Exhibit 10.4.34
EXECUTION COPY
--------------------------------------------------------------------------------
PROJECT LEASE AGREEMENT
Dated as of May 18, 2005
between
SE PUNA, L.L.C.,
as Owner Lessor,
and
PUNA GEOTHERMAL VENTURE,
as Lessee
PUNA GEOTHERMAL GENERATION PROJECT
--------------------------------------------------------------------------------
CERTAIN OF THE RIGHT, TITLE AND INTEREST OF THE OWNER LESSOR IN AND TO THIS
PROJECT LEASE AGREEMENT 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, UNION BANK OF CALIFORNIA, N.A., NOT IN ITS INDIVIDUAL CAPACITY BUT
SOLELY AS INDENTURE TRUSTEE UNDER AN INDENTURE OF TRUST AND SECURITY AGREEMENT,
DATED AS OF MAY 18, 2005 BETWEEN SAID INDENTURE TRUSTEE, AS SECURED PARTY, AND
THE OWNER LESSOR, AS DEBTOR. SEE SECTION 20 HEREOF FOR INFORMATION CONCERNING
THE RIGHTS OF THE ORIGINAL HOLDER AND THE HOLDERS OF THE VARIOUS COUNTERPARTS
HEREOF.
Table of Contents
Page
----
SECTION 1. DEFINITIONS................................................... 1
SECTION 2. LEASE OF THE PROJECT.......................................... 1
Section 2.1. Lease................................................ 1
SECTION 3. BASIC LEASE TERM AND RENT..................................... 2
Section 3.1. Basic Lease Term..................................... 2
Section 3.2. Rent................................................. 2
Section 3.3. Supplemental Lease Rent.............................. 3
Section 3.4. Adjustment of Lease Schedules; Minimum Rent.......... 3
Section 3.5. Manner of Payments................................... 5
SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT............ 6
Section 4.1. Disclaimer of Warranties............................. 6
Section 4.2. Quiet Enjoyment...................................... 7
SECTION 5. RETURN OF PROJECT............................................. 7
Section 5.1. Return............................................... 7
Section 5.2. Condition Upon Return................................ 8
Section 5.3. Environmental Reports; Clean-up...................... 9
Section 5.4. Expenses............................................. 10
SECTION 6. LIENS......................................................... 10
SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS....................... 10
Section 7.1. Maintenance.......................................... 10
Section 7.2. Replacement of Components............................ 11
SECTION 8. MODIFICATIONS................................................. 12
Section 8.1. Required Modifications............................... 12
Section 8.2. Optional Modifications............................... 12
Section 8.3. Modifications Subject to Head Lease.................. 12
Section 8.4. Purchase of Removable Modifications and Expansion
Project.............................................. 13
SECTION 9. NET LEASE..................................................... 13
SECTION 10. EVENTS OF LOSS............................................... 15
Section 10.1. Occurrence of Events of Loss......................... 15
Section 10.2. Application of Payments.............................. 17
Section 10.3. Conditions to Lessee's Right to Rebuild or Replace... 17
Section 10.4. Application of Payments Not Relating to an Event of
Loss................................................. 20
Section 10.5. Partial Casualties................................... 21
SECTION 11. INSURANCE.................................................... 22
SECTION 12. INSPECTION................................................... 22
SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS..................... 22
Section 13.1. Election to Terminate................................ 22
Section 13.2. Solicitation of Offers; Payments Upon Termination.... 23
Section 13.3. Procedure for Exercise of Termination Option......... 25
SECTION 14. TERMINATION FOR OBSOLESCENCE................................. 26
Section 14.1. Termination.......................................... 26
Section 14.2. Solicitation of Offers............................... 27
Section 14.3. Right of Owner Lessor to Retain the Owner Lessor's
Leasehold Interest................................... 27
Section 14.4. Procedure for Exercise of Termination Option......... 28
SECTION 15. LEASE RENEWAL................................................ 30
Section 15.1. Wintergreen Renewal Lease Term....................... 30
Section 15.2. Fair Market Value Renewal Lease Terms................ 30
Section 15.3. Renewal Lease Rent for the Renewal Lease Term........ 31
Section 15.4. Determination of Fair Market Rental Value............ 31
Section 15.5. Termination Value During Renewal Lease Terms......... 32
SECTION 16. EVENTS OF DEFAULT............................................ 32
SECTION 17. REMEDIES..................................................... 34
Section 17.1. Remedies for Lease Event of Default.................. 34
Section 17.2. Cumulative Remedies.................................. 37
Section 17.3. No Delay or Omission to be Construed as Waiver....... 37
Section 17.4. Limited Recourse..................................... 37
SECTION 18. SUBLEASE..................................................... 38
ii
SECTION 19. OWNER LESSOR'S RIGHT TO PERFORM.............................. 38
SECTION 20. SECURITY FOR OWNER LESSOR'S OBLIGATION TO THE INDENTURE
TRUSTEE...................................................... 39
SECTION 21. PURCHASE OPTIONS............................................. 39
Section 21.1. Election of Purchase Options......................... 39
Section 21.2. Purchase Option Payments............................. 39
Section 21.3. Assumption of the Senior Notes....................... 40
SECTION 22. MISCELLANEOUS................................................ 41
Section 22.1. Amendments and Waivers............................... 41
Section 22.2. Notices.............................................. 41
Section 22.3. Survival............................................. 42
Section 22.4. Successors and Assigns............................... 42
Section 22.5. True Lease........................................... 42
Section 22.6. Governing Law........................................ 42
Section 22.7. Severability......................................... 42
Section 22.8. Counterparts......................................... 43
Section 22.9. Headings and Table of Contents....................... 43
Section 22.10. Further Assurances................................... 43
Section 22.11. Effectiveness........................................ 43
Section 22.12. Limitation of Liability.............................. 43
Section 22.13. Entire Agreement..................................... 43
SCHEDULE 1 -- INSURANCE
EXHIBIT A -- FORM OF PROJECT LEASE SUPPLEMENT
iii
PROJECT LEASE AGREEMENT
This PROJECT LEASE AGREEMENT, dated as of May 18, 2005 (this "Project
Lease"), is between SE PUNA, L.L.C., a Delaware limited liability company (the
"Owner Lessor"), and PUNA GEOTHERMAL VENTURE, a Hawaii general partnership (the
"Lessee").
WITNESSETH:
WHEREAS, pursuant to the Head Lease, the Owner Lessor has leased the
Project from the Lessee for the Head Lease Term;
WHEREAS, pursuant to this Project Lease, the Owner Lessor desires to lease
the Project to the Lessee for the Basic Lease Term and the Renewal Lease Terms,
if any, provided herein, and the Lessee desires to lease the Project from the
Owner Lessor on such terms;
WHEREAS, the Project is located on the Project Site (as more particularly
described on Exhibit A hereto), but the Project does not include the Project
Site or any part thereof, and no part of the Project Site is being leased to the
Lessee under this Project Lease; and
WHEREAS, pursuant to the Sublease of the Power Plant Sublease, the Lessee
is subleasing the Project Site to the Owner Lessor for a term equal to the term
of the Head Lease and pursuant to the Sub-Sublease of Power Plant Sublease, the
Owner Lessor is sub-subleasing the Project Site to the Lessee for a term equal
to the Basic Lease Term, including any Renewal Lease Term;
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
Unless the context hereof shall otherwise require, capitalized terms used
in this Project Lease, including the foregoing recitals, and not otherwise
defined herein shall have the respective meanings specified in Appendix A to the
Participation Agreement, dated as of May 18, 2005, among the Lessee, the Owner
Lessor, SE Puna Lease, L.L.C., as Equity Investor, Wilmington Trust Company, in
its individual capacity, the Noteholders named therein and Union Bank of
California, N.A., as Indenture Trustee. The general provisions of such Appendix
A shall apply to this Project Lease.
SECTION 2. LEASE OF THE PROJECT
Section 2.1. Lease. The Owner Lessor hereby leases the Project (such lease
to be evidenced by the execution and delivery of Project Lease Supplement No. 1
or, if executed, Project Lease Supplement No. 2 in respect thereof), upon the
terms and conditions set forth herein and in Project Lease Supplement No. 1 or,
if executed, Project Lease Supplement No. 2, to the Lessee for the Basic Lease
Term and, subject to the Lessee's exercise of the renewal option or options in
Section 15, one or more Renewal Lease Terms, as the case may be, and the
Lessee hereby leases the Project, upon the terms and conditions set forth herein
and in Project Lease Supplement No. 1 or, if executed, Project Lease Supplement
No. 2, from the Owner Lessor for such term. The Lessee and the Owner Lessor
understand and agree that this Project Lease is subject to the Permitted
Encumbrances. The Project shall be subject to the terms of this Project Lease
from the date on which this Project Lease is executed and delivered.
SECTION 3. BASIC LEASE TERM AND RENT
Section 3.1. Basic Lease Term. The basic lease term of this Project
Lease for the Project (the "Basic Lease Term") shall commence on the Closing
Date and shall terminate at 11:59 p.m. (New York City time) on January 3, 2028
(the "Basic Lease Term Expiration Date"), subject to earlier termination in
whole pursuant to Section 10, 13, 14, 17 or 22 hereof.
Section 3.2. Rent.
(a) Payment of Rent. The Lessee hereby agrees to pay to the Owner
Lessor Periodic Lease Rent, payable with respect to the Basic Lease Term for the
lease of the Project. Renewal Lease Rent shall be paid on the dates and in the
amounts set forth in Section 15. All Periodic Lease Rent and Renewal Lease Rent
to be paid pursuant to this Section 3.2 shall be payable in the manner set forth
in Section 3.5.
(b) Allocation of Rent. The Periodic Lease Rent allocated to each
Rental Period for the use by the Lessee of the Project shall be an amount equal
to the Allocated Rent. Notwithstanding that Periodic Lease Rent is payable in
accordance with Section 3.2(a) hereof and without limiting the Lessee's payment
obligations under Section 3.2(a), the Allocated Rent calculated pursuant to this
Section 3.2(b) shall represent and be the amount of Periodic Lease Rent for
which the Lessee becomes liable on account of the use of the Project for each
calendar year included in whole or in part in the Basic Lease Term.
(c) Section 467 Loan, Etc. It is the intention of the Owner Lessor and
the Lessee that the allocation of Periodic Lease Rent to each Rental Period as
provided in Section 3.2(b) constitutes a specific allocation of fixed rent
within the meaning of Treasury Regulation Section 1.467-1(c)(2)(ii) with the
effect that the Owner Lessor and the Lessee, on any federal income tax returns
filed by them (or on any federal income tax returns (and any state and local
income tax returns that follow the reporting on the relevant party's federal
income tax return) on which their income is included), shall accrue the amounts
of rental income and rental expense, respectively, set forth for each Rental
Period in an amount equal to the Proportional Rent. In addition, (i) if, with
respect to any Rental Period, the percentage set forth for such Rental Period
under the caption "Section 467 Interest Percentage" set forth in Schedule 2 to
Project Lease Supplement No. 1 (or if executed, Project Lease Supplement No. 2)
is positive, the Owner Lessor shall deduct interest expense and the Lessee shall
accrue interest income with respect to such period in an amount equal to the
product of the Head Lease Rent multiplied by such percentage ("Lessor Section
467 Interest") and (ii) if, with respect to any Rental Period, the percentage
set forth for such Rental Period under the caption "Section 467 Interest
Percentage" set forth in Schedule 2 to Project Lease Supplement No. 1 (or if
executed, Project Lease Supplement No. 2) is in parentheses, the Owner Lessor
shall accrue interest income and the Lessee shall deduct interest expense with
respect to such period in an amount equal to the
2
product of the Head Lease Rent multiplied by such percentage ("Lessee Section
467 Interest"). All Section 467 Interest and principal in respect thereof,
Proportional Rent and Allocated Rent is already included as part of Periodic
Lease Rent and Termination Values, is payable as a portion thereof, and has been
taken into account in the calculation of the percentage set forth under the
heading "Periodic Lease Rent Percentage" on Schedule 1 to Project Lease
Supplement No. 1 (or if executed, Project Lease Supplement No. 2) or under the
heading "Termination Value Percentage" on Schedule 3 to Project Lease Supplement
No. 1 (or if executed, Project Lease Supplement No. 2). In no event shall any
Section 467 Interest or principal in respect thereof, Proportional Rent and/or
Allocated Rent be separately payable (including upon any termination of this
Project Lease, and regardless of whether or not Termination Value shall be
payable in connection with any such termination), it being agreed and understood
that these items represent characterizations for federal income tax purposes
only, including in the case of any termination of this Project Lease pursuant to
Sections 10, 13, 14 and 17 where Termination Value is not payable.
Section 3.3. Supplemental Lease Rent. The 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 Lessee to pay any
Supplemental Lease Rent, the Owner Lessor shall have all rights, powers and
remedies provided for herein or by law or equity or otherwise for the failure to
pay Periodic Lease Rent or Renewal Lease Rent. The Lessee will also pay as
Supplemental Lease Rent, to the extent permitted by Applicable Law, an amount
equal to interest at the Overdue Rate on any part of any payment of Periodic
Lease Rent or Renewal 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. The Lessee also agrees to pay as Supplemental Lease Rent an
amount equal to any premium, including Make Whole Premium, required to be paid
pursuant to the Indenture or any Senior Note (other than any Make Whole Premium
which may be payable after an assumption of the Senior Notes by the Equity
Investor pursuant to Section 11.4 of the Participation Agreement after the
termination of this Project Lease) and any amount required to be paid as
compensation by the Owner Lessor pursuant to Section 5.4(A) of the Indenture.
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 Lease Schedules; Minimum Rent.
(a) The Lessee and the Owner Lessor agree that Periodic Lease Rent,
Allocated Rent, FPPO Price, EBO Price, Proportional Rent, Section 467 Interest
and principal in respect thereof, and Termination Values shall be adjusted,
either upwards or downwards, to reflect (i) the issuance of any Additional
Senior Notes pursuant to Section 2.12 of the Indenture in connection with a
refunding or refinancing of the Senior Notes pursuant to Section 11.3 of the
Participation Agreement (ii) the issuance of Additional Senior Notes pursuant to
Section 2.12 of the Indenture in connection with the financing of Modifications
pursuant to Section 11.1 of the Participation Agreement and (iii) any payment of
Head Lease Rent pursuant to Section 11.2(c) of the Participation Agreement. In
the event of a refinancing of the Senior Notes and issuance of
3
Additional Senior Notes pursuant to clause (i) above, the Periodic Lease Rent
and Allocated Rent shall change solely to reflect the change in interest payable
on the Additional Senior Notes issued from the interest on the Senior Notes
being refunded or refinanced. In the event that the Lessee obtains supplemental
financing pursuant to clause (ii) above, Periodic Lease Rent and Allocated Rent
shall change solely to reflect the increased debt service payable on the Senior
Notes as a result of the issuance of Additional Senior Notes.
(b) Any adjustments pursuant to this Section 3.4 shall be calculated
to preserve the Equity Investor's Net Economic Return through the end of the
Basic Lease Term and to maintain a minimum Projected Lease Rent Coverage Ratio
of 1.40 to 1.00 on each Rent Payment Date during the remainder of the Basic
Lease Term; provided, however, that to the extent consistent with preserving the
Equity Investor's Net Economic Return, all adjustments shall be calculated to
preserve operating lease treatment for the Lessee under GAAP and to minimize, to
the extent possible, the internal rate of return of the Periodic Lease Rents and
the present value of the Periodic Lease Rent through the end of the Basic Lease
Term. Adjustments will be made using the same method of computation and
assumptions, including Tax Assumptions and Pricing Assumptions originally used
(other than those that have changed as the result of the event giving rise to
the adjustment) in the calculation of the Periodic Lease Rent, Allocated Rent,
Section 467 Loan Balance, Section 467 Loan Interest and Termination Values and
to comply with law including Section 467 of the Code (except to the extent that
the original transaction did not comply therewith). The adjustments contemplated
by this Section 3.4 will result in corresponding adjustments to Allocated Rent,
Proportional Rent, Section 467 Loan Balances, Section 467 Interest and
Termination Values.
(c) Anything herein or in any other Operative Document to the contrary
notwithstanding, Periodic Lease Rent payable on any Rent Payment Date, whether
or not adjusted in accordance with this Section 3.4, shall, in the aggregate, be
in an amount at least sufficient to pay in full principal and interest payable
on the Senior Notes on such Rent Payment Date (except principal and interest
payable upon an Indenture Event of Default that is not caused by a Lease Event
of Default). Anything herein or in any other Operative Document to the contrary
notwithstanding, Termination Values, the EBO Price and the FPPO Price payable on
any date under this Project Lease, whether or not adjusted in accordance with
this Section 3.4, shall be, together with all other Rent due and owing on such
date, exclusive of any portion thereof that is an Excepted Payment, in an amount
at least sufficient to pay in full the principal of, premium, if any, and
interest payable on the Senior Notes on such date.
(d) Any adjustment pursuant to this Section 3.4 shall initially be
computed by the Equity Investor, subject to the verification procedure described
in this Section 3.4(d). Once computed, the results of such computation shall
promptly be delivered by the Equity Investor to the Lessee. Within 20 days after
the receipt of the results of any such adjustment, the Lessee may request that a
nationally recognized firm of accountants or lease advisors selected by the
Equity Investor and reasonably satisfactory to the Lessee (the "Verifier")
verify, after consultation with the Equity Investor and the Lessee, the accuracy
of such adjustment in accordance with this Section 3.4. The Equity Investor and
the Lessee hereby agree, (i) each shall have the right to communicate with the
Verifier, and (ii) subject to the execution by the Verifier of an appropriate
confidentiality agreement, to provide the Verifier with all information and
4
materials (other than income tax returns) as shall be necessary in connection
therewith. If the Verifier confirms that such adjustment is in accordance with
this Section 3.4, it shall so certify to the Lessee, the Owner Lessor and the
Equity Investor and such certification shall be final, binding and conclusive on
the Lessee, the Equity Investor and the Owner Lessor. If the Verifier concludes
that such adjustment is not in accordance with this Section 3.4, and the
adjustments to Periodic Lease Rent, Allocated Rent, Proportional Rent, Section
467 Loan Balance, Section 467 Interest or Termination Value calculated by the
Verifier are different from those calculated by the Equity Investor, then it
shall so certify to the Lessee, the Owner Lessor and the Equity Investor and the
Verifier's calculation shall be final, binding and conclusive on the Lessee, the
Owner Lessor and the Equity Investor. If the Lessee does not request
verification of any adjustment within the period specified above, the
computation provided by the Equity Investor shall be final, binding and
conclusive on the Lessee, the Owner Lessor and the Equity Investor. The final
determination of any adjustment hereunder shall be set forth in an amendment to
this Project Lease, executed and delivered by the Owner Lessor and the Lessee
and consented to by the Equity Investor; provided, however, that any omission to
execute and deliver such amendment shall not affect the validity and
effectiveness of any such adjustment. The reasonable fees, costs and expenses of
the Verifier in verifying an adjustment pursuant to this Section 3.4 shall be
paid by the Lessee; provided, however, that, in the event that such Verifier
determines that the present value of Periodic Lease Rent to be made under this
Project Lease as calculated by the Equity Investor is greater than the present
value of the correct Periodic Lease Rent as certified by the Verifier, in each
case, discounted semiannually on each Rent Payment Date at the Discount Rate, by
more than six basis points, then such expenses of the Verifier shall be paid by
the Equity Investor. 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 Project Lease or any other Operative Document
shall not be within the scope of the Verifier's responsibilities. In addition,
notwithstanding any other provisions in the Operative Documents, in no event
shall the EBO Price be adjusted to an amount that is less than the greatest of
(A) the Termination Value for the Project computed as of the EBO Date, (B) the
estimated fair market value of the Project on the EBO Date (as set forth in the
appraisal received pursuant to Section 4(n) of the Participation Agreement or
this Section 3.4, as the case may be), and (C) the present value as of the EBO
Date of the sum of (i) the then remaining scheduled Periodic Lease Rent payments
through the end of the Basic Lease Term as set forth in such appraisal, and (ii)
the FPPO Price (the present value calculation described in this clause (C) shall
be determined utilizing a semi-annual compounded discount rate equal to the
Discount Rate.
Section 3.5. Manner of Payments. All Rent (whether Periodic Lease
Rent, Renewal Lease Rent or Supplemental Lease Rent) shall be paid by the Lessee
in lawful currency of the United States of America in immediately available
funds to the recipient not later than 1:00 p.m. (New York City time) on the date
due. All Rent payable to the Owner Lessor by the Lessee (other than Excepted
Payments) shall be paid by the Lessee to the Owner Lessor by payment to the
Owner Lessor's Account, or to such other place as the Owner Lessor shall notify
the Lessee in writing; provided, however, that so long as the Lien of the
Indenture has not been terminated and fully 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 of the Indenture shall have been
terminated and fully discharged in accordance with its terms), and the Lessee
agrees, that all payments of Rent (other than Excepted Payments) payable to the
Owner
5
Lessor shall be paid to such place as the Indenture Trustee shall notify the
Lessee in writing pursuant to the Indenture. 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 Lessee in writing.
SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT
Section 4.1. Disclaimer of Warranties.
(a) Without waiving any claim the Lessee may have against any
manufacturer, vendor or contractor, THE LESSEE ACKNOWLEDGES AND AGREES SOLELY
FOR THE BENEFIT OF THE OWNER LESSOR, THE EQUITY INVESTOR AND THE INDENTURE
TRUSTEE THAT (i) THE PROJECT AND EACH COMPONENT THEREOF IS OF A SIZE, DESIGN,
CAPACITY AND MANUFACTURE ACCEPTABLE TO THE LESSEE, (ii) THE LESSEE IS SATISFIED
THAT THE PROJECT AND EACH COMPONENT THEREOF IS SUITABLE FOR THEIR RESPECTIVE
PURPOSES, (iii) NEITHER THE OWNER LESSOR NOR THE EQUITY INVESTOR IS A
MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, (iv) THE PROJECT 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 APPLICABLE LAWS NOW IN
EFFECT OR HEREAFTER ADOPTED, INCLUDING (1) ZONING REGULATIONS, (2) ENVIRONMENTAL
LAWS OR (3) BUILDING RESTRICTIONS, AND IN THE STATE AND CONDITION OF EVERY PART
THEREOF WHEN THE SAME FIRST BECAME SUBJECT TO THIS PROJECT LEASE WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND BY THE OWNER LESSOR OR THE EQUITY
INVESTOR AND (v) THE OWNER LESSOR LEASES FOR THE BASIC LEASE TERM AND THE
RENEWAL LEASE TERMS, IF ANY, SPECIFIED HEREIN AND THE LESSEE TAKES THE PROJECT
UNDER THIS PROJECT LEASE "AS-IS," "WHERE-IS" AND "WITH ALL FAULTS," AND THE
LESSEE ACKNOWLEDGES THAT NONE OF THE OWNER LESSOR, THE EQUITY INVESTOR OR THE
INDENTURE TRUSTEE 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
PROJECT OR THE OWNER LESSOR'S LEASEHOLD INTEREST, 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 Project will be free of
Owner Lessor's Liens. It is agreed that all such risks, as between the Owner
Lessor and the Equity Investor on the one hand and the Lessee on the other hand
are to be borne by the Lessee with respect to acts, occurrences or omissions
during the Project Lease Term. None of the
6
Owner Lessor, the Equity Investor or the Indenture Trustee shall have any
responsibility or liability to the 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 Project 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 Project or
any Component thereof or any risks relating thereto; or (z) the delivery,
operation, servicing, maintenance, repair, improvement, replacement or
decommissioning of the Project or any Component thereof. The provisions of this
paragraph (a) of this Section 4.1 have been negotiated, and, except to the
extent otherwise expressly stated herein or in Sections 3.2(f) and 3.4(f) of the
Participation Agreement, the foregoing provisions are intended to be a complete
exclusion and negation of any representations or warranties of the Owner Lessor
and the Equity Investor, express or implied, with respect to the Project or any
Components thereof that may arise pursuant to any Applicable Law now or
hereafter in effect or otherwise.
(b) During the Project 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 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 Lessee, as their interests may appear,
but in all cases at the sole cost and expense of the Lessee, whatever claims and
rights the Owner Lessor may have in respect of the Project or any Component
thereof against any manufacturer, vendor or contractor or under any express or
implied warranties relating to the Project or any Component thereof.
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, the Owner Lessor
shall not interfere with or interrupt the quiet enjoyment of the use, operation
and possession by the Lessee of the Project or Modifications thereto during the
Project Lease Term.
SECTION 5. RETURN OF PROJECT
Section 5.1. Return. Unless the Lessee shall have purchased the Owner
Lessor's Leasehold Interest in accordance with Section 22 hereof, upon
expiration or early termination of this Project Lease, the Lessee, at its own
expense, shall return the Project (together with any Modifications, title to
which shall have vested in the Owner Lessor pursuant to the first sentence of
Section 8.3) to the Owner Lessor or any transferee or assignee of the Owner
Lessor by surrendering the Project into the possession of the Owner Lessor or
such transferee or assignee at the Project Site subject to the return conditions
set forth in Sections 5.2 and 5.3. In connection with such return, the Lessee
shall:
(i) assign, to the extent permitted by Applicable Law, and shall
cooperate with all reasonable requests of the Equity Investor, the
Owner Lessor or any transferee or assignee of either of such parties
for purposes of obtaining, or enabling the Equity Investor, the Owner
Lessor or such transferees or assignees to obtain, any and all
Governmental Approvals and licenses, permits, approvals and consents
of any other Persons that are or will be required to be obtained by
the Equity
7
Investor, the Owner Lessor or such transferee or assignee in
connection with the use, operation or maintenance of the Project on or
after such return in compliance with Applicable Law; provided that if
any such Governmental Approval or other license, permit, approval or
consent also relates to any other facilities, the Lessee and the Owner
Lessor shall enter into mutually satisfactory arrangements so that the
Project and such other facilities may each be owned, operated and
maintained in a commercially reasonable manner;
(ii) provide the Owner Lessor or a transferee or assignee of
Owner Lessor copies of all documents (including all Governmental
Approvals and related materials), instruments, plans, maps,
specifications, manuals, drawings and other documentary materials
relating to the installation, maintenance, operation, construction,
design, modification and repair of the Project as shall be in the
Lessee's possession and shall be reasonably appropriate or necessary
for the continued operation of the Project; and
(iii) assign to the Owner Lessor, or its designee, any Project
Document requested by the Owner Lessor by an appropriate instrument of
transfer in form and substance reasonably satisfactory to the Owner
Lessor and prepared by and at the expense of the Lessee.
Upon such return, the right to use the Project granted hereunder for the benefit
of the Lessee shall cease and terminate.
Section 5.2. Condition Upon Return. At the time of the return of the
Project by the Lessee to the Owner Lessor or any transferee or assignee of the
Owner Lessor pursuant to Section 5.1, the following conditions shall be complied
with, all at the Lessee's sole cost and expense; provided that clauses (a), (b)
and (d) shall not apply to any return pursuant to Section 10 and clause (b)
(solely with respect to compliance with Section 8) shall not apply to any
termination pursuant to Section 14:
(a) the Project shall be in at least as good condition as it would
have been in if it had been maintained in the manner required by the terms of
this Project Lease and shall be free and clear of all Liens (other than
Permitted Liens described in clause (a)-(c), (f), (g) and (j) of the definition
thereof);
(b) the Project shall be in compliance with Sections 7 and 8;
(c) no Component shall be a temporary component and any replacement
component shall satisfy the standards of Section 7.2;
(d) if this Project Lease is being terminated and the Owner Lessor's
Leasehold Interest is being transferred to a third party pursuant to Section 13
or Section 14, the Lessee, at the request of the Owner Lessor, shall enter into
arrangements with such third party reasonably acceptable to such third party to
permit such third party access to and use of the Project and the Project Site;
and
8
(e) the Lessee, at the request of the Owner Lessor made in accordance
with Section 8.4, shall sell to the Owner Lessor (or its transferee or assignee)
on the date set forth in Section 8.4 at the then Fair Market Sales Value thereof
each Removable Modification to the Project requested by the Owner Lessor, and/or
the Expansion Project, subject in each case to all existing Liens. The fees and
expenses of the Independent Appraiser(s) incurred pursuant to this clause (e)
shall be paid by the Owner Lessor. If the Owner Lessor determines not to
purchase any Removable Modification (which may include the Expansion Project)
the Lessee, at its expense, shall remove such Removable Modification from the
Project Site no later than the expiration or termination date of the Project
Lease without damaging or otherwise adversely affecting the Project.
Section 5.3. Environmental Reports; Clean-up.
(a) In connection with the return of the Project to the Owner Lessor
pursuant to this Section 5, the Lessee shall, at its own expense, provide the
Owner Lessor and, so long as the Lien of the Indenture shall not have been
terminated and fully discharged, the Indenture Trustee (i) not earlier than nine
(9) months nor later than three (3) months prior to the expiration date of the
Basic Lease Term or the last Renewal Lease Term elected by the Lessee, (ii) in
connection with any return pursuant to Section 10, 13 or 14, no later than three
(3) months prior to the expiration of this Project Lease or (iii) in connection
with any return pursuant to Section 17, as promptly as possible after such
return (but, so long as reasonable access is provided, within 45 days after such
return), a phase I environmental report including a compliance with
Environmental Laws audit (together referred to as "phase I survey") addressed to
the Owner Lessor and, so long as the Lien of the Indenture has not been
terminated and fully discharged, the Indenture Trustee, as to the environmental
condition of the Project, the presence or absence of any Environmental
Conditions and compliance or noncompliance with applicable Environmental Laws.
Such phase I survey shall have been performed not earlier than 90 days prior to
the date such phase I survey is provided to the Owner Lessor, by a reputable
environmental consulting firm (selected by the Lessee and reasonably acceptable
to the Equity Investor), and shall be in form and scope reasonably satisfactory
to the Equity Investor and, if the Lien of the Indenture shall not have been
terminated and fully discharged, the Indenture Trustee. The phase I survey will
only be expanded to a phase II environmental survey if and only if, as a result
of the phase I survey, facts are revealed that would reasonably require further
investigation in order to assess the environmental condition of the Project, the
presence or absence of any Environmental Conditions, or compliance or
noncompliance with applicable Environmental Laws. The provisions of such
environmental surveys shall not relieve the Lessee of any indemnification
obligation or liability with respect to Environmental Conditions existing at the
time of such return, whether known or unknown, in respect of the Project.
(b) If the phase I survey (and phase II environmental survey, if
necessary) delivered pursuant to Section 5.3(a) indicates that any action
(including cleaning, investigation, abatement, correction, removal or
remediation) is then required under any then applicable Environmental Laws
(whether indicated in the phase I survey or phase II environmental survey or
otherwise and including any action then required under applicable Environmental
Laws for the Project to be then in compliance with such Laws), the Lessee shall,
at its own expense, within 90 days of the Owner Lessor having received such
survey provide the Owner Lessor and, so long
9
as the Lien of the Indenture shall not have been terminated and fully
discharged, the Indenture Trustee, with a remediation plan reasonably
satisfactory to the Equity Investor and, if the Lien of the Indenture shall not
have been terminated and fully discharged, the Indenture Trustee, designed to
effect compliance with applicable Environmental Laws and the return conditions
set forth in this Section 5 as promptly as is reasonably practical (and in any
event prior to the expiration of the Project Lease Term) and without materially
adversely affecting the continued operation of the Project. To the extent that
any action (including cleaning, investigation, abatement, correction, removal or
remediation) required to be taken under this Section 5.3(b) cannot reasonably be
completed prior to expiration or termination of this Project Lease, the Lessee
shall complete such action (including cleaning, investigation, abatement,
correction, removal or remediation) as promptly thereafter as is reasonably
practical, and in addition the Lessee shall provide to the Owner Lessor and, so
long as the Lien of the Indenture shall not have been terminated and fully
discharged, the Indenture Trustee, (x) adequate financial assurance during such
period following such expiration or termination of this Project Lease or (y) an
agreement from an entity that meets the Minimum Credit Rating that such
obligations shall be satisfied. The obligations of the Lessee set forth in this
Section 5.3(a) and (b) shall survive the termination of this Project Lease and
the expiration of the Project Lease Term.
Section 5.4. Expenses. The Lessee agrees to pay or reimburse, on an
After-Tax Basis, on demand, all reasonable costs and expenses incurred by the
Owner Lessor, the Equity Investor, the Indenture Trustee and any Noteholder in
connection with any return contemplated by this Section 5.
SECTION 6. LIENS
The Lessee will not directly or indirectly create, incur, assume or suffer
to exist any Lien on or with respect to the Project (or any Component thereof),
the Project Site, the Lessee's Interest in the Geothermal Resource or the Owner
Lessor's interest therein, except Permitted Liens, and the Lessee shall promptly
notify the Owner Lessor of the imposition of any such Lien of which the Lessee
is aware and shall promptly, at its own expense, take such action as may be
necessary to fully discharge and release any such Lien.
SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS
Section 7.1. Maintenance. The Lessee, at its own cost and expense,
will (a) cause the Project to be maintained in good condition, repair and
working order (ordinary wear and tear excepted) and in any event in all material
respects (i) in accordance with Prudent Industry Practice, (ii) in compliance
with all Applicable Laws of any Governmental Entity having jurisdiction,
including all Environmental Laws (provided, however, that the Lessee may, in
good faith and by appropriate proceedings, diligently contest the validity or
application of any Applicable Law in any reasonable manner which does not
involve any danger of (A) foreclosure, sale, forfeiture or loss of, or
imposition of a Lien (other than a de minimis Lien) on, such Project, (B) impair
(other than in a de minimis fashion) the use, operation or maintenance of such
Project in any respect, (C) any criminal liability being incurred by the Equity
Investor, the Owner Lessor, the Indenture Trustee or any Noteholder, (D) the
Equity Investor, the Owner Lessor, the Indenture Trustee or any Noteholder being
subject to any unindemnified civil liability or of the
10
Equity Investor or the Owner Lessor being subject to regulation as a public
utility under Applicable Law or (E) any Material Adverse Effect); and (iii) in
accordance with the terms of all insurance policies required to be maintained
pursuant to Section 11 and (b) cause to be made, at its own cost and expense,
all repairs, renewals, replacements, betterments and improvements thereof, all
as may be necessary so that the Project may be operated in accordance with its
intended purposes.
Section 7.2. Replacement of Components. In the ordinary course of
maintenance, service, repair or testing of the Project or any Component the
Lessee, at its own cost and expense, may remove or cause or permit to be removed
from the Project any Component; provided, however, that the Lessee shall (a)
cause such Component to be replaced by a replacement Component which shall be
free and clear of all Liens (except Permitted Liens described in clauses
(a)-(c), (e) (solely for amounts not yet delinquent), (f), (g) or (j) of the
definition thereof) and in at least as good operating condition as the Component
replaced, assuming that the Component replaced was maintained in accordance with
this Project Lease (each such replacement Component being herein referred to as
a "Replacement Component") and (b) cause such replacement to be performed in a
manner which does not (i) decrease by more than a de minimis amount the current
or residual value, remaining useful life or utility of the Project below the
current or residual value, the remaining useful life or the utility thereof
immediately prior to such replacement (assuming the Project and such Component
thereof was then in the condition required to be maintained by the terms of this
Project Lease), (ii) cause the Project to become "limited-use" property within
the meaning of Rev. Proc. 2001-28, 2001-1 C.B. 1156 or (iii) cause the Lessee or
the Owner Lessor to be in default under any applicable term or provision of any
Operative Document. If any Component to the Project that is subject to this
Project Lease is at any time removed from the Project, such Component shall
remain subject to this Project Lease, wherever located, until such time as such
Component shall be replaced by a Replacement Component which has been
incorporated in the Project and which meets the requirements for Replacement
Components specified above. Immediately upon any Replacement Component becoming
incorporated in the Project, without further act (and at no cost to the Owner
Lessor and with no adjustment to the Head Lease Rent, Periodic Lease Rent,
Allocated Rent, Proportional Rent or Renewal Lease Rent), (x) the replaced
Component shall no longer be subject to this Project Lease, (y) such replaced
Component shall be free and clear of all rights of the Owner Lessor and the
Indenture Trustee, and (z) the Replacement Component shall become subject to the
Head Lease and this Project Lease and, so long as the Lien of the Indenture
shall not have been terminated and fully discharged, the Lien of the Indenture,
and (ii) be deemed a part of the Project for all purposes of this Project Lease.
Notwithstanding anything in this Section 7.2 or elsewhere in this Project Lease
to the contrary, if the Lessee has determined that a Component is surplus or
obsolete, it shall have the right to remove such Component without replacing it;
provided, that no such Component may be so removed without being replaced if
such removal would decrease by more than a de minimis amount the current or
residual value, remaining useful life or utility of the Project below the
current or residual value, the remaining useful life or the utility thereof
immediately prior to such removal (assuming the Project was then in the
condition required to be maintained by the terms of this Project Lease) or cause
the Project to become "limited-use" property within the meaning of Rev. Proc.
2001-28, 2001-1 C.B. 1156.
11
SECTION 8. MODIFICATIONS
Section 8.1. Required Modifications. The Lessee, at its own cost and
expense, shall make or cause to be made all Modifications to the Project as are
required (a) by Applicable Law (provided, however, that the Lessee may, in good
faith and by appropriate proceedings, diligently contest the validity or
application of any Applicable Law in any reasonable manner which (i) does not
involve any danger of foreclosure, sale, forfeiture or loss of, or imposition of
a Lien on, the Project or any material part thereof or impair the use, operation
or maintenance of the Project in any material respect, and (ii) could not result
in any criminal liability being incurred by, or could not reasonably be expected
to have any material adverse effect on the interests of, the Equity Investor (or
any Affiliate thereof) or the Owner Lessor, including subjecting the Equity
Investor (or any Affiliate thereof) or the Owner Lessor to regulation as a
public utility under Applicable Law solely as a result of such contest;
provided, that no such contest may extend beyond the expiration or early
termination of this Project Lease) or (b) to maintain in effect any insurance
required to be maintained by the Lessee under any Operative Document
Modifications (each, a "Required Modification"). In connection with the making
of any Required Modification, the Lessee shall procure all consents (including,
to the extent applicable, consents from the Power Purchaser under the Power
Purchase Agreement) and approvals from any Governmental Entity having
jurisdiction.
Section 8.2. Optional Modifications. The Lessee at any time may, at
its own cost and expense, make or cause or permit to be made any Modification to
the Project as the Lessee considers necessary or desirable in the proper conduct
of its business (any such Modification that is not a Required Modification being
referred to as an "Optional Modification"), provided that the Lessee shall not
make and shall prevent from being made any Optional Modification to the Project
that would (i) decrease by more than a de minimis amount the current or residual
value, utility or remaining useful life of the Project below the current or
residual value, utility or remaining useful life of the Project immediately
prior to such Modification assuming the Project was then in the condition
required to be maintained by the terms of this Project Lease or (ii) cause the
Project to become "limited-use" property, within the meaning of Rev. Proc.
2001-28, 2001-1 C.B. 1156, and no such Optional Modification shall be made
unless (x) the Lessee provides to the Owner Lessor and, so long as the Lien of
the Indenture shall not have been terminated and fully discharged, the Indenture
Trustee a certification from the Geothermal Consultant that such Modification is
not reasonably expected materially and adversely to affect the Owner Lessor's
rights under the Sublease of Resource Sublease or otherwise materially reduce or
impair the Geothermal Resource available to the Lessee pursuant to the Resource
Sublease Partial Assignment for the purpose of satisfying its obligations under
the Power Purchase Agreement, (y) the Lessee shall have received all consents
(including, to the extent applicable, consents from the Power Purchaser under
the Power Purchase Agreement) and approvals from any Governmental Entity having
jurisdiction and (z) such Modification could not reasonably be expected to have
a Material Adverse Effect (collectively, the "Improvement Conditions").
Section 8.3. Modifications Subject to Head Lease. All (a) Required
Modifications (including Severable Modifications that are Required
Modifications), (b) Nonseverable Modifications and (c) Modifications financed by
the Owner Lessor by an
12
Additional Equity Investment or a Supplemental Financing pursuant to Section
11.1 of the Participation Agreement shall (without adjustment to the Head Lease
Rent (except as set forth in Section 11.2 of the Participation Agreement) or,
except as provided herein or in Section 11.2 of the Participation Agreement,
Periodic Lease Rent, Allocated Rent, Proportional Rent or Renewal Lease Rent)
immediately (i) become subject to the Head Lease and this Project Lease and, so
long as the Lien of the Indenture shall not have been terminated and fully
discharged, the Owner Lessor's Leasehold Interest therein shall immediately
become subject to the Lien of the Indenture, and (ii) be deemed part of the
Project for all purposes of this Project Lease and the other Operative
Documents. The Lessee, at its own cost and expense, shall take such steps as the
Owner Lessor and, so long as the Lien of the Indenture shall not have been
terminated and fully discharged, the Indenture Trustee may reasonably require
from time to time to confirm that such Modifications are subject to the Head
Lease and this Project Lease and, so long as the Lien of the Indenture shall not
have been terminated and fully discharged, the Owner Lessor's interest therein
are subject to the Lien of the Indenture. Optional Modifications which are
Severable Modifications and which are not financed by the Owner Lessor by an
Additional Equity Investment or a Supplemental Financing pursuant to Section
11.1 of the Participation Agreement are referred to herein as "Removable
Modifications"). All Modifications other than Removable Modifications shall
become subject to the Head Lease, this Project Lease and the Lien of the
Indenture. The parties agree that the Well Improvements are Nonseverable
Modifications.
Section 8.4. Purchase of Removable Modifications and Expansion
Project. Unless this Project Lease shall have sooner terminated, not later than
twenty (20) days prior to the Basic Lease Term Expiration Date (or any Renewal
Term then in effect), the Lessee shall notify the Owner Lessor of all Removable
Modifications which have not been removed from the Project. The Owner Lessor
shall have the right to purchase any Removable Modifications made to the Project
including those with respect to the Expansion Project which have not been
removed from the Project. The Owner Lessor may only exercise the purchase option
described in the immediately preceding sentence by irrevocable written notice to
the Lessee. The purchase price for Removable Modifications and the Expansion
Project to be purchased by the Owner Lessor shall be the then Fair Market Sales
Value as determined pursuant to Section 5.2(e). The Lessee may, at the Lessee's
cost and expense, remove any Removable Modifications, including the Expansion
Project that the Owner Lessor has not elected to purchase. The Lessee shall (at
the Lessee's cost and expense) repair any damage to the Project caused by the
removal by the Lessee of any Removable Modification including those with respect
to the Expansion Project. Any Removable Modification to the Project including
those with respect to the Expansion Project which are not removed by the Lessee
at or prior to the expiration or early termination of the Project Lease shall
become subject to the Head Lease (at no cost to the Owner Lessor).
SECTION 9. NET LEASE
This Project Lease is a "net lease" and the Lessee's obligation to pay all
Rent, including Periodic Lease Rent, Renewal Lease Rent and Supplemental Rent
payable hereunder, (and the accrual of Allocated Rent) shall be absolute and
unconditional under any and all circumstances and shall not be terminated,
extinguished, diminished, lost, setoff (except as expressly provided herein) or
otherwise impaired by any circumstance of any character, including by (i) any
claim, setoff, counterclaim, recoupment, defense or other right which the Lessee
may have against the
13
Owner Lessor, the Equity Investor, the Indenture Trustee, any of their
respective Affiliates or any other Person, including any claim as a result of
any breach by any of said parties of any covenant or provision in this Project
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 Project or any Component or any portion of any thereof,
or any eviction by paramount title or otherwise, or any unavailability of the
Project, the Lessee's interest in the Geothermal Resource, the Project Site, any
Component or any portion of either thereof, any other portion of the Project, or
any part thereof, (iii) any loss, theft or destruction of, or damage to, the
Project or any Component or any portion of any thereof or interruption or
cessation in the use or possession thereof or any part thereof by the 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
Project Site, the Project, the Lessee's interest in the Geothermal Resource, any
Component or any portion thereof by any Governmental Entity or otherwise, (v)
the invalidity or unenforceability (or allegation of invalidity or
unenforceability) or lack of due authorization or other infirmity of this
Project Lease or any other Operative Document, (vi) the lack of right, power or
authority of the Owner Lessor to enter into this Project Lease or any other
Operative Document, (vii) any ineligibility of the Project or any Component or
any portion of any thereof for any particular use, whether or not due to any
failure of the Lessee to comply with any Applicable Law, (viii) any event of
"force majeure" or any frustration of purpose, (ix) any legal requirement
similar or dissimilar to the foregoing, any present or future law to the
contrary notwithstanding, (x) any insolvency, bankruptcy, reorganization or
similar proceeding by or against the Lessee or any other Person, (xi) any Lien
of any Person with respect to the Project Site, the Project, any Component or
any portion of any thereof or any part thereof, (xii) any prohibition,
limitation or restriction of Lessee's use of all or any part of the Project, the
Project Site or any portion thereof or any interest therein or the interference
with such use by any Person, (xiii) the termination or loss of the Project Site
or any portion thereof, any other lease, sublease, right-of-way, easement or
other interest in personal or real property upon or to which any portion of the
Project is located, attached or appurtenant or in connection with which any
portion of the Project is used or otherwise affects or may affect the Project or
any right thereto, (xiv) any defect in the title to, or the existence of any
Lien with respect to the Project or any act of circumstances that may constitute
an eviction or constructive eviction, failure of consideration or commercial
frustration of purpose, (xv) any breach, default or misrepresentation by Owner
Lessor or any other Person under this Project Lease or any of the other
Operative Documents, (xvi) any failure, omission or delay on the part of any
Person to exercise any right, power or remedy under any Operative Document,
(xvii) the taking or omission of any of the actions referred to in any of the
Operative Documents or (xviii) 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 Rent, including all Periodic Lease Rent, Renewal
Lease Rent and Supplemental Rent payable hereunder, shall continue to be payable
by the Lessee hereunder, and Allocated Rent shall continue to accrue in each
case and in all events in the manner and at times provided for herein. Such
Rent, including Periodic Lease Rent or Renewal Lease Rent and Supplemental Lease
Rent 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 Lessee or any other Person against the Owner
Lessor or any other Person under this Project Lease or otherwise. To the extent
permitted by Applicable Law, the Lessee hereby waives any and all rights which
it may
14
now have or which at any time hereafter may be conferred upon it, by
statute or otherwise, to terminate, cancel, quit or surrender this Project Lease
except in accordance with Section 10, 13, 14 or 22. If for any reason whatsoever
this Project Lease shall be terminated in whole or in part by operation of law
or otherwise, except as specifically provided herein, the Lessee nonetheless
agrees, to the extent permitted by Applicable Law, to pay to the Owner Lessor an
amount equal to each installment of Periodic Lease Rent (or, in connection with
a termination of a Renewal Lease Term, Renewal 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 Project Lease not been so
terminated. Nothing contained herein shall be construed to waive any claim which
the Lessee might have under any of the Operative Documents or otherwise or to
limit the right of the 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 Lessee
shall deem appropriate.
SECTION 10. EVENTS OF LOSS
Section 10.1. Occurrence of Events of Loss. (a) The Owner Lessor will
promptly notify, or will cause the Equity Investor to promptly notify, the
Lessee upon obtaining Actual Knowledge of any event that upon election of the
Equity Investor would result in a Regulatory Event of Loss; provided that the
failure to deliver such notice shall not result in any liability to the Owner
Lessor or the Equity Investor. If an Event of Loss described in clause (a) or
(b) of the definition of such term shall occur or an event shall occur which
could become an Event of Loss as described in clause (c) of such term, then the
Lessee shall promptly notify the Owner Lessor and, so long as the Lien of the
Indenture shall not have been terminated and fully discharged, the Indenture
Trustee of the occurrence thereof. In the case of an Event of Loss described in
clause (a) or (b) of the definition thereof, the Lessee may elect to rebuild or
replace the damaged Project, provided (i) no Lease Default or Lease Event of
Default has occurred and is continuing (other than any Lease Default or Lease
Event of Default that would be cured by such rebuilding), (ii) notice of such
election has been given to the Owner Lessor and, so long as the Lien of the
Indenture shall not have been terminated and fully discharged, the Indenture
Trustee within 30 days of the date of the occurrence of the Event of Loss and
(iii) the conditions set forth in Section 10.3(a) shall have been satisfied.
If the Lessee fails to duly satisfy the conditions set forth in Section
10.3(a), the Lessee will be deemed to have made the election to terminate this
Project Lease pursuant to Section 10.1(b) as of the end of the 30 day period
referred to in the previous paragraph. If the Lessee satisfies the conditions in
Section 10.3(a), but fails to satisfy the conditions in Section 10.3(b), (c) or
(d), the Lessee will be deemed to have elected the termination option as of the
last day of the month in which the Owner Lessor has given notice of such
failure.
(b) If (i) an Event of Loss described in clause (a) or (b) of the
definition of such term shall have occurred and the Lessee shall have elected
(or shall be deemed to have elected) not to rebuild or replace the Project
pursuant to Section 10.1(a) hereof, or (ii) an Event of Loss described in clause
(c) of the definition of Event of Loss shall occur or (iii) a Regulatory Event
of Loss shall occur, then, (x) in the case of clause (i) above, on the next
Termination Date occurring at least 30 days after such election or deemed
election or (y) in the case of clause (ii) above, on the Termination Date next
occurring (1) at least six months after the occurrence of
15
such Event of Loss or (2) if earlier, at least 30 days after receipt of Casualty
Insurance Proceeds or Requisition Proceeds in respect of such Event of Loss, or
(z) in the case of clause (iii) above, on the Termination Date next occurring at
least three months after the occurrence of such Regulatory Event of Loss the
Lessee shall terminate this Project Lease. In connection with any such
termination arising as a result of an Event of Loss described in clause (a), (b)
or (c) of the definition thereof, if the Lessee shall have elected not to
rebuild or replace the Project, the Owner Lessor may elect to retain the Project
and pay the outstanding principal and accrued and unpaid interest on the Senior
Notes; provided however, that if the Owner Lessor elects to retain the Project
it shall notify the Lessee at least 30 days prior to such Termination Date and
shall deliver to the Indenture Trustee a letter of credit of an Acceptable
Letter of Credit Provider with a maximum drawing amount equal to not less than
the principal and interest which would be payable on the Senior Notes. If the
Owner Lessor elects to retain the Project as provided above, then the Lessee
shall, on such Termination Date, pay to the Owner Lessor (A) all amounts of any
unpaid Periodic Lease Rent and Renewal Lease Rent due on or before such
Termination Date, plus (B) all amounts of Supplemental Lease Rent (including
reasonable documented out-of-pocket costs and expenses incurred in connection
with such Event of Loss by the Owner Lessor, the Equity Investor, and the
Indenture Trustee) due and payable on or before such Termination Date. If the
Owner Lessor fails to elect to retain the Project as provided above, Lessee
shall offer (and unless the Lessor elects to retain the Project, such offer
shall be deemed accepted) to purchase, subject to the rights of any insurers
under policies maintained by the Lessee, on such Termination Date the Owner
Lessor's Leasehold Interest by paying or causing to be paid (1) the Termination
Value determined as of such Termination Date, plus (2) any unpaid Periodic Lease
Rent and Renewal Lease Rent due on or before such Termination Date, plus (3) all
other Supplemental Lease Rent (including reasonable documented out-of-pocket
costs and expenses incurred in connection with such Event of Loss by the Owner
Lessor, the Equity Investor and the Indenture Trustee) due and payable on or
prior to such Termination Date. Upon the payment of all sums required to be paid
pursuant to this Section 10.1(b), (i) Allocated Rent shall cease to accrue and
the obligation to pay Periodic Lease Rent or Renewal Lease Rent shall cease,
(ii) the Lessee shall cease to have any other liability to the Owner Lessor, the
Equity Investor, or the Indenture Trustee except for Supplemental Lease Rent and
other obligations (including those under Sections 9.1 and 9.2 of the
Participation Agreement and the Tax Indemnity Agreement) surviving pursuant to
the express terms of any Operative Document, (iii) the Owner Lessor shall pay
the outstanding principal and accrued and unpaid interest on the Senior Notes,
(iv) this Project Lease, the Head Lease, the Sublease of the Power Plant
Sublease and the Real Estate Documents related thereto shall terminate, (v) the
Owner Lessor shall, at the Lessee's cost and expense, execute and deliver to the
Lessee a release and termination of this Project Lease, the Head Lease, the
Sublease of the Power Plant Sublease and the Real Estate Documents related
thereto, (vi) the Owner Lessor shall transfer (by an appropriate instrument of
transfer in form and substance reasonably satisfactory to the Owner Lessor and
prepared by and at the expense of the Lessee) the Owner Lessor's Leasehold
Interest to the Lessee on an "as is, where is" and "with all faults" basis,
without representations or warranties other than a warranty as to the absence of
Owner Lessor's Liens and a warranty of the Equity Investor as to the absence of
Equity Investor's Liens and (vii) the Owner Lessor shall use all reasonable
efforts to cause the Indenture Trustee to discharge the Lien of the Indenture
and shall execute and deliver appropriate releases and other documents or
instruments necessary or desirable to effect the foregoing, all to be prepared,
filed and recorded (as appropriate) at the cost and expense of the Lessee.
16
Section 10.2. Application of Payments.
(a) All Requisition Proceeds received at any time by the Owner Lessor
or the Lessee from any Governmental Entity as a result of the occurrence of an
Event of Loss described in clause (c) of the definition of Event of Loss and all
Casualty Insurance Proceeds received as a result of the occurrence of an Event
of Loss described in clause (a) or (b) of the definition of Event of Loss shall
be applied as follows:
(i) in the event that the Owner Lessor elects to retain the
Project pursuant to Section 10.1(b), all such Requisition Proceeds and
all Casualty Insurance Proceeds shall be promptly paid to the Owner
Lessor;
(ii) in the event that the Owner Lessor elects not to retain the
Project pursuant to Section 10.1(b), then all such payments received
at any time by the Lessee shall be promptly paid to the Owner Lessor
or if the Lien of the Indenture shall not have been terminated and
fully discharged, to or at the direction of the Indenture Trustee, for
application pursuant to the following provisions of this Section 10.2:
(A) so much of such payments as shall not exceed the Rent
required to be paid by the Lessee pursuant to Section 10.1(b)
shall be applied in reduction of the Lessee's obligation to pay
such amount if not already paid by the Lessee or, if already paid
by the Lessee, shall, so long as no Lease Default or Lease Event
of Default shall have occurred and be continuing, be applied to
reimburse the Lessee for its payment of the Termination Value
portion of such amount; and
(B) the balance, if any, of such payments remaining
thereafter shall be apportioned between the Owner Lessor and the
Lessee as their interests may appear.
Notwithstanding the foregoing, if the Lessee shall have decided to rebuild
or replace the Project pursuant to Section 10.1(a), any Casualty Insurance
Proceeds received by the Owner Lessor, the Indenture Trustee or the Lessee as a
result of the occurrence of an Event of Loss described in clause (a) or (b) of
the definition of Event of Loss shall be paid to the Depositary Bank, deposited
into the Loss Proceeds Account and applied as provided in the Depositary
Agreement.
Section 10.3. Conditions to Lessee's Right to Rebuild or Replace. (a)
The Lessee's right to rebuild or replace the Project pursuant to Section 10.1(a)
shall be subject to the fulfillment, at the Lessee's sole cost and expense, of
the conditions contained in said clause (a), and the following additional
conditions:
(i) receipt by the Equity Investor and, so long as the Lien of
the Indenture shall not have been terminated and fully discharged, the
Indenture Trustee, on or prior to the date on which the election to
rebuild has been delivered pursuant to the third sentence of Section
10.1(a), of: (A) a report of the Engineering Consultant
17
or another independent engineer, such other engineer and such report
to be satisfactory to the Equity Investor and, so long as the Lien of
the Indenture has not been terminated and fully discharged, the
Indenture Trustee (and if the Lessee's interest in the Geothermal
Resource is affected by such Event of Loss a report of the Geothermal
Consultant or another independent geothermal consultant, such other
geothermal consultant and such report to be satisfactory to the Equity
Investor and, so long as the Lien of the Indenture shall not have been
terminated and fully discharged, the Indenture Trustee) to the effect
that (1) the rebuilding or replacement of the Project is
technologically feasible and economically viable with the Casualty
Insurance Proceeds paid or payable as a result of such damage to the
Project together with all funds that the Lessee has agreed in writing
to provide (in form and substance satisfactory to the Owner Lessor
and, so long as the Lien of the Indenture shall not have been
terminated and fully discharged, the Indenture Trustee), the
availability of such funds as required to be guaranteed by an
Acceptable Letter of Credit Provider whose right to reimbursement
shall be limited to funds of the Lessee which are not subject to the
Liens created under the Depositary Agreement, (2) it is reasonable to
expect that such rebuilding or replacement can be completed within
eighteen months from the date on which the Event of Loss occurred (the
"Rebuilding Measuring Date") but, in any event, no later than the last
day of the Project Lease Term unless Section 15.6 shall be applicable
and (3) it is reasonable to assume that the total net energy produced
by the Project at 12 and 18 months, respectively, after the Rebuilding
Measuring Date is equal to 40% and 100%, respectively, of the total
net energy produced by the Project in the last full calendar year
immediately preceding the Event of Loss, and (B) an appraisal of an
appraiser selected by the Lessee, such appraiser and such appraisal to
be reasonably acceptable to the Equity Investor and, so long as the
Lien of the Indenture shall not have been terminated and fully
discharged, the Indenture Trustee, to the effect that the Project,
after completion of the rebuilding or replacement, will have at least
the same current and residual value, utility and remaining useful life
as the Project immediately prior to the Event of Loss (assuming the
Project was then in the condition required by the terms of this
Project Lease), and (C) an Officer's Certificate of the Lessee, which
shall be reasonably satisfactory as to form and substance to the
Equity Investor and, so long as the Lien of the Indenture shall not
have been terminated and fully discharged, the Indenture Trustee, to
the effect that (1) no Lease Default or Lease Event of Default shall
have occurred and be continuing, (2) the Lessee has adequate financial
resources, from insurance proceeds or otherwise, to complete such
rebuilding or replacement and to perform its other obligations under
the Operative Documents, including the payment of Rent, (3) the Power
Purchase Agreement will stay in effect during the period of rebuilding
or replacement, (4) the Lease Rent Coverage Ratio during the period of
rebuilding or replacement will be not less than 1.00 to 1.00 (taking
into account all proceeds received from Business Interruption
insurance) and (5) such rebuilding will not result in the Project
being "limited use" property within the meaning of Rev. Proc. 2001-28,
2001-1 C.B. 1156.
(ii) receipt by the Equity Investor on or prior to the date on
which the election to rebuild or replace has been delivered pursuant
to the third sentence of
18
Section 10.1(a), of (A) a legal opinion of independent tax counsel
selected by the Equity Investor and reasonably satisfactory to the
Lessee to the effect that such rebuilding or replacement will not
result in any incremental tax risks to the Equity Investor, and (B) an
indemnity (with verification, tax savings, and contest rights
provisions substantially the same as those set forth in the Tax
Indemnity Agreement) against any tax risks resulting from the rebuild
or replacement of the Project in form and substance reasonably
satisfactory to the Equity Investor from the Lessee;
(iii) no material adverse accounting effect on the Equity
Investor shall be caused by such rebuilding or replacement; and
(iv) the Lessee shall have demonstrated to the reasonable
satisfaction of the Owner Lessor and, so long as the Lien of the
Indenture shall not have been terminated and fully discharged, the
Indenture Trustee (A) the absence of any Lease Default or Lease Event
of Default (other than any Lease Default or Lease Event of Default
that would be cured by such rebuilding), and (B) that all Governmental
Approvals required in connection with the work done or proposed to be
done have been obtained or can reasonably be expected to be obtained
on or prior to the date required in connection therewith.
(b) If the conditions to the rebuilding or replacement of the Project
set forth in paragraph (a) of this Section 10.3 have been fulfilled, the Lessee
shall cause the rebuilding or replacement to commence as soon as practicable,
and in any event within twelve (12) weeks of the Rebuilding Measuring Date and
will cause work on such rebuilding or replacement to proceed diligently
thereafter. As the rebuilding or replacement of the Project progresses, title to
the rebuilt or replacement Project shall vest in the Lessee and become subject
to the Head Lease and such interest of the Owner Lessor shall become subject to
this Project Lease and, so long as the Lien of the Indenture shall not have been
terminated and fully discharged, the Lien of the Indenture automatically without
any further act by any Person.
(c) Casualty Insurance Proceeds shall be released to pay costs of
rebuilding or replacement only if accompanied by an Officer's Certificate of the
Lessee which demonstrates that the rebuilding or replacement is proceeding in a
manner consistent with the requirements of Section 10.3(a), including in
conformity with the construction schedule described in the report of the
Engineering Consultant delivered pursuant thereto.
(d) On the date of the completion of such rebuilding or replacement of
the Project which shall occur within eighteen (18) months of the Rebuilding
Measuring Date (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 thereto shall be delivered
to the Owner Lessor and, so long as the Lien of the Indenture shall not have
been terminated and fully discharged, the Indenture Trustee:
(i) with respect to the Project, supplements to the Head Lease
and this Project Lease subjecting such rebuilt or replacement facility
to the Head Lease and this Project Lease (at no cost to the Owner
Lessor with no change in Head Lease
19
Rent, Allocated Rent, Proportional Rent or the Periodic Lease Rent or
Renewal Lease Rent as a result of such rebuilding or replacement);
(ii) supplements to the Indenture subjecting such rebuilt or
replacement facility to the Lien of the Indenture (at Lessee's sole
cost and expense);
(iii) such recordings and filings as may be reasonably requested
by the Equity Investor or the Indenture Trustee to be made or filed;
(iv) an opinion of counsel of the Lessee, such counsel and such
opinion to be reasonably satisfactory to the Equity Investor and, so
long as the Lien of the Indenture shall not have been terminated and
fully discharged, the Indenture Trustee to the effect that (A) the
supplements to the Head Lease and this Project Lease or other
documents required by clause (i) above constitute effective
instruments for subjecting such rebuilt or replacement facility to the
Head Lease and this Project Lease, (B) the supplements to the
Indenture required by clause (ii) above, if any, constitute effective
instruments for subjecting such rebuilt or replacement facility to the
Lien of the Indenture, and (C) all filings and other action necessary
to perfect and protect the Owner Lessor's and, if applicable, the
Indenture Trustee's interest in such rebuilt or replacement facility
have been accomplished;
(v) an appraisal by an Independent Appraiser, certifying that the
rebuilt or replacement facility 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 that the Project
would have had on the Rebuilding Closing Date had such Event of Loss
not occurred (assuming the Project would then be in the condition and
repair required to be maintained by the terms of this Project Lease)
and the Project is not "limited-use" property within the meaning of
Rev. Proc. 2001-28, 2001-1 C.B. 1156;
(vi) a report by an Engineering Consultant certifying that the
rebuilt or replacement facility is in a state of repair and condition
required by this Project Lease; and
(vii) satisfactory evidence as to the compliance with Section 11
of this Project Lease with respect to the rebuilt or replacement
facility.
(e) Whether or not the transactions contemplated by this Section 10.3
are consummated, the Lessee agrees to pay or reimburse, on an After-Tax Basis,
any costs or expenses (including reasonable legal fees and expenses) incurred by
the Owner Lessor, the Equity Investor, the Indenture Trustee and the Noteholders
in connection with the transactions contemplated by this Section 10.3.
Section 10.4. Application of Payments Not Relating to an Event of
Loss.
(a) In the event that during the Project Lease Term (i) the use of all
or any portion of the Project or the Lessee's interest in the Geothermal
Resource is subject to a seizure,
20
condemnation, confiscation or the taking of or requisition of title to or use
thereof by any Governmental Entity, or (ii) the Lessee is prevented from
operating or maintaining all or any portion of the Project, the Lessee's
interest in the Geothermal Resource or the Project Site as a result of a
seizure, condemnation, confiscation or the taking of or requisition of title to
or use thereof by any Governmental Entity, which in either case does not
constitute an Event of Loss, the Lessee's obligation to pay all installments of
Periodic Lease Rent and Renewal Lease Rent and the accrual of Allocated Rent
shall continue for the duration of such requisitioning or taking. The Lessee
shall be entitled to receive and retain for its own account all Requisition
Proceeds payable for any such period by such Governmental Entity as compensation
for such requisition or taking of possession; provided that such payments shall
be paid to the Depositary Bank, deposited into the Loss Proceeds Account and
applied in accordance with the terms of the Depositary Agreement.
(b) Any Casualty Insurance Proceeds with respect to the Project
received at any time by the Owner Lessor, the Indenture Trustee or the Lessee
under any of the insurance policies required to be maintained by the Lessee
under Section 11 as a result of any Partial Casualty shall be paid to the
Depositary Bank, deposited into the Loss Proceeds Account and applied in
accordance with the terms of the Depositary Agreement.
Section 10.5. Partial Casualties.
(a) Upon the occurrence of any Partial Casualty (other than a
Significant Partial Casualty), the Lessee (unless the Casualty Insurance
Proceeds received with respect to such Partial Casualty is less than $2,500,000,
the obligations of HELCO under the PPA are not affected as a result of any
decision not to cause such rebuilding or replacement to occur in accordance with
this Section 10.5(a) and such Partial Casualty does not (i) decrease by more
than a de minimis amount the current or residual value, remaining useful life or
utility of the Project below the current or residual value, the remaining useful
life or the utility thereof immediately prior to such Partial Casualty (assuming
the Project was then in the condition required to be maintained by the terms of
this Project Lease), (ii) cause the Project to become "limited-use" property
within the meaning of Rev. Proc. 2001-28, 2001-1 C.B. 1156 or (iii) result in a
Default or an Event of Default under any applicable term or provision of any
Operative Document) shall cause the rebuilding or replacement of the Project to
commence as soon as practicable, and in any event within twelve (12) months of
the occurrence of the event that caused such Partial Casualty and will cause
work on such rebuilding or replacement to proceed diligently thereafter. As the
rebuilding or replacement of the project progresses, (i) all such rebuilt or
replacement portions of Project shall become subject to the Head Lease and this
Project Lease, and (ii) so long as the Lien of the Indenture shall not have been
terminated and fully discharged, the Owner Lessor's interest therein shall
become subject to the Lien of the Indenture, automatically without any further
act by any Person. A Partial Casualty which constitutes a Significant Partial
Casualty shall be treated for purposes of this Project Lease as an Event of Loss
described in clauses (a) and (b) of the definition of such term, and, if the
Lessee chooses to rebuild or replace the Project, the provisions of Section 10.3
(a)(i) and (b) shall apply to such Partial Casualty. If the Lessee has failed to
satisfy such provisions of Section 10.3 with respect to a Significant Partial
Casualty, then such Partial Casualty shall be considered an Event of Loss for
purposes hereof, and the provisions of Section 10.1(b) shall apply.
21
(b) Upon the occurrence of a Partial Casualty (other than a
Significant Partial Casualty), the Lessee shall (i) cause the rebuilding or
replacement of the Owner Lessor's Leasehold Interest to be completed so that the
Project is in as good operating condition as the Project was immediately prior
to such Partial Casualty, assuming that the Project was maintained in accordance
with this Project Lease, (ii) cause such rebuilding or replacement to be
performed in a manner which does not (A) decrease by more than a de minimis
amount the current or residual value, remaining useful life or utility of the
Project below the current or residual value, the remaining useful life or the
utility thereof immediately prior to such replacement (assuming the Project was
then in the condition required to be maintained by the terms of this Project
Lease) or (B) cause the Project to become "limited-use" property within the
meaning of Rev. Proc. 2001-28, 2001-1 C.B. 1156 and (iii) cause the rebuilding
or replacement of the Project to be conducted and completed so as not to cause
the Lessee or the Owner Lessor to be in default under any applicable term or
provision of any Operative Document.
SECTION 11. INSURANCE
The Lessee will maintain (or cause to be maintained) the insurance required
to be maintained pursuant to Schedule 1 to this Project Lease.
SECTION 12. INSPECTION
During the Project Lease Term, each of the Equity Investor, the Owner
Lessor, and, so long as the Lien of the Indenture shall not have been terminated
and fully discharged, the Indenture Trustee and each of their representatives
may, during normal business hours, on reasonable notice to the Lessee, for a
reasonable period of time in light of the circumstances and at their own risk
and expense (except, at the expense but not the risk, of the Lessee when a
Significant Lease Default or a Lease Event of Default has occurred and is
continuing), inspect the Project and the records with respect to the operations
and maintenance thereof, in the Lessee's custody or to which the Lessee has
access so long as the Lessee has the opportunity to be present. Any such
inspection will not unreasonably disturb or interfere with the normal operation
or maintenance of the Project or the conduct by the Lessee of its business and
will be in accordance with the Lessee's safety and insurance programs. In no
event shall the Owner Lessor, the Equity Investor or the Indenture Trustee (or,
if applicable, any Noteholder) have any duty or obligation to make any such
inspection and such Persons shall not incur any liability or obligation by
reason of not making any such inspection.
SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS
Section 13.1. Election to Terminate. So long as no Significant Lease
Default or Lease Event of Default shall have occurred and be continuing, the
Lessee shall have the right to, at its option, upon giving prior written notice
to the Owner Lessor and, so long as the Lien of the Indenture shall have been
terminated and fully discharged, the Indenture Trustee no later than 12 months
after the date the Lessee has Actual Knowledge of the occurrence of an event set
forth in clause (a) or (b) below (any such notice, a "Burdensome Termination
Notice"), terminate this Project Lease in whole on the Termination Date
specified in such notice (the "Burdensome Termination Date") (which shall be a
date occurring not more than 90 days after the date of such
22
notice or such longer period (not to exceed twelve (12) months) as may be
required to effect the consummation of such termination) if:
(a) as a result of a change in Applicable Law, it shall have become
illegal for the Lessee to continue this Project Lease or for the Lessee to make
payments under this Project Lease or the other Operative Documents, and the
transactions contemplated by the Operative Documents cannot be restructured to
comply with such change in Applicable Law in a manner reasonably acceptable to
the Lessee, the Equity Investor, the Owner Lessor, and, so long as the Lien of
the Indenture shall not have been terminated and fully discharged, the Indenture
Trustee; or
(b) one or more events outside the control of the Lessee or any
Affiliate thereof shall have occurred that will, or can reasonably be expected
to, give rise to an obligation by the Lessee to incur an indemnity obligation
pursuant to the Tax Indemnity Agreement or Section 9.1 or 9.2 of the
Participation Agreement (excluding any such indemnity in respect of Hawaii
General Excise Taxes on Periodic Lease Rent at the rate thereof in effect of the
Closing Date); provided, that (i) such indemnity (and the underlying cost or
Tax) can be avoided in whole or in part if this Project Lease is terminated and
the Owner Lessor sells the Owner Lessor's Leasehold Interest and (ii) the amount
of such avoided payments would exceed (on a present value basis, discounted at
the Discount Rate to the Burdensome Termination Date, compounded on an annual
basis to the Burdensome Termination Date) 2.5% of the Head Lease Rent, and
provided, further, that no such termination option shall exist if the applicable
indemnitee shall waive its right to, or the Equity Investor shall arrange, in
its sole discretion, for payment of (without reimbursement by the Lessee or any
Affiliate thereof), amounts of indemnification payments under the Tax Indemnity
Agreement or Section 9.1 or 9.2 of the Participation Agreement in excess of such
amount as to cause such avoided payments, computed in accordance with the
preceding proviso, not to exceed 2.5% of the Head Lease Rent; or
No termination of this Project Lease pursuant to this Section 13.1 shall become
effective unless the conditions set forth in Section 13.3 are satisfied. In
connection with any termination by the Lessee of the Project Lease pursuant to
this Section 13.1, prior to the date on which notice of prepayment of Senior
Notes has become irrevocable in accordance with the terms of the Indenture, the
Lessee shall provide reasonable assurances to the Indenture Trustee of its
ability to pay the principal, Make Whole Premium, if any, and interest on the
Senior Notes in full on the Burdensome Termination Date. If the Lessee does not
give notice of its exercise of the termination option under this Section 13.1
within twelve (12) months of the date the Lessee receives notice or first has
Actual Knowledge of an event or condition described above, the Lessee will lose
its right to terminate this Project Lease pursuant to this Section 13.1 as a
result of such event or condition.
Section 13.2. Solicitation of Offers; Payments Upon Termination. (a)
Upon receipt of a termination notice from the Lessee pursuant to Section 13.1,
the Owner Lessor may, but shall be under no obligation to, sell the Owner
Lessor's Leasehold Interest and, at the request of the Owner Lessor, the Lessee
will, as non-exclusive agent for the Owner Lessor, use commercially reasonable
efforts to obtain cash bids for the Owner Lessor's Leasehold Interest. In
connection with such termination, the Lessee may, but shall be under no
obligation to, make
23
an offer to purchase the Owner Lessor's Leasehold Interest. Only bona fide bids,
whether from the Lessee or a third party, to purchase the Owner Lessor's
Leasehold Interest for cash on the Burdensome Termination Date on an "as is,
where is" and "with all faults" basis without any representation, other than by
the Owner Lessor as to the absence of Owner Lessor's Liens and a warranty of the
Equity Investor as to the absence of Equity Investor's Liens, shall be
"Qualifying Cash Bids". All the proceeds of any such sale shall be for the
account of the Owner Lessor; provided that so long as the Lien of the Indenture
shall not have been terminated and fully discharged, the proceeds of such sale
shall be paid directly to or at the direction of the Indenture Trustee. The
Owner Lessor shall be under no obligation to accept any Qualifying Cash Bid. If
the Owner Lessor receives any Qualifying Cash Bids, the Owner Lessor shall be
deemed to have accepted the highest such bid received by 10 Business Days prior
to the Burdensome Termination Date unless the Owner Lessor rejects such bid and
elects to retain the Owner Lessor's Leasehold Interest in writing prior to the
earlier of (x) the expiration date of such bid and (y) the date at least 45 days
prior to the Burdensome Termination Date.
(b) If the Owner Lessor receives any Qualifying Cash Bid (regardless
of whether or not such Qualifying Cash Bid is accepted by the Owner Lessor) on
the Burdensome Termination Date, the Lessee shall pay the Owner Lessor (i) the
amount, if any, by which the Termination Value determined as of the Burdensome
Termination Date exceeds the sales price of the highest Qualifying Cash Bid
actually received by the Owner Lessor, whether from the Lessee or a third party
(net of the fees, commissions and costs of any broker engaged by the Lessee or
any Affiliate thereof), plus (ii) all other amounts due and payable under
clauses (a), (b) and (c) of Section 13.3; provided that so long as the Lien of
the Indenture shall not have been terminated and fully discharged, such amounts
shall be paid directly to or at the direction of the Indenture Trustee.
(c) If no Qualifying Cash Bids are received by the Termination Date or
if a Qualifying Cash Bid is accepted (or deemed accepted) by the Owner Lessor
but does not, other than as a result of the Owner Lessor's failure to transfer
the Owner Lessor's Leasehold Interest free and clear of Owner Lessor's Liens or
the Equity Investor's failure to provide a warranty as to the absence of Equity
Investor's Liens, result in a sale of the Owner Lessor's Leasehold Interest, the
Owner Lessor may elect in writing to retain the Owner Lessor's Leasehold
Interest (and to forego its right to receive payment of Termination Value) and
require the Lessee to pay to the Owner Lessor on the Burdensome Termination Date
all amounts due and payable under clauses (a), (b) and (c) of Section 13.3 (but
not Termination Value); provided, however, that the Owner Lessor may not elect
to retain the Owner Lessor's Leasehold Interest unless it shall provide to the
Indenture Trustee an irrevocable commitment to pay, and reasonable assurances of
its ability to pay, the principal, premium and interest on the Senior Notes in
full on the Burdensome Termination Date. In the event the Owner Lessor does not
elect to retain the Owner Lessor's Leasehold Interest, the Lessee may, in its
sole discretion, (except as provided in the last sentence of this last paragraph
(c)), (i) withdraw its Burdensome Termination Notice (provided such withdrawal
is prior to the date on which the notice to prepay Senior Notes is irrevocable
in accordance with the terms of the Indenture), in which event this Project
Lease shall continue, any notice of prepayment of Senior Notes pursuant to the
Indenture shall be withdrawn and the Lessee shall pay on an After-Tax Basis all
reasonable, documented out-of-pocket costs and expenses of the Owner Lessor, the
Equity Investor and the Indenture Trustee in connection with
24
the giving (and subsequent withdrawal) of the Burdensome Termination Notice, or
(ii) as non-exclusive agent for the Owner Lessor, use commercially reasonable
efforts to sell the Owner Lessor's Leasehold Interest, in which case the Lessee
shall be required to pay the Termination Value determined as of the Burdensome
Termination Date plus all amounts due and payable under clauses (a), (b) and (c)
of Section 13.3. If the Lessee does not withdraw its Burdensome Termination
Notice, the Lessee may, but shall be under no obligation to, make an offer (but
will not have the right) to purchase the Project for scrap. If at least one
Qualifying Cash Bid is received and the Owner Lessor does not elect to retain
the Owner Lessor's Leasehold Interest, the Owner Lessor shall sell the Owner
Lessor's Leasehold Interest to the party that submitted the highest Qualifying
Cash Bid on an "as is, where is" and "with all faults" basis, without
representations or warranties other than a warranty as to the absence of Owner
Lessor's Liens and a warranty of the Equity Investor as to the absence of Equity
Investor's Liens. The Lessee shall pay on an After-Tax Basis all reasonable
documented out-of-pocket expenses of the Owner Lessor, the Equity Investor, the
Indenture Trustee and the Noteholders in connection with such sale, and the
Owner Lessor shall pay the net cash proceeds of the sale to the Lessee to the
extent Lessee has paid Termination Value and the amounts under clauses (a), (b)
and (c) of Section 13.3. Notwithstanding the foregoing, if a notice to prepay
Senior Notes has been given in response to a Burdensome Termination Notice, and
such prepayment notice has become irrevocable in accordance with the terms of
the Indenture, the Lessee shall make the election described in clause (ii) above
and, if no Qualifying Cash Bids are received, offer to (but will not have the
right) purchase the Project for scrap on the Burdensome Termination Date.
Section 13.3. Procedure for Exercise of Termination Option. If the
Lessee shall have exercised its option to terminate this Project Lease under
Section 13.1, on the Burdensome Termination Date specified in the Burdensome
Termination Notice, the Lessee shall pay to the Owner Lessor (a) all
Supplemental Lease Rent (including all reasonable out-of-pocket costs and
expenses of the Owner Lessor, the Equity Investor, the Indenture Trustee and the
Noteholders) due and payable on or prior to the Burdensome Termination Date, (b)
any unpaid Periodic Lease Rent and Renewal Lease Rent due on or before such
Burdensome Termination Date and (c) any premium, including Make Whole Premium,
due on the Senior Notes being prepaid pursuant to this Section 13. All Rent
payments, including payments of Make Whole Premium, under Section 13.2 and this
Section 13.3 shall, so long as the Lien of Indenture shall not have been
terminated and fully discharged be made to or at the direction of the Indenture
Trustee. So long as the Lessee shall not have withdrawn its Burdensome
Termination Notice pursuant to Section 13.2(c)(i), upon payment of all sums
specified in Section 13.2 and this Section 13.3, (i) Allocated Rent shall cease
to accrue and the obligation to pay Periodic Lease Rent or Renewal Lease Rent
shall cease, (ii) the Lessee shall cease to have any liability to the Owner
Lessor, the Equity Investor or the Indenture Trustee, except for Supplemental
Lease Rent and other obligations (including those under Sections 9.1 and 9.2 of
the Participation Agreement and the Tax Indemnity Agreement) surviving pursuant
to the express terms of any Operative Document, (iii) unless the Lessee assumes
the Senior Notes and the obligations and liabilities of the Owner Lessor under
the Indenture, the Owner Lessor shall pay the outstanding principal and accrued
and unpaid interest and Make Whole Premium, if any, on the Senior Notes, (iv)
this Project Lease, the Head Lease (unless the Owner Lessor elects to retain
Owner Lessor's Leasehold Interest) and the Sublease of the Power Plant Sublease
shall terminate, (v) the Owner Lessor shall, at the Lessee's cost and expense,
execute and deliver to the Lessee a release and
25
termination of this Project Lease, the Head Lease (unless the Owner Lessor
elects to retain the Owner Lessor's Leasehold Interest) and the Sublease of the
Power Plant Sublease, (vi) unless the Lessee assumes the Senior Notes and the
obligations and liabilities of the Owner Lessor under the Indenture or purchases
the Owner Lessor's Leasehold Interest in accordance with Section 13.1, the
Lessee will return the Project to the Owner Lessor in accordance with Section 5,
(vii) in connection with any sale of Owner Lessor's Leasehold Interest pursuant
to Section 13.2, such sale shall be made subject to the Lessee's rights to
remove Severable Modifications as permitted in Section 8.4 and the Owner Lessor
shall (unless the Owner Lessor elects to retain the Owner Lessor's Leasehold
Interest) transfer (by an appropriate instrument of transfer in form and
substance reasonably satisfactory to the Owner Lessor and prepared by and at the
expense of the Lessee) the Owner Lessor's Leasehold Interest to the purchaser
pursuant to this Section 13.3 on an "as is, where is" and "with all faults"
basis, without representations or warranties other than a warranty as to the
absence of Owner Lessor's Liens and a warranty of the Equity Investor as to the
absence of Equity Investor's Liens, and (viii) the Owner Lessor shall use all
reasonable efforts to cause the Indenture Trustee to discharge the Lien of the
Indenture, unless the Lessee assumes the Senior Notes and the obligations and
liabilities of the Owner Lessor under the Indenture, and shall execute and
deliver appropriate releases and other documents or instruments necessary or
desirable to effect the foregoing, all to be prepared, filed and recorded (as
appropriate) at the cost and expense of the Lessee. It shall be a condition of
the termination of this Project Lease pursuant to this Section 13 that the
Lessee shall pay all amounts it is obligated to pay under Section 13.2 and this
Section 13.3. If the Lessee fails to consummate the termination option under
this Section 13 after giving notice of its intention to do so, (i) this Project
Lease shall continue, (ii) such failure to consummate shall not constitute a
Lease Default, and (iii) unless such failure is a consequence of a failure of
either the Owner Lessor or the Equity Investor to fulfill its obligations under
this Section 13, the Lessee will lose its right to terminate this Project Lease
pursuant to this Section 13 as a result of the particular event or condition
described in Section 13.1 (a) or (b) then giving rise to the option to terminate
this Project Lease under Section 13.1 during the remainder of the Project Lease
Term, provided that if the notice to prepay Senior Notes given as a result of
the Burdensome Termination Notice has become irrevocable in accordance with the
terms of the Indenture, the Lessee shall make a Supplemental Rent Payment (on an
After-Tax Basis to the Owner Lessor and the Equity Investor) equal to the
principal of, and interest and Make-Whole Premium, if any, on the Senior Notes
which are due and payable on the Burdensome Termination Date. Whether or not
this Project Lease is terminated, the Lessee shall in any event pay all
reasonable out-of-pocket costs and expenses of the Owner Lessor, the Equity
Investor, the Indenture Trustee and the Noteholders in connection with the
exercise by the Lessee of its right to terminate this Project Lease under this
Section 13.
SECTION 14. TERMINATION FOR OBSOLESCENCE
Section 14.1. Termination. Upon at least six month's prior written
notice to the Owner Lessor, the Equity Investor and, so long as the Lien of the
Indenture has not been terminated and fully discharged, the Indenture Trustee
(which notice shall be accompanied by an Officer's Certificate setting forth in
reasonable detail the basis on which it is exercising this termination option),
the Lessee shall have the option, so long as no Significant Lease Default or
Lease Event of Default shall have occurred and be continuing on the proposed
Obsolescence Termination Date, to terminate this Project Lease on any
Termination Date occurring on or after
26
the seventh anniversary of the Closing Date (the date of termination selected by
the Lessee being the "Obsolescence Termination Date") on the terms and
conditions set forth in this Section 14 if the Lessee determines as certified by
either of the Lessee's partners that the Project is economically or
technologically obsolete or surplus to its needs or is no longer useful in its
trade or business (a) as a result of a change in Applicable Law, regulation or
tariff of general application, or imposition by any Governmental Entity having
or claiming jurisdiction over the Lessee or the Project of any conditions or
requirements (including requiring significant capital improvement to the
Project) upon the availability, continued effectiveness or renewal of any
license or permit required for the ownership or operation of the Project or (b)
for any other reason. No termination of this Project Lease pursuant to this
Section 14.1 shall become effective unless the conditions set forth in Section
14.4 hereof are satisfied.
Section 14.2. Solicitation of Offers. If the Lessee shall give the
Owner Lessor notice pursuant to Section 14.1 and the Owner Lessor shall not have
elected to retain the Owner Lessor's Leasehold Interest pursuant to Section 14.3
hereof, the Lessee shall, as non-exclusive agent for the Owner Lessor, use its
commercially reasonable efforts to obtain bids for the sale of and, subject to
Section 14.4 hereof, sell such Owner Lessor's Leasehold Interest on the
Obsolescence Termination Date, and all of the proceeds of such sale will be for
the account of the Owner Lessor; provided that so long as the Lien of the
Indenture shall not have been terminated and fully discharged, the proceeds of
such sale shall be paid directly to or at the direction of the Indenture
Trustee. The Owner Lessor shall also have the right, but no obligation, to
obtain bids for the sale of such Owner Lessor's Leasehold Interest either
directly or through agents other than the Lessee. At least 90 days prior to the
Obsolescence Termination Date the Lessee shall certify to the Owner Lessor and
the Indenture Trustee each bid or offer, the amount and terms thereof and the
name and address of the party (which shall not be the Lessee, any Affiliate of
the Lessee or any third party with whom the Lessee or an Affiliate of the Lessee
has an arrangement to use or operate the Project to generate power for the
benefit of the Lessee or such Affiliate after the termination of this Project
Lease) submitting such bid or offer.
Section 14.3. Right of Owner Lessor to Retain the Owner Lessor's
Leasehold Interest. If the Owner Lessor has provided to the Indenture Trustee an
irrevocable commitment to pay, and reasonable assurances of its ability to pay
the principal of, and interest and Make-Whole Premium, if applicable, on, the
Senior Notes which would be payable on the Obsolescence Termination Date, the
Owner Lessor may irrevocably elect to retain, rather than sell, the Owner
Lessor's Leasehold Interest by giving notice to the Lessee not less than 90 days
after the Lessee elects to terminate this Project Lease under Section 14.1. If
the Owner Lessor elects to retain such Owner Lessor's Leasehold Interest
pursuant to this Section 14.3, on the Obsolescence Termination Date the Lessee
shall pay to the Owner Lessor (a) all Supplemental Lease Rent (including all
reasonable out-of-pocket costs and expenses of the Owner Lessor, the Equity
Investor, the Indenture Trustee and the Noteholders (excluding the fees and
costs of any broker unless engaged by the Lessee on the Owner Lessor's behalf),
but excluding Termination Value) due and payable on or prior to such
Obsolescence Termination Date, (b) any unpaid Periodic Lease Rent and Renewal
Lease Rent due on or before such Obsolescence Termination Date, plus (c) any
premium, including any Make Whole Premium, due on the Senior Notes being prepaid
pursuant to this Section 14, but the Lessee shall not be required to pay
Termination Value. All Rent payments, including payments of Make Whole Premium,
if applicable, under
27
this Section 14.3 shall, so long as the Lien of the Indenture shall not have
been terminated and fully discharged, be made to or at the direction of the
Indenture Trustee. Upon payment of all sums required to be paid pursuant to this
Section 14.3, (i) Allocated Rent shall cease to accrue and the obligation to pay
Periodic Lease Rent and Renewal Lease Rent shall cease, (ii) the Lessee shall
cease to have any liability to the Owner Lessor, the Equity Investor or the
Indenture Trustee with respect to the Project, except for Supplemental Lease
Rent and other obligations (including those under Sections 9.1 and 9.2 of the
Participation Agreement and the Tax Indemnity Agreement) surviving pursuant to
the express terms of any Operative Document, (iii) the Owner Lessor shall pay
the outstanding principal and accrued and unpaid interest (and Make Whole
Premium, if applicable) on the Senior Notes, (iv) this Project Lease and the
Head Lease shall terminate, (v) the Owner Lessor shall, at the Lessee's cost and
expense, execute and deliver to the Lessee a release and termination of this
Project Lease and the Sublease of the Power Plant Sublease, (vi) the Lessee will
return the Project to the Owner Lessor in accordance with Section 5, and (vii)
the Owner Lessor shall use all reasonable efforts to cause the Indenture Trustee
to discharge the Lien of the Indenture and to execute and deliver appropriate
releases and other documents or instruments necessary or desirable to effect the
foregoing, all to be prepared, filed and recorded (as appropriate) at the cost
and expense of the Lessee. It shall be a condition to the termination of this
Project Lease pursuant to this Section 14.3 that the Lessee shall pay all
amounts that it is obligated to pay under this Section 14.3. If the Owner Lessor
shall not have complied with its obligations set forth in the next preceding
sentence, on the Obsolescence Termination Date, the notice of termination shall
be deemed revoked and this Project Lease shall continue in full force and effect
in accordance with its terms (without prejudice to the Lessee's right to
exercise its rights under this Section 14 or the rights of the Noteholders to
exercise their rights under the Indenture if such revocation is given after the
date on which the notice of prepayment of the Senior Notes is irrevocable under
the Indenture).
Section 14.4. Procedure for Exercise of Termination Option. If the
Owner Lessor has not elected to retain the Owner Lessor's Leasehold Interest in
accordance with Section 14.3 hereof, on the Obsolescence Termination Date the
Owner Lessor shall sell the Owner Lessor's Leasehold Interest under this Section
14.4 hereof to the bidder or bidders (which shall not be the Lessee, any
Affiliate thereof or any third party with whom the Lessee or an Affiliate of the
Lessee has an arrangement to use or operate the Project to generate power for
the benefit of the Lessee or such Affiliate after the termination of this
Project Lease), that shall have submitted the highest cash bid and the net
proceeds of such sale shall be for the account of the Owner Lessor. In addition,
the Lessee shall certify to the Owner Lessor and, so long as the Lien of the
Indenture shall not have been terminated and fully discharged, the Indenture
Trustee that such buyer is not the Lessee, any Affiliate thereof or any third
party with whom the Lessee or an Affiliate of the Lessee has an arrangement to
use or operate the Project to generate power for the benefit of the Lessee or
such Affiliate after the termination of this Project Lease. On the Obsolescence
Termination Date, the Lessee shall pay to the Owner Lessor (a) the excess, if
any, of Termination Value determined as of such Obsolescence Termination Date,
over the total sales price of the Owner Lessor's Leasehold Interest retained by
the Owner Lessor (net of the fees, commissions, costs and other amounts of any
broker engaged by the Lessee or any Affiliate thereof on the Owner Lessor's
behalf), plus (b) any unpaid Periodic Lease Rent and Renewal Lease Rent due on
or before such Obsolescence Termination Date, plus (c) all Supplemental Lease
Rent (including all reasonable out-of-pocket costs and expenses of the Owner
Lessor, the
28
Equity Investor, the Indenture Trustee and the Noteholders (excluding the fees
and costs of any broker unless engaged by the Lessee on the Owner Lessor's
behalf)) due and payable on or prior to such Obsolescence Termination Date, plus
(d) any premium, including Make Whole Premium, if applicable, due on the Senior
Notes being prepaid pursuant to this Section 14. All Rent payments, including
payments of Make Whole Premium, under this Section 14.4 shall, so long as the
Lien of the Indenture shall not have been terminated and fully discharged, be
made to or at the direction of the Indenture Trustee. Upon the payment of all
sums specified in this Section 14.4, (i) Allocated Rent shall cease to accrue
and the obligation to pay Periodic Lease Rent or Renewal Lease Rent shall cease,
(ii) the Lessee shall cease to have any liability to the Owner Lessor, the
Equity Investor or the Indenture Trustee, except for Supplemental Lease Rent and
other obligations (including those under Sections 9.1 and 9.2 of the
Participation Agreement and the Tax Indemnity Agreement) surviving pursuant to
the express terms of any Operative Document, (iii) the Owner Lessor shall pay
the outstanding principal and accrued and unpaid interest (and Make Whole
Premium, if applicable) on the Senior Notes, (iv) this Project Lease and the
Head Lease shall terminate, (v) the Owner Lessor shall, at the Lessee's cost and
expense, execute and deliver to the Lessee a release and termination of this
Project Lease, the Head Lease and the Real Estate Documents, (vi) the Lessee
will return the Project to the Owner Lessor in accordance with Section 5, (vii)
in connection with any sale of the Owner Lessor's Leasehold Interest pursuant to
this Section 14.4, such sale shall be made subject to the Lessee's rights to
remove Severable Modifications as permitted in Section 8.3 and 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 by and at
the expense of the Lessee) the Owner Lessor's Leasehold Interest to the
purchaser pursuant to this Section 14.4 on an "as is, where is" and "with all
faults" basis, without representations or warranties other than a warranty as to
the absence of Owner Lessor's Liens and a warranty from the Equity Investor as
to the absence of Equity Investor's Liens, and (viii) the Owner Lessor shall use
all reasonable efforts to cause the Indenture Trustee to discharge the Lien of
the Indenture and shall execute and deliver appropriate releases and other
documents or instruments necessary or desirable to effect the foregoing, all to
be prepared, filed and recorded (as appropriate) at the sole cost and expense of
the Lessee. Unless the Owner Lessor shall have elected to retain the Owner
Lessor's Leasehold Interest pursuant to Section 14.3 or the Owner Lessor with
the consent of the Lessee shall have entered into a legally binding contract to
sell the Owner Lessor's Leasehold Interest, the Lessee may, at its election,
revoke its notice of termination on at least 30 days' prior notice to the Owner
Lessor and, so long as the Lien of the Indenture shall not have been terminated
and fully discharged, the Indenture Trustee, in which event this Project Lease
shall continue, and the Lessee will reimburse the Owner Lessor, the Equity
Investor, the Indenture Trustee and the Noteholders on an After-Tax Basis for
all reasonable, documented out-of-pocket costs and expenses incurred in
connection with the election (and subsequent revocation) by the Lessee of its
right to terminate this Project Lease under this Section 14; provided, however,
that the Lessee shall not be permitted to initiate a notice to terminate
pursuant to Section 14.1 more than three times during the term of this Project
Lease or more than twice in any five year period. The Owner Lessor shall be
under no duty to solicit bids, to inquire into the efforts of the Lessee to
obtain bids or otherwise take any action in arranging any such sale of the Owner
Lessor's Leasehold Interest other than, if the Owner Lessor has not elected to
retain the Owner Lessor's Leasehold Interest, to transfer the Owner Lessor's
Leasehold Interest in accordance with clause (vii) of this Section 14.4. It
shall be a condition of the Owner Lessor's obligation to consummate
29
a sale of the Owner Lessor's Leasehold Interest that the 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 Project Lease shall continue in full force and effect in
accordance with its terms (without prejudice to the Lessee's right to exercise
its rights under this Section 14); provided that if the Lessee has not given a
notice of revocation before the date on which the notice of prepayment of Senior
Notes has become irrevocable in accordance with the terms of the Indenture, the
Lessee shall be obligated to make a Supplemental Rent payment (on an After-Tax
Basis to the Owner Lessor and the Equity Investor) equal to the principal of,
and interest and Make-Whole Premium, if applicable, on the Senior Notes which
are due and payable.
SECTION 15. LEASE RENEWAL
Section 15.1. Wintergreen Renewal Lease Term. Not earlier than
twenty-four (24) months and not later than eighteen (18) months prior to the
expiration of the Basic Lease Term, the Lessee may deliver to the Owner Lessor
written notice (which notice may be in addition to a notice of the Lessee's
tentative interest in electing an FMV Renewal Lease Term under Section 15.2) of
the Lessee's tentative interest in renewing this Project Lease for a term (the
"Wintergreen Renewal Lease Term") commencing on the day following the last day
of the Basic Lease Term and ending on a date (a) as of which the sum of the
number of years of the proposed Wintergreen Renewal Lease Term and the Basic
Lease Term is not more than seventy-five (75%) of the estimated economic useful
life of the Project measured from the Closing Date, but determined by an
Independent Appraiser (which Independent Appraiser shall be selected by the
Owner Lessor and be reasonably acceptable to the Lessee) in accordance with the
Appraisal Procedure not more than twelve (12) months before the end of the Basic
Lease Term, and (b) as of which the estimated fair market value of the Project
determined, by such Independent Appraiser, subsequent to the Lessee's tentative
election of the Wintergreen Renewal Lease Term (but not earlier than twelve (12)
months prior to the expiration of the Basic Lease Term), shall equal or exceed
twenty percent (20%) of the Head Lease Rent (without taking into account
inflation or deflation subsequent to the Closing Date), provided that no
Wintergreen Renewal Lease Term shall be for a period of less than one (1) year.
Unless the Lessee shall have irrevocably elected to renew this Project Lease for
an FMV Renewal Lease Term under Section 15.2, and provided that no Lease Event
of Default shall have occurred and be continuing on such notice date on or prior
to eighteen (18) months before the expiration of the Basic Lease Term, the
Lessee may deliver to the Owner Lessor a further notice in writing irrevocably
electing to renew this Project Lease for the Wintergreen Renewal Lease Term
determined as aforesaid and, subject to no Significant Lease Default or Lease
Event of Default having occurred and continuing on the last day of the Basic
Lease Term, the Wintergreen Renewal Lease Term shall thereupon take effect as
provided herein. The Independent Appraiser's fees and expenses shall be borne by
the Lessee.
Section 15.2. Fair Market Value Renewal Lease Terms. Not earlier than
thirty-six (36) months and not later than eighteen (18) months prior to the
expiration of the Basic Lease Term, the Wintergreen Renewal Lease Term or any
other Renewal Lease Term, unless a Lease Event of Default shall have occurred
and be continuing, the Lessee may deliver to the Owner Lessor notice (which
notice may be in addition to a notice of the Lessee's tentative interest in
30
electing the Wintergreen Renewal Lease Term) of the Lessee's tentative interest
in renewing this Project Lease for a term (each such term, a "FMV Renewal Lease
Term") commencing on the day following the last day of the Basic Lease Term or a
Renewal Lease Term otherwise expiring and extending for a period equal to three
years; provided that unless such FMV Renewal Lease Term extends to the end of
the useful life of the Project, no such FMV Renewal Lease Term shall extend
beyond the date that is three (3) years prior to the end of the useful life of
the Project (as set forth in the most recent of (a) the Closing Appraisal or (b)
the appraisal obtained in connection with the exercise of the Wintergreen
Renewal Lease Term or the most recent FMV Renewal Lease Term, if any). Unless
the Lessee shall have irrevocably elected to renew this Project Lease for the
Wintergreen Renewal Lease Term pursuant to Section 15.1 (it being understood
that the exercise by the Lessee of its right to renew this Project Lease at the
end of the Basic Lease Term pursuant to Section 15.1 hereof shall not impair its
right to renew this Project Lease at any time thereafter pursuant to this
Section 15.2), and provided that no Lease Event of Default shall have occurred
and be continuing on any such notice date or on the date of expiration of the
Basic Lease Term or the Renewal Lease Term immediately preceding such FMV
Renewal Lease Term, as the case may be, on or prior to eighteen (18) months
before the expiration of the existing Basic Lease Term or the relevant Renewal
Lease Term, as the case may be, the Lessee may deliver to the Owner Lessor a
further notice irrevocably electing to renew this Project Lease for the FMV
Renewal Lease Term tentatively elected as aforesaid and, subject to no
Significant Lease Default or Lease Event of Default having occurred and
continuing on the last day of the Basic Lease Term or the Renewal Lease Term
immediately preceding such FMV Renewal Lease Term, as the case may be, the FMV
Renewal Lease Term shall thereupon take effect as provided herein.
Section 15.3. Renewal Lease Rent for the Renewal Lease Term.
(a) Renewal Lease Rent shall be paid on each Rent Payment Date, in
arrears, during each Renewal Lease Term.
(b) The installment of Renewal Lease Rent payable on each Rent Payment
Date during the Wintergreen Renewal Lease Term is an amount equal to 100% of the
average annual Periodic Lease Rent during the Project Lease Term.
(c) Renewal Lease Rent payable on each Rent Payment Date during any
FMV Renewal Lease Term shall be the Fair Market Rental Value for the Project as
determined in accordance with Section 15.4.
Section 15.4. Determination of Fair Market Rental Value. The Fair
Market Rental Value of the Project as of the commencement of any Renewal Lease
Term shall be determined by agreement of the Owner Lessor and the Lessee within
six months after receipt by the Owner Lessor of the tentative notice from the
Lessee of its election to renew pursuant to Section 15.2, (but not more than
twelve (12) 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
Independent Appraiser in accordance with the Appraisal Procedures, which
Independent Appraiser shall be selected by the Owner Lessor and reasonably
acceptable to the Lessee. The appraiser's fees and expenses shall be borne by
the Lessee.
31
Section 15.5. Termination Value During Renewal Lease Terms. The
amounts which are payable during any Renewal Lease Term in respect of
Termination Value shall be determined on the basis of the Fair Market Sales
Value of the Project as of the commencement of such Renewal Lease Term,
amortized on a straight-line basis over such Renewal Lease Term to the projected
Fair Market Sales Value of the Project as of the expiration of such Renewal
Lease Term, as such Fair Market Sales Value in each case is determined prior to
the commencement of such Renewal Lease Term, plus any amount of Renewal Lease
Rent accrued and unpaid to the date of termination. In determining Fair Market
Sales Value for any Renewal Lease Term, effect shall be given, whether positive
or negative, to the encumbrance on the Project of any FMV Renewal Lease Term
available or in force.
Section 15.6. Rebuilding Related Extensions. In the event that the
Project has suffered an Event of Loss or Significant Partial Loss and the Lessee
has elected to rebuild the Project pursuant to Section 10.1 but is unable to
satisfy the conditions set forth in Section 10.3 prior to the last day of the
Project Lease Term, then, notwithstanding the provisions of Section 15.2, the
Lessee shall be deemed to have elected the renewal option set forth in Section
15.2. The term of any such renewal shall extend until the date that is 18 months
following the date on which all of the conditions set forth in Section 10.3 are
satisfied. The Fair Market Rental Value payable during any such renewal term
shall be equal to the Fair Market Rental Value of the Project assuming that the
Project had been fully rebuilt on the first day of such renewal term in
accordance with Section 10.3.
SECTION 16. EVENTS OF DEFAULT
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 Entity):
(a) the Lessee shall fail to make any payment of Periodic Lease Rent,
Renewal Lease Rent or Termination Value (or amounts computed by reference to
Termination Value) after the same shall have become due and payable, and such
failure shall have continued for five (5) Business Days after the same shall
have become due and payable; or
(b) the Lessee shall fail to make any payment of Supplemental Lease
Rent (other than Excepted Payments, unless the Equity Investor shall have
acknowledged in writing that such failure to pay any such Excepted Payment shall
constitute a default hereunder) after the same shall have become due and such
failure shall have continued for a period of 30 days after receipt by the Lessee
of written notice of such failure from the Equity Investor, the Owner Lessor or
the Indenture Trustee; or
(c) [intentionally omitted]
(d) the Lessee or the Pledgor shall fail to perform or observe any
other covenant, obligation or agreement to be performed or observed by it under
this Project Lease or any other Operative Document to which it is a party (other
than any covenant, obligation or agreement referred to in any other clause of
this Section 16 or contained in the Tax Indemnity
32
Agreement or in Section 3.2(c) of this Project Lease or Section 5.31 or 11.2 of
the Participation Agreement), and such failure shall continue unremedied for 30
days after receipt by the Lessee of written notice of such failure from the
Equity Investor, the Owner Lessor or the Indenture Trustee (or, in the case of a
failure described in this clause (d), a longer period, not to exceed (A) in the
case of failure to comply with Governmental Approvals or Applicable Laws, 210
days, so long as the Owner Lessor and the Indenture Trustee receive written
confirmation from the Engineering Consultant that such failure can be cured
within such period; and (B) in all other cases, 180 days, in each case, as long
as the Lessee or the Pledgor is diligently pursuing a cure in good faith and
such failure is capable of being cured); or
(e) any representation or warranty made by the Lessee or the Pledgor
in the Operative Documents (other than a Tax Representation) shall prove to have
been incorrect as of the date made in any significant respect and shall continue
to be significant and the condition giving rise to such incorrect representation
or warranty is unremedied for a period of 30 days after receipt by the Lessee of
written notice thereof from the Equity Investor, the Owner Lessor or the
Indenture Trustee; provided, however, that if (i) the condition giving rise to
such incorrect representation or warranty is capable of being remedied but not
within such 30-day period, and (ii) such party is diligently proceeding to
remedy such condition, then the period for cure shall be extended for the period
necessary to remedy such condition, but in no event shall the aggregate cure
period under this Section 16(e) exceed 180 days; or
(f) the bankruptcy, insolvency or reorganization of, or the
appointment of an administrator for, (i) the Power Purchaser and the Power
Purchase Agreement shall not have been replaced with Replacement PPA or (ii) KLP
or KLDC and as a result thereof the Lessee's right to possession of the Project
Site shall have been disturbed; or
(g) (i) the Lessee or the Pledgor shall commence any case or other
proceeding (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it as bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or the Lessee or the Pledgor shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Lessee or the Pledgor any case or other proceeding of a
nature referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of sixty (60) days; or (iii)
there shall be commenced against the Lessee or the Pledgor any case or other
proceeding seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which results
in the entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within sixty (60) days from the
entry thereof; or (iv) the Lessee or the Pledgor shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii) or (iii) above; or (v) the Lessee
or the Pledgor shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or
33
(h) the dissolution of the Lessee under Applicable Law, including,
without limitation, the dissolution of the Lessee as a result of the bankruptcy,
insolvency or reorganization of any Lessee Partner;
(i) a final and non-appealable judgment or judgments for the payment
of money in excess of $5,000,000 not covered by insurance shall be rendered
against the Lessee, and such judgment or judgments shall not have been vacated,
stayed, discharged, bonded or satisfied by Lessee or its Affiliates within 30
days from the date of entry thereof; or
(j) any party to a Project Document shall default in its significant
obligations thereunder and such default remains uncured for the longer of (A)
the period allowed for the cure of such default under the applicable Project
Document and (B) in the case of a default by a party (other than the Lessee) to
a Project Document, 180 days during which the Lessee shall have a right to cure
such default or replace such defaulting party with a Replacement Contract; or
(k) any significant provision of any Project Document or any
Governmental Approval required to be obtained and/or maintained by the Lessee
shall at any time for any reason cease to be valid and binding or the
enforceability thereof is contested and the applicable Project Document shall
not have been replaced with a Replacement Contract that is on substantially
similar or better terms to the Lessee within 180 days or the applicable
Governmental Approval shall not have been replaced or reinstated within 180
days; or
(l) (i) the Indenture Trustee shall cease to have a valid first
priority security interest in the Collateral or any part thereof or (ii) the
Owner Lessor shall cease to have a valid first priority security interest in the
property subject to the Lien of any of the Lessee Security Documents or any part
thereof, provided, that upon receipt by the Lessee of written notice of such
cessation from the Equity Investor, the Owner Lessor or the Indenture Trustee,
the Lessee shall have a period of three (3) Business Days to cure such default;
or
(m) a Change of Control shall have occurred; or
(n) the occurrence of a Head Lease Event of Default caused by the
Lessee.
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 acknowledging that in making a
determination that a Lease Event of Default has occurred under Section 16(d) or
(e), to the extent the Lessor exercises discretion in making such determination,
it shall exercise such discretion in a commercially reasonable manner), the
Owner Lessor may, at its option, declare this Project Lease to be in default by
written notice to the Lessee; provided that upon the occurrence of a Lease Event
of Default described in paragraph (g) of Section 16, this Project Lease shall
automatically be deemed to be in default without the need for giving any notice;
and at any time thereafter, so long as the 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,
Applicable Law then in effect:
34
(a) proceed by appropriate court action or actions, either at law or
in equity, to enforce performance by the Lessee, at the Lessee's sole cost and
expense, of the applicable covenants and terms of this Project Lease or to
recover damages for breach thereof;
(b) by notice in writing to the Lessee, terminate this Project Lease
whereupon all right of the Lessee to the possession and use under this Project
Lease of the Project shall absolutely cease and terminate but the Lessee shall
remain liable as hereinafter provided; and thereupon, the Owner Lessor may
demand that the Lessee, and the Lessee shall upon written demand of the Owner
Lessor and at the Lessee's expense, forthwith return possession of the Project
to the Owner Lessor in the manner and condition required by, and otherwise in
accordance with all of the provisions of Section 5, except those provisions
relating to periods of notice; and the Owner Lessor may thenceforth hold,
possess and enjoy the same free from any right of the Lessee, or its successor
or assigns, to use the Project for any purpose whatever;
(c) sell the Owner Lessor's Leasehold Interest at public or private
sale, as the Owner Lessor may determine, free and clear of any rights of the
Lessee under this Project Lease and without any duty to account to the 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 Applicable Law), in which event Allocated
Rent shall cease to accrue and the Lessee's obligation to pay Periodic Lease
Rent or Renewal Lease Rent hereunder due for any periods subsequent to the date
of such sale shall terminate (except to the extent that Periodic Lease Rent and
Renewal Lease Rent is to be included in computations under paragraph (e) or (f)
below if the Owner Lessor elects to exercise its rights under said paragraphs);
(d) hold, keep idle or lease to others the Project as the Owner Lessor
in its sole discretion may determine, free and clear of any rights of the Lessee
under this Project Lease and without any duty to account to the Lessee with
respect to such action or inaction or for any proceeds with respect thereto,
except that the Lessee's obligation to pay Periodic Lease Rent or Renewal Lease
Rent due for any periods subsequent to the date upon which the Lessee shall have
been deprived of possession and use of the Project pursuant to this Section 17
shall be reduced by the net proceeds, if any, received by the Owner Lessor from
leasing the Project to any Person other than the 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,
the Owner Lessor, by written notice to the Lessee specifying a Termination Date
that shall be not earlier than 10 days after the date of such notice, may demand
that the Lessee pay to the Owner Lessor, and the Lessee shall pay to the Owner
Lessor, on the Termination Date specified in such notice, any unpaid Periodic
Lease Rent and Renewal Lease Rent due on or before such Termination Date, any
Supplemental Lease Rent due and payable on or prior to such Termination Date,
plus as liquidated damages for loss of a bargain and not as a penalty (in lieu
of the Periodic Lease Rent or Renewal Lease Rent due on and after such
Termination Date), (i) an amount equal to the excess, if any, of the Termination
Value computed as of such Termination Date over the Fair Market Sales Value of
the Project as of such Termination Date, or (ii) an amount equal to the excess,
if any, of Termination Value computed as of such Termination Date over the Fair
Market Rental Value of
35
the Project until the end of the Basic Lease Term or the then current Renewal
Lease Term, after discounting such Fair Market Rental Value semiannually to
present value as of such Termination Date at a rate equal to the Lease Debt
Rate, or (iii) an amount equal to the Termination Value computed as of such
Termination Date; provided that upon payment of such Termination Value by the
Lessee pursuant to this clause (iii) and all other Rent (not otherwise included
in the calculation of such Termination Value) then due and unpaid, or accrued
and unpaid, by the Lessee, then upon any sale of the Owner Lessor's Leasehold
Interest as a result of such exercise of remedies at public or private sale, the
Owner Lessor shall pay over to the Lessee upon consummation of any such sale the
net proceeds of such sale (after deducting from such proceeds all costs and
expenses incurred by the Owner Lessor in connection therewith and all other
amounts that may become payable to the Owner Lessor, the Equity Investor, the
Indenture Trustee or any Noteholder) but not to exceed the sum of such
Termination Value paid by the Lessee plus interest at the Prime Rate (as
published in the Wall Street Journal from time to time) from such Termination
Date until the date of payment of such proceeds to the Lessee and the Lessee
waives all claims against the Owner Lessor and the Equity Investor in connection
with the sale of the Owner Lessor's Leasehold Interest efforts pursuant to this
proviso. Upon payment of such amount under either clause (i), (ii) or (iii) of
this paragraph (e) and all other Rent then due and unpaid, or accrued and
unpaid, by the Lessee, Allocated Rent shall cease to accrue and the Lessee's
obligation to pay Periodic Lease Rent or Renewal Lease Rent hereunder due for
any periods subsequent to the date of such payment shall terminate and this
Project Lease, the Head Lease and the Sublease of the Power Plant Sublease shall
terminate;
(f) if the Owner Lessor shall have sold the Owner Lessor's Leasehold
Interest pursuant to paragraph (c) above, the Owner Lessor may, if it shall so
elect, demand that the Lessee pay to the Owner Lessor, and the Lessee shall pay
to the Owner Lessor, as liquidated damages for loss of a bargain and not as a
penalty (in lieu of the Periodic Lease Rent or Renewal Lease Rent due for any
periods subsequent to the date of such sale), an amount equal to (i) any unpaid
Periodic Lease Rent and Renewal Lease Rent due on or before the date of such
sale and, plus (ii) if the date is not a Termination Date, the sum of (A)
accrued and unpaid interest on the Senior Notes from the Termination Date next
preceding the date of such sale (after payment of principal, premium and
interest on the Senior Notes on such Termination Date (if such Termination Date
is a Rent Payment Date)) to the date of such sale, plus (B) the product of (x)
the positive or negative difference between the Equity Portion of Termination
Value on the Termination Date next preceding the date of such sale (after any
payment of the Equity Portion of Periodic Lease Rent due on such Termination
Date (if such Termination Date is a Rent Payment Date)) and the Equity Portion
of Termination Value on the Termination Date next succeeding the date of such
sale, and (y) a fraction, the numerator of which is the number of days from the
Termination Date next preceding the date of such sale to the date of such sale,
and the denominator of which is the number of days between the Termination Date
next preceding the date of such sale and the Termination Date next succeeding
the date of such sale, plus (iii) either (A) if the date of such sale is not a
Termination Date, the amount, if any, by which the Termination Value computed as
of the Termination Date next preceding the date of such sale (after deducting
any payment of the Periodic Lease Rent due on such Termination Date (if such
Termination Date is a Rent Payment Date)), exceeds the net proceeds of such sale
or (B) if the date of such sale is a Termination Date, the amount by which the
Termination Value as of the date of sale exceeds the net proceeds of such sale,
together with interest on the amounts payable
36
pursuant to this Section 17.1(f) at the Overdue Rate for the period, if any,
from the date of sale to and including the date of actual payment of all such
amounts to the Owner Lessor; and, upon payment of all such amounts, the Lessee's
obligation to pay Periodic Lease Rent or Renewal Lease Rent for any periods
subsequent to the date of such payment shall terminate and this Project Lease,
the Head Lease and the Sublease of the Power Plant Sublease shall terminate; or
(g) apply any amounts that are held by the Owner Lessor or the Lease
Indenture Trustee as security for the Lessee's obligations hereunder or under
any Security Document against any amounts owed by the Lessee hereunder or under
any other Operative Document, subject to Section 12.17 of the Participation
Agreement.
In addition, the Lessee shall be liable, except as otherwise provided
above, for (i) any and all unpaid Periodic Lease Rent and Renewal Lease Rent due
hereunder before or during the exercise of any of the foregoing remedies, and
(ii) on an After-Tax Basis, for legal fees and other costs and expenses incurred
by reason of the occurrence of any Lease Event of Default or the exercise of the
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 Project
in accordance with Section 5 hereof, including, any costs and expenses incurred
by the Owner Lessor, the Equity Investor, the Indenture Trustee and the
Noteholders in connection with retaking constructive possession of, or in
repairing, the Project in order to cause it to be in compliance with all
maintenance standards imposed by this Project Lease.
All payments of Rent under this Section 17.1 shall, so long as the Lien of
the Indenture shall not have been terminated and fully discharged, be made to or
at the direction of the Indenture Trustee.
Section 17.2. Cumulative Remedies. The remedies in this Project 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, except as
specifically provided in this Section 17, preclude the simultaneous or later
exercise by the Owner Lessor of any or all of such other remedies. To the extent
permitted by Applicable Law, the 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 Project or any Component thereof in
mitigation of the Owner Lessor's damages as set forth in this Section 17 or
which may otherwise limit or modify any of the 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 Lessee under this Project 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 17.4. Limited Recourse. Notwithstanding anything else in any
Operative Document to the contrary, if the sole Lease Event of Default is
triggered by the occurrence of (each a "Limited Recourse Event" (x) an event set
forth in Section 16(d) (as it pertains to any
37
covenant, obligation or agreement (other than a payment obligation) of the
Lessee in any Real Estate Document or any Project Document) or (y) an event set
forth in Section 16(e) as it pertains to (i) the representation and warranty of
the Lessee in Section 3.1(c)(iii), 3.1(d)(i)(B) (to the extent such
representation and warranty relates to the Owner Lessor), 3.1(e), 3.1(h)(iii),
and 3.1(x) of the Participation Agreement, or (ii) any representation or
warranty of the Lessee in any Real Estate Document or in any Project Document)
or (z) an event set forth in Section 16(f), (j), (k) and (l) (as it pertains to
any party to a Project Document), or any combination of the foregoing and no
other event that gives rise to a Lease Event of Default has occurred and is
continuing, the Lessee's recourse liability to the Owner Lessor including
recourse with respect to amounts in the Accounts as a consequence of such Lease
Event of Default (including any liability for enforcement costs or losses
arising as a result of such Lease Event of Default and Section 9 of the
Participation Agreement for any Claims arising out of any Limited Recourse
Event) shall be limited to the Limited Recourse Amount (it being understood by
the parties hereto that the limit on the Lessee's recourse liability with
respect to any indemnification provisions shall only pertain to Claims that
directly arise from a Limited Recourse Event). In addition, any amounts owed to
the Owner Lessor which are not paid in full from the Lessee's liability to pay
the Limited Recourse Amount may be realized by the exercise of remedies with
respect to the Collateral under this Section 17. For the avoidance of doubt, the
Owner Lessor (or the Indenture Trustee) shall not be entitled to claim the
excess, if any, of (i) the aggregate of the balances in the Payment Accounts and
the Accounts (other than the Loss Proceeds Account) over (ii) the Limited
Recourse Amount, in each case as of the date of the declaration of a Limited
Recourse Event.
SECTION 18. SUBLEASE
The Lessee shall not have the right to sublease the Project or assign its
interest in this Project Lease, the Project Documents or the Project Site, in
whole or in part, without the prior consent of the Owner Lessor.
SECTION 19. OWNER LESSOR'S RIGHT TO PERFORM
If the 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 Lessee and failure of the Lessee to so perform or comply,
the Owner Lessor may itself, or may cause the Equity Investor to, 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 Equity Investor incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the Overdue
Rate, to the extent permitted by Applicable Law, shall be deemed to be
Supplemental Lease Rent, payable by the Lessee to the Owner Lessor on demand.
Notwithstanding anything to the contrary contained in the foregoing, the
provisions of this Section 19 shall in no event restrict any of the Owner
Lessor's rights following the occurrence of the a Lease Event of Default, it
being agreed and understood that the Owner Lessor shall be entitled to exercise
all of its remedies pursuant to Section 17 upon the occurrence of any such
event.
38
SECTION 20. SECURITY FOR OWNER LESSOR'S OBLIGATION TO THE INDENTURE TRUSTEE
In order to secure the Senior Notes, the Owner Lessor will assign and xxxxx
x Xxxx to the Indenture Trustee in and to all of the Owner Lessor's right, title
and interest in, to and under this Project Lease (other than Excepted Payments),
and grant a security interest in favor of the Indenture Trustee in all of the
Owner Lessor's right, title and interest in and to the Owner Lessor's Leasehold
Interest. The Lessee hereby consents to such assignment and to the creation of
such Lien and security interest and acknowledges receipt of copies of the
Indenture and the other Operative Documents, it being understood that such
consent shall not affect any requirement or the absence of any requirement for
any consent of the Lessee under any other circumstances. Unless and until the
Lessee shall have received written notice from the Indenture Trustee that the
Lien of the Indenture has been terminated and fully discharged, the Indenture
Trustee shall have the right to exercise the rights of the Owner Lessor under
this Project Lease to the extent set forth in and subject in each case to the
exceptions set forth in the Indenture. TO THE EXTENT, IF ANY, THAT THIS PROJECT
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 PROJECT 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
INDENTURE TRUSTEE ON THE SIGNATURE PAGE THEREOF.
SECTION 21. PURCHASE OPTIONS
Section 21.1. Election of Purchase Options. So long as no Significant
Lease Default or Lease Event of Default shall have occurred and be continuing,
the Lessee shall have the option to purchase the Owner Lessor's Leasehold
Interest from the Owner Lessor (i) on the EBO Date for the EBO Amount (the
"Early Buyout Option") and (ii) on the last day of the Basic Lease Term at the
FPPO Price by giving the Owner Lessor written notice not earlier than
forty-eight (48) months and not later than eighteen 18 months prior to the date
such purchase option may be exercised.
Section 21.2. Purchase Option Payments.
(a) On the Purchase Date, the Lessee shall pay to the Owner Lessor, or
at its direction the EBO Amount or the FPPO Price, as applicable.
(b) On the Purchase Date, the Lessee shall pay to the Owner Lessor (a)
all Supplemental Lease Rent (including all reasonable out-of-pocket costs and
expenses of the Owner Lessor, the Equity Investor, the Indenture Trustee and the
Noteholders) due and payable on or prior to the Purchase Date, and (b) any
unpaid Periodic Lease Rent and Renewal Lease Rent due on or before such Purchase
Date. All Rent payments under this Section 21 shall, so long as the Lien of
Indenture shall not have been terminated and fully discharged, be made to or at
the direction of the Indenture Trustee. Upon payment of all sums specified in
this Section 21.2, (i) Allocated Rent shall cease to accrue and the obligation
to pay Periodic Lease Rent or
39
Renewal Lease Rent shall cease, (ii) the Lessee shall cease to have any
liability to the Owner Lessor with respect to the Project, except for
Supplemental Lease Rent and other obligations (including those under Sections
9.1 and 9.2 of the Participation Agreement and the Tax Indemnity Agreement)
surviving pursuant to the express terms of any Operative Document, (iii) the
Owner Lessor shall pay the outstanding principal, accrued and unpaid interest,
and premium, if any, on the Senior Notes, (iv) this Project Lease, the Head
Lease and the Sublease of Power Plant Sublease shall terminate, (v) the Owner
Lessor shall, at the Lessee's cost and expense, execute and deliver to the
Lessee a release and termination of this Project Lease, the Head Lease and the
Sublease of Power Plant Sublease and (vi) the Owner Lessor shall transfer (by an
appropriate instrument of transfer in form and substance reasonably satisfactory
to the Owner Lessor and prepared by and at the expense of the Lessee) the Owner
Lessor's Leasehold Interest to the Lessee pursuant to this Section 21 on an "as
is, where is" and "with all faults" basis, without representations or warranties
other than a warranty as to the absence of Owner Lessor's Liens and a warranty
of the Equity Investor as to the absence of Equity Investor's Liens, and shall
execute and deliver appropriate releases and other documents or instruments
necessary or desirable to effect the foregoing, all to be prepared, filed and
recorded (as appropriate) at the cost and expense of the Lessee. It shall be a
condition of the termination of this Project Lease pursuant to this Section 21
that the Lessee shall pay all amounts it is obligated to pay under this Section
21.2. If the Lessee fails to consummate any purchase pursuant to the exercise of
the option set forth in Section 21.1(i) hereof, after giving notice of its
intention to do so, (i) this Project Lease shall continue and (ii) such failure
to consummate shall not constitute a Lease Default; provided, however, that,
unless the exercise of the purchase option has been withdrawn before the date on
which any related notice of prepayment of Senior Notes has become irrevocable in
accordance with the terms of the Indenture, the Lessee shall be obligated to
make a Supplemental Rent payment (on an After-Tax Basis to the Owner Lessor and
the Equity Investor) equal to the principal of, and interest and Make-Whole
Premium, if any on the Senior Notes which are due and payable. Whether or not
this Project Lease is terminated and whether or not the Lessee fails to
consummate any purchase pursuant to the exercise of the option set forth in
Section 21.1(i) hereof, the Lessee shall in any event pay all reasonable
out-of-pocket costs and expenses of the Owner Lessor, the Equity Investor, the
Indenture Trustee and the Noteholders in connection with the exercise by the
Lessee of its right to purchase the Owner Lessor's Leasehold Interest under this
Section 21.
Section 21.3. Assumption of the Senior Notes. Notwithstanding the
provisions of Section 21.2, if (a) the Lessee (or its designee) shall have
executed and delivered an assumption agreement to assume in full the Senior
Notes and the obligations and liabilities of the Owner Lessor under the
Indenture as permitted by and in accordance with Section 2.10(B) of the
Indenture, (b) all other conditions contained in such Section 2.10(B) shall have
been satisfied, and (c) no Significant Lease Default or Lease Event of Default
shall have occurred and be continuing after giving effect to such assumption,
then the amounts otherwise payable by the Lessee pursuant to this Section 21
shall be reduced by the outstanding principal amount of and accrued interest on
the Senior Notes so assumed by the Lessee.
40
SECTION 22. MISCELLANEOUS
Section 22.1. Amendments and Waivers. No term, covenant, agreement or
condition of this Project 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 by a telecommunications device
capable of creating a written record, and any such notice shall become effective
(a) upon personal delivery thereof, including 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) and (b) above, in each case addressed to such
party and copy party at its address set forth below or in the case of any such
party or copy party hereto, at such other address as such party or copy party
may from time to time designate by written notice to the other party:
If to the Owner Lessor:
SE Puna, L.L.C.
c/o Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Corporate Trust Administration
with a copy to the Equity Investor:
SE Puna Lease, L.L.C.
c/o Southern Company
000 Xxxxxxxxx Xxxxxx XX
Xxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Director, Finance and Capital Markets
and to the Indenture Trustee:
Union Bank of California, N.A.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
41
Facsimile No.: (000) 000-0000
Attention: Corporate Trust Department
If to the Lessee:
Puna Geothermal Venture
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: President
Section 22.3. Survival. Except for the provisions of Sections 3.3,
3.5, 5, 9 and 17 (and any other provisions hereof which expressly contemplate
that they shall so survive), which shall survive, the warranties and covenants
made by each party hereto shall not survive the expiration or termination of
this Project Lease in accordance with its terms.
Section 22.4. Successors and Assigns. This Project 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. Except as expressly provided herein or in
the other Operative Documents, neither party hereto may assign its interests or
transfer its obligations herein without the consent of the other party hereto.
Section 22.5. True Lease. The parties intend that the Owner Lessor (or
the Equity Investor) is the owner and lessor of the Project and that the Lessee
is the lessee thereof for all purposes including Federal income tax purposes
(subject to the Head Lessor's retention of legal title to the Project). Nothing
herein shall be construed to affect the Owner Lessor's status as owner of the
Project or as conveying to the Lessee any right, title or interest in or to the
Project except as lessee only.
Section 22.6. Governing Law. This Project Lease was negotiated in the
State of New York, and in all respects this Project Lease shall be governed by,
and construed in accordance with, the laws of the State of New York, except that
provisions for the creation and enforcement of any interest in real estate
created hereby shall be governed by and construed according to the laws of the
State of Hawaii, it being understood that, to the fullest extent permitted by
the law of the State of Hawaii, the law of the State of New York shall govern
the validity and enforceability of the representations, warranties, covenants
and obligations of the Lessee and the Owner Lessor under this Project Lease and
all other Operative Documents and all of the obligations arising hereunder or
thereunder.
Section 22.7. Severability. Any provision of this Project 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.
42
Section 22.8. Counterparts. This Project Lease may be executed by the
parties hereto on any number of separate counterparts, each of which, subject to
Section 20, 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 Project 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 to make such further 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 Project Lease.
Section 22.11. Effectiveness. This Project Lease has been dated as of
the date first above written for convenience only. This Project Lease shall be
effective on the Closing Date.
Section 22.12. Limitation of Liability. It is expressly understood and
agreed by the parties hereto that (a) this Project Lease is executed and
delivered by the Trust Company, not individually or personally but solely as
manager of the Owner Lessor under the LLC Agreement, in the exercise of the
powers and authority conferred and vested in it pursuant thereto, (b) each of
the representations, undertakings and agreements herein made on the part of the
Owner Lessor is made and intended not as personal representations, undertakings
and agreements by the Trust Company but is made and intended for the purpose for
binding only the Owner Lessor, (c) nothing herein contained shall be construed
as creating any liability on the Trust Company, individually or personally, to
perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto or by any Person
claiming by, through or under the parties hereto and (d) under no circumstances
shall the Trust Company, be personally liable for the payment of any
indebtedness or expenses of the Owner Lessor or be liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken by the Owner Lessor under this Project Lease.
Section 22.13. Entire Agreement. This Agreement, together with the
other applicable Operative Documents, constitutes the entire agreement of the
parties hereto and thereto with respect to the subject matter hereof and thereof
and supercedes all oral and prior written agreements and understandings with
respect to such subject matter.
43
IN WITNESS WHEREOF, the Owner Lessor and the Lessee have caused this
Project Lease to be duly executed and delivered by their respective officers
thereunto duly authorized.
SE Puna, L.L.C.
By: Wilmington Trust Company, not in its
individual capacity but solely as
Owner Manager
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Financial Services Officer
PUNA GEOTHERMAL VENTURE
By: ORNI 8 LLC, its partner
By: Ormat Nevada Inc., its Manager
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Assistant Secretary
By: OrPuna LLC, its partner
By: Ormat Nevada Inc., its Manager
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Assistant Secretary
*Receipt of the original counterpart of the foregoing Project Lease is hereby
acknowledged on this 18th day of May 2005.
Union Bank of California, N.A.,
as Indenture Trustee
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
----------
* This acknowledgment executed in the original counterpart only.
PROJECT LEASE SUPPLEMENT NO. 1
This PROJECT LEASE SUPPLEMENT NO. 1, dated as of May 18, 2005, is between
SE PUNA, L.L.C., a Delaware limited liability company (the "Owner Lessor"), and
PUNA GEOTHERMAL VENTURE, a Hawaii general partnership (the "Lessee").
WITNESSETH:
WHEREAS, the Owner Lessor and the Lessee have heretofore entered into that
certain Project Lease Agreement, dated as of May 18, 2005 (the "Project Lease").
The terms used herein are used with the meanings specified in the Project Lease;
and
WHEREAS, the Project Lease provides for the execution and delivery of a
Project Lease Supplement substantially in the form hereof for, among other
things, the purpose of leasing the Project and confirming Periodic Lease Rent,
Allocated Rent and Termination Values with respect thereto.
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. Lease. The Owner Lessor hereby leases the Project, upon the
terms and conditions set forth in the Project Lease, to the Lessee for the Basic
Lease Term (and Renewal Lease Term, if any) and the Lessee hereby leases the
Project upon the terms and conditions set forth in the Project Lease, from the
Owner Lessor for such Basic Lease Term (and Renewal Lease Term, if any). The
Head Lease Rent for the Project, designated as such in the Head Lease Supplement
therefor, is $71,000,000.
Section 2. Payment of Periodic Rent. The Lessee hereby agrees to pay
to the Owner Lessor basic lease rent for the lease of the Project (the "Periodic
Lease Rent"), payable with respect to the Basic Lease Term thereof, as follows:
each payment of Periodic Lease Rent shall be payable on each Rent Payment Date
in the amount equal to, subject to Section 3.4 of the Project Lease, the product
of (x) the Head Lease Rent therefor multiplied by (y) the percentage set forth
opposite such Rent Payment Date on Schedule 1 hereto under the caption "Periodic
Lease Rent Percentage."
Section 3. Allocation of Rent. The Periodic Lease Rent allocated to
each Rental Period for the use by the Lessee of the Project shall be an amount
equal to the product of (x) the Head Lease Rent therefor multiplied by (y) the
percentage set forth opposite such Rental Period in Schedule 2 hereof under the
caption "Allocation Percentage" (the "Allocated Rent").
1
Section 4. Termination Values. Termination Values for any Termination
Date in respect of the Project shall be an amount equal to the product of (x)
the Head Lease Rent therefor multiplied by (y) the percentage set forth under
the heading "Termination Value Percentages" on Schedule 3 hereto.
Section 5. EBO Price; EBO Date Prepaid Rent Balance. The EBO Price in
respect of the Project shall mean an amount equal to $74,137,981.97. The EBO
Date Prepaid Rent Balance shall mean an amount equal to $3,023,892.07.
Section 6. FPPO Price. The FPPO Price in respect of the Project shall
mean an amount equal to $42,850,709.17.
Section 7. Miscellaneous. (a) This Project Lease Supplement No. 1
shall be construed in connection with and as part of the Project Lease, and all
terms, conditions and covenants contained in the Project Lease, except as herein
modified, shall be and remain in full force and effect.
(b) This Project Lease Supplement No. 1 may be executed in any number of
counterparts, each executed counterpart constituting an original but all
together one and the same instrument.
IN WITNESS WHEREOF, the Owner Lessor and the Lessee have caused this
Project Lease Supplement No. 1 to be duly executed and delivered by their
respective officers thereunto duly authorized as of the day and year first above
written.
SE PUNA, L.L.C.
By: Wilmington Trust Company, not in its
individual capacity but solely as
Owner Manager
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Financial Services Officer
PUNA GEOTHERMAL VENTURE
By: ORNI 8 LLC, its partner
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Assistant Secretary
By: OrPuna LLC, its partner
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Assistant Secretary
*Receipt of the original counterpart of the foregoing Project Lease Supplement
No. 1 is hereby acknowledged on this 18th day of May 2005.
Union Bank of California, N.A.,
as Indenture Trustee
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
----------
* This acknowledgment executed in the original counterpart only.
--------------------------------------------------------------------------------
SCHEDULE 1
TO THE
PROJECT LEASE SUPPLEMENT NO. 1
PERIODIC LEASE RENT
(expressed as a percentage of Head Lease Rent and in dollars)
--------------------------------------------------------------------------------
RENT PERIODIC LEASE PERIODIC LEASE
PAYMENT DATE RENT PERCENTAGE RENT
------------ --------------- --------------
June 30, 2005 0.0000000000 459,599.12
December 30, 2005 2.8464218732 2,020,959.53
June 30, 2006 4.3784005070 3,108,664.36
December 30, 2006 4.3784005070 3,108,664.36
June 30, 2007 4.2254682113 3,000,082.43
December 30, 2007 4.2254682113 3,000,082.43
June 30, 2008 4.0000000000 3,320,578.42
December 30, 2008 4.0000000000 3,320,578.42
June 30, 2009 3.3255457465 2,361,137.48
December 30, 2009 5.0010715634 3,550,760.81
June 30, 2010 2.7606800000 1,960,082.80
December 30, 2010 4.0000000000 3,323,227.26
June 30, 2011 4.9906810563 3,543,383.55
December 30, 2011 4.9906810563 3,543,383.55
June 30, 2012 5.0771234507 3,604,757.65
December 30, 2012 5.0771234507 3,604,757.65
June 30, 2013 4.9704976620 3,529,053.34
December 30, 2013 4.9704976620 3,529,053.34
June 30, 2014 5.3714510704 3,813,730.26
December 30, 2014 5.3714510704 3,813,730.26
June 30, 2015 5.0612968028 3,593,520.73
December 30, 2015 5.0612968028 3,593,520.73
June 30, 2016 5.1572162113 3,661,623.51
December 30, 2016 5.1572162113 3,661,623.51
June 30, 2017 5.4082660423 3,839,868.89
December 30, 2017 5.4082660423 3,839,868.89
June 30, 2018 5.5358332535 3,930,441.61
December 30, 2018 5.5358332535 3,930,441.61
June 30, 2019 5.6862400704 4,037,230.45
December 30, 2019 5.6862400704 4,037,230.45
June 30, 2020 2.5095298592 1,781,766.20
December 30, 2020 5.3780137042 3,818,389.73
June 30, 2021 0.0000000000 0.00
December 30, 2021 5.8578008310 4,159,038.59
June 30, 2022 0.0000000000 0,00
December 30, 2022 2.5535723521 1,813,036.37
June 30, 2023 0.0000000000 0.00
December 30, 2023 0.0000000000 0.00
June 30, 2024 0.0000000000 0.00
December 30, 2024 0.0000000000 0.00
June 30, 2025 0.0000000000 0.00
December 30, 2025 0.0000000000 0.00
June 30, 2026 0.0000000000 0.00
December 30, 2026 0.0000000000 0.00
June 30, 2027 0.0000000000 0.00
December 30, 2027 0.0000000000 0.00
Total 156.6392511126 111,213,868.29
--------------------------------------------------------------------------------
SCHEDULE 2
TO THE
PROJECT LEASE SUPPLEMENT NO. 1
ALLOCATED RENT, PROPORTIONAL RENT AND SECTION 467 INTEREST PERCENTAGES
(expressed as a percentage of Head Lease Rent)
--------------------------------------------------------------------------------
RENTAL PERIOD
-------------------------------
PROPORTIONAL SECTION 467
FROM AND TO AND ALLOCATION RENT INTEREST
INCLUDING INCLUDING PERCENTAGE PERCENTAGE PERCENTAGE
--------- --------- ---------- ------------ -----------
May 19, 2005 December 30,2005 2.5672189155 2.8862298169 0.0000000000
January 1, 2006 December 30,2006 7.0015061268 7.8715358732 0.0318945211
January 1, 2007 December 30,2007 7.0015061268 7.8715358732 0.0800454085
January 1, 2008 December 30,2008 7.0015061268 7.8715358732 0.1146663239
January 1, 2009 December 30,2009 7.0015061268 7.8715358732 0.1985021268
January 1, 2010 December 30,2010 7.0015061268 7.8715358732 0.0000000000
January 1, 2011 December 30,2011 7.0015061268 7.8715358732 0.2224497183
January 1, 2012 December 30,2012 7.0015061268 7.8715358732 0.3448942113
January 1, 2013 December 30,2013 7.0015061268 7.8715358732 0.4828434789
January 1, 2014 December 30,2014 7.0015061268 7.8715358732 0.0000000000
January 1, 2015 December 30,2015 7.0015061268 7.8715358732 0.7999701831
January 1, 2016 December 30,2016 7.0015061268 7.8715358732 0.9601491549
January 1, 2017 December 30,2017 7.0015061268 7.8715358732 1.1388090423
January 1, 2018 December 30,2018 7.0015061268 7.8715358732 1.3532088169
January 1, 2019 December 30,2019 7.0015061268 7.8715358732 1.5922591408
January 1, 2020 December 30,2020 7.0015061268 7.8715358732 1.8596523239
January 1, 2021 December 30,2021 7.0015061268 7.8715358732 1.9581244789
January 1, 2022 December 30,2022 7.0015061268 7.8715358732 1.9552049155
January 1, 2023 December 30,2023 7.0015061268 7.8715358732 1.7786600845
January 1, 2024 December 30,2024 7.0015061268 7.8715358732 1.4587841127
January 1, 2025 December 30,2025 7.0015061268 7.8715358732 1.0000000000
January 1, 2026 December 30,2026 7.0015061268 7.8715358732 0.7677700282
January 1, 2027 December 30,2027 7.0015061268 7.8715358732 0.3948223239
January 1, 2028 January 3,2028 0.0388974075 0.0437309249 0.0000191635
Total 156.6392511126 176.1037499522 19.4644988396
--------------------------------------------------------------------------------
SCHEDULE 3
TO THE
PROJECT LEASE SUPPLEMENT NO. 1
TERMINATION VALUE PERCENTAGES
(expressed as a percentage of Head Lease Rent)
--------------------------------------------------------------------------------
TERMINATION TERMINATION VALUE
DATE PERCENTAGE
----------- -----------------
May 30, 2005 106.3202447183
June 30, 2005 106.5414426479
July 30, 2005 107.3672670704
August 30, 2005 108.1967439014
September 30, 2005 109.0299003662
October 30, 2005 109.8490624930
November 30, 2005 110.6718273803
December 30, 2005 108.6518000141
January 30, 2006 109.4490959437
February 28, 2006 110.2498318451
March 30, 2006 111.0540333521
April 30, 2006 111.0000000000
May 30, 2006 112.6449368592
June 30, 2006 109.0575402676
July 30, 2006 109.7770797183
August 30, 2006 110.4994797887
September 30, 2006 111.2247618028
October 30, 2006 111.9274590282
November 30, 2006 112.6328913803
December 30, 2006 108.9626787606
January 30, 2007 109.6151808310
February 28, 2007 110.2700626901
March 30, 2007 110.9273420423
pril 30, 2007 111.5806647183
May 30, 2007 112.2258624225
June 30, 2007 108.6479172676
July 30, 2007 109.2520861549
August 30, 2007 109.8583120423
September 30, 2007 110.0000000000
October 30, 2007 111.0629816901
November 30, 2007 111.6613520423
December 30, 2007 108.0362679718
January 30, 2008 108.5998349577
February 29, 2008 109.1651949014
March 30, 2008 109.0000000000
April 30, 2008 110.2978436056
May 30, 2008 110.0000000000
June 30, 2008 106.7467600704
July 30, 2008 107.2748676197
August 30, 2008 107.8045544930
September 30, 2008 108.0000000000
October 30, 2008 108.0000000000
November 30, 2008 109.3890590704
December 30, 2008 105.2411565493
January 30, 2009 105.7362144930
February 28, 2009 106.2326508451
--------------------------------------------------------------------------------
SCHEDULE 3
TO THE
PROJECT LEASE SUPPLEMENT NO. 1
TERMINATION VALUE PERCENTAGES
(expressed as a percentage of Head Lease Rent)
--------------------------------------------------------------------------------
TERMINATION TERMINATION VALUE
DATE PERCENTAGE
----------- -----------------
March 30, 2009 106.7304758310
April 30, 2009 107.2279376479
May 30, 2009 107.7215289155
June 30, 2009 104.8909419014
July 30, 2009 105.3562444366
August 30, 2009 105.8227036479
September 30, 2009 106.2903281690
October 30, 2009 106.7521042394
November 30, 2009 107.2150107183
December 30, 2009 102.6779844648
January 30, 2010 103.0942189155
February 28, 2010 103.5112444507
March 30, 2010 103.9290669577
April 30, 2010 104.3459367746
May 30, 2010 104.7621812535
June 30, 2010 102.0000000000
July 30, 2010 102.0000000000
August 30, 2010 103.2252264366
September 30, 2010 103.6296150704
October 30, 2010 104.0328116479
November 30, 2010 104.4367021549
December 30, 2010 100.1606900000
January 30, 2011 100.5275350704
February 28, 2011 100.0000000000
March 30, 2011 101.2624976338
April 30, 2011 101.6301477465
May 30, 2011 102.0007365070
June 30, 2011 97.3810951972
July 30, 2011 97.7381267183
August 30, 2011 98.0956088873
September 30, 2011 98.4535450704
October 30, 2011 98.8152846901
November 30, 2011 99.1775100423
December 30, 2011 94.5495436761
January 30, 2012 94.8964908873
February 29, 2012 95.2439189296
March 30, 2012 95.5918313803
April 30, 2012 95.9410683662
May 30, 2012 96.2934571972
June 30, 2012 91.5692439577
July 30, 2012 91.9066932817
August 30, 2012 92.2446603099
September 30, 2012 92.5831488873
October 30, 2012 92.9257015352
November 30, 2012 93.2688099014
December 30, 2012 88.0000000000
--------------------------------------------------------------------------------
SCHEDULE 3
TO THE
PROJECT LEASE SUPPLEMENT NO. 1
TERMINATION VALUE PERCENTAGES
(expressed as a percentage of Head Lease Rent)
--------------------------------------------------------------------------------
TERMINATION TERMINATION VALUE
DATE PERCENTAGE
----------- -----------------
January 30, 2013 88.8620157183
February 28, 2013 89.1892283099
March 30, 2013 89.0000000000
April 30, 2013 89.8462092958
May 30, 2013 90.1787953099
June 30, 2013 85.5414793803
July 30, 2013 85.8592020986
August 30, 2013 86.1775199859
September 30, 2013 86.4964374789
October 30, 2013 86.8196960000
November 30, 2013 87.1435909437
December 30, 2013 82.4976293662
January 30, 2014 82.8050977183
February 28, 2014 83.1132019155
March 30, 2014 83.4219467042
April 30, 2014 83.7322710845
May 30, 2014 84.0462218592
June 30, 2014 78.9894056901
July 30, 2014 79.2854033239
August 30, 2014 79.5820810141
September 30, 2014 79,8794438310
October 30, 2014 80.1814558592
November 30, 2014 80.4841927465
December 30, 2014 75.4162088310
January 30, 2015 75.6992816901
February 28, 2015 75.9830756761
March 30, 2015 76.2675961831
April 30, 2015 76.5538383521
May 30, 2015 76.8439588028
June 30, 2015 72.0000000000
July 30, 2015 72.3469298732
August 30, 2015 72.6210792676
September 30, 2015 72.8960100704
October 30, 2015 73.1759061127
November 30, 2015 73.4566263662
December 30, 2015 68.6768801690
January 30, 2016 68.9391129155
February 29, 2016 69.2021728592
March 30, 2016 69.4660661972
April 30, 2016 69.7318436056
May 30, 2016 70.0017883944
June 30, 2016 65.1154016338
July 30, 2016 65.3671490000
August 30, 2016 65.6197815211
September 30, 2016 65.8733057746
October 30, 2016 66.1321467324
--------------------------------------------------------------------------------
SCHEDULE 3
TO THE
PROJECT LEASE SUPPLEMENT NO. 1
TERMINATION VALUE PERCENTAGES
(expressed as a percentage of Head Lease Rent)
--------------------------------------------------------------------------------
TERMINATION TERMINATION VALUE
DATE PERCENTAGE
----------- -----------------
November 30, 2016 66.3919256901
December 30, 2016 61.0000000000
January 30, 2017 61.7351882958
February 28, 2017 61.9758834930
March 30, 2017 62.0000000000
April 30, 2017 62.0000000000
May 30, 2017 62.7093997746
June 30, 2017 57.5503090141
July 30, 2017 57.7761732817
August 30, 2017 58.0030171690
September 30, 2017 58.0000000000
October 30, 2017 58.0000000000
November 30, 2017 58.0000000000
December 30, 2017 53.5261781268
January 30, 2018 53.0000000000
February 28, 2018 53.9480842958
March 30, 2018 54.1605711268
April 30, 2018 54.3752575915
May 30, 2018 54.5946757042
June 30, 2018 49.2793448732
JULY 30, 2018 49.4745167606
August 30, 2018 49.6707460563
September 30, 2018 49.8680406338
October 30, 2018 50.0713185634
November 30, 2018 50.2757142958
December 30, 2018 44.9454029014
January 30, 2019 45.1238531831
February 28, 2019 45.3034015352
March 30, 2019 45.4840561549
April 30, 2019 45.6670528169
May 30, 2019 45.8550564085
June 30, 2019 40.3579891831
July 30, 2019 40.5200875070
August 30, 2019 40.6833308028
September 30, 2019 40.8477275775
October 30, 2019 41.0184530986
November 30, 2019 41.1903878451
December 30, 2019 35.0000000000
January 30, 2020 35.7983495352
February 29, 2020 35.9203001831
March 30, 2020 36.0431594789
April 30, 2020 36.1682258451
May 30, 2020 36.2980779296
June 30, 2020 33.0000000000
July 30, 2020 34.0280491549
August 30, 2020 34.1375404085
--------------------------------------------------------------------------------
SCHEDULE 3
TO THE
PROJECT LEASE SUPPLEMENT NO. 1
TERMINATION VALUE PERCENTAGES
(expressed as a percentage of Head Lease Rent)
--------------------------------------------------------------------------------
TERMINATION TERMINATION VALUE
DATE PERCENTAGE
----------- -----------------
September 30, 2020 34.0000000000
October 30, 2020 34.3641149014
November 30, 2020 34.0000000000
December 30, 2020 29.2212414225
January 30, 2021 29.2777475915
February 28, 2021 29.3346748028
March 30, 2021 29.3920261549
April 30, 2021 29.4510894507
May 30, 2021 29.5143805775
June 30, 2021 29.5781432676
July 30, 2021 29.6512191127
August 30, 2021 29.7248394507
September 30, 2021 29.7990083099
October 30, 2021 29.8787801127
November 30, 2021 29.9591462958
December 30, 2021 24.1823104366
January 30, 2022 24.1952508169
February 28, 2022 24.2082876197
March 30, 2022 24.2214215493
April 30, 2022 24.2359159296
May 30, 2022 24.2543080000
June 30, 2022 24.2728371268
July 30, 2022 24.3003469437
August 30, 2022 24.0000000000
September 30, 2022 24.3559830423
October 30, 2022 24.0000000000
November 30, 2022 24.4225948310
December 30, 2022 21.9027010563
January 30, 2023 21.0000000000
February 28, 2023 21.9179115493
March 30, 2023 21.9256019014
April 30, 2023 21.9346127887
May 30, 2023 21.9475990986
June 30, 2023 21.9606821690
July 30, 2023 21.9829820423
August 30, 2023 22.0054480704
September 30, 2023 22.0280814930
October 30, 2023 22.0560946056
November 30, 2023 22.0000000000
December 30, 2023 22.1127485352
January 30, 2024 22.1479062817
February 29, 2024 22.1833259859
March 30, 2024 22.2190096056
April 30, 2024 22.2562618592
May 30, 2024 22.2979147887
June 30, 2024 22.3398780845
--------------------------------------------------------------------------------
SCHEDULE 3
TO THE
PROJECT LEASE SUPPLEMENT NO. 1
TERMINATION VALUE PERCENTAGES
(expressed as a percentage of Head Lease Rent)
--------------------------------------------------------------------------------
TERMINATION TERMINATION VALUE
DATE PERCENTAGE
----------- -----------------
July 30, 2024 22.0000000000
August 30, 2024 22.4440579155
September 30, 2024 22.4967307324
October 30, 2024 22.5552934930
November 30, 2024 22.6142926056
December 30, 2024 22.6737313239
January 30, 2025 22.7404847746
February 28, 2025 22.8077355915
March 30, 2025 22.0000000000
April 30, 2025 22.9451185775
May 30, 2025 23.0196177324
June 30, 2025 23.0946719577
July 30, 2025 23.1804336479
August 30, 2025 23.2668343521
September 30, 2025 23.3538788028
October 30, 2025 23.4473708169
November 30, 2025 23.5415594225
December 30, 2025 23.6364498028
January 30, 2026 24.1928156056
February 28, 2026 24.2964280563
March 30, 2026 24.0000000000
April 30, 2026 24.5074244507
May 30, 2026 24.6198905915
June 30, 2026 24.7331947042
July 30, 2026 24.8583517042
August 30, 2026 24.9844412394
September 30, 2026 25.1114702254
October 30, 2026 25.0000000000
November 30, 2026 25.3815175915
December 30, 2026 25.5180521972
January 30, 2027 25.0796465211
February 28, 2027 25.2263174225
March 30, 2027 25.3740811408
April 30, 2027 25.5244330423
May 30, 2027 25.6819076620
June 30, 2027 25.8405556056
July 30, 2027 26.0124255915
August 30, 2027 26.1855761408
September 30, 2027 26.3600168169
October 30, 2027 26.0000000000
November 30, 2027 26.7278867042
December 30, 2027 26.9138799014
