Leasehold Mortgage, Assignment Of

NRG GENERATING (PARLIN) COGENERATION INC.,
as Mortgagor


to


CREDIT SUISSE, AS AGENT FOR THE SECURED PARTIES,
as Mortgagee


LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND
RENTS AND SECURITY AGREEMENT


(Leasehold and Easements)


Dated: As of June 28, 1996


Location: Part of Lot 1, Block 41
and Lot 1.04, Block 42 Borough of Sayreville County of
Middlesex State of New Jersey


RECORD AND RETURN TO:


Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112


Attention: Richard Sonkin, Esq.


MIDDLESEX COUNTY, NEW JERSEY


This instrument prepared by:


/s/ Christopher C. Beers
Name: Christopher C. Beers


LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND
RENTS AND SECURITY AGREEMENT


THIS LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT (this "Mortgage") made as of the 28th day of June, 1996 by NRG GENERATING (PARLIN) COGENERATION INC., a Delaware corporation having an address at c/o NRG Energy, Inc., 1221 Nicollet Mall, Suite 700, Minneapolis, Minnesota 55403 ("Mortgagor") and CREDIT SUISSE having an address at Tower 49, 12 East 49th Street, New York, New York 10017, as agent (in such capacity, "Agent") on behalf of and for the benefit of the Secured Parties under the Credit Agreement (defined below) (the Agent, acting on its own behalf and on behalf of the Secured Parties pursuant to the Credit Agreement being hereinafter referred to as "Mortgagee"),


W I T N E S S E T H :


WHEREAS, Mortgagor is the owner and holder of a leasehold estate in the premises described in Exhibit A attached hereto (hereinafter referred to as the "Leasehold Premises") pursuant to a certain Ground Lease dated as of January 2, 1987 between E. I. Du Pont de Nemours and Company and O'Brien Energy Systems, Inc., a memorandum of which was recorded in the Middlesex County Clerk's office on December 15, 1988, in Deed Book 3751, page 4 (hereinafter referred to as the "Ground Lease");


WHEREAS, Mortgagor is also the holder of the those easement rights pursuant to the instruments described in Exhibit B attached hereto (collectively, the "Easements"), which Easements pertain to the premises, or to portions thereof, described therein (collectively, the "Easement Premises" and together with the Leasehold Premises being hereinafter collectively referred to as the "Premises");


WHEREAS, Mortgagor proposes to operate on the Premises an existing 122 MW power plant, including the related electric power transmission, fuel supply and fuel transportation facilities, fuel storage facilities and other facilities and goods that are ancillary, incidental, necessary or reasonably related to the marketing, management, servicing, ownership or operation of the foregoing (the "Parlin Plant");


WHEREAS, Mortgagee has simultaneously herewith extended to Mortgagor and NRG Generating (Newark) Cogeneration Inc. ("NRG (Newark)"; Mortgagor and NRG (Newark) being hereinafter collectively referred to as


"Borrowers") (i) certain loans in the aggregate principal amount of ONE HUNDRED FIFTY-FIVE MILLION and No/100 DOLLARS ($155,000,000) (collectively, the "Funding Loans") and (ii) a certain debt service line of credit facility commitment in the principal amount of up to FIVE MILLION and No/100 DOLLARS ($5,000,000) (the "Debt Service Loans"), which (a) Funding Loans are to be advanced pursuant and subject to the terms and conditions of a certain Credit Agreement dated as of May 17, 1996 among Mortgagee, Credit Suisse, Greenwich Funding Corporation and any other Purchasing Lender and the Borrowers (as the same may be amended, modified or supplemented from time to time, the "Credit Agreement") and shall be evidenced by the Funding Loan Notes, and (b) Debt Service Loans are to be advanced pursuant and subject to the terms and conditions of the Credit Agreement and shall be evidenced by the Debt Service Loan Notes, and which Funding Loans and Debt Service Loans shall be secured, in part, by this Mortgage;


WHEREAS, the Borrowers are to be jointly and severally liable for the repayment of the Funding Loans and the Debt Service Loans;


WHEREAS, all capitalized terms not otherwise defined in this Mortgage shall have the meaning given such terms in the Credit Agreement;


WHEREAS, it is a condition precedent to the making of certain of the Funding Loans and the availability of the Debt Service Loans under the Credit Agreement that Mortgagor shall execute and deliver this Mortgage and grant the security interests pursuant to this Mortgage to the Agent for the benefit of the Secured Parties as security for the obligations of Borrowers under the Credit Agreement and the other Loan Instruments;


NOW, THEREFORE, to secure the payment and performance of the Debt (hereinafter defined) and the performance of the Borrowers' obligations under the Credit Agreement and the Loan Instruments and the performance of the Mortgagor's obligations under this Mortgage, Mortgagor has mortgaged, given, granted, bargained, sold, aliened, enfeoffed, conveyed, confirmed and assigned, and by these presents does mortgage, give, grant, bargain, sell, alien, enfeoff, convey, confirm and assign unto Mortgagee all right, title and interest of Mortgagor now owned, or hereafter acquired, in and to the following property, rights and interests (such property, rights and interests being hereinafter collectively referred to as the "Mortgaged Property"):


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(a) the Leasehold Premises;


(b) all buildings, improvements and fixtures now or hereafter located on the Leasehold Premises, including, but not limited to, the Parlin Plant (the "Leasehold Premises Improvements");


(c) the Ground Lease and the leasehold estate created thereunder and all other rights and interests of the tenant thereunder;


(d) all modifications, extensions and renewals of the Ground Lease and all credits, deposits, options, privileges and rights of tenant under the Ground Lease, including, but not limited to, the right to exercise options, to give consents and to receive moneys payable to the tenant thereunder or in connection therewith;


(e) the Easements and the interests created thereunder and in connection therewith;


(f) any and all portions of the Parlin Plant now or hereafter located on the Easement Premises (the "Easement Improvements" and, together with the Leasehold Premises Improvements, being hereinafter collectively referred to as the "Improvements");


(g) all the estate, right, title, claim or demand of any nature whatsoever of Mortgagor, either in law or in equity, in possession or expectancy, in and to the Mortgaged Property or any part thereof;


(h) any and all easements (other than the Easements), rights-of-way, gores of land, streets, ways, alleys, passages, sewer rights, waters, water courses, water rights and powers, and all estates, rights, titles, interests, privileges, liberties, tenements, hereditaments, revocable consents, options, appendages and appurtenances of any nature whatsoever, in any way belonging, relating or pertaining to the Mortgaged Property (including, but not limited to, any and all development rights, option rights, air rights or similar or comparable rights of any nature whatsoever now or hereafter appurtenant to the Premises or now or hereafter transferred to the Premises) and all land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Premises to the center line thereof;


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(i) all machinery, apparatus, equipment, fittings, fixtures and other property of every kind and nature whatsoever owned by Mortgagor, or in which Mortgagor has or shall have an interest, now or hereafter located upon the Premises, or appurtenant thereto, and usable in connection with the present or future operation and occupancy of the Mortgaged Property and all equipment, materials, supplies, apparatus and other items now or hereafter attached to, installed in or used on the Premises (temporarily or permanently) of any nature whatsoever and all renewals, replacements and substitutions thereof and additions thereto, including but not limited to any and all partitions, ducts, shafts, pipes, radiators, conduits, wiring, floor coverings, awnings, motors, engines, boilers, stokers, pumps, dynamos, transformers, turbines, generators, fans, blowers, vents, switchboards, elevators, mail or coal conveyors, escalators, compressors, furnaces, cleaning equipment, call and sprinkler systems, fire extinguishing apparatus, water and other tanks, heating, ventilating, plumbing, laundry, incinerating, air conditioning and air cooling systems and water, gas, telephone, telecommunications, telemetry and electric equipment (collectively, the "Equipment"), and the right, title and interest of Mortgagor in and to any of the Equipment which may be subject to any security agreements (as defined in the Uniform Commercial Code of the State of New Jersey (the "Uniform Commercial Code")), superior in lien to the lien of this Mortgage;


(j) all awards or payments, including interest thereon, and the right to receive the same, which may be made with respect to the Mortgaged Property, whether from state fund sharing or from the exercise of the right of eminent domain (including any transfer made in lieu of the exercise of said right), changes of grade of street or for any other injury to or decrease in the value of the Mortgaged Property, whether direct or consequential, which said awards and payments are hereby assigned to Mortgagee, and Mortgagee is hereby authorized to collect and receive the proceeds thereof and to give proper receipts and acquittances therefor;


(k) all refunds or rebates of Taxes (as hereinafter defined) or charges in lieu of Taxes, now or hereafter assessed or levied against the Mortgaged Property;


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(1) all leases (including oil, gas and other mineral leases), subleases, franchises, licenses, concessions, permits, contracts (including, without limitation, the Parlin Power Purchase Agreement and the Parlin Steam Agreement) and other agreements (other than the Ground Lease and the Easements) affecting the use or occupancy of the Mortgaged Property now or hereafter entered into and any renewals or extensions thereof (collectively, the "Other Leases");


(m) the right to receive and apply the rents, issues and profits of the Mortgaged Property under the Other Leases (collectively, the "Rents") to the payment of the Debt;


(n) all inventory, accounts and general intangibles owned by Mortgagor or in which Mortgagor now or hereafter shall have any right, title or interest, now or hereafter located upon, arising in connection with or concerning the Mortgaged Property;


(o) all proceeds of and any unearned premiums on any insurance policies covering the Mortgaged Property, including, without limitation, the right to receive and apply the proceeds of any insurance, judgments, or settlements made in lieu thereof, for damage to the Mortgaged Property;


(p) to the extent permitted by law, the right, in the name and on behalf of Mortgagor, to appear in and defend any action or proceeding brought with respect to the Mortgaged Property and to commence any action or proceeding to protect the interest of Mortgagee in the Mortgaged Property;


(q) all of Mortgagor's right, title and interest in and to all plans and specifications prepared for or in connection with the Improvements and all studies, data and drawings related thereto; and


(r) all products and proceeds of any of the Mortgaged Property herein described.


TO HAVE AND TO HOLD the above granted and described Mortgaged Property unto and to the proper use and benefit of Mortgagee, and the successors and assigns of Mortgagee, forever, to secure the following obligations (hereinafter collectively referred to as the "Debt"):


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(i) payment of the indebtedness evidenced by the Funding Loan Notes;


(ii) payment of the indebtedness evidenced by the Debt Service Loan Notes (the Funding Loan Notes and the Debt Service Loan Notes being hereinafter collectively referred to as the "Notes");


(iii) payment of all amounts owing pursuant to any Interest Rate Hedge Agreement;


(iv) payment, performance and observance of each term, covenant and condition to be paid, performed or observed by Borrowers under the Credit Agreement, the Notes and the other Loan Instruments;


(v) payment of all sums required to be paid and performance and observance of each term, covenant and condition contained in this Mortgage to be performed or observed by Mortgagor under this mortgage; and


(vi) payment of all sums expended or advanced by Mortgagee pursuant to the terms of this Mortgage, the Credit Agreement or any other Loan Instruments.


PROVIDED, ALWAYS, and these presents are upon this express condition, if Borrowers shall well and truly pay to Mortgagee the Debt at the time and in the manner provided in the Notes, the Credit Agreement and the Loan Instruments and shall well and truly abide by and comply with each and every covenant and condition set forth herein, in the Notes, the Credit Agreement and the Loan Instruments then these presents and the estate hereby granted shall cease, determine and be void.


AND Mortgagor covenants with and represents and warrants to Mortgagee as follows:


1. Payment of Debt. Mortgagor shall pay the Debt at the time and in the manner provided for its payment in the Notes, the Credit Agreement and the Loan Instruments.


2. Warranty of Title. Subject only to the Permitted Liens, Mortgagor warrants that Mortgagor is the owner and holder of W a leasehold estate in and to the Leasehold Premises, (ii) the right to use and enjoy the Easements, (iii) marketable title to the improvements and Equipment, and (iv) good title to all other portions of the Mortgaged Property. Mortgagor covenants that Mortgagor will at all times and at Mortgagor's sole expense warrant and


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defend the title to the Mortgaged Property against the claims and demands of all persons whomsoever except for Permitted Liens. In addition, Mortgagor represents and warrants that (i) the Ground Lease is in full force and effect and has not been modified or amended in any manner whatsoever, (ii) there are no uncured defaults under the Ground Lease and no event has occurred, which but for the passage of time, or notice, or both, would constitute a default under the Ground Lease, (iii) all rents and other payments due and payable under the Ground Lease have been paid in full and (iv) no action is pending and no notice has been given or received for the purpose of terminating, and no event has occurred or condition exists that could result in termination of, the Ground Lease.


3. Insurance. Mortgagor will keep the Improvements and the Equipment insured as shall, from time to time, be required in accordance with Sections 4.25 and 5.12 of the Credit Agreement. If at any time Mortgagee is not in receipt of written evidence that all insurance required hereunder and under the Credit Agreement is in full force and effect, Mortgagee shall have the right without notice to Mortgagor to take such action as Mortgagee deems necessary to protect the Mortgaged Property, including, without limitation, the obtaining of such insurance coverage as Mortgagee in its sole discretion deems appropriate, and all expenses incurred by Mortgagee in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by Mortgagor to Mortgagee upon demand. Any amounts not so paid by Mortgagor shall be deemed secured by this Mortgage. Mortgagor shall at all times comply with and shall cause the Improvements and Equipment and the use, occupancy, operation, maintenance, alteration, repair and restoration thereof to comply with the terms, conditions, stipulations and requirements of the insurance policies procured and maintained pursuant to Sections 4.25 and 5.12 of the Credit Agreement (the "Policies"). If the Premises, or any portion thereof, is determined to be located in a Federally designated "special flood hazard area", in addition to the other Policies required under this paragraph, a flood insurance policy shall be delivered by Mortgagor to Mortgagee. If no portion of the Premises is located in a Federally designated "special flood hazard area", such fact shall be substantiated by a certificate in form reasonably satisfactory to Mortgagee from a licensed surveyor, appraiser or professional engineer or other qualified person. If the Mortgaged Property shall be damaged or destroyed, in whole or in part, by fire or other property hazard or casualty, Mortgagor shall give prompt notice thereof to Mortgagee and any Proceeds received by


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Mortgagee shall be held and disbursed as set forth in Section 5.18 of the Credit Agreement.


4. Payment of Taxes, etc. Mortgagor shall pay, or cause to be paid, all taxes or charges in lieu of taxes, assessments, water rates, sewer rents and other charges, including vault charges and license or permit fees for the use of vaults, chutes and similar areas on or adjoining the Premises, now or hereafter levied or assessed against the Mortgaged Property (the "Taxes") prior to the date upon which any fine, penalty, interest or cost may be added thereto or imposed by law for the nonpayment thereof, subject, in all events, to Mortgagor's rights to contest Taxes in accordance with Section 5.13 of the Credit Agreement. Mortgagor shall deliver to Mortgagee, upon request, receipted bills, canceled checks and other evidence satisfactory to Mortgagee evidencing the payment of the Taxes prior to the date upon which any fine, penalty, interest or cost may be added thereto or imposed by law for the nonpayment thereof (as any such date may be extended pursuant to exercise of said right of Mortgagor to contest Taxes in accordance with Section 5.13 of the Credit Agreement).


5. Condemnation. Notwithstanding any taking by any public or quasi-public authority through eminent domain or otherwise, Mortgagor shall continue to pay the Debt at the time and in the manner provided for its payment in the Notes, the Credit Agreement and the Loan Instruments and the Debt shall not be reduced until (and only to the extent) any award or payment therefor shall have been actually received and applied by Mortgagee to the discharge of the Debt in accordance with the provisions of the Credit Agreement. Mortgagee shall apply the amount of any such award or payment in accordance with Section 5.18 of the Credit Agreement. If the Mortgaged Property is sold, through foreclosure or otherwise, prior to the receipt by Mortgagee of such award or payment, Mortgagee shall have the right, whether or not a deficiency judgment on the Debt shall have been sought, recovered or denied, to receive such award or payment, or a portion thereof sufficient to pay the Debt, whichever is less. Mortgagor shall file and prosecute its claim or claims for any such award or payment in good faith and with due diligence and cause the same to be collected and paid over to Mortgagee. Mortgagor hereby irrevocably authorizes and empowers Mortgagee, in the name of Mortgagor or otherwise to collect and receipt for any such award or payment and to file and prosecute such claim or claims if (a) Mortgagor fails to do so within a reasonable time prior to the expiration of the period allowed therefor under


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applicable law, or (b) an Event of Default has occurred and is continuing. Although it is hereby expressly agreed that the same shall not be necessary in any event, Mortgagor shall, upon demand of Mortgagee, make, execute and deliver any and all assignments and other instruments sufficient for the purpose of assigning any such award or payment to Mortgagee, free and clear of any encumbrances of any kind or nature whatsoever.


6. Leases and Rents. (a) Mortgagor hereby assigns to Mortgagee as security for the payment of the Debt and the observance and performance by Borrowers of all of the terms, covenants and provisions of this Mortgage, the Credit Agreement and the Loan Instruments on the Borrowers' part to be observed or performed, all of Mortgagor's right, title and interest in and to the Other Leases and the Rents. Subject to the terms of this paragraph, Mortgagee waives the right to enter the Mortgaged Property for the purpose of collecting the Rents, and grants Mortgagor the right to collect the Rents. Mortgagor shall hold the Rents, or an amount sufficient to discharge all sums then currently due on the Debt, in trust for use in payment of the Debt. The right of Mortgagor to collect the Rents may be revoked by Mortgagee upon the occurrence of any Event of Default by giving notice of such revocation to Mortgagor. Following such notice, Mortgagee may retain and apply the Rents toward payment of the Debt in accordance with the provisions of the Credit Agreement, or to the operation, maintenance and repair of the Mortgaged Property, and irrespective of whether Mortgagee shall have commenced a foreclosure of this Mortgage or shall have applied or arranged for the appointment of a receiver. Mortgagor shall not, without the consent of Mortgagee, which consent shall not be unreasonably withheld, conditioned or delayed, make, or suffer to be made, any Other Leases or modify or cancel any Other Leases or accept prepayments of installments of the Rents for a period of more than one (1) month in advance or


further assign the whole or any part of the Rents. Mortgagor shall (i) fulfill or perform each and every provision of the Other Leases on the part of Mortgagor to be fulfilled or performed, (ii) promptly send copies of all notices of default which Mortgagor shall send or receive under the Other Leases to Mortgagee, and (iii) enforce, short of termination of the Other Leases, the performance or observance of the provisions thereof by the other parties thereto.


(b) Mortgagor agrees that it will not further pledge or assign its interest in any of the Other Leases, or


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further assign the Rents so long as any part of the Debt remains unpaid.


(c) Nothing contained in this paragraph shall be construed as imposing on Mortgagee any of the obligations of the tenant under the Ground Lease or of the lessor under the Other Leases.


7. Maintenance of the Mortgaged Property.
(a) Mortgagor shall cause the Mortgaged Property to be maintained in good condition and-repair in accordance with the provisions of the Credit Agreement and will not commit or suffer to be committed any waste of the Mortgaged Property. The Improvements and the Equipment shall not be removed, demolished or materially altered (except for normal replacement of the Equipment), without the consent of Mortgagee, which consent shall not be unreasonably withheld, conditioned or delayed.


(b) Mortgagor shall promptly comply with all Laws and Environmental Requirements affecting the Mortgaged Property, or any portion thereof or the use thereof, in accordance with the provisions of the Credit Agreement. Mortgagor shall observe and perform every term to be observed and performed by Mortgagor (as tenant) under the Ground Lease and shall also comply with the requirements of the Easements and all other rights-of- way, easements, grants, privileges, licenses, franchises and restrictive covenants which from time to time benefit or pertain to the whole or any portion of the Mortgaged Property, and Mortgagor shall not modify, amend or terminate, or surrender any of its rights under, the Ground Lease, the Easements or any such rights-of-way, easements, grants, privileges, licenses, franchises or restrictive covenants. Except as otherwise specifically permitted by the terms of the Credit Agreement, Mortgagor will not alter the use of the Mortgaged Property without the prior consent of Mortgagee, and Mortgagor will not, without obtaining the prior consent of Mortgagee, initiate, join in or consent to any private restrictive covenant, zoning ordinance, or other public or private restrictions, limiting or affecting the uses which may be made of the Mortgaged Property or any part thereof.


8. Estoppel Certificates. Mortgagor, within ten (10) days after request by Mortgagee and at its expense, will furnish Mortgagee with a statement, duly acknowledged and certified, setting forth the amount of the Debt and the offsets or defenses thereto, if any.


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9. Transfer or Encumbrance of the Mortgaged Property. Except as otherwise specifically permitted by the terms of the Credit Agreement, no part of the Mortgaged Property and no legal or beneficial interest in Mortgagor shall in any manner be further encumbered, sold, transferred, assigned or conveyed, or permitted to be further encumbered, sold, transferred, assigned or conveyed without the consent of Mortgagee. The provisions of this paragraph shall apply to each and every such further encumbrance, sale, transfer, assignment or conveyance, regardless of whether or not Mortgagee has consented to, or waived by its action or inaction its rights hereunder with respect to any such previous further encumbrance, sale, transfer, assignment or conveyance and irrespective of whether such further encumbrance, sale, transfer, assignment or conveyance is voluntary, by reason of operation of law or is otherwise made.


10. Notice. All notices, consents, directions, approvals, authorizations, instructions, demands, statements, requests and other communications given or made hereunder or in connection herewith shall be sent in accordance with the provisions of and to the addresses set forth in Section 8.1 of the Credit Agreement.


11. Changes in Laws Regarding Taxation. In the event of the passage after the date of this Mortgage of any law of the State of New Jersey deducting from the value of real property for the purpose of taxation any lien or encumbrance thereon or changing in any way the laws for the taxation of mortgages or deeds of trust or debts secured by mortgages or deeds of trust for state or local purposes or the manner of the collection of any such taxes, and imposing a tax, either directly or indirectly, on this Mortgage, the Notes, the Credit Agreement, any of the Loan Instruments or the Debt, Mortgagor shall, if permitted by law, pay any tax imposed as a result of any such law within the statutory period or within thirty (30) days after demand by Mortgagee, whichever is less, provided, however, that if, in the opinion of the attorneys for Mortgagee, Mortgagor is not permitted by law to pay such taxes, Mortgagee shall have the right, at its option, to declare the Debt due and payable on a date specified in a prior notice to Mortgagor of not less than sixty (60) days.


12. [Intentionally Omitted]


13. Sale of Mortgaged Property. If this Mortgage is foreclosed, the Mortgaged Property, or any interest therein, may, at the discretion of Mortgagee, be sold in one


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or more parcels or in several interests or portions and in any order or manner.


14. No Credits on Account of the Debt. Mortgagor will not claim or demand or be entitled to any credit or credits on account of the Debt for any part of the Taxes assessed against the Mortgaged Property or any part thereof and no deduction shall otherwise be made or claimed from the taxable value of the Mortgaged Property, or any part thereof, by reason of this Mortgage or the Debt.


15. Other Security for the Debt. Mortgagor shall observe and ...