTERPART, WHICH
SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED
BY THE HOLDER REPRESENTATIVE ON THE SIGNATURE PAGE THEREOF.
SECTION 22. MISCELLANEOUS
SECTION 22.1. AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Facility Lease may be terminated, amended or compliance
therewith waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto.
SECTION 22.2. NOTICES. Unless otherwise expressly specified or
permitted by the terms hereof, all communications and notices provided for
herein to a party hereto shall be in writing or shall be produced by a
telecommunications device capable of creating a written record, and any such
notice shall become effective (a) upon personal delivery thereof, including,
without limitation, by overnight mail or courier service, (b) in the case of
notice by United States mail, certified or registered, postage prepaid, return
receipt requested, upon receipt thereof, or (c) in the case of notice by such a
telecommunications device, upon transmission thereof, PROVIDED such transmission
is promptly confirmed by either of the methods set forth in clauses (a) or (b)
above, in each case addressed to such party and any copy party at its address
set forth below or at such other address as such party or copy party may from
time to time designate by written notice to the other party:
46
If to the Owner Lessor:
Xxxxxxx Trust I
c/o Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
Attention: Corporate Trust Administration
with a copy to the Owner Participant:
Xxxxxxx Generation I, LLC
c/o PSEG Resources, Inc.
00 Xxxx Xxxxx, Xxxxx X-00
Xxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: President
and to the Holder Representative:
Citibank, N.A.
000 Xxxx Xxxxxx
5th Floor, Zone 2
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Global Trust & Agency Services
If to the Facility Lessee:
Xxxxxxx Holdings EME, LLC
One Financial Place
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Facsimile No. : (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
with copy to:
Edison Mission Energy
00000 Xxx Xxxxxx Xxxxxx
Xxxxx 0000
00
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: General Counsel
SECTION 22.3. SURVIVAL. Except for the provisions of Sections 3.3, 3.5,
5, 9 and 17, which shall survive, the warranties and covenants made by each
party hereto shall not survive the expiration or termination of this Facility
Lease in accordance with its terms.
SECTION 22.4. SUCCESSORS AND ASSIGNS. (a) This Facility Lease shall be
binding upon and shall inure to the benefit of, and shall be enforceable by, the
parties hereto and their respective successors and assigns as permitted by and
in accordance with the terms hereof.
(b) Except as expressly provided in Section 22.4(c), the
Facility Lessee may not assign the Facility Lease or any other Operative
Document, or any interest therein, without the prior written consent of the
Owner Lessor and the Owner Participant.
(c) The Facility Lessee may, upon satisfaction of the
conditions set forth herein and in Section 22.4(d), without the consent of any
other Lease Financing Party, so long as the Owner Lessor or Owner Participant
does not become regulated as a "public utility" or "public utility holding
company" as a result of such assignment, assign the Facility Lease and the other
Operative Documents, or any interest therein. In addition to the conditions set
forth in the preceding sentence, the Facility Lessee may assign the Facility
Lease and the other Operative Documents, or any interest therein, under the
following circumstances:
(i) to any entity; PROVIDED that such entity's long
term senior unsecured Indebtedness is rated equal to or higher than
BBB+ from S&P and Baa1 from Xxxxx'x; or
(ii) to any entity; PROVIDED that the Facility Lessee
shall remain secondarily liable under the Facility Lease and all other
Operative Documents, and the Midwest Lease Guarantee shall remain in
full force and effect.
In the case of an assignment pursuant to clause (i) above, the Facility Lessee
shall, upon the transferee's assumption of the Facility Lessee's obligations
under the Facility Lease and the other Operative Documents in accordance with
the terms of this Section 22.4(c) and Section 22.4(d), have no further liability
or obligation thereunder. Notwithstanding the foregoing, so long as the Lessor
Notes are outstanding, no such assignment shall be permitted unless each of S&P
and Xxxxx'x shall
48
have confirmed that such assumption shall not result in a downgrade of the then
existing credit rating of the Funding LLC Notes below BBB- and Baa3,
respectively.
(d) Any assignment by the Facility Lessee pursuant to Section
22.4(c) shall be subject to satisfaction of the following additional conditions:
(i) the Owner Lessor and the Owner Participant (and,
so long as the Lessor Notes are outstanding, the Holder Representative
and the Lender) shall have received an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to each recipient
thereof, to the effect that all regulatory approvals required in
connection with such transfer or necessary to assume the Facility
Lessee's obligations under the Operative Documents shall have been
obtained;
(ii) such transfer shall be pursuant to an assignment
and assumption agreement in form and substance reasonably satisfactory
to the Owner Participant (and the Holder Representative and the Lender,
so long as the Lessor Notes are outstanding);
(iii) the Owner Lessor and the Owner Participant (and
the Holder Representative and the Lender, so long as the Lessor Notes
are outstanding) shall have received an opinion of counsel, which
opinion and counsel are reasonably satisfactory to each recipient
thereof, as to the validity and enforceability of such assignment and
assumption agreement required pursuant to (ii) above;
(iv) the Owner Participant shall have received an
opinion reasonably satisfactory to it from Hunton & Xxxxxxxx, or from a
nationally recognized tax counsel selected by the Owner Participant and
reasonably acceptable to the Facility Lessee, to the effect that such
transfer would not result in any material indemnified, or any
unindemnified, incremental tax risk to the Owner Participant;
(v) no Material Lease Default or no Lease Event of
Default shall have occurred and be continuing;
(vi) such transfer by the Facility Lessee shall not
result in a Regulatory Event of Loss;
(vii) the transferee shall not be involved in
material litigation with the Owner Participant;
49
(viii) the Facility Lessee shall pay all reasonable
documented out-of-pocket expenses incurred by the other Lease
Financing Parties in connection with such assignment ; and
(ix) the transferee, or the operator of the Facility
retained by the transferee, shall be experienced in operating
facilities such as the Facility.
The Facility Lessee acknowledges that the Owner Participant is a third
party beneficiary of this Section 22.4 and should be entitled to enforce its
rights hereunder as if it were a party to this Facility Lease.
SECTION 22.5. "TRUE LEASE". This Facility Lease shall constitute an
agreement of lease and nothing herein shall be construed as conveying to the
Facility Lessee any right, title or interest in or to the Undivided Interest
except as lessee only. The parties hereto hereby agree that the Lessee's
obligation to make Excepted Payments is a separate and independent obligation
from its obligation to make other Rent payments, and that the Lessee's
obligation to make Excepted Payments may be assigned, pledged or otherwise
transferred separately from the Lessee's obligations to make other Rent
payments. The obligation to make Excepted Payments has been included herein for
the convenience of the parties.
SECTION 22.6. GOVERNING LAW. This Facility Lease was negotiated in the
State of New York which the Facility Lessee and the Owner Lessor agree has a
substantial relationship to the parties and to the underlying transaction
embodied hereby, and, in accordance with Section 5-1401 of the New York General
Obligations Law, in all respects, including matters of construction, validity
and performance, this Facility Lease shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts made
and performed in such State and any applicable law of the United States of
America, EXCEPT that the provisions for the creation and enforcement of the
leasehold interest created hereby shall be governed by and construed according
to the law of the state in which the Facility is located, it being understood
that, to the fullest extent permitted by the law of the state in which the
Facility is located, the law of the State of New York shall govern the validity
and the enforceability of the representations, warranties, covenants and
obligations of the Facility Lessee and the Owner Lessor under this Facility
Lease and all other Operative Documents and all of the indebtedness arising
hereunder or thereunder. To the fullest extent permitted by law, the Facility
Lessee and the Owner Lessor hereby unconditionally and irrevocably waive any
claim to assert that the law of any other jurisdiction governs this Facility
Lease, except as expressly otherwise provided above.
50
SECTION 22.7. SEVERABILITY. Any provision of this Facility Lease that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 22.8. COUNTERPARTS. This Facility Lease may be executed by the
parties hereto in separate counterparts, each of which, subject to Section 21,
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 22.9. HEADINGS AND TABLE OF CONTENTS. The headings of the
sections of this Facility Lease and the Table of Contents are inserted for
purposes of convenience only and shall not be construed to affect the meaning
or construction of any of the provisions hereof.
SECTION 22.10. FURTHER ASSURANCES. Each party hereto will promptly and
duly execute and deliver such further documents and assurances for and take such
further action reasonably requested by the other party, all as may be reasonably
necessary to carry out more effectively the intent and purpose of this Facility
Lease.
SECTION 22.11. EFFECTIVENESS. This Facility Lease has been dated as of
the date first above written for convenience only. This Facility Lease shall be
effective on the date of execution and delivery by the Facility Lessee and the
Owner Lessor.
SECTION 22.12. LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that (a) this Facility Lease is executed and
delivered by Wilmington Trust Company ("WILMINGTON"), not individually or
personally but solely as trustee of the Owner Trust under the Trust Agreement,
in the exercise of the powers and authority conferred and vested in it pursuant
thereto, (b) each of the representations, undertakings and agreements herein
made on the part of the Owner Lessor is made and intended not as personal
representations, undertakings and agreements by Wilmington but is made and
intended for the purpose for binding only the Owner Lessor, (c) nothing herein
contained shall be construed as creating any liability on Wilmington
individually or personally, to perform any covenant either expressed or implied
contained herein, all such liability, if any, being expressly waived by the
parties hereto or by any Person claiming by, through or under the parties hereto
and (d) under no circumstances shall Wilmington be personally liable for the
payment of any indebtedness or expenses of the Owner Lessor or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Owner Lessor under this Facility Lease.
51
SECTION 22.13. MEASURING LIFE. If and to the extent that any of the
rights and privileges granted under this Facility Lease, would, in the absence
of the limitation imposed by this sentence, be invalid or unenforceable as being
in violation of the rule against perpetuities or any other rule or law relating
to the vesting of interests in property or the suspension of the power of
alienation of property, then it is agreed that notwithstanding any other
provision of this Facility Lease, such options, rights and privileges, subject
to the respective conditions hereof governing the exercise of such options,
rights and privileges, will be exercisable only during (a) the longer of (i) a
period which will end twenty-one (21) years after the death of the last survivor
of the descendants living on the date of the execution of this Facility Lease of
the following Presidents of the United States: Xxxxxxxx X. Xxxxxxxxx, Xxxxx X.
Xxxxxx, Xxxxxx X. Xxxxxxxxxx, Xxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxx, Xxxxxxx X.
Xxxxx, Xxxxxx X. Xxxx, Xxxxx X. Xxxxxx, Xxxxxx X. Xxxxxx, Xxxxxx X.X. Xxxx and
Xxxxxxx X. Xxxxxxx or (ii) the period provided under the Uniform Statutory Rule
Against Perpetuities or (b) the specific applicable period of time expressed in
this Facility Lease, whichever of (a) and (b) is shorter.
52
IN WITNESS WHEREOF, the Owner Lessor and the Facility Lessee have
caused this Facility Lease to be duly executed and delivered under seal by their
respective officers thereunto duly authorized.
XXXXXXX TRUST I
By: Wilmington Trust Company,
not in its individual capacity
but solely as Owner Trustee
By: /s/ Xxxxxxxx X. Xxxxxxxx
----------------------------
Name: Xxxxxxxx X. Xxxxxxxx
Title: Authorized Signer
Date: December 15, 1999
XXXXXXX HOLDINGS EME, LLC
By: /s/ Xxxx X. Xxxxxxxx, Xx.
-----------------------------
Name: Xxxx X. Xxxxxxxx, Xx.
Title: Vice President
Date: December 15, 1999
53
EXHIBIT A
TO
FACILITY LEASE
DESCRIPTION OF FACILITY SITE
A-1
SCHEDULE 1-1
TO
FACILITY LEASE
BASIC LEASE RENT
A. COMPONENTS OF BASIC LEASE RENT. Basic Lease Rent shall be
comprised of three components: "COMPONENT A" of Basic Lease
Rent is set forth on Column A in Annex I to this Schedule 1-1;
"COMPONENT B" of Basic Lease Rent is set forth on Column B in
Annex I to this Schedule 1-1; and "COMPONENT C" of Basic Lease
Rent is set forth in Column C of Annex I and is subject to
adjustment or calculation as set forth in Part B of this
Schedule 1-1. Component C is computed on the basis of
"Aggregate Component D" which is set forth on Column D in
Annex I to this Schedule 1-1 and equals (i) the sum of each
Component B for all Rent Payment Dates set forth in Column B
of Annex I to this Schedule 1-1 less the sum of the Maximum
Increase Amounts for all Advance Periods as set forth in Annex
C to the Initial Lessor Note LESS (ii) the sum of Component B
for each Rent Payment Date falling prior to, but not on,
the date of computation PLUS (iii) the sum of the Maximum
Increase Amounts for the Advance Periods ending prior to, but
not on, the date of computation. As set forth in Section 3.4
of this Facility Lease, each component of Basic Lease Rent is
subject to adjustment under the circumstances, and in the
manner, described in Section 3.4 of this Facility Lease. On
any Rent Payment Date or Additional Rent Payment Date, Basic
Lease Rent shall equal the sum of Component A, Component B and
Component C payable on such Rent Payment Date or Additional
Rent Payment Date and each component is payable as set forth
in Annex I to this Schedule 1-1. Anything in the foregoing to
the contrary notwithstanding, in accordance with Section
3.4(b) of this Facility Lease, each installment of Basic Lease
Rent payable under this Facility Lease on any Rent Payment
Date or Additional Rent Payment Date, whether or not adjusted
in accordance with Section 3.4 of this Facility Lease, shall
be in an amount at least sufficient to pay in full principal
and interest payable on the Lessor Notes on such Rent Payment
Date or Additional Rent Payment Date.
B. COMPUTATION OF COMPONENT C. Component C is a variable
component intended to reflect a return on Aggregate Component
D at a notional interest rate per annum (the "COMPONENT C
RATE") that is
Schedule 1-1-1
computed on the basis of market-based indices determined on
the Closing Date. Component C, as shown in Column C of Annex I
to this Schedule 1-1, has been calculated using an assumed
Funding Rate equal to 6.4048% per annum, which is the Funding
Rate used to calculate Component C on the Closing Date and
assuming that there is no Additional Rent Payment Date. The
amount of Component C due on any Rent Payment Date and the
amount of Component C payable on any Additional Rent Payment
Date shall be adjusted or calculated to reflect the
calculation described below. The market-based indices
applicable to Component C on the Closing Date are identical to
the market-based indices used to compute interest on the
Initial Lessor Notes, Aggregate Component D is identical to
the assumed outstanding principal amount of the Initial Lessor
Notes and the Component C Rate is identical to the Funding
Rate under the Initial Lessor Notes. The market-based indices
for the Initial Lessor Notes and the Funding Rate for the
Initial Lessor Notes are set forth below. For ease of
administration and to ensure strict compliance by the Facility
Lessee with the provisions of Section 3.4(b) of this Facility
Lease and the last sentence of Part A of this Schedule 1-1,
the Facility Lessor and the Facility Lessee have agreed that
the computation of Component C and the computation of
interest on the Initial Lessor Notes shall be a single
computation and that Component C on any Rent Payment Date or
Additional Rent Payment Date shall be calculated in the same
manner as, and shall be adjusted or computed, as the case may
be, so that it is equal to, the interest payable on the
Initial Lessor Notes on the correlative Interest Payment Date
under the Initial Lessor Notes. Each Interest Payment Date
under, and as defined in, the Initial Lessor Notes to the
extent the same is not a Rent Payment Date shall be an
Additional Rent Payment Date under this Facility Lease. As
provided in Section 16 of the Participation Agreement, any
change in the market-based indices or other factors used for
the computation of Component C or used in the computation of
interest on the Initial Lessor Notes from those in effect on
the Closing Date shall be considered a refinancing
contemplated by Section 16 of the Participation Agreement, and
accordingly, would be subject to the provisions of Section 16
of the Participation Agreement.
C. DEFINITIONS. As used in this Schedule 1-1 to this Facility
Lease, capitalized terms shall have the meanings assigned
thereto in this Facility Lease. In addition, the following
terms shall have the meanings set forth below (such meanings
to be equally applicable to both the singular and plural forms
of the terms defined).
Schedule 1-1-2
"APPLICABLE RATE" shall mean, for any day, with respect to any Eurodollar Rate
Portion or Base Rate Portion or the facility fees payable under the APA, as the
case may be, the applicable rate per annum set forth below under the caption
"Eurodollar Margin", "Base Rate Margin" or "Facility Fee Rate," respectively,
based upon the ratings by Xxxxx'x and S&P, respectively, applicable on such date
to the Index Debt:
========================================================================================================================
Index Debt CATEGORY 1 CATEGORY 2 CATEGORY 3 CATEGORY 4 CATEGORY 5 CATEGORY 6
------------- ------------- ------------- ------------- ------------- -------------
Ratings >BBB+/Baa1 BBB/Baa2 BBB-/Baa3 BB+/Ba1 BB/Ba2 < BB/Ba2
Eurodollar
Margin 0.650% 0.850% 1.000% 1.500% 1.750% 1.750%
------------------------------------------------------------------------------------------------------------------------
Base Rate
Margin 0.000% 0.000% 0.000% 0.500% 0.750% 0.750%
------------------------------------------------------------------------------------------------------------------------
Facility
Fee Rate 0.350% 0.400% 0.500% 0.750% 1.000% 1.500%
========================================================================================================================
For purposes of the foregoing, (i) if either Xxxxx'x or S&P shall not have in
effect a rating for the Index Debt (other than by reason of the circumstances
referred to in the last sentence of this definition), then such rating agency
shall be deemed to have established a rating in Category 6; (ii) if the ratings
established or deemed to have been established by Xxxxx'x and S&P for the Index
Debt shall fall within different Categories, the Applicable Rate shall be based
on the lowest of the ratings; and (iii) if the ratings established or deemed to
have been established by Xxxxx'x and S&P for the Index Debt shall be changed
(other than as a result of a change in the rating system of Xxxxx'x or S&P),
such change shall be effective as of the date on which it is first announced by
the applicable Rating Agency. Each change in the Applicable Rate shall apply
during the period commencing on the effective date of such change and ending on
the date immediately preceding the effective date of the next such change. If
Xxxxx'x or S&P shall have changed its system of classifications after the date
of the APA, a rating shall be considered to be at or above a specified level if
it is at or above the new rating which most closely corresponds to the specified
level under the old rating system.
"BASE RATE" shall mean a fluctuating interest rate per annum in effect from time
to time, which rate per annum shall at all times be equal to the higher of (a)
the rate of interest announced publicly by Citibank, N.A. in New York, New York,
from time to time, as Citibank's base rate; and (b) 1/2 of one percent per annum
above the Federal Funds Rate.
"BASE RATE PORTION" shall mean any portion of any Purchaser Percentage Interest
to the extent the same bears interest at the Base Rate.
Schedule 1-1-3
"EURODOLLAR RATE" shall mean, for any Interest Period for each Eurodollar Rate
Portion, an interest rate per annum appearing on Page 3750 of the Telerate
Service (or on any successor or substitute page of such service, or any
successor to or substitute for such service, providing rate quotations
comparable to those currently provided on such page of such service, as
determined by the APA Agent from time to time for purposes of providing
quotations of interest rates applicable to Dollar deposits in the London
interbank market) as of 11:00 A.M. (London time) on the date two Business Days
prior to the first day of such Interest Period as the rate for Dollar deposits
having a term comparable to such Interest Period, or in the event such offered
rate is not available from said Page 3750, at the rate per annum at which
Citibank is offered Dollar deposits at or about 11:00 a.m. (New York City time)
two Business Days prior to the beginning of such Interest Period in the
interbank eurodollar market where its eurodollar and foreign currency and
exchange operations are then being conducted for delivery on the first day of
such Interest Period for the number of days comprised therein, subject, however,
to the provisions of Section 18 of the APA. Any provision of the APA (including,
without limitation, Annex III thereto) to the contrary notwithstanding, at such
time as there shall exist for any Purchaser a Eurodollar Reserve Percentage that
is greater than zero, the Eurodollar Rate used in the determination of
Eurodollar Rate Portions of such Purchaser shall be the Eurodollar Rate (Reserve
Adjusted).
"EURODOLLAR RATE PORTION" shall mean any portion of any Purchaser Percentage
Interests that have the same Interest Period and bear interest at the same
Eurodollar Rate as provided in Section 18(b) of the APA.
"EURODOLLAR RATE (RESERVE ADJUSTED)" shall mean, relative to any portion of any
Purchaser Percentage Interest to be continued or maintained as, or converted
into, a Eurodollar Rate Portion for any Interest Period, a rate per annum
(rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%)
determined pursuant to the following formula:
Eurodollar Rate Eurodollar Rate
-------------------------
(Reserve Adjusted) = 1.00 - Eurodollar Reserve
Percentage
The Eurodollar Rate (Reserve Adjusted) for any Interest Period for Eurodollar
Rate Portions will be determined by the APA Agent on the basis of the Eurodollar
Reserve Percentage in effect on, and the applicable rates furnished to and
received by the APA Agent, two Business Days before the first day of such
Interest Period.
"EURODOLLAR RESERVE PERCENTAGE" shall mean, relative to any Interest Period for
Eurodollar Rate Portions, the reserve percentage (expressed as a decimal) equal
to
Schedule 1-1-4
the aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
specified under regulations issued from time to time by the Board of Governors
of the Federal Reserve System (or any successor thereto) and then applicable to
assets or liabilities consisting of and including "Eurocurrency Liabilities," as
currently defined in Regulation D of the Board of Governors of the Federal
Reserve System, having a term approximately equal or comparable to such Interest
Period.
"FEDERAL FUNDS RATE" shall mean, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the APA Agent from three Federal funds brokers of
recognized standing selected by it.
"FINANCE FACILITY" shall mean the Uncommitted Finance Facility, dated December
15, 1999, among the Lender and the Securitization Company, as the same may from
time to time be amended, amended and restated, supplemented or otherwise
modified in accordance with the terms thereof.
"FUNDING LLC MATURITY DATE" shall mean December 3, 2004 or, if such day is not a
Business Day, the immediately preceding Business Day.
"FUNDING RATE" shall mean (1) for any day prior to the Funding LLC Maturity Date
or any day occurring on or after the Funding LLC Maturity Date if the Funding
LLC Note shall have been repaid or refinanced in full (a) with respect to the
Securitization Company Percentage Interest, the Quoted Rate for such day, and
(b) with respect to the Purchaser Percentage Interest (i) to the extent that the
Purchaser Percentage Interest is a Eurodollar Rate Portion, the Eurodollar Rate
for the related Interest Period plus the Applicable Rate therefor for such day
and (ii) to the extent that such Purchaser Percentage Interest is a Base Rate
Portion, the Base Rate plus the Applicable Rate therefor for such day, and (2)
for any day occurring on or after the Funding LLC Maturity Date on which the
Funding LLC Note shall not have been repaid or refinanced in full, a rate per
annum equal to the sum of the Base Rate plus 5.00% per annum (for the first
three months) and, thereafter, the sum of the Base Rate plus the initial 5.00%
per annum PLUS an additional 1.00% per annum (so incrementally increasing by
1.00% per annum each three-month period thereafter). The Funding Rate with
respect to the Securitization Company Percentage Interest shall be computed by
the UFF Agent in accordance with the Finance Facility and advised to the Holder
Representative from time to time in accordance with Section 2 of the
Schedule 1-1-5
Finance Facility. The Funding Rate with respect to the Purchaser Percentage
Interest shall be computed by the APA Agent in accordance with the APA and
advised to the Holder Representative from time to time in accordance with
Section 18(b)(v) of the APA.
"INDEX DEBT" shall mean each of the Midwest Funding Note and the obligations of
Holdings in respect of the "Tranche A Loans" and the "Tranche B Loans" under the
Holdings Credit Agreement.
"INTEREST PAYMENT DATE" shall mean (a) with respect to the Securitization
Company Percentage Interest and the Purchaser Percentage Interest to the
extent that the Purchaser Percentage Interest is a Base Rate Portion, the
sixth day of each of January, April, July and October and the Funding LLC
Maturity Date (or, if such day is not a Business Day, the next succeeding
Business Day) and (b) with respect to the Purchaser Percentage Interest to
the extent that the Purchaser Percentage Interest is a Eurodollar Rate
Portion, the last day of the Interest Period for such Eurodollar Rate Portion
and, in the case of a Eurodollar Rate Portion with an Interest Period of more
than three months' duration, each day prior to the last day of such Interest
Period that occurs at intervals of three months' duration after the first day
of such Interest Period, in each case commencing with the first such day
after the date of the APA.
"INTEREST PERIOD" shall mean:
(a) with respect to any portion of the Securitization Company
Percentage Interest, the period commencing (if the initial period for such
portion) on the date such portion was acquired and (for each period thereafter)
on the last day of the immediate preceding Interest Period for such portion and
ending on the last day of each of March, June, September and December and the
Funding LLC Maturity Date; and
(b) with respect to any portion of the Purchaser Percentage
Interest that is a Eurodollar Rate Portion, the period commencing on the date
such portion was acquired or the date of the conversion of any Base Rate Portion
into such Eurodollar Rate Portion and ending on the last day of the period
selected by the Lender (at the Owner Lessor's direction) pursuant to Section
18(a) of the APA and, thereafter, each subsequent period commencing on the last
day of the immediately preceding Interest Period for such portion and ending on
the last day of the period selected by the Lender (at the Owner Lessor's
direction) pursuant to such Section 18(a); the duration of each such Interest
Period shall be one, two, three or six months (or such longer or
Schedule 1-1-6
shorter period as the Purchasers determine is available), as the Lender may, in
accordance with such Section 18(a), select; PROVIDED, HOWEVER, that:
(i) the Lender may not select any Interest Period that ends
after the Funding LLC Maturity Date;
(ii) the Lender may not have in effect at any time more than
eight Interest Periods with respect to Eurodollar Rate
Portions;
(iii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last
day of such Interest Period shall be extended to occur on the
next succeeding Business Day, PROVIDED, HOWEVER, that, if such
extension would cause the last day of such Interest Period to
occur in the next following calendar month, the last day of
such Interest Period shall occur on the next preceding
Business Day; and
(iv) whenever the first day of any Interest Period occurs on a
day of an initial calendar month for which there is no
numerically corresponding day in the final calendar month of
such Interest Period, such Interest Period shall end on the
last Business Day of such final calendar month.
"OVERDUE RATE" shall mean with respect to any default in the payment when due
prior to the Funding LLC Maturity Date of any principal of, or interest on, any
Portion payable by the Owner Lessor under the Lessor Loan Agreement, the sum of
the otherwise applicable interest rate hereunder in respect of such Portion,
including the Applicable Rate therefor plus 2.00% per annum so long as such
default in continuing. The Overdue Rate shall be computed by the APA Agent in
accordance with the APA and advised to the Holder Representative, the Owner
Lessor, the Facility Lessee and the Facility Sublessee from time to time in
accordance with Section 18(b) of the APA.
"PORTION" shall mean a portion of the principal amount of a Lessor Note
consisting of a Purchaser Percentage Interest or a Securitization Company
Percentage Interest or a portion of either. The Portions shall be computed by
the APA Agent in accordance with the APA and advised to the Holder
Representative from time to time in accordance with Section 18(b) of the APA.
"PURCHASER" has the meaning specified in the APA.
Schedule 1-1-7
"PURCHASER PERCENTAGE INTEREST" shall mean, for any day, the percentage interest
of the Purchasers in a Lessor Note on such day under the APA. The Purchaser
Percentage Interest shall be computed by the APA Agent in accordance with the
APA and advised to the Holder Representative from time to time in accordance
with Sections 2(c) and 4(c) of the APA.
"QUOTED RATE" shall mean, for any Interest Period of (a) any portion of the
Securitization Company Percentage Interest a per annum rate equal to the sum of
(i) the per annum rate equivalent to the weighted average of the per annum rates
paid or payable by the Securitization Company from time to time as interest on
or otherwise (by means of interest rate xxxxxx or otherwise) in respect of those
promissory notes issued by the Securitization Company that are allocated, in
whole or in part, by the APA Agent (on behalf of the Securitization Company) to
fund such portion, as the case may be, during such Interest Period, as
determined by the APA Agent (on behalf of the Securitization Company) and
reported to the Lender, which rates shall reflect and give effect to the
commissions of placement agents and dealers in respect of such promissory notes,
to the extent such commissions are allocated, in whole or in part, to such
promissory notes by the APA Agent (on behalf of the Securitization Company);
PROVIDED, HOWEVER, that if any component of such rate is a discount rate, in
calculating the "Quoted Rate" for such Interest Period the APA Agent shall for
such component use the rate resulting from converting such discount rate to an
interest bearing equivalent rate per annum PLUS (ii) that per annum rate which
will result in an aggregate yield to the Securitization Company equal to the
total of the amounts payable by the Lender on account of (y) the program fee,
insurance premium fee, securitization fee and other fees in respect of the
Finance Facility and the APA, as set forth in the letter dated December 13,
1999, among the Securitization Company, the Lender, Citibank and CNAI (as
amended, supplemented or otherwise modified from time to time, the
"SECURITIZATION FEE LETTER") and (z) the management fee and other fees as set
forth in the letter dated December 13, 1999, among Lord Securities Corporation
and Holdings (as amended, supplemented or otherwise modified from time to time,
the "MANAGEMENT FEE LETTER" and, together with the Securitization Fee Letter,
the "MIDWEST FUNDING FEE LETTERS") or (b) if the Securitization Company dos not
fund or maintain such Securitization Company Percentage Interest, the rate
established therefor under the Finance Facility or APA for the Person funding or
maintaining such Securitization Company Percentage Interest under the
circumstance contemplated by clause (h) of the definition of "Lender Rate" set
out in the Finance Facility.
"RELATED COMMERCIAL PAPER" shall mean, with respect to any Securitization
Company Portion in which the Securitization Company holds any Percentage
Schedule 1-1-8
Interests, the promissory notes issued by the Securitization Company to fund or
maintain such Securitization Company Portion.
"SECURITIZATION COMPANY" shall mean CXC Incorporated, a Delaware corporation.
"SECURITIZATION COMPANY PERCENTAGE INTEREST" shall mean, for any day, the
Percentage Interest of the Securitization Company or any other Person (other
than a Purchaser or any transferee thereof) holding an interest in the
Percentage Interest of the Securitization Company in a Lessor Note on such day
under the APA. The Securitization Company Percentage Interest shall be computed
by the APA Agent and advised to the Holder Representative from time to time in
accordance with Section 2 of the APA.
"UFF AGENT" shall mean Citicorp North America, Inc., as agent for the
Securitization Company under the Finance Facility, together with its
successors and assigns.
Schedule 1-1-9
ANNEX I
TO SCHEDULE 1-1
TO FACILITY LEASE
Component A Component B Component C(1)
Rent Payment of Basic Lease Rent of Basic Lease Rent of Basic Lease Rent Aggregate Component D
Date (Column A) (Column B) (Column C) (Column D)
----------------- ----------------------- ---------------------------- ---------------------- ----------------------------
--------------
(1) Subject to adjustment in accordance with Schedule 1-1. Component C
of Basic Lease Rent is payable in arrears
Schedule 1-1-10
SCHEDULE 1-2
TO
FACILITY LEASE
ALLOCATION OF BASIC LEASE RENT
RENTAL PERIOD ENDING ON BASIC LEASE RENT(1)
-------------------------------------- -------------------------------------
---------------
(1) Reflects Basic Lease Rent computed using the Funding Rate
applicable to Component C on the Closing Date.
Schedule 1-2-1
SCHEDULE 1-3
TO
FACILITY LEASE
467 RENT ALLOCATION
RENTAL PERIOD ENDING 467 FIXED 467 INTEREST ON SUM OF 467
ON RENT FIXED RENT FIXED RENT AND
467
INTEREST ON FIXED
RENT
--------------------------------- ------------------ ------------------------- ------------------------
Schedule 1-3-1
SCHEDULE 2
TO
FACILITY LEASE
TERMINATION VALUES(1) (EXCLUDING RENT PAYABLE)
Column A
Excess of the Column B
allocation of Excess Basic Lease Column C Column D
Basic Lease Rent Rent paid over Termination Value Termination Value(2)
Termination Over Basic allocation of ot including Column (Columns A + B + C) Equity Portion of
Date Lease Rent paid Basic Lease Rent A or Column B ($ Dollars) Termination Values
------------- -------------------- ---------------------- --------------------- -------------------- ---------------------
-------------------------
(1) [If the Termination Date is not also a Rent Payment Date,
the Termination Value shall be increased by an amount equal to the
amount of interest accrued on the Lessor Notes, from and including the
immediately preceding Rent Payment Date to, but excluding, the
Termination Date.]
(2) Termination Values have been computed so as to reflect a
credit for Basic Lease Rent previously paid but allocated to periods
after such Termination Date and to include an additional amount for
Basic Lease Rent previously accrued, but not yet paid as of such
Termination Date.
Schedule 2-1
