Ground Lease Agreement

EXHIBIT 10.7


GROUND LEASE AGREEMENT


BETWEEN


COGEN TECHNOLOGIES LINDEN VENTURE, L.P.


(d/b/a COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP)


AND


EXXON CORPORATION


AUGUST 1, 1990


TABLE OF CONTENTS


ARTICLE HEADING PAGE - ------- ------- ----
1 Definitions........................................ 3
2 Demised Premises and Additional Rights............. 11
3 Mortgage Priority.................................. 17
4 Term............................................... 17
5 Rent............................................... 24
6 Use of Premises and Ownership of Improvements...... 27
7 Exxon's Cogeneration Unit.......................... 31
8 Quiet Enjoyment.................................... 33
9 Taxes.............................................. 35 10 Environmental Responsibility....................... 36 11 Liens.............................................. 46 12 Permitted Encumbrances on Leasehold Interests
and Improvements................................. 47 13 Eminent Domain..................................... 48 14 Limitation on Liability and Distribution of Risks.. 49 15 Insurance.......................................... 54 16 Termination........................................ 56 17 Removal of Improvements............................ 66 18 Nonwaiver.......................................... 68 19 Force Majeure...................................... 68 20 Assignment and Subletting.......................... 70 21 Exxon's Complex, Property, and Operations.......... 84 22 Notice and Service................................. 85 23 Consent Not to be Unreasonably Withheld............ 87 24 Amendments......................................... 87 25 Choice of Law...................................... 87 26 Renegotiation...................................... 87 27 Other Agreements................................... 88 28 No Commission ..................................... 88 29 Captions........................................... 89 30 Counterparts....................................... 89 31 Authority.......................................... 89


EXHIBIT HEADING PAGE - ------- ------- ---- A Exxon's Property................................... 96 B Demised Premises................................... 97 C Projection Easement Area........................... 102 D Interconnection and Utility Areas.................. 103 E Access Rights of Way............................... 104 F Selected Governmental Authorizations for the
Cogeneration Facility............................ 106 G-1 Assumption Agreement............................... 107 G-2 Assumption Agreement............................... 109 G-3 Assumption Agreement............................... 111 H Consent to Assignment.............................. 114 I Consent to Leasehold Mortgage...................... 118 J Recognition Agreement.............................. 122


GROUND LEASE AGREEMENT


This Ground Lease Agreement is made and entered into effective August 1, 1990, by and between Exxon Corporation, a New Jersey Corporation ("Exxon") and Cogen Technologies Linden Venture, L.P., doing business in New Jersey as Cogen Technologies Linden Venture, Limited Partnership ("Cogen"), a Delaware limited partnership (collectively "Parties").


Exxon, operating through its division Exxon Company, U.S.A., owns, operates and maintains its Bayway Refinery and, operating through Exxon Chemical Americas, a division of Exxon Chemical Company (a division of Exxon), owns, operates and maintains its Bayway Chemical Plant. The Bayway Refinery and Bayway Chemical Plant (collectively "Exxon's Complex") are located on "Exxon's Property" (as defined in Article 1 below) in Linden, New Jersey. Additionally, Exxon owns, operates, and maintains its Linden Marketing Terminal ("Exxon's Marketing Terminal") and Linden Technology Center ("Exxon's Technology Center") in Linden, New Jersey.


Cogen Technologies, Inc., has entered into a Power Purchase Agreement dated April 14, 1989 ("Power Purchase Agreement") with Consolidated Edison Company of New York, Inc. ("Consolidated Edison"). Under the Power Purchase Agreement Cogen Technologies, Inc. proposes to sell to Consolidated Edison electricity from a cogeneration facility


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("Cogeneration Facility") to be located in Linden, New Jersey. The Power Purchase Agreement was approved by the Public Service Commission of the State of New York and became effective in September, 1989 and has been assigned to Cogen. The Cogeneration Facility is contemplated, but not required, to be a qualifying cogeneration facility as defined in Section 3(18) of the Federal Power Act and the regulations thereunder. Cogen and Consolidated Edison contemplate that the Power Purchase Agreement will remain in force for twenty-five years from the Date of Initial Commercial Operation (as defined in Article 1 below) and possibly for two additional five-year renewal terms.


Cogen desires to construct, own, operate, and maintain the Cogeneration Facility on part of the land on which Exxon's Bayway Refinery is located and to lease from Exxon the "Demised Premises" (as defined in Article 1 below) upon which the Cogeneration Facility will be located. Exxon is willing to lease the Demised Premises to Cogen and to grant Cogen such easements and rights-of-way as are reasonably necessary for the construction, operation, maintenance, repair, replacement and removal of the Cogeneration Facility and related improvements in partial consideration of Cogen's contemporaneously entering into the Steam Sale Agreement (as defined in Article 1 below) for the sale of steam to Exxon from the Cogeneration Facility for use at Exxon's Complex, Exxon's Marketing Terminal and Exxon's Technology Center. The parties to this Ground Lease Agreement and the Steam Sale Agreement acknowledge and agree


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that both such agreements are interdependent, as provided in both such agreements.


Exxon and Cogen contemplate that Exxon may elect to install its own cogeneration unit (the "Exxon System," as defined in Article 1 below) on the Demised Premises. Cogen is willing to accommodate the Exxon System on the Demised Premises and, on terms to be negotiated, to construct and operate the Exxon System for Exxon.


Now, therefore, in consideration of the mutual covenants contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:


ARTICLE I
DEFINITIONS


The following terms will have the following meanings:


"Access Rights of Way" means the nonexclusive access easement granted to Cogen for ingress and egress on, over and across, those portions of Exxon's Property (exclusive of the Demised Premises and the tank fields referred to in Section 2.11 below), more particularly described in Exhibit E, to give Cogen vehicular and pedestrian access to the Demised Premises and to enable Cogen to construct, operate, maintain, repair, replace, and remove the Improvements and the Exxon System, if applicable.


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"Affiliate" means a corporation or other entity that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, another corporation or other entity.


"Annual Period" means any one of a succession of consecutive twelve month periods, the first of which will begin on the Date of Initial Commercial Operation.


"Base Term" of the Ground Lease means that part of the term of the Ground Lease beginning with the Date of Initial Commercial Operation, and continuing for a period of twenty-five Annual Periods, unless sooner terminated.


"Cogeneration Facility" means the cogeneration facility to be constructed by Cogen on the Demised Premises. The Cogeneration Facility excludes the Exxon System.


"Commercial Operation" means the production of electricity by Cogen at the Cogeneration Facility upon the completion of such testing of the Cogeneration Facility as Cogen determines is required by prudent electrical practices, and the supply of steam at the points where Cogen's steam supply system connects to Exxon's steam pipeline at Exxon's existing steam headers.


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"Construction Period" means that part of the term of the Ground Lease from the commencement of the Ground Lease in accordance with Section 4.3A to the Date of Initial Commercial Operation.


"CPI" means the Consumer Price Index for all Urban Consumers for the New York- Northern New Jersey Metropolitan Area, published by the Bureau of Labor Statistics of the U.S. Department of Labor (all items figure - 1982-1984 = 100).


"Date of Initial Commercial operation" means the first day of the month which immediately follows the date Cogen designates in writing to Consolidated Edison as the initial date of Commercial Operation of its Cogeneration Facility.


"Demised Premises" means those two parcels of land, totalling approximately 12.77 acres, on the site of Exxon's Bayway Refinery at Linden, New Jersey. The Demised Premises are described more particularly in Exhibit B, and upon the commencement of the Construction Period are to be leased to Cogen pursuant to this Ground Lease Agreement. The Demised Premises do not include the Interconnection Areas, Utility Areas, Staging Areas, and Access Rights of Way.


"ECRA" means the New Jersey Environmental Cleanup Responsibility Act, NJSA 13:1K-6 et seq., together with related regulations, as such Act and regulations may be amended from time to time.


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"Evergreen Period" means that part of the term of the Ground Lease immediately following the Renewal Terms and preceding the Improvements Removal Period, if any.


"Exxon's Complex" means Exxon Company, U.S.A.'s Bayway Refinery and Exxon Chemical America's Bayway Chemical Plant, both located at Linden, New Jersey. Exxon's Complex excludes Exxon's Marketing Terminal and Exxon's Technology Center.


"Exxon's Marketing Terminal" means Exxon's Linden Marketing Terminal located in Linden, New Jersey.


"Exxon's Property" means all the land upon which Exxon's Complex is situated, as more particularly described in Exhibit A. Exxon's Property includes the Demised Premises, Interconnection Areas, Utility Areas, Staging Areas, and Access Rights of Way.


"Exxon System" means Exxon's own cogeneration unit consisting of one gas turbine, one waste heat recovery system, one back-pressure steam turbine and appurtenant facilities which might be installed on the Demised Premises, as more fully described in Section 7.1.


"Exxon's Technology Center" means Exxon's Linden Technology Center, located at Linden, New Jersey.


"Financier" initially means General Electric Power Funding Corporation (as construction lender or as agent for itself and other


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construction lenders), and may also mean any other entity subsequently extending credit to Cogen for the construction, operation, maintenance, repair, replacement, or removal of the Cogeneration Facility and other Improvements, or any entity subsequently providing funds for the refinancing or taking-out of such loans, and the nominees or designees of any such entities; provided that, at no time will Exxon be obligated to recognize more than one such entity as the Financier to whom duties are owed, or rights are granted, under this Ground Lease Agreement and the Steam Sale Agreement. The parties anticipate that after General Electric Power Funding Corporation is the Financier, a specific designated Affiliate of General Electric Power Funding Corporation will become the Financier and that such designated Affiliate will also become a limited partner in Cogen. Exxon will recognize as the Financier for purposes of this Ground Lease Agreement and the Steam Sale Agreement (i) General Electric Power Funding Corporation, until such time as General Electric Power Funding Corporation notifies Exxon in writing that such designated Affiliate should be considered to be the Financier, and (ii) thereafter, the designated Affiliate, until such time as such designated Affiliate notifies Exxon in writing that Cogen has the right to designate another entity as the Financier, and (iii) thereafter, such other entity as Cogen may designate in writing from time to time. Exxon will not be required to recognize as the Financier any partner of Cogen other than such designated Affiliate of General Electric Power Funding Corporation.


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"Force Majeure" means a cause beyond the reasonable control of the affected Party, as more fully defined in Article 19.


"Governmental Authorizations" means any and all licenses, permits, certificates and other authorizations required by applicable federal, state, or local law.


"Ground Lease" means the creation of a leasehold estate in the Demised Premises as provided for in this Ground Lease Agreement. The Ground Lease will commence with the beginning of the Construction Period pursuant to Section 4.3A.


"Ground Lease Agreement" means this agreement, including all exhibits and amendments thereto that may be made from time to time.


"Improvements" means the Cogeneration Facility and all related improvements constructed or placed by Cogen on the Demised Premises, the Interconnection Areas, or the Utility Areas, but not including the Exxon System which may be installed upon the Demised Premises but owned by Exxon, as more fully described in Section 7.1.


"Improvements Removal Period" means that part of the term of the Ground Lease for the removal of the Improvements at the end of the Ground Lease pursuant to Section 4.7.


"Interconnection Areas" means those portions of Exxon's Property (exclusive of the Demised Premises and the tank fields referred to in


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Section 2.11), more particularly described in Exhibit D, on, over, and under which Cogen will have a nonexclusive easement and right of way to construct, operate, maintain, repair, replace and remove Cogen's electrical and steam interconnections from its Cogeneration Facility to the facilities of Exxon, Consolidated Edison and those other purchasers of steam or electricity that may be served through such Interconnection Areas described in Exhibit D and, with Exxon's prior written consent with respect to the routing and location of additional interconnections for additional purchasers of steam or electricity from the Cogeneration Facility, to the facilities of such additional purchasers of steam or electricity.


"Memorandum of Lease" means a written summary of this Ground Lease Agreement, and any amendments, suitable for recordation, as more fully described in Section 2.8.


"Party" means Cogen or Exxon, as the case may be, and its permitted successors and assigns.


"Power Purchase Agreement" means that certain Power Purchase Agreement dated April 14, 1989, executed by and between Cogen Technologies, Inc. and Consolidated Edison (which Power Purchase Agreement has been assigned to Cogen) under which electric energy generated at the Cogeneration Facility will be sold by Cogen for purchase by Consolidated Edison, including all exhibits and amendments thereto that may be made from time to time.


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"Renewal Term" means either of two periods of the term of the Ground Lease immediately following the Base Term, as more fully described in Section 4.5.


"Staging Areas" means those specific portions of Exxon's Property (exclusive of the Demised Premises and the tank fields referred to in Section 2.11) to which Exxon from time to time grants Cogen temporary access for the storage of material and equipment used by Cogen for the construction, operation, maintenance, repair, replacement, or removal of the Improvements or the Exxon System, if applicable.


"Steam Sale Agreement" means the agreement of even date herewith between Cogen and Exxon for the sale of steam from the Cogeneration Facility, including all exhibits and amendments thereto that may be made from time to time.


"Three Turbine Rating" means the power output rating which Cogen's Cogeneration Facility would obtain utilizing three GE MS-7000 gas turbines.


"Utility Areas" means those portions of Exxon's Property (exclusive of the Demised Premises and the tank fields referred to in section 2.11), more particularly described in Exhibit D, on, over, under, or across which Cogen will have a nonexclusive easement and right of way to construct, operate, maintain, repair, replace, and remove structures, wires, pipes, lines, equipment and other materials relating to water transfer between the two parcels of the Demised


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Premises, stormwater discharge, wastewater discharge and other utilities serving the Cogeneration Facility (other than water, gas and standby power supplied to Cogen by public utilities).


ARTICLE 2
DEMISED PREMISES AND ADDITIONAL RIGHTS


2.1 Demised Premises. Upon the occurrence of the conditions described in
Section 4.3, and on the other terms of this Ground Lease Agreement, Exxon
will lease, let and demise to Cogen and Cogen will lease from Exxon the
Demised Premises. Cogen and Exxon are considering redefining by mutual
agreement the precise boundaries of the north parcel of the Demised Premises
in order to facilitate the placement of certain water tanks that will be
part of the Cogeneration Facility. In that event, Exhibit B will be amended
to reflect the new boundaries of the Demised Premises.


2.2 Additional Rights. To facilitate Cogen's use of the Demised Premises, Exxon
grants to Cogen certain additional rights to use the Interconnection Areas
and Utility Areas, certain Access Rights of Way over Exxon's Property, and
certain temporary rights to use Staging Areas, all as more specifically set
forth in Sections 2.3, 2.4, 2.5, 2.6, and 2.7 below. Additionally, Exxon
grants to Cogen a nonexclusive easement which will run with the land to
allow for the construction, operation, maintenance, repair, replacement and
removal of certain air cooling towers which will be part of the Cogeneration
Facility and which will


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extend beyond the perimeter of the Demised Premises, as shown in Exhibit C.
All additional rights referred to in this Section 2.2 will be ancillary to
the lease of the Demised Premises, and unless otherwise provided for herein,
the term of these additional rights will extend until the termination of the
Ground Lease.


2.3 Rights to Use Interconnection Areas. Exxon grants Cogen a nonexclusive
easement and right of way on, over, across and under the Interconnection
Areas of Exxon's Property, as specifically described in accordance with
Section 2.6, for Cogen to construct, operate, maintain, repair, replace and
remove Cogen's electrical and steam interconnections from its Cogeneration
Facility to the facilities of Exxon, Consolidated Edison and those other
purchasers of steam or electricity that may be served through such
Interconnection Areas described in Exhibit D and, with Exxon's prior written
consent with respect to the routing and location of additional
interconnections for additional purchasers of steam or electricity from the
Cogeneration Facility, to the facilities of such additional purchasers of
steam or electricity.


2.4 Rights to Use Utility Areas. Exxon grants Cogen a nonexclusive easement and
right of way on, over, under and across the Utility Areas of Exxon's
Property, as specifically described in accordance with Section 2.6, for
Cogen to construct, operate, maintain, repair, replace and remove
structures, wires, pipes, lines, equipment and other materials relating to
water transfer


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between the two parcels of the Demised Premises, stormwater discharge, waste
water discharge and other utilities serving the Cogeneration Facility (other
than water, gas and standby power supplied to Cogen by public utilities).


2.5 Access Rights of Way. Exxon grants Cogen the nonexclusive easement referred
to as the Access Rights of Way for ingress and egress on, over and across
Exxon's Property, as specifically described in accordance with Section 2.6,
to give Cogen vehicular and pedestrian access to the Demised Premises and to
enable Cogen to construct, operate, maintain, repair, replace and remove
Cogen's Improvements and the Exxon System, if applicable. Under normal
conditions, Cogen and its invitees will park on the Demised Premises. During
turnarounds and other unusual circumstances Exxon at Cogen's request will
designate additional areas for parking by Cogen and its invitees to meet
their reasonable needs.


2.6 Locations of the Interconnection Areas. Utility Areas, and Access Rights of
Way.


A. The initial locations of the Interconnection and Utility Areas are
described in Exhibit D. The initial Access Rights of Way are described in
Exhibit E. The easements described in Exhibits D and E will run with the
land.


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B. Cogen, with the prior written consent of Exxon and subject to Section
2.11, may change the specific boundary lines and dimensions for the
Interconnection Areas and Utility Areas, during construction and from
time to time thereafter during the term of this Ground Lease Agreement,
to enable Cogen to service new customers or to accommodate changed
operating circumstances. Additionally, at any time during the term of the
Ground Lease Agreement, Cogen, at the request of Exxon, will relocate the
Interconnection Areas, Utility Areas, and Access Rights of Way, or any
portion thereof, to other mutually agreeable locations on Exxon's
Property to enable Exxon to accommodate changed operating circumstances
or to sell part of Exxon's Property to a third party free of encumbrances
related to the easements over the Interconnection Areas, Utility Areas,
or to the Access Rights of Way. Any such relocation at the request of
Exxon will be solely at Exxon's expense and will be accomplished without
any unreasonable interruption of Cogen's operation. Any redetermination
or relocation of the Interconnection Areas, Utility Areas, or Access
Rights of Way under the provisions of this Section 2.6B will be
negotiated in good faith by the Parties and will be specifically
described in an instrument executed by the Parties in recordable form as
an amendment to this Ground Lease Agreement.


2.7 Rights to Use Staging Areas. Subject to Section 2.11, Exxon agrees, from
time to time as reasonably requested by Cogen, to


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grant to Cogen temporary access rights to those specific portions of Exxon's
Property that Exxon may designate as Staging Areas for the storage of
material and equipment used by Cogen for the construction, operation,
maintenance, repair, replacement or removal of the Improvements or the Exxon
System, if applicable. Cogen may install temporary security fencing around
the Staging Areas, subject to the right of Exxon and authorized third
persons, if any, to gain access. Exxon's granting to Cogen temporary access
from time to time to such Staging Areas will not be considered amending this
Ground Lease Agreement.


2.8 Memorandum of Lease. The Parties will execute and acknowledge, from time to
time, upon the request of either Party, (i) a Memorandum of Lease,
describing the material provisions of this Ground Lease Agreement, including
the priorities established by Article 3, and setting forth a description of
the Demised Premises, the Interconnection Areas, the Utility Areas and the
Access Rights of Way and referring to the Staging Areas and (ii) any
amendments to the Memorandum of Lease, reflecting amendments to this Ground
Lease Agreement, including those instruments prepared pursuant to Section
2.6 above. The Memorandum of Lease, and any such amendments, will be
recorded in the appropriate records of real property of Union County, New
Jersey. When the Ground Lease terminates or, if it fails to commence
(pursuant to Section 4.3) at that time, the Parties will execute and
acknowledge for recordation one or more instruments to clear


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Exxon's Property of all encumbrances or clouds created by this Ground Lease
Agreement.


2.9 Safety and Security. Each Party, and authorized third persons such as
Contractors and government officials, gaining access to the facilities of
the other Party under this Ground Lease Agreement will abide by the other
Party's safety and security rules and regulations then current and
generally applicable to all employees and contractors, including those
relating to obtaining required work permits.


2.10 Cooperation. Each Party will cooperate with the other so that exercise of
its rights under this Article 2 will not unreasonably interfere with the
operations and rights of the other and of authorized third parties, such as
contractors and government officials. Exxon will extend reasonable
cooperation to public utilities providing water, gas, and standby power to
the Cogeneration Facility and the Exxon System, if applicable, to
facilitate the provision of such services to the Cogeneration Facility and
the Exxon System, if applicable.


2.11 Tank Fields. This Ground Lease Agreement will not give Cogen any easement,
right of way, access or other rights respecting the two tank fields
identified in Exhibit A as the Rahway River Tank Field and the Forty-Acre
Tank Field and this Ground Lease Agreement will not create any encumbrances
or clouds on such tank fields.


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ARTICLE 3
MORTGAGE PRIORITY


3.1 Predetermined Areas. The Ground Lease will be a prior encumbrance against
Exxon's Property (except for the tank fields referred to in Section 2.11)
with respect to any mortgages or other liens that may subsequently be placed
upon Exxon's Property. The recording of the Memorandum of Lease will
establish the priority of this Ground Lease and this Ground Lease will have
preference and precedence and be superior and prior to any such subsequent
mortgage or lien on Exxon's Property. ...