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Sectors: Energy
Governing Law: Illinois, View Illinois State Laws
Effective Date: September 30, 1998
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Exhibit 10.13


GROUND LEASE


by and between


THE PEOPLES GAS LIGHT AND COKE COMPANY,
as Lessor


and


ELWOOD ENERGY LLC,
as Lessee


Dated: September 30, 1998


Address of Premises: 21100 Noel Road
Elwood, Illinois


GROUND LEASE
------------


THIS GROUND LEASE (this "Lease"), made this 30th day of September, 1998, by
----- and between THE PEOPLES GAS LIGHT AND COKE COMPANY, an Illinois Corporation (the "Lessor"), and ELWOOD ENERGY LLC, a Delaware limited liability company (the ------ "Lessee"). - -------


W I T N E S S E T H:
-------------------


WHEREAS, Lessor is the owner of fee title to the premises (as defined below), which consists of approximately 18.892 acres of land, together with the improvements located thereon, and is legally described on Exhibit A attached
--------- hereto and made part hereof. The premises are part of the McDowell Energy Center in unincorporated Will County, Illinois. The address of the premises is 21100 Noel Road, Elwood, Illinois; and


WHEREAS, the Lessor desires to lease to the Lessee, and the Lessee desires to lease from the Lessor, the premises, all on and subject to the terms and conditions hereinafter set forth;


NOW, THEREFORE, in consideration of the foregoing Recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lessor and Lessee hereby agree as follows:


AGREEMENTS
----------


ARTICLE 1
DEFINITIONS
-----------


For the purpose of this Lease, the following terms shall have the meanings ascribed to them below:


"Approval Contingencies" shall have the meaning ascribed to such term in
---------------------- Section 2.4 hereof. - -----------


"award" shall have the meaning ascribed to such term in Section 9.1 hereof.
----- -----------


"basic rent" shall have the meaning ascribed to such term in Section 3.1
---------- ----------- hereof.


"building fixtures" shall have the meaning ascribed to such term in Section
----------------- ------- 18.1 hereof. - ----


"Buildings" shall mean the buildings, structures and improvements and all
--------- building fixtures (as said term is defined in Section 18.1 hereof), together
------------ with any and all buildings, structures and improvements now existing or at any time hereafter erected, constructed or situated upon the land comprising the demised premises, or any part thereof, during the hereafter affixed or attached to any such buildings, structures, or improvements and any and all renewals and replacements of,


additions to and substitutions for any such building, building fixtures, structure or improvement, specifically excluding, however, the Kirk Building (as hereinafter defined).


"business day" shall mean any day other than (i) a Saturday, (ii) a Sunday
------------ or (iii) a State of Illinois or federal holiday upon which banks are authorized or required by law to be closed for the conduct of normal business.


"Commencement Date" shall have the meaning ascribed to such term in Section
----------------- ------- 2.2 hereof. - ---


"Common Areas" shall have the meaning ascribed to such term in Section 14.1
------------ ------------ hereof.


"Common Facilities Agreement" shall have the meaning ascribed to such term
--------------------------- in Section 14.1 hereof.
------------


"Common Utility Facilities" shall have the meaning ascribed to such term in
------------------------- Section 14.2 hereof. - ------------


"Default" shall mean any event which, with the giving of notice and/or
------- passage of time would constitute an Event of Default under this Lease.


"Default Rate" shall mean a rate per annum which is the sum of (x) the
------------ "prime rate" of interest as announced by Citibank, N.A. (or any other national bank designated by Lessor) from time to time, plus (y) four percent (4%).


"Environmental Laws" shall have the meaning ascribed to such term in
------------------ Section 21.1 hereof. - ------------


"Extended Commencement Date" shall have the meaning ascribed to such term
-------------------------- in Section 2.4 hereof.
-----------


"Event of Default" shall have the meaning ascribed to such term in Section
---------------- ------- 20.1 hereof. - ----


"Gas Main Easement" shall have the meaning ascribed to such term in Section
----------------- ------- 14.3 hereof. - ----


"Governmental Authority" shall have the meaning ascribed to such term in
---------------------- Section 21.1 hereof. - ------------


"Hazardous Materials" shall have the meaning ascribed to such term in
------------------- Section 21.1 hereof. - ------------


"ICC Approval Contingency" shall have the meaning ascribed to such term in
------------------------ Section 2.3 hereof. - -----------


"Impositions" shall have the meaning ascribed to such term in Section 4.1
----------- ----------- hereof.


"Institutional Mortgagee" shall mean a bank, savings bank or trust company
----------------------- having a capital


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of not less than One Hundred Million Dollars ($100,000,000), an insurance company, authorized to do business in the State in which the Property is located, a financial services company, college, university, mortgage banker, building and loan or savings and loan association or society, pension fund, welfare fund, retirement fund, endowment fund, or a fraternal organization, or any combination thereof, or a collateral agent, trustee or other entity in connection with any public offering, 144A offering or other similar registered or exempt offering of notes or other indebtedness.


"Kirk Building" shall mean that certain approximately 40.2 foot by 77.2
------------- foot metal storage building located on the premises which is currently being used by Lessor for the storage of various catalysts for manufacturing processes.


"Lessor's Parcel" shall have the meaning ascribed to such term in Section
--------------- ------- 14.1 hereof. - ----


"Lessor's Remaining Property" shall have the meaning ascribed to such term
--------------------------- in Section 14.1 hereof.
------------


"Permitted Exceptions" shall have the meaning ascribed to such term in
-------------------- Section 2.1 hereof. - -----------


"Personal Property" shall have the meaning ascribed to such term in Section
----------------- ------- 18.2 hereof. - ----


"Premises," "premises", "demised premises" or "leased premises" shall mean
-------- -------- ---------------- --------------- and include all of the land, appurtenant rights and easement rights demised herein (including, without limitation, the rights granted to Lessee pursuant to Article 14 hereof), and any Buildings now located thereon, but specifically excluding, however, the Kirk Building.


"Property" shall mean and include both the demised premises and the
-------- Buildings, but specifically excluding, however, the Kirk Building.


"Rent" or "rent" shall mean, collectively, all basic rent and additional
---- ---- rent payable under this Lease from time to time.


"Subdivision Approval Contingency" shall have the meaning ascribed to such
-------------------------------- term in Section 2.4 hereof.
-----------


"Term" shall have the meaning ascribed to such word in Section 2.2 hereof.
---- -----------


"Termination Date" shall have the meaning ascribed to such term in Section
---------------- ------- 2.2 hereof. - ---


"Waste Treatment Facility" shall have the meaning ascribed to such term in
------------------------ Section 14.3 hereof. - ------------


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ARTICLE 2
PREMISES AND TERM
-----------------


Section 2.1 Lease of Premises. Lessor, for and in consideration of the rent
----------------------------- herein reserved and of the covenants and agreements herein contained on the part of the Lessee to be kept, observed and performed, has demised and leased, and does by these presents demise and lease, to the Lessee, and Lessee hereby leases from Lessor, the premises, subject however to the terms and conditions of this Lease and the following exceptions to title:


(a) General and special taxes and assessments for the year 1998 and subsequent years, which are not yet due and payable, and


(b) The exceptions to title listed on Exhibit B attached hereto and made a
--------- part hereof (collectively, the "Permitted Exceptions"), provided that Lessor
-------------------- shall have until fifteen (15) days from the date the Approval Contingencies are satisfied to cause the Mortgage described as Item 1 on Schedule B to be released of record, at which time said Mortgage shall no longer be a Permitted Exception.


Section 2.2 Term. The term of this Lease (the "Term") shall commence on the
---------------- ---- satisfaction or waiver of the Approval Contingencies (the "Commencement Date")
----------------- and shall end ninety nine (99) years thereafter (as such termination date may be modified pursuant to the provisions of this Lease, the "Termination Date"),
---------------- unless said Term shall be sooner terminated, as provided elsewhere in this Lease. Upon determination of the Commencement Date, Lessor and Lessee shall promptly confirm same in writing.


Section 2.3 ICC Approval Contingency. Notwithstanding anything contained in
------------------------------------ this Lease to the contrary, Lessor's obligations and Lessee's rights under this Lease are expressly subject to and contingent upon the issuance by the Illinois Commerce Commission (the "ICC") of an interim written order permitting and approving this Lease of the premises by and between Lessor and Lessee, in form and substance reasonably satisfactory to both Lessor and Lessee (the "ICC Approval Contingency"). If the ICC Approval Contingency has not been satisfied by December 1, 1998, then the terms of Section 2.4(c) below shall apply. Lessor and Lessee shall cooperate with one another and shall perform, execute, and acknowledge and deliver all reasonably necessary acts, instruments and assurances and do all things necessary to assist one another in satisfying the ICC Approval Contingency on or before December 1, 1998. Lessor shall promptly apply for, and diligently pursue, such necessary ICC approvals.


Section 2.4 Subdivision Approval Contingency.
--------------------------------------------


(a) Lessor and Lessee acknowledge that the premises are not presently a complete, separately platted parcel. If state, county, and/or local law requires that a subdivision plat be filed as a condition to the leasing of the premises, then as soon as practicable, Lessor shall prepare and


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file for approval a plat of subdivision for the premises reasonably satisfactory to both Lessor and Lessee. If the plat of subdivision has not been approved by all necessary governmental bodies and authorities and recorded in the Office of the Will County Recorder (collectively, the "Subdivision Approval Contingency") by December 1, 1998, then the terms of subparagraph (c) below shall apply. In connection therewith, Lessee shall bear all fees and expenses charged by all governmental authorities and any surveyors, engineers, and other consultants whose services are reasonably necessary to obtain such required subdivision and the approvals therefor. Lessor and Lessee shall cooperate with one another and shall perform, execute, acknowledge and deliver all reasonably necessary acts, instruments and assurances and do all things necessary to assist the other in obtaining any required subdivision and the approvals therefor.


(b) The Subdivision Approval Contingency and the ICC Approval Contingency are sometimes collectively referred to herein as the "Approval Contingencies."


(c) If the Commencement Date has not occurred by December 1, 1998, then the time period for satisfying the Approval Contingencies shall be automatically extended for an additional three hundred sixty-five (365) days (the "Extended Commencement Date"). In the event Lessor and Lessee are unable to satisfy the Approval Contingencies on or prior to the Extended Commencement Date, then either party hereto may terminate this Lease upon written notice to the other, in which event this Lease shall terminate and the parties shall have no further liability to each other hereunder.


ARTICLE 3
RENTAL
------


Section 3.1 Basic Rent. As consideration for Lessor's lease of the premises
---------------------- to Lessee, Lessee hereby covenants and agrees to pay Lessor on or before the Commencement Date, in coin or currency which at the time of payment is legal tender for public or private debts in the United States of America, at the office of the Lessor in Chicago, Illinois, or at such other place as the Lessor may designate in writing, in lieu of any annual base rent, a one-time, lump sum amount equal to Two Hundred Eighty Three Thousand Three Hundred Eighty and No/100 Dollars ($283,380.00) (the "basic rent").
----------


Section 3.2 Net Lease. It is the purpose and intent of Lessor and Lessee
---------------------- that the basic rent be absolutely net to Lessor, so that this Lease shall yield, net, to Lessor, the basic rent specified in Section 3.1 hereof, and that, except
----------- as specifically set forth in this Lease, all costs and expenses and obligations of every kind and nature whatsoever relating to the Property (except the taxes of Lessor referred to in Section 4.2 hereof and the costs to be paid by Lessor
----------- under Sections 2.3 and 2.4 hereof) which may arise or become due during the term of this Lease shall be paid by Lessee, and that Lessor shall be indemnified, defended and held harmless by Lessee from and against the same.


Section 3.3 No Set-Off. The basic rent shall be paid to Lessor when due,
----------------------- without abatement, deduction or set-off.


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Section 3.4 Additional Rent. Lessee shall also pay as additional rent
---------------------------- without abatement, deduction or set-off, all sums, Impositions (as defined in Section 4.1), costs, expenses and other payments which Lessee in any of the - ----------- provisions of this Lease agrees to pay.


ARTICLE 4
TAXES AND ASSESSMENTS
---------------------


Section 4.1 Payment of Impositions.
-----------------------------------


(a) Lessee further agrees to pay as additional rent for the demised premises all taxes and assessments, general and special, water rates and all other impositions, ordinary and extraordinary, of every kind and nature whatsoever, which may be levied, assessed or imposed upon the Property or levied or assessed upon the interest of the Lessor in or under this Lease, now accrued or due, or accruing and becoming due and payable during the term of this Lease, and also all unpaid installments now accrued or due, or accruing and becoming due and payable during the term hereof, of special assessments levied against the Property for improvements completed or not yet completed (all of the foregoing being collectively referred to herein as "Impositions"). All
----------- Impositions shall be paid by Lessee before the same shall become delinquent, and in any case within sufficient time to prevent any sale or forfeiture of the Property therefor or for any part thereof; provided, however, that the general taxes levied against the Property for the first and last calendar years of the Term shall be prorated between the Lessor and the Lessee on and as of the Commencement Date and Termination Date, as the case may be, on the basis of the then last available tax bills.


(b) Upon the execution of this Lease, Lessor shall promptly file a petition to have the Property separately assessed with a distinct property tax identification number in the name of the Lessor (or, if possible, in the name of the Lessee). Until such tax division is obtained, if any tax bills for Impositions cover the demised premises (including any Buildings thereon) and other property owned by Lessor (i) such bills shall be allocated between the demised premises and such other property based on the area of the demised premises relative to the area of the entire tax parcel covered by such tax bills of which the demised premises forms a part; (ii) Lessee shall promptly pay Lessor on demand (which demand shall be accompanied by a copy of the applicable tax bill and the computation upon which the portion thereof payable by Lessee is based) the portion of such tax bills which are allocated to the demised premises, as set forth above; and (iii) Lessor shall pay all tax bills for Impositions covering the demised premises (including any buildings thereon) and other property owned by Lessor in a timely manner, except to the extent Lessee fails to make timely payment pursuant to subpart (ii) of this sentence.


Section 4.2 Substitute Taxes. The parties to this Lease agree that
----------------------------- nothing herein contained shall be construed to require the Lessee to pay any franchise, inheritance, estate, succession or transfer tax of the Lessor or any income or excess profits tax assessed upon or in respect of the income of the Lessor or chargeable to or required to be paid by the Lessor, unless such tax shall be specifically levied against the income of the Lessor derived from the rent paid pursuant to this


6


Lease, expressly and as and for a specific substitute for the taxes, in whole or in part, upon the Property or any part thereof. Lessee covenants and agrees to pay all such substitute taxes as so much additional rent as and when the same become due and payable; provided, however, that if the amount or rate of any such income or excess profits taxes so levied against the income of the Lessor, as a specific substitute for the taxes on the Property or any part thereof, shall be increased by reason of any other income received or property owned by the Lessor, then the Lessee shall not be obligated to pay such increased amount but only such tax as the Lessor would be obligated to pay in case it derived no income from any source other than the real estate hereby demised.


Section 4.3 Tax Deposits. Following the occurrence of an Event of Default
------------------------- hereunder, Lessee further covenants and agrees that it will deposit with the Lessor, on the first day of each month of the Term hereof, an amount equal to 1.05 times one-twelfth (1/12th) of the amount of the general real estate taxes and assessments on the Property as determined by the previous year's tax bill, or, if such tax bill is not available, then by the last procurable tax bill. If such previous year's or last procurable bill does not include a full assessment of the Buildings, each of such deposits shall be in an amount of 1.05 times one- twelfth (1/12th) of the Lessor's reasonable estimate of the taxes and assessments to be assessed. It is the intent hereof that such aggregate deposits for taxes and assessments shall be sufficient for the payment of such general real estate taxes and assessments when due. At the written request of Lessee, accompanied by the bill for the tax then due, Lessor shall use said moneys so deposited to pay the general taxes and assessments on the Property when and as said general taxes and assessments shall become due and payable to the proper taxing authority; and, in the absence of such written request, Lessor may, but shall not be required to, apply said deposited moneys to the payment of such general taxes and assessments. In the event Lessee is required to make monthly deposits under the terms of this Section 4.3, and thereupon makes twelve (12) consecutive monthly deposits in a timely manner as required in this Section and is not otherwise in Default under this Lease beyond applicable cure periods, Lessee's obligation to continue making such deposits shall discontinue until such time, if any, that another Event of Default occurs, in which case the provisions of this sentence shall once again apply. In the event that during the Term of this Lease there shall be an excess of moneys so deposited with the Lessor over and above the amount of taxes and assessments to become due and payable in any calendar year, such excess shall be retained by the Lessor and shall be credited pro tanto to the monthly installments to be paid to the Lessor
--- ----- by the Lessee during the next succeeding year, excepting only that at the time of the termination of this Lease, if Lessee is not then in Default, then Lessee shall be entitled to withdraw the amount of such deposit in excess of the amount required to pay the taxes and assessments to the end of the Term hereof. Nothing herein contained shall relieve the Lessee from the necessity of paying any deficiency of any general taxes and assessments in the event that the total annual deposit with Lessor is less than the amount of the actual tax levied and assessed.


Section 4.4 Lessor's Right to Pay Delinquent Amounts. It is further agreed
---------------------------------------------------- that the Lessor shall at its option have the right at all times during the Term hereof to pay any Impositions remaining unpaid after the same shall have become delinquent, and to pay, cancel and clear off all tax sales, liens, charges and claims upon or against the Property, and to redeem said Property from the same or any of them from time to time, and the amounts so paid, including reasonable expenses, shall be so much additional rent due from the Lessee to the Lessor on the business day after any


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such payment, with interest thereon at the Default Rate from the date of payment thereof by the Lessor until the repayment thereof by the Lessee to the Lessor.


Section 4.5 Lessee's Right to Contest. All other provisions of this Lease
------------------------------------- to the contrary notwithstanding, Lessee shall not be required to pay, discharge or remove any Imposition so long as Lessee shall in good faith and with due diligence contest the same or the validity thereof by appropriate legal proceedings which shall have the effect of preventing the collection of the Imposition so contested and the sale or forfeiture of said Property or any part thereof or any interest therein to satisfy the same, and, provided that, pending any such legal proceedings, Lessee shall deposit with the Lessor cash in an amount equal to not less than one hundred percent (100%) of the amount of the Impositions and all interest and penalties thereon so contested, or Lessee shall deposit the bond described below. Pending the diligent prosecution of any such legal proceedings, and provided Lessee has maintained the deposit or bond above provided for, Lessor shall not have the right to pay, remove or discharge the Imposition so contested. At the conclusion of such contest, upon written request of Lessee, accompanied by the bill for the Imposition then due, Lessor shall use the cash deposited with Lessor pursuant to this Section 4.5, less the amount of
----------- any loss, cost, damage and reasonable expense that Lessor may sustain in connection with the Imposition so contested, to pay such Imposition; or if the Property shall have been released and discharged from any such Imposition, and if Lessee is not in Default under the provisions of this Lease, Lessor shall return the cash so deposited to Lessee. Notwithstanding anything in this Section
------- 4.5 to the contrary, if Lessee fails to prosecute such contest with due - --- diligence, or fails to maintain said deposit or bond as above provided, or if Lessee is otherwise in Default under the provisions of this Lease, or if, at the conclusion of such contest, Lessee fails to request Lessor to pay the Imposition, then Lessor may use the cash so deposited to pay any item for which Lessor would be entitled to make advances under Section 4.4 and Article 25
----------- ---------- hereof. The amount of any money deposited or the face amount of any bond posted (provided such bond shall have been approved by Lessor, which approval shall not be unreasonably withheld) by Lessee with any municipality or other governmental body to secure the payment of any Imposition in connection with any contest thereof, shall be credited against the amount of the deposit required to be made by Lessee with Lessor pursuant to this Section 4.5.
-----------


Section 4.6 Lessee's Right to Recover. In the event that Lessee at any time
------------------------------------- institutes suit against any governmental authority to recover any Imposition paid by Lessee under protest in Lessor's name, Lessee shall have the right, at its own sole expense, to institute and prosecute such suit or suits in Lessor's name, in which event Lessee covenants and agrees to indemnify and defend Lessor and save it harmless from and against all costs, charges or liabilities in connection with any such suit. All funds recovered as a result of any such suit shall belong to Lessee.


Section 4.7 No Interest Payable on Deposits. Lessor shall not be liable to
------------------------------------------- Lessee for the payment of any interest on any monies deposited by Lessee with Lessor pursuant to Section 4.3 or 4.5 hereof.
----------- ---


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