Lease Agreement

LEASE AGREEMENT


This LEASE AGREEMENT, by and between ATMOS POWER SYSTEMS, INC., A GEORGIA corporation ("Lessor"), and A. E. STALEY MANUFACTURING COMPANY ("Lessee"), also hereinafter referred to individually as "Party" or collectively as "Parties' (the "Agreement").


WHEREAS, the parties desire to enter into a proposed transaction involving the construction by Lessor, and the operation and leasing by Lessee, of a certain electrical power generating plant (initially rated at 20,964 Kilowatts) and associated facilities (collectively herein referred to as the "Plant") to be located in Loudon County, Tennessee; and


WHEREAS, upon the full execution and effectiveness of this Agreement, Lessor is prepared to construct the Plant and to order the electric generating equipment to be utilized in the -Plant; and


WHEREAS, Lessor and Lessee desire to enter into a definitive written agreement concerning the lease of the Plant from Lessor to Lessee.


NOW, THEREFORE, for and in consideration of the premises and of the mutual agreements hereinafter set forth, the parties mutually agree as follows:


1. CONDITIONS TO EFFECTIVENESS OF AGREEMENT. This Agreement shall not take effect unless all the following conditions have been fulfilled:


(a) Lessee has provided or obtained all rights in real property required for construction of the Plant and has, for no additional consideration, granted to Lessor all rights-of-way and easements upon, across or through real property owned or controlled by Lessee and required by Lessor to meet its obligations to have the Plant ready for commercial operation;


(b) Lessor, and/or its affiliate(s), have obtained any consent or approval of the Tennessee Valley Authority ("TVA") that may be required for the construction or operation of the Plant pursuant to applicable TVA interconnection requirement(s) and Lessee and/or its affiliate(s) have received any required consents or approvals from all other third parties and governmental authorities (including, but not limited to, receipt of any required air contaminant permit issued by the State of Tennessee Air Pollution Control Division ("TAPCD")) necessary to operate the Plant; and


(c) Lessor's Board of Directors has approved Lessor's execution of this Lease Agreement.


(d) Lessor shall have been furnished, as adequate assurance of performance of Lessee's financial obligations under and for the Term of this Agreement, a guaranty of Lessee s performance of such financial obligations, during the Term of this Agreement, executed by Tate & Lyle Holdings US, in a form acceptable to Lessor.


2. LEASE. Lessor hereby leases to Lessee, and Lessee leases from Lessor, the Plant described on Schedule A to this Agreement (referred to herein, together with all replacements, additions and accessories, as the "Plant").


3. SCOPE OF WORK. Lessor and Lessee shall, in addition to all other obligations undertaken by each pursuant to the terms and conditions of this Agreement, be responsible for performing the tasks set forth under their respective names in Schedule B which is attached hereto and made a part hereof.


4. TERM. This Agreement shall become effective upon execution by the Parties, assuming all conditions of Section 1 above have been met (the "Effective Date"), provided, however, that Lessor's obligation to deliver possession of the Plant to Lessee for electrical power generation shall begin on the earlier of the date of commencement of commercial operation of the Plant or June 1, 2002 (the "Commencement Date") and shall expire on the date which is ten (10) years subsequent to the Commencement Date (the "Term") unless extended by mutual agreement of the Parties or terminated in accordance with the terms of this Agreement. Further, THIS LEASE CANNOT BE CANCELLED BY LESSEE DURING THE TERM PROVIDED IN THIS LEASE.


5. FEES. The fees due to Lessor by Lessee, the amount of which are set forth in Schedule A attached hereto, will be due and payable fifteen days after receipt of an invoice from Lessor for the previous month, beginning with the first month following the month in which the Commencement Date occurs, or, in the event the Plant is not ready for commercial operation by June 1, 2002, beginning with the first month following the month in which commencement of commercial operations begins, and for the next succeeding one hundred nineteen (119) months during the term of the lease. The fees shall be paid to Lessor at the address set forth in Section 22 hereof or at such other place as Lessor may designate in writing to Lessee.


In the event that Lessee is unable, through its diligent efforts, to obtain one or more of the consents or approvals from third parties or governmental authorities as may be necessary to operate the Plant, and Lessor shall have, upon the expectation that Lessee would have received such consent(s) or approval(s) ordered the electric generating equipment to be utilized at the Plant, necessitating Lessor's cancellation of such order, then Lessee agrees to negotiate with Lessor in good faith with respect to the allocation between Lessor and Lessee of any charges, fees or other costs imposed on Lessor by the manufacturer or supplier of such electric generating equipment as a result of Lessor's cancellation of such order.


6. RIGHTS AND DUTIES OF LESSEE.


6.01 Lessee shall be entitled to the use, operation, possession and control of the Plant during the term of this Agreement. Lessee shall employ and have absolute control, supervision and responsibility over any operators or users of the Plant, subject to the restrictions set forth below.


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6.02 Lessee shall use the Plant in a careful and proper manner and agrees not to permit the Plant to be operated or used in violation of any applicable federal, state or local statute, law, ordinance, rule or regulation relating to the ownership, possession, control, operation, use or maintenance of the Plant. Lessee will also be responsible for providing all fuel for the operation of the Plant and Lessor will have no responsibility for fuel management. Lessee agrees to reimburse Lessor in full for all damages to the Plant arising from any misuse or negligent act by Lessee, its employees and its agents.


7. LIMITATION OF WARRANTIES AND WAIVER OF DAMAGES.


7.01 It is understood between the parties that Lessor is not the manufacturer of the equipment leased, nor the agent of the manufacturer of the equipment and that no warranty against patent or latent defects in material, workmanship, or capacity, nor that the equipment will meet the requirements of any law, rules, specifications or contracts which provide for specific machinery or apparatus or special methods is given, other than such representations as may be made by the original manufacturer and not by Lessor with respect to emissions performance and fuel consumption and which are set forth in the Environmental Emissions and Fuel Consumption Assurances of original manufacturer (the "Performance Assurances") which has been prepared by the original manufacturer and is attached hereto and made a part hereof as Schedule C, which Performance Assurances set forth the original manufacturer's obligations in the event the equipment leased hereunder fails to meet such Performance Assurances. Additionally, the original manufacturer of the equipment has represented to Lessor that the noise levels of the Plant, when operational, measured as approximate dBA levels at specified distances from the genset, are: @7 meters - --90 dBA and @10 meters -- 88 dBA and that the dBA Free Field noise level of the two circuit radiator which comprises a part of the Plant is approximately 53 dBA@l0 meters. These representations are restated in this Section 8.01 for convenience and as a reference only and shall not be construed as a representation or warranty of such noise levels by Lessor. Further, Lessor does not warrant the equipment leased as being fit for a particular purpose. Lessor further disclaims any liability for loss, damage or injury to Lessee or third parties as a result of any defects, latent or otherwise, in the Plant whether arising from Lessor's negligence or the application of the laws of strict liability. As to Lessor, Lessee leases the Plant "as is."


7.02 Regardless of cause, Lessee will not assert any claim whatsoever against Lessor for any punitive or any other exemplary damages, loss of anticipated profits or any other indirect, special or consequential damages, in tort, contract, or otherwise, except as otherwise may be specifically provided herein. Further, Lessor makes no warranty as to the treatment-of the lease for tax or accounting purposes.


8. PLANT MAINTENANCE, REPAIR AND ALTERATION.


8.01 Lessor, at its own cost and expense, shall maintain and keep the Plant in good repair, condition and working order, and shall furnish any and all parts and labor required for that purpose; provided, however, that if any such maintenance or repair work is required as a result of the negligence of Lessee or of any of Lessee's employees or agents, Lessee shall reimburse Lessor, within thirty (30) days after receipt of proper invoice from Lessor, for the costs to Lessor


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of such maintenance and/or repair work. Lessor reserves the right to enter the premises, at all reasonable times during the Term of this Agreement, for the purpose of inspecting the Plant and, if applicable under the provisions of this Agreement, for the purpose of repairing and/or replacing such part of the Plant. In addition, Lessee shall not alter any portion of the Plant, or remove any portion of the Plant from the location shown on the face of the lease, without Lessor's prior written consent.


8.02 All equipment, accessories, parts and replacements which are added to or become attached to the Plant shall constitute accessions, shall immediately become Lessor's property and shall be deemed incorporated in the Plant and subject to the terms of this Agreement as if originally leased hereunder.


9. TAXES. Lessee shall comply with all laws and regulations relating to, and shall promptly pay when due, exclusive of applicable sales, use and exise taxes, all personal property, stamp, documentary and ad valorem taxes, license and registration fees, assessments, fines, penalties and similar charges imposed on the ownership, possession, control, operation or use of the Plant during the term of this Agreement, and shall pay all taxes (except Lessor's federal, state or local income taxes) imposed on Lessor or Lessee with respect to the rental payments hereunder. Lessor shall be responsible for collecting and promptly paying when due all sales, use and exise taxes due on the fees paid by Lessee to Lessor hereunder, and Lessor shall file all returns required in connection therewith. Lessee shall, with respect to the taxes for which it is responsible under this Section 9, (a) reimburse Lessor upon demand for all taxes paid or advanced by Lessor, (b) indemnify and hold Lessor harmless against actual or asserted violations, (c) pay all costs and expenses of every character in connection therewith or arising therefrom, and (d) file all returns required therefor and furnish copies to Lessor.


If any taxing authority requires that a tax for which Lessee has assumed responsibility under this Section 9 as set forth above be paid to the taxing authority directly by Lessor, Lessee shall, on notice from Lessor, pay to Lessor the amount of the tax together with the next fee installment.


10. TITLE. The Plant is, and at all times shall remain, Lessor's property, and Lessee shall have no right, title or interest therein, and no right to purchase or otherwise acquire title to or ownership in the Plant, except as provided in this Agreement. Lessor warrants that it is the owner of the Plant free and clear of all encumbrances whatsoever. Lessor covenants that, during the Term of this Agreement, it will not in any manner encumber the Plant without providing prior written notice of such encumbrance to Lessee. Lessee shall, at its own cost and~expense, protect and defend Lessor's title against all persons claiming against or through Lessee, at all times keeping the Plant free from any legal process or encumbrances whatsoever including, without limitation, liens, attachments, levies and executions, and shall give Lessor immediate written notice thereof, and shall indemnify and hold Lessor harmless from any loss or damage caused thereby. Lessee will cooperate with Lessor and take whatever action may be necessary to enable Lessor to file, register or record, and re-file, register, or re-record, this lease if deemed appropriate by Lessor, in such offices as Lessor may determine and wherever required or permitted by law, for the proper protection of the Lessor's title to the Plant. Lessee shall execute and deliver to Lessor, upon Lessor's request, such further instruments and assurances as Lessor


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deems necessary or advisable for the confirmation or perfection of Lessor's rights hereunder.


The parties hereto intend the transaction contemplated hereby to be a lease and not a loan. In the event this transaction is deemed to be a loan, Lessee shall be deemed to have granted to Lessor a security interest in the Plant and all proceeds thereof. Lessee shall cooperate with Lessor and sign any further documentation reasonably required by Lessor to continue, provide, or otherwise assert Lessor's deemed security interest in the Plant. The Plant is and shall remain the personal property of Lessor irrespective of its use or manner of attachment to realty.


11. INVESTMENT TAX CREDIT. Any right to the investment tax credit(s) permitted under applicable provisions of the Internal Revenue Code and the laws of the State of Tennessee is reserved to Lessor or Lessor's lender, if applicable, and shall not in any event pass through to or be transferred to Lessee in any manner.


12. RISK OF LOSS.


12.01 Lessee shall bear all risks of loss or damage to the Plant from any cause; the occurrence of such loss or damage shall not relieve Lessee of any obligation hereunder. If any portion of the Plant is lost, stolen, destroyed or damaged as a result of its possession, control, operation, use or maintenance by Lessee, Lessee shall promptly notify Lessor of the occurrence and shall file all necessary accident and claim reports including those required by law and those required by interested insurance companies.


12.02 Lessee and its employees and agents shall cooperate fully with Lessor and all insurers providing insurance against the Plant in the investigation and defense of all claims or suits. Lessee shall promptly deliver to Lessor all papers, notices and documents served on or delivered to Lessee or its employees or agents in connection with any claim, suit, action or proceeding at law or in equity commenced or threatened against Lessee or Lessor concerning the Plant.


12.03 (a) In the event any portion of the Plant becomes lost, stolen, destroyed or damaged beyond repair, Lessee shall pay Lessor in cash the replacement value of the Plant less any net proceeds of insurance received by Lessor for loss or damage to the Plant. Upon such payment, this Agreement shall terminate with respect to that item of Plant and Lessee shall become vested with title to the Plant on an "as is" basis without warranty by Lessor expressed or implied for any matter concerning the Plant.


(b) Notwithstanding anything contained in Section 8 of this Lease or elsewhere herein to the contrary, in the event of loss or damage of any kind to any portion of the Plant which is neither total nor substantial, Lessee, at the option of Lessor, shall either place such portion of the Plant ih good repair and working order or replace the lost or damaged portion of the Plant with like property out of the proceeds of insurance or otherwise within thirty (30) days after the loss or damage and the lease shall continue in full force and effect until the expiration of its term. Lessee may retain any excess insurance proceeds over and above the cost of replacement or repair of the lost or damaged property.


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13. INSURANCE. Lessee shall keep the Plant insured against all risks of loss or damage from every cause whatsoever for not less than the full replacement value thereof, and shall carry public liability insurance, both personal injury and property damage, covering the Plant. All such insurance shall be in such form and amounts and shall be placed with such companies as Lessor reasonably considers to be satisfactory to it, and shall name Lessor as loss payee as its interest may appear or additional insured, as the case may be. Lessee shall pay the premiums therefore and deliver to Lessor the policies of insurance, duplicates thereof, or certificates of insurance, and such other evidences of insurance coverage as Lessor may deem necessary or appropriate. Each insurer shall agree, by endorsement upon the policy or policies issued by it or by independent instrument furnished to Lessor, that it will give Lessor thirty (30) days' prior written notice of the effective date of any alteration or cancellation of any policy. Insurance proceeds, at the option of Lessor, shall be applied (a) toward the replacement, restoration or repair of the Plant, or (b) toward payment of the obligations of Lessee hereunder.


Lessee agrees to consult with Lessor in its efforts to make claim for, receive payment of, and execute and endorse all documents, checks and drafts received in payment for loss or damage under any such insurance policy. In case of the failure of Lessee to procure or maintain such insurance or to comply with any other provision of this Agreement, Lessor shall have the right, but shall not be obligated, to effect such insurance or compliance on behalf of Lessee. In that event, all moneys spent by and expenses of Lessor in effecting such insurance or compliance shall be deemed to be additional fees and shall be paid by Lessee to Lessor with the next monthly payment of fees.


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