Opinion ID: 2800503
Heading Depth: 2
Heading Rank: 3

Heading: Agreement to Resolve Pending Litigation

Text: In 1994 and 1996, AMBIT and Horizon had disputes regarding rent payment under the Lease Agreement. The 1994 dispute arose when AMBIT became delinquent on the rent. AMBIT claimed that its rental payments to Horizon were subordinate to payments other than Senior Debt. Horizon sued AMBIT and the matter was resolved by agreement on May 23, 1994. AMBIT paid Horizon for all of the past due rent, plus interest and attorney fees but the issue regarding the priority of the rent payments was not resolved. Subsequently, AMBIT became delinquent on rent due under the Lease Agreement and again took the position that its rent payments were subordinate to payments other than Senior Debt, specifically, operations and maintenance costs. On May 28, 1996, the parties entered into an Agreement to Resolve Pending Litigation that purported to resolve the dispute.
The Agreement to Resolve Pending Litigation addressed the issue of the priority of the rent owed by AMBIT to Horizon as follows: Tenant acknowledges and agrees that the payment of Tenant’s obligations to Horizon under the Lease . . . has been subordinated under the Lease to the payment of “Senior Debt,” as that term is defined in the Lease, on the terms and conditions, and subject to the limitations, contained in the Lease. Horizon has not agreed with Tenant (or, Horizon asserts, with any person or entity), to subordinate any payment of Lease Obligations to any other claims against Tenant, including, without limitation, claims for payment of other operating and maintenance expenses of Tenant or the Plant, which are not included in the definition of “Senior Debt” under the Lease (such other claims against Tenant, including, without limitation, the payment of other operating and maintenance expenses of Tenant or the Plant, which are not included in the definition of “Senior Debt” under the Lease, being hereinafter referred to as “Non-Senior Project Obligations”). Tenant acknowledges that any failure to pay or perform any of the Non-Senior Project Obligations (hereinafter a “Non-Senior Project Obligation Default”) neither is intended to nor does constitute an excuse for nonpayment or 4 nonperformance of, or a defense to payment, performance or enforcement of the Lease Obligations. Tenant agrees that it shall not, and it shall instruct its attorneys, accountants, financial advisors, investment bankers and other professionals representing it, that none of them shall assert at any time in any court or other legal proceeding that any prospective, threatened or actual NonSenior project Obligation Default constitutes or effects an excuse for or a defense to payment or performance of any Lease Obligations. We note the Agreement to Resolve Pending Litigation was executed after the Trust Indenture and this contract explicitly references the Trust Indenture. Section 2b of the Agreement to Resolve Pending Litigation states: Tenant [i.e., AMBIT] is permitted to and shall pay rent which is due and payable under the Lease as “Other Lease Rent” under the Trust Indenture or, if Revenues under the Trust Indenture are insufficient to pay Other Lease Rent, then as “Operating and Maintenance Expenses” from the “Maintenance Reserve Fund” under the Trust Indenture (so long as funds are available in the Maintenance Reserve Fund). Tenant further acknowledges that all payments of rent due or to become due under the Lease constitute “Operating and Maintenance Expenses” under the Trust Indenture. (Emphasis added). The above provision expressly brings the Trust Indenture’s priority of payment into AMBIT’s rent obligations to Horizon. However, this provision was not addressed by the circuit court in its summary judgment order.
In order to resolve the dispute over the use of local fuel versus foreign fuel, the parties agreed that Horizon would receive rent in the amount of two and one-half percent (2.5%) of AMBIT’s gross revenues so long as any local fuel, whether usable or not, remained on the leased premises.5 5 Specifically, the contract provides: Tenant acknowledges, as a fact, that since the commencement of operations by the Plant, all Foreign Fuel used in the operation of the Plant has been used for Non-Operating Reasons, and further acknowledges, as a fact, that so long as any Local Fuel is located at the Demised Premises, any Foreign Fuel being used in the operation of the Plant is being used for Non-Operating Reasons. As contemplated by the Lease, Local Fuel includes “waste coal material” (as defined in the Lease) on the Demised Premises, whether or not permitted by permits whose issuance or continuance is subject to actions which are within Tenant’s control and whether or not reclaimed, and is not dependent on the quality of the waste coal material. Tenant expects and intends that Horizon will detrimentally rely on this factual admission, that such reliance is foreseeable by 5