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Home My WebLink AboutResolution - 2500 - Lease Agreement - EPR Inc - Portion Of LP&L Plant #2 - 01/08/1987JPB: js RESOLUTION Resolution #2500 January 8, 1987 BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: THAT the Mayor of the City of Lubbock BE and is hereby authorized and directed to execute for and on behalf of the City of Lubbock, a Lease Agree- ment by and between the City of Lubbock and Environmental Protection Re- sources, Inc., attached herewith, which shall be spread upon the minutes of the Council and as spread upon the minutes of this Council shall constitute and be a part of this Resolution as if fully copied herein in detail. Passed by the City Council this gt.h day of January , 1987• S. y 4 9. C. McMINN, MAYOR ATTEST: Ranette—Boyd, City Secretary' APPROVED AS TO CONTENT: 3 ass Bob Cass, Deputy City Manager APPROVED AS TO FORM: #ame�sP.Brewster, Civil Trial Attorney Resolution #2500 JTC-3781C-02/09/87 LUBBOCK, TEXAS LEASE AGREEMENT CERTAIN PROVISIONS SET FORTH IN THIS LEASE MAY RENDER TERMS HEREOF SUBJECT TO ARBITRATION UNDER THE TEXAS GENERAL ARBITRATION ACT (ARTICLES 224 ET SEQ. OF THE TEXAS REVISED CIVIL STATUTES) LUBBOCK, LEASE AGREEMENT TABLE OF CONTENTS Page ARTICLE 1 - DEMISED PREMISES - TERM OF LEASE 1 ARTICLE 2 - RENT 3 ARTICLE 3 - PAYMENT OF TAXES, ASSESSMENTS, ETC. 4 ARTICLE 4 - SURRENDER 6 ARTICLE 5 - INSURANCE 7 ARTICLE 6 - INTENTIONALLY DELETED - ARTICLE 7 - REPAIRS AND MAINTENANCE OF THE DEMISED PREMISES 13 ARTICLE 8 - COMPLIANCE WITH LAWS, ORDINANCES, ETC. 14 ARTICLE 9 - CONSTRUCTION OF FACILITY 15 ARTICLE 10 - DISCHARGE OF LIENS 18 ARTICLE 11 - NO WASTE 19 ARTICLE 12 - USE OF PROPERTY 19 ARTICLE 13 - ENTRY ON DEMISED PREMISES BY LANDLORD 20 ARTICLE 14 - INDEMNIFICATION 20 ARTICLE 15 - DAMAGE OR DESTRUCTION 23 ARTICLE 16 - CONDEMNATION 28 ARTICLE 17 - ASSIGNMENTS AND MORTGAGES OF 31 TENANT'S INTEREST ARTICLE 18 - DEFAULT PROVISIONS 32 ARTICLE 19 - INTENTIONALLY DELETED - ARTICLE 20 - INVALIDITY OF PARTICULAR PROVISIONS 34 ARTICLE 21 - NOTICES 34 ARTICLE 22 - RIGHTS OF LEASEHOLD MORTGAGEES 35 ARTICLE 23 - QUIET ENJOYMENT 38 Page ARTICLE 24 - FEE MORTGAGES 39 ARTICLE 25 - INTENTIONALLY DELETED - ARTICLE 26 - ARBITRATION AND APPRAISAL 39 ARTICLE 27 - CERTIFICATES 40 ARTICLE 28 - INTENTIONALLY DELETED - ARTICLE 29 - DEFINITION OF CERTAIN TERMS 41 ARTICLE 30 - BROKERS 42 ARTICLE 31 - CONSENT OF LANDLORD 42 ARTICLE 32 - PAYMENTS UNDER PROTEST 43 ARTICLE 33 - NO ORAL MODIFICATION 43 ARTICLE 34 - COVENANTS TO BIND AND BENEFIT RESPECTIVE PARTIES 44 ARTICLE 35 - LIMITED LIABILITY 44 ARTICLE 36 - CHOICE OF LAW 44 ARTICLE 37 - LEASE RECORDING 45 ARTICLE 38 - RELEASE AND SUBROGATION 45 ARTICLE 39 - INTENTIONALLY DELETED - ARTICLE 40 - CAPTIONS AND TABLE OF CONTENTS; CONFLICTS; RECORDATION 46 ARTICLE 41 - PROJECT FINANCING 47 LEASE AGEMENT LEASE AGREEMENT, made this 6 "— ay of February 1987 between THE CITY OF LUBBOCK, a Texas home rule municipal corporation ("Landlord"), and ENVIRONMENTAL PROTECTION RESOURCES OF LUBBOCK, INC., a Texas corporation having its principal office at 1770 One Riverway, Houston, Texas 77056 ("Tenant"). ARTICLE 1 Demised Premises - Term of Lease Landlord hereby demises and leases to Tenant, and Tenant hereby hires and takes from Landlord, the following described premises (hereinafter called "the demised premises"): A certain parcel of land in the City of Lubbock, Lubbock County, State of Texas, more particularly described in Exhibit A. TOGETHER with the benefit of the rights and easements of access to and use of certain adjacent land of Landlord and of access to, tie-in to, and use of certain equipment of Landlord, all as more particularly set forth in Exhibit B. TO HAVE AND TO HOLD for a term which shall begin on the date first set forth above and shall end on the earlier of: (a) termination by Landlord or Tenant of a certain Waste Processing Services Contract between Landlord and Tenant of even date herewith, a copy of which is attached hereto as Exhibit C (the "Waste Processing Agreement"), pursuant to which Tenant has agreed to construct and operate a waste -to -energy facility (the "Facility") on the demised premises and Landlord has agreed to provide Tenant with certain quantities of solid waste for disposal and conversion by Tenant to electrical energy; or (b) expiration of the Waste Processing Agreement following the exercise of any extensions or renewals thereof, if applicable. SUBJECT, however, to the following: (a) The terms and provisions of the easements and access rights set forth in Exhibit B; (b) Present and future zoning laws, ordinances, resolutions and regulations of the City of Lubbock and all present and future ordinances, laws, regulations and orders of all boards, bureaus, commissions and bodies of any municipal, county, state or federal governments now or here after having or acquiring jurisdiction of the demised premises or the use and improvement thereof; and (c) Condition and state of repair of the demised premises as the same may be on the date hereof. This lease is granted and accepted upon the foregoing and upon the following covenants and conditions, and subject to the following restrictions to which the parties consent; and each of the parties hereby expressly covenants and agrees to keep, perform and observe all the terms, covenants and conditions herein contained on its part to be kept, performed and observed: 2 ARTICLE 2 Rent SECTION 2.01. Tenant shall pay to Landlord, during the term, a net annual rent, over and above the other payments to be made by Tenant hereunder, equal to the greater of: (i) Twenty -Five Thousand ($25,000.00) Dollars ("Minimum Annual Rent") or (ii) One (lo) percent of the gross annual electric sales revenues generated by the Facility. Such net annual rent (hereinafter called "net rent") shall be payable as follows: On the Commencement Date (as defined in the Waste Processing Agreement), Tenant shall pay to Landlord net rent for the period from the Commencement Date through the following December 31st. Such first net rent payment shall be in an amount equal to the Minimum Annual Rent, but prorated accordingly if the Commencement Date does not occur on a January 1st. Thereafter, on the first day of each January, Tenant shall pay to Landlord an amount equal to the Minimum Annual Rent. At the end of each calender year, Landlord and Tenant shall mutually determine whether any additional net rent payment is required as a result of electric sales revenues for such calendar year. If an additional payment is required by Tenant, such payment shall be made within thirty (30) days after the end of such calendar year. SECTION 2.02. Until Tenant shall have been given notice otherwise by Landlord, Tenant shall pay the net rent to Landlord at the address specified in Article 21. 3 SECTION 2.03. It is the purpose and intent of Landlord and Tenant that this is a net lease and that the net rent shall, except as herein otherwise provided,. be absolutely net to Landlord. The net rent shall be paid to Landlord without notice or demand and without abatement, deduction or set-off, except as herein otherwise provided. SECTION 2.04. Except as herein otherwise provided, Tenant shall also pay as additional rent without notice, and without abatement, deduction or set-off, all sums, Impositions (as defined in Article 3 hereof), costs, expenses and other payments which Tenant in any of the provisions of this lease assumes or agrees to pay, and, in the event of any non-payment thereof, Landlord shall have (in addition to all other rights and remedies) all the rights and remedies provided for herein or by law in the case of non-payment of the net rent. ARTICLE 3 Payment of Taxes, Assessments, Etc. SECTION 3.01. Tenant shall pay or cause to be paid directly to the appropriate party, and before any fine, penalty, interest or cost may be added thereto for the non-payment thereof, all ad valorem taxes, assessments, water and sewer rents, rates and charges, levies, license and permit fees and other governmental charges, general and special, ordinary and extraordinary, foreseen and unforeseen, of any kind and nature whatsoever which at any time during the term of this lease may be assessed, levied, confirmed, imposed upon, or 4 grow or become due and payable out of or in respect of, or become a lien upon the demised premises, or any part thereof (all such taxes, assessments, water and sewer rents, rates and charges, levies, license and permit fees and other governmental charges being hereafter referred to as "Impositions"); provided, however, that (a) If, by law, any Imposition may at the option of the taxpayer be paid in installments, Tenant may pay the same in such installments over such period as the law allows and Tenant shall only be liable for such installments as shall become due during the term of this lease; and (b) All Impositions for the fiscal years in which the term of this lease shall begin and end shall be apportioned so that Tenant shall pay only those portions thereof which correspond with the portion of said year as is within the term hereby demised. SECTION 3.02. Nothing herein contained shall require the Tenant to pay (i) municipal, state or federal income taxes (if any) assessed against Landlord; or (ii) municipal, state or federal capital levy, gift, estate, succession, inheritance or transfer taxes of Landlord; or (iii) corporation excess profits or franchise taxes imposed upon any corporate owner of the fee of the demised premises; or (iv) any income, profits, or revenue tax, assessment or charge imposed upon the rent payable by Tenant under this lease. SECTION 3.03. Tenant, upon request of Landlord, shall furnish to Landlord within thirty days after the date when any Imposition would become delinquent, official receipts of the appropriate taxing authority, or other evidence satisfactory to Landlord, evidencing the payment thereof. 5 SECTION 3.04. Tenant shall be privileged to seek a reduction in the valuation of the demised premises assessed for any tax purpose and to contest in good faith by appropriate proceedings, at Tenant's expense, the amount or validity in whole or in part of any Imposition; and may defer payment thereof if allowed by law. Subject to the foregoing, and without cost to it, Landlord shall execute and deliver any appropriate papers which may be necessary to permit Tenant so to contest any valuation or Imposition and shall further cooperate with Tenant'in such contest, as Tenant may from time to time reasonably request. SECTION 3.05. Landlord shall not be required to join in any proceedings referred to in Section 3.04 hereof unless the provisions of any law, rule or regulation at the time in effect shall require that such proceedings be brought by or in the name of Landlord or any owner of the fee of the demised premises, in which event Landlord shall join in such proceedings. Landlord shall not be subjected to any liability for the payment of any costs or expenses in connection with any such proceedings. Tenant shall be entitled to any refund of any Imposition and penalties or interest thereon received by Landlord which have been paid by Tenant, or which have been paid by Landlord but previously reimbursed in full by Tenant. ARTICLE 4 Surrender SECTION 4.01. Tenant shall on the last day of the term surrender and deliver up the demised premises and all 2 improvements thereon belonging to the Landlord, to the possession and use of Landlord without delay, except as otherwise specifically provided in this lease or the Waste Processing Agreement. SECTION 4.02. If this lease shall terminate pursuant to Article 15 (Casualty) or Article 16 (Condemnation) hereof, then, notwithstanding anything contained herein or in the Waste Processing Agreement, Tenant shall have a reasonable time thereafter, not to exceed one (1) year, to remove any of Tenant's property that is subject to removal hereunder. SECTION 4.03. Landlord shall not be responsible for any loss or damage occurring to any property owned by Tenant following expiration or termination of this lease, unless due to the willful and wrongful acts of Landlord, its employees or agents. SECTION 4.04. The provisions of this Article shall survive the expiration or earlier termination of this lease. ARTICLE 5 Insurance SECTION 5.01. Tenant, at its expense, shall keep in full force and effect insurance on the Facility, including all improvements and structures now or hereafter erected thereon (but excluding equipment, trade and other fixtures, furniture, furnishings, and other personal property supplied or installed by Tenant so far as any of the same are not, as a matter of 7 law, part of the real estate) in an amount at least equal to the full replacement value thereof (exclusive of portions thereof below the basement floor), without deduction for depreciation, containing coverage against all risks of direct physical loss or damage and extended to include earthquake and flood, breakdown of boilers, machinery and electrical equipment. Such insurance shall include an agreed amount provision. The replacement cost of the Facility shall be determined at least once every thirty-six (36) months by the agreement of Landlord and Tenant. If Landlord and Tenant are unable to so agree, the replacement cost shall be determined by the Independent Third Party as defined by the Waste Processing Agreement. SECTION 5.02. Tenant, at its expense, shall maintain: (a) for the mutual benefit of Landlord and Tenant, general public liability insurance against claims for personal injury, death, and property damage, occurring upon, in or about the demised premises, or the elevators, and on, in or about any adjoining sidewalks and passageways (including, without limitation, personal injury, death, and property damage resulting directly or indirectly from any change, alteration, improvement or repair thereof) for at least $5,000,000.00 for any one accident and $1,000,000.00 for injury to any one individual (or for $5,000,000.00 for a single limit policy) and $1,000,000.00 for damage to property; (b) boiler insurance, including pressure vessels and pipes, if there be any such vessel or pipes in the demised premises, in an amount not less than $1,000,000.00; (c) worker's compensation insurance, pursuant to Texas Worker's Compensation Law, as amended, and the Federal Longshoreman and Harbor Workers' Compensation Act and Federal Maritime Employers Liability Law, for all workers who will be employed in the construction or operation of the Facility; provided, however, that Tenant may be self-insured for such worker's compensation insurance in accordance with the provisions of Texas law; and D (d) comprehensive motor vehicle liability insurance including non -owned and hired auto coverage for at least $1,000,000.00 combined single limit for personal injury and property damage. SECTION 5.03. Any policy of insurance which is obtained by Tenant and provides for a deductible amount in excess of $100,000.00 shall be subject to the approval of Landlord. In connection with such approval, Landlord may in its sole discretion require Tenant to deliver an irrevocable letter of credit provided by a mutually acceptable bank with a Moody's or Standard & Poor's rating of "A" or better, in an amount equal to such portion of the deductible which is in excess of $100,000.00. SECTION 5.04. A. All insurance provided for in this Article shall be effected under valid and enforceable policies, issued by insurers organized in the United States and licensed to do business in the State of Texas. Upon the execution of this lease, and thereafter not less than thirty (30) days prior to the expiration dates of the expiring policies theretofore furnished pursuant to this Article, duplicate originals of the policies bearing notations evidencing the payment of premiums or accompanied by other evidence satisfactory to Landlord of such payment, shall be delivered by Tenant to Landlord. B. Nothing in this Article 5 shall prevent Tenant from taking out insurance of the kind and in the amounts provided for under this Article under a blanket insurance policy or policies covering other properties as well as the demised premises, provided, however, that any such policy or policies V] of blanket insurance (i) shall specify therein, or Tenant shall furnish Landlord with a written statement from the insurers under such policy or policies specifying, the amount of the total insurance allocated to the demised premises, which amounts shall not be less than the amounts required by Sections 5.01 and 5.02 hereof, and (ii) such amounts so specified shall be sufficient to prevent any of the insureds from becoming a co-insurer within the terms of the applicable policy or policies, and provided further, however, that any such policy or policies of blanket insurance shall, as to the demised premises, otherwise comply as to endorsements and coverage with the provisions of this Article. SECTION 5.05. Except with respect to the insurance required by subdivision (a) of Section 5.02 hereof, neither Landlord nor Tenant shall take out separate insurance concurrent in form or contributing in the event of loss with that required in this Article to be furnished by, or which may reasonably be required to be furnished by Tenant unless Landlord and Tenant are included therein as the insured, with loss payable as in this lease provided. SECTION 5.06. A. All policies of insurance provided for in Sections 5.01 and 5.02 hereof shall name Landlord and Tenant as the insured as their respective interests may appear, and also, any leasehold mortgagee, as the interest of any such mortgagee may appear, by standard mortgagee clause, if obtainable. During the construction of and after the completion of the Facility on the demised premises, the loss, 10 if any, under such policies shall be adjusted as follows: In case of any particular casualty resulting in damage or destruction not exceeding $100,000.00 in the aggregate, the loss under such policies shall be adjusted with the insurance companies by Tenant and shall be payable to Tenant. In the case of such damage or destruction in excess of $100,000.00, the loss shall be adjusted with the insurance companies by Landlord and Tenant and the proceeds of any such insurance, as so adjusted, shall be payable to the Trustee acting hereunder pursuant to provisions of Section 5.08 hereof. B. All such policies shall provide that the loss, if any, thereunder shall be adjusted and paid as hereinabove provided. Each such policy shall, to the extent obtainable, contain a provision that no act or omission of Tenant shall affect or limit the obligation of the insurance company so to pay the amount of any loss sustained. SECTION 5.07. Each such policy or certificate therefor issued by the insurer shall contain an agreement by the insurer that such policy shall not be cancelled, non -renewed or substantially modified without at least thirty (30) days' prior written notice to Landlord and to any leasehold mortgagee named therein. SECTION 5..08. The following provisions shall apply from and after the time that there shall be any insured damage in excess of $100,000.00 to the Facility or a taking of all or a portion of the demised premises: (a) A bank or trust company having an office in the City of Lubbock, designated by Landlord and Tenant jointly, 11 shall act as trustee (the "Trustee") to receive and disburse insurance proceeds and taking awards in accordance with Articles 15 and 16 hereof and Landlord and Tenant shall enter into an agreement with said bank appropriately covering assumptions of the duties of the Trustee hereunder and containing such provisions as may be reasonably required by said bank, provided that Landlord shall not be required thereby to assume any obligations or liabilities other than as provided in this lease. (b) In the event of the refusal to act or the resignation of said bank or of any successor or substituted bank designated to act or acting as Trustee hereunder, then in lieu of such bank Landlord and Tenant jointly shall have the right to designate any other bank having an office in the City of Lubbock, to act as Trustee. (c) As soon as may be practicable after the joint designation or substitution of any such bank to act as Trustee, Landlord and Tenant shall enter into an agreement with the bank so designated or so being substituted appropriately covering the assumption by it of the duties of the Trustee hereunder and containing such provisions as may reasonably be required by such bank, provided that Landlord is not required thereby to assume any obligations or liabilities other than as provided in this lease, and the bank which shall have resigned or for which another bank shall have been so substituted, if any, shall turn over to the new Trustee all insurance proceeds remaining on hand with it. (d) The fees and charges of every bank acting as Trustee hereunder shall be borne solely by Tenant and shall be paid periodically and in such manner as may be required by such Trustee. (e) Anything contained in this Section to the contrary notwithstanding, any agreement which Landlord and Tenant shall enter into with any bank acting as Trustee hereunder may include as a party thereto the holder of any mortgage on this lease, when requested by either party, provided such mortgage shall provide or the holder thereof shall agree in writing to application of insurance proceeds in the same manner as provided in this lease. ARTICLE 6 (INTENTIONALLY DELETED] MA ARTICLE 7 Repairs And Maintenance Of The Demised Premises SECTION 7.01. Throughout the term of this lease, Tenant, at its sole cost and expense, shall take good care of the demised premises (including all improvements and structures now or hereafter erected thereon), any sidewalks, curbs and entranceways adjoining the same and shall keep the same in good order and condition, except for (i) reasonable wear and tear, and (ii) damage from a taking (defined in Article 16) or from fire or other casualty after the last repair, replacement, restoration or renewal required to be made by Tenant pursuant to its obligations hereunder, and make all necessary repairs thereto, interior and exterior, structural and non-structural, ordinary and extraordinary, and foreseen and unforeseen. All repairs made by Tenant shall be at least equal in quality and class to the original work. SECTION 7.02. Tenant shall put, keep and maintain all portions of the demised premises and any sidewalks and curbs adjoining the same in a clean and orderly condition. SECTION 7.03. Landlord shall in no event be required to make any alterations, rebuildings, replacements, changes, additions or improvements to the demised premises during the term of this lease; provided, however, that Landlord shall have the obligations set forth in Exhibit B with respect to the equipment and adjacent premises of Landlord necessary for Tenant's construction and operation of the Facility. 13 ARTICLE 8 Compliance With Laws, Ordinances, Etc. SECTION 8.01. Throughout the term of this lease, Tenant shall promptly comply with all present and future laws, ordinances, orders, rules, regulations and requirements of all federal, state and municipal governments, departments, commissions, boards and officers, as the same may be interpreted and enforced by the appropriate authorities from time to time with respect to the demised premises, or to the use or manner of use of the demised premises or the owners, tenants or occupants thereof, whether or not such law, ordinance, rule, regulation or requirement shall affect the interior or exterior of the demised premises, necessitate structural changes or improvements or interfere with the use and enjoyment of the demised premises. SECTION 8.02. Tenant shall likewise observe and comply with the requirements of all policies of insurance required to be supplied by Tenant at any time in force with respect to the demised premises. If such observance or compliance is required by reason of any condition, event or circumstance arising after the commencement of the term of this lease, Tenant shall be privileged to substitute policies of other insurance companies, provided such policies meet the requirements of Article 5. SECTION 8.03. Tenant shall have the right, after prior written notice to Landlord, to contest by appropriate legal proceedings diligently conducted in good faith, in the name of 14 Tenant or by joinder of Landlord, without cost or expense to Landlord, the validity or application of any law, ordinance, order, rule, regulation or requirement of the nature referred to in Section 8.01 hereof, subject to the following: (a) If by the terms of any such law, ordinance, order, rule, regulation or requirement, compliance therewith pending the prosecution of any such proceeding may legally be delayed without the incurrence of any lien, charge or liability of any kind against the demised premises or the underlying fee or any part thereof and without subjecting Tenant or Landlord to any liability, civil or criminal, for failure so to comply therewith, Tenant may delay compliance therewith until the final determination of such proceeding; or (b) If any lien, charge or civil liability would be incurred by reason of any such delay, Tenant nevertheless may contest as aforesaid and delay as aforesaid, provided that such delay would not subject Landlord to criminal liability or fine, and Tenant (i) furnishes to Landlord security, reasonably satisfactory to Landlord, against any loss or injury by reason of such contest or delay, and (ii) prosecutes the contest with due diligence. Subject to the foregoing and without cost to it, Landlord shall execute and deliver all appropriate papers which may be necessary or proper to permit Tenant so to contest the validity or application of any such law, ordinance, order, rule, regulation or requirement and further cooperate with Tenant in such contest, as Tenant may from time to time reasonably request. ARTICLE 9 Construction of the Facility SECTION 9.01. Tenant shall commence and complete construction of the Facility in accordance with the provisions of the Waste Processing Agreement. Any improvements 15 constructed in compliance with the provisions of the Waste Processing Agreement shall be deemed to be in compliance with the provisions of this lease. Tenant shall, at its expense, obtain all permits, licenses and approvals required by any municipal, state or federal agency or authority for construction and operation of the Facility. Landlord agrees to cooperate with Tenant in Tenant's efforts to obtain all permits required for the original construction and operation of the Facility. Notwithstanding anything contained herein or in the Waste Processing Agreement, if Tenant is unable to obtain all such permits, licenses and approvals or project financing within two (2) years from the date hereof, either Landlord or Tenant shallhavethe right, upon ten (10) days' written notice to the other party, to terminate this lease and the Waste Processing Agreement and thereafter both agreements shall be null and void and without further recourse to either Landlord or Tenant. SECTION 9.02. The Facility and any other improvements hereafter constructed on the demised premises shall be built wholly within the lines of the demised premises; provided, however, that Tenant shall have such easements for access to and use of certain adjacent land of Landlord and access to, tie-in to and use of certain equipment of Landlord, all as set forth in Exhibit B. SECTION 9.03. Any alterations, additions, changes or improvements to the Facilities shall be constructed in compliance with all requirements of the law and with all 16 ordinances, orders, rules, regulations and requirements of all federal, state and municipal government or other public authority relating thereto. SECTION 9.04. Tenant may from time to time make alterations, additions, changes or improvements to the Facility, without the consent of the Landlord, provided that such alterations, additions, changes or improvements shall not weaken or impair the structural strength, or lessen the fair market value of the premises under this lease or the uses to which the existing premises, structure or improvements of Landlord were adaptable at the time of this lease. Any such alterations, additions, changes or improvements shall comply with Sections 9.02 and 9.03 hereof. Tenant shall obtain and keep in force all permits, licenses, consents and approvals required as a result of such alterations or reconstructions. Landlord agrees to cooperate with Tenant in Tenant's efforts to obtain all permits required for alteration or reconstruction of the Facility and use of the Facility thereafter, but Tenant shall bear all expenses thereof. SECTION 9.05. Any and all structures, alterations, additions and improvements constructed or placed upon the demised premises during the term of this lease shall, during the term of this lease, be owned by Tenant, excluding only the demised property as above described to which Tenant's interest shall only be construed as a leasehold interest. Provided, however, that if upon the termination of the term of this 17 Lease, or any extended term subsequently renegotiated, Tenant has not removed its structures or alterations, additions and improvements within one (1) year following such expiration of this lease, then any and all of its structures, alterations, additions and improvements upon the demised premises shall, upon the expiration of such one (1) year period, become the property of Landlord without the necessity of any deed or other conveyance from Tenant to Landlord. ARTICLE 10 Discharge Of Liens SECTION 10.01. If any mechanic's, laborer's or materialman's lien shall at any time be filed against the demised premises, the underlying fee, or any part thereof as a result of any action by Tenant, Tenant, within thirty (30) days after receiving notice of the filing thereof, shall either: (i) cause the same to be discharged of record by payment, deposit, bond, order of a court of competent jurisdiction or otherwise, or (ii) provide Landlord with a bond or other security reasonably satisfactory to Landlord. SECTION 10.02. Nothing in this lease contained shall be deemed or construed in any way as constituting the consent or request of Landlord, express or implied by inference or otherwise, to any contractor, subcontractor, laborer or materialman for the performance of any labor or the furnishing of any materials for any specific improvement, alteration to or repair of the demised premises or any part thereof. 18 ARTICLE 11 No Waste SECTION 11.01. Tenant shall not suffer any strip or waste or damage, or injury to the demised premises or the underlying fee or any part thereof, but this shall not be deemed to prevent demolition, construction or alterations pursuant to the provisions of this lease. Demolition shall be limited to those facilities subsequently to be approved by Landlord. ARTICLE 12 Use Of Property SECTION 12.01. Tenant shall only use the demised premises for the construction, use and operation of a waste -to -energy facility as more specifically described in the Waste Processing Agreement, incidental uses customarily accessory to such a facility, and for such other uses as may be reasonably acceptable to Landlord. SECTION 12.02. Tenant shall not use or allow the demised premises to be used for any unlawful purpose or in violation of any certificate of occupancy covering or affecting the use of the demised premises or any part thereof or which may, under applicable law, constitute a nuisance, public or private, or which may make void or voidable any insurance then in force with respect to such use. 19 ARTICLE 13 Entry On Demised Premises By Landlord SECTION 13.01. Tenant shall permit Landlord and its authorized representatives to enter the demised premises at any and all times. In the event entry by Landlord is for the purpose of conducting performance demonstrations of the electrical generation output of the Facility, the Landlord shall be obligated to pay any and all costs and expenses relating to the operation of the Facility in preparing for and during such performance demonstrations, if any, over and above the normal operating costs during such period. ARTICLE 14 Indemnification SECTION 14.01. Tenant shall indemnify and save Landlord harmless against and from all loss, liabilities, obligations, damages, penalties, claims, costs, charges and expenses, including reasonable attorneys' fees, which may be imposed upon or incurred by or asserted against Landlord by reason of any of the following occurrences during the term of this lease: (a) any work or thing done in or on the demised premises or any part thereof by Tenant or any other party other than Landlord or Landlord's representative; (b) any use, non-use, possession, occupation, condition, operation, maintenance or management of the demised premises or any part thereof including any sidewalk or curb to the extent part of the demised premises; (c) any negligence on the part of Tenant or any of its agents, contractors, servants, employees, subtenants, licensees or invitees; O (d) any accident, injury or damage to any person or property occurring in or on the demised premises or any part thereof, including any sidewalk or curb to the extent part of the demised premises; provided, however, that Tenant shall not be required to indemnify and save Landlord harmless from any costs rising from any action of Landlord, its agents, contractors, licensees, invitees or employees or any failure on the part of Landlord to perform or comply with any of the covenants, agreements, terms, provisions, conditions or limitations contained in this lease on its part to be performed or complied with. In case any action or proceeding is brought against Landlord by reason of any claim arising out of any of the occurrences from which Tenant is required, pursuant to the preceding paragraph, to indemnify and save Landlord harmless against, Tenant upon written notice from Landlord shall at Tenant's expense defend such action or proceeding using legal counsel reasonably satisfactory to Landlord. If Tenant has supplied Landlord with insurance policies covering any of the aformentioned risks no claim shall be made against Tenant unless and until the insurer shall fail or refuse to defend and/or pay all or any part thereof. Notwithstanding the foregoing, to the extent necessary to preserve its rights, Landlord shall have the right to make claim, institute legal proceedings,"or otherwise seek redress against Tenant prior to the expiration of any statute of limitations or other period or limitation limiting the time or manner in which Landlord may seek redress regardless of whether any insurer is responding or not. 21 SECTION 14.02. Landlord shall, to the extent it may do so at law, indemnify and save Tenant harmless against and from all loss, liabilities, obligations, damages, penalties, claims, costs, charges and expenses, including reasonable attorneys' fees, which may be imposed upon or incurred by or asserted against Tenant by reason of any of the following occurrences during the term of this lease: (a) any work or thing done in or on the demised premises or any part thereof by Landlord; (b) any use, non-use, possession, occupation, condition, operation, maintenance or management of the demised premises or any part thereof, including any entry and use of the demised premises for the performance demonstrations permitted in Article 13; (c) any negligence on the part of Landlord or any of its agents, contractors, servants, employees, subtenants, licensees or invitees; (d) any accident, injury or damage to any person (including without limitation any employee, agent or contractor of Landlord) or property occurring in or on the demised premises or any part thereof arising out of the performance demonstrations permitted in Article 13; provided, however, that Landlord shall not be required to indemnify and save Tenant harmless from any costs rising from any action of Tenant, its agents, contractors, licensees, invitees or employees or any failure on the part of Tenant to perform or comply with any of the covenants, agreements, terms, provisions, conditions or limitations contained in this lease on its part to be performed or complied with. 22 ARTICLE 15 Damage Or Destruction SECTION 15.01. In case of damage to or destruction of the Facility or any part thereof by fire or other casualty, Tenant shall promptly give written notice thereof to Landlord. Tenant shall, at Tenant's sole cost and expense, restore, repair, replace, rebuild or alter the same as nearly as possible to its condition immediately prior to such damage or destruction, all in conformity with and subject to the conditions of Article 9 hereof. Such restorations, repairs, replacements, rebuilding or alterations shall be commenced as soon as practicable following the occurrence of such damage or destruction, and shall thereafter be prosecuted with reasonable diligence, unavoidable delays excepted. SECTION 15.02. A. In the event of damage to or destruction of the Facility in excess of $100,000.00, all insurance money paid on account of such damage or destruction to the insured interest of either Tenant or Landlord (but only as provided in subparagraph "D" hereof) shall be paid to the Trustee to be appointed pursuant to the provisions of Section 5.08 hereof, less the reasonable cost, if any, incurred in the collection thereof and shall be applied by the Trustee to the payment of the cost of the restoration, repairs, replacement, rebuilding or alterations, including the cost of temporary repairs for the protection of property pending the completion of permanent restoration, repairs, replacements, rebuilding or alterations (all of which temporary repairs, protection of 23 property and permanent restoration, repairs, replacement, rebuilding or alterations are hereinafter collectively referred to as the "restoration"), and shall be paid out to Tenant, from time to time as such restoration progresses, upon compliance by Tenant with all conditions precedent to payment which are usual in construction loan agreements of major Texas banks for construction of the size and complexity of the restoration. Pending completion of restoration, there shall be withheld from payments on account of work completed and materials furnished such amounts as are then customarily being withheld by major Texas banks in connection with construction of the size and complexity of the restoration. All payments shall be received by Tenant solely for the purposes of paying the cost of such restoration upon the written request of Tenant which shall be accompanied by the following documentation: (1) a verified certificate signed by Tenant, or a certificate signed by the architect or engineer in charge of such construction, dated not more than thirty (30) days prior to such request, setting forth the following: (a) that the sum then requested either has been paid by Tenant, or is justly due to contractors, subcontractors, materialmen, engineers, architects or other persons who have rendered services or furnished materials for the restoration therein specified, and giving the name and addresses of such persons who have rendered services or furnished materials and a brief description of such services and materials and the several amounts so paid or due to each of said persons in respect thereof, and stating that no part of such expenditures has been or is being made the basis, in any previous or then pending request, for the withdrawal of insurance money or has been paid out of the proceeds of insurance received by Tenant, and that the sum then requested does not exceed the value of the services and materials described in the 24 certificate, together with a description of the progress of restoration to date; and (b) that except for the amount, if any, stated pursuant to the foregoing subclause (1)(a) in such certificate to be due for services or materials, there is no outstanding indebtedness shown on Tenant's books or known to the persons signing such certificate, after due inquiry, which is due on the date of such certificate for labor, wages, materials, supplies or services in connection with such restoration which, if unpaid, might become the basis of a vendor's, mechanic's, laborer's or materialman's statutory or similar lien upon such restoration or upon the demised premises, or any part thereof; and (c) that the cost, as estimated by the persons signing such certificate, of the restoration required to be done subsequent to the date of such certificate in order to complete the same, does not exceed the aggregate of the insurance money (.including deposits made by Tenant pursuant to Section 15.02B below) remaining in the hands of such trustee, after payment of the sum requested in such certificate; and (d) that the restoration to date has been performed solely within the boundary lines of the demised premises and in accordance with the plans and specifications for such restoration. (2) a title search by a title insurance company doing business in the City of Lubbock showing that there has not been filed with respect to the demised premises or any part thereof, any instrument for the retention of title for the work performed, or any vendor's, mechanic's, laborer's, materialman's or like lien, which has not been discharged of record, except liens which will be discharged by payment of the amount then requested or liens with respect to which Tenant has furnished Landlord with a satisfactory bond. B. No restoration other than temporary work to protect persons or property or to prevent interference with business shall be commenced until Tenant submits satisfactory evidence M to the Trustee that the net proceeds are adequate to complete restoration. If at any time prior to or during the course of restoration the net insurance money held by the Trustee shall be insufficient to pay the entire cost of such restoration, Tenant shall immediately upon request pay the deficiency. C. Upon receipt by the Trustee of satisfactory evidence that the restoration has been completed and paid for in full and that there are no liens of the character referred to above, any balance at the time held by the Trustee shall be paid to Tenant, and specifically subject to the following subparagraph D. D. While subject to the above procedures and mechanics for restoration of Section 15.02, above, the money received on account of such damage or destruction to the insured interest of Landlord shall only be used for the restoration, repairs, replacement, rebuilding or alterations of Land or improvement upon the demised property and not otherwise, but Tenant shall be able to direct such restoration and upon the certifications above required, Tenant may draw against such proceeds for the payment of the restoration of Landlord's said property. Such restoration of Landlord's property by Tenant shall further be subject to same approval of Landlord as provided for repairs and replacements under Section 7.01. Upon the satisfactory evidence required by subparagraph C above, any balance at that time of insurance funds received on Landlord's property interest and not required for the restoration of Landlord's property, shall be paid to Landlord. 26 SECTION 15.03. Except as otherwise explicitly provided herein, no destruction of or damage to the demised premises or any part thereof by fire or any other casualty shall permit Tenant to surrender this lease or shall relieve Tenant from its liability to pay the full net rent and additional rent and any other charges payable under this lease or from any of its other obligations under this lease. SECTION 15.04. Notwithstanding the obligation to repair and restore the Facility contained in Section 15.01, if during the last three (3) years of the term hereof the Facility shall be so damaged by fire or other casualty such that the cost of replacement or restoration thereof shall exceed fifty (50%) percent of the then fair market value of the Facility, then Landlord and Tenant may mutually agree, with the consent of any first leasehold mortgagee, elect to cancel this lease and this lease shall terminate and expire on the date specified in such mutual agreement. SECTION 15.05. In the event Tenant elects to cancel this lease pursuant to Section 15.04, Tenant shall be entitled to all insurance proceeds, other than those allocated to that portion of the Facility belonging to Landlord as existing on the date of this lease and as subsequently altered, restored, repaired or reconstructed, and Tenant shall not be obligated to perform any restoration of the Facility. This lease and the term hereof shall terminate as of the effective date of such cancellation as specified in the notice from Tenant to 27 Landlord. No such cancellation or termination by Tenant shall release Tenant from any obligation hereunder for rent and additional rent (including insurance premiums) accrued or payable for or during any period prior to the effective date of such cancellation, and any prepaid rent, and insurance premiums beyond the effective date of such cancellation shall be adjusted and refunded. ARTICLE 16 Condemnation SECTION 16.01. In the event that the demised premises, or any part thereof, shall be taken in condemnation proceedings or by exercise of any right of eminent domain or by agreement between Landlord, Tenant and those authorized to exercise such right (any such matters being hereinafter referred as a "taking"), Landlord and Tenant shall have the right to participate in any taking proceedings for the purpose of protecting their interests hereunder. Each party so participating shall pay its own expenses therein. SECTION 16.02. If at any time during the term of this lease there shall be a taking of the whole or substantially all of the demised premises, this lease shall terminate and expire on the date of such taking and the net rent and additional rent hereunder shall be apportioned and paid to the date of such taking. For the purpose of this Article "substantially all of the demised premises" shall be deemed to have been taken if the untaken part of the demised premises shall be, in the 28 reasonable judgment of Landlord and Tenant, insufficient for the restoration of the Facility and the economic and feasible operation thereof by Tenant. If Landlord and Tenant cannot agree, the matter shall be submitted to arbitration. SECTION 16.03. If this lease is terminated as a result of such taking: (a) If at the time of such taking Tenant shall have erected or be engaged in the erection of the Facility, Tenant shall be entitled to the building award as the term "building award" is hereinafter defined. The "building award" shall be deemed to be that part of the taking award which shall be attributed by the taking authority to the Facility, but not including the award for the structures or improvements of Landlord. If the taking authority does not so allocate or attribute the award, then the allocation shall be determined by agreement between the parties. If they cannot agree the matter shall be resolved by arbitration. (b) Landlord shall be entitled to that portion of the award which is attributable to the land and its structures and improvements thereon. SECTION 16.04. In the event of a taking which does not terminate this lease: (a)' The net rent shall be reduced by the same proportion that the value of the part of the demised premises taken bears to the value of the whole demised premises immediately prior to such taking. (b) Tenant shall, promptly after such taking and at its expense, restore the Facility and other improvements to complete architectural units. (c) Landlord shall be entitled to the award for its own structures and improvements, the land taken and for consequential damages to and diminution of the value of the land not so taken. (d) Tenant shall be entitled to use the entire building award and that portion of the award attributable to Landlord's structures and improvements, to pay the cost of restoration required by subparagraph (b) above. The building award shall be paid to Tenant by the Trustee in progress payments as the work progresses in the same manner as provided in Section 15.02 hereof with respect to the 29 application of insurance proceeds. The provisions as to that portion of the award attributable to the taking of Landlord's structures and improvements, as shall all provisions as to restoration in said Section 15.02 (D), also govern Tenant's restoration after a taking. If the building award shall be insufficient to defray the cost of restoration, Tenant shall pay any further deficiency. After restoration, any portion of the building award, other than that attributable to Landlord's interests, in excess of the cost of restoration, shall be paid to Tenant. Any excess in the portion of the award attributable to Landlord's structures and improvements, not required to restore Landlord's structures and improvements, shall be paid to Landlord in like manner as provided in Section 15.02 (D). SECTION 16.05. If at any time during the term of this lease there shall be a taking and the difference between the estimated cost to restore the Facility exceeds the available taking awards by an amount in excess of the Required Amount (as defined in the Waste Processing Agreement) Tenant may elect to cancel this lease, on at least thirty (30) days' written notice, given within sixty (60) days of the date of determination of the taking awards, and this lease shall terminate and expire on the date specified in such notice. SECTION 16.06. In the event of a taking of all or a part of the demised premises for temporary use, this lease shall continue in full force and effect except Tenant shall be relieved from performing any obligation hereunder or under the Waste Processing Agreement to the extent such performance is prevented by the taking and Tenant shall be entitled to the award made for such taking whether paid by damages, rent or otherwise, except that if the temporary taking includes structures, improvements or fixtures also being used by Landlord, the value of the proportional loss inflicted upon 30 Landlord shall be payable to Landlord. The proportion of loss inflicted upon Landlord and Tenant, respectively, shall be allocated by agreement between Landlord and Tenant, and, if they are unable to agree, shall be subject to determination by arbitration; provided further that: (a) if such taking shall extend beyond the term of this lease, such award shall be apportioned between Landlord and Tenant as of the date of the expiration of the term of this lease; and (b) Tenant shall be entitled to file and prosecute any claim against the condemnor for damages and to recover the same, for any negligent use, waste or injury to the demised premises throughout the balance of the term of this lease. SECTION 16.07. In the event of any dispute between Landlord and Tenant with respect to any issue of fact or the allocation of any award arising out of a taking mentioned in this Article 16, such dispute shall be resolved by arbitration pursuant to Article 26 hereof. SECTION 16.08. In case of any taking mentioned in this Article 16, the entire award shall be paid to the Trustee to be appointed by Landlord and Tenant in the manner provided in Section 5.08 hereof for distribution to the parties entitled thereto pursuant to the provisions of this Article 16. ARTICLE 17 Assignments and Mortgages Of Tenant's Interest SECTION 17.01. Tenant shall not have the right to assign this lease; provided, however, that'the foregoing restriction on assignment shall not apply to any first leasehold mortgagee who acquires Tenant's interest in this lease by foreclosure or by assignment in lieu of foreclosure. 31 SECTION 17.02. A. Tenant shall have the right to mortgage or pledge Tenant's interest in this lease, subject to the limitations of this Section. Any such mortgage or pledge shall be subject to the rights of Landlord hereunder. B. No holder of a mortgage on this lease shall have the rights or benefits in Article 22 hereof, nor shall the provisions of said Article be binding upon Landlord, unless and until Landlord has been notified of such mortgage and such mortgagee's address in accordance with the provisions of Section 10.18 of the Waste Processing Agreement. SECTION 17.03. Tenant shall not have the right to sublet the demised premises, in whole or in part, without the prior written consent of Landlord. ARTICLE 18 Default Provisions SECTION 18.01. If any one or more of the following events (herein called "events of default") shall happen: (a) If default shall be made in the due and punctual payment of any net rent, or additional rent or other sums payable under this lease or any part thereof, when and as the same shall become due and payable, and such default shall continue for a period of thirty (30) days after notice from Landlord to Tenant specifying the items in default, and shall continue thereafter for a period of ten (10) days after a second notice from Landlord to Tenant which shall specify the items in default and, in addition, shall state Landlord's intention to terminate this lease by reason of such default; or (b) the occurrence of one of the events specified as an event of default in Section 5.1 of the Waste Processing Agreement; 32 then and in any such event Landlord, at any time thereafter, may give written notice to Tenant specifying such event or events of default and stating that this lease and the term hereby demised shall terminate on the date specified in such notice. Upon the date specified in Landlord's notice, this lease and the term thereby demised and all rights of Tenant under this lease shall terminate, unless prior to the date specified for termination the event or events of default shall have been cured. SECTION 18.02. Upon any such termination of this lease pursuant to Section 18.01 above, the rights and obligations of Landlord and Tenant shall be as provided in this lease and in Section 5.4 of the Waste Processing Agreement. SECTION 18.03. No failure by Landlord to insist upon the strict performance of any agreement, term, covenant or condition hereof or to exercise any right or remedy consequent { upon a breach thereof, and no acceptance of full or partial rent during the continuance of any such breach, shall constitute a waiver of any such breach or of such agreement, term, covenant or condition. No agreement, term, covenant or condition hereof to be performed or complied with by Tenant, and no breach thereof, shall be waived, altered or modified except by a written instrument executed by Landlord. SECTION 18.04. Each right and remedy provided for in this lease shall be cumulative and shall be in addition to every other right or remedy provided for in this lease, and the exercise or beginning of the exercise by Landlord or Tenant of 33 any one or more of the rights or remedies provided for in this lease shall not preclude the simultaneous or later exercise by the party in question.of any or all other rights or remedies provided for in this lease. ARTICLE 19 [INTENTIONALLY DELETED] ARTICLE 20 Invalidity of Particular Provisions SECTION 20.01. In the event any covenant, condition or provision of this lease is held to be invalid or unenforceable by final judgement of a court of competent jurisdiction, the invalidity or unenforceability thereof shall in no way affect any of the other covenants, conditions or provisions hereof, provided that such remaining convenants, conditions and provisions can thereafter be applicable and effective without material prejudice to either Landlord or Tenant. In the event of a dispute between the parties as to whether the balance of the lease can remain applicable and effective without material prejudice to either party, the issue shall be submitted to arbitration. ARTICLE 21 Notices SECTION 21.01. Any and all notices, demands, requests, submissions, approvals, consents, dis'approvals, objections, 34 offers or other communications or documents required to be given, delivered or served or which may be given, delivered or served under or by the terms and provisions of this lease or pursuant to law or otherwise, shall be in writing and shall be deemed to have been duly given, delivered or served if and when delivered personally or by messenger or when received by registered or certified mail, return receipt requested, addressed if to the Tenant to: Lubbock Project Manager Environmental Protection Resources of Lubbock, Inc. 1770 One Riverway Houston, Texas 77056 or to such other address as Tenant may from time to time designate by written notice to Landlord, or if to Landlord addressed to: City Manager City of Lubbock P.O. Box 2000 Lubbock, Texas 79457 or to such other agent or agents as may be designated in writing by the parties. ARTICLE 22 Rights of Leasehold Mortgagees SECTION 22.01. If Tenant shall mortgage this lease in compliance with the provisions of Article 17 hereof, then so long as any such mortgage shall remain unsatisfied of record, the following provisions shall apply: (a) Landlord, upon serving upon Tenant any notice of default or any other notice under the provisions of or with respect to this lease, shall also serve a copy of such notice upon the holder of such mortgage, at the address 35 provided for in paragraph (f) of this section, and no notice by Landlord to Tenant shall be deemed to have been duly given as to the holder of such mortgage unless and until a copy thereof has been so served. (b) Any holder of such mortgage, in case Tenant shall be in default hereunder, shall, within the periods and otherwise as herein or in the Waste Processing Agreement provided, have the right to remedy such default, or cause the same to be remedied, and Landlord shall accept such performance by or at the instance of such holder as if the same had been made by Tenant. (c) For the purposes of this Article, no event of default shall be deemed to exist with respect to the performance of work required to be performed, or of acts to be done, or of conditions to be remedied, if steps shall, in good faith, have been commenced within the time permitted therefor to rectify the same and shall be prosecuted to completion with diligence and continuity as in Article 18 hereof provided. (d) Anything herein contained to the contrary notwithstanding, upon the occurrence of an event of default other than an event of default due to a default in the payment of money, Landlord shall take no action to effect a termination of this lease without first giving to the holder of such mortgage written notice thereof and a reasonable time thereafter within which either (i) to obtain possession of the mortgaged property (including possession by a receiver) or (ii) to institute, prosecute and complete foreclosure proceedings or otherwise acquire Tenant's interest under this lease with diligence; provided such mortgagee shall have, within sixty (60) days of receipt of notice from Landlord, given Landlord written notice of its intention and submitted to Landlord a plan or alternate plan reasonably acceptable to Landlord and reasonably calculated to remedy the default and return the Facility to operational status which conforms with the provisions of the Waste Processing Agreement. A reasonable time shall mean not in excess of one (1) year, as to obtaining possession or instituting foreclosure proceedings, and not in excess of such reasonable time as with due diligence is required to prosecute and complete foreclosure proceedings. Such holder upon obtaining possession or acquiring Tenant's interest under this lease shall promptly cure all defaults; provided, however, that such holder shall not be obligated to continue such possession or to continue such foreclosure proceedings after such defaults shall have been cured. It is understood and agreed that such holder, or his designee, or any purchaser in foreclosure proceedings (including, without limitation, a corporation or other entity formed by such holder or by the holder) may become the legal owner 36 and holder of this lease through such foreclosure proceedings or by assignment of this lease in lieu of foreclosure. (e) Any notice or other communication which Landlord shall desire or is required to give to or serve upon the holder of a mortgage on this lease shall be in writing and shall be served by registered or certified mail, return receipt requested, addressed to such holder at his address as set forth in such mortgage, or in the last assignment thereof delivered to Landlord pursuant to Section 17.02 hereof, or at such other address as shall be designated by such holder by notice in writing given to Landlord by registered or certified mail. The date of delivery as indicated or the return of receipt shall be deemed to be the date of delivery or service. Any notice or other communication which the holder of a mortgage on this lease shall desire or is required to give to or serve upon Landlord shall be deemed to have been duly given or served if sent in compliance with Section 21.01 above. (f) Anything herein contained to the contrary notwithstanding, the provisions of this Article shall enure only to the benefit of the holder of a leasehold mortgage which is a first lien on the leasehold created hereby and no third party, including any other lienholder, shall have any right whatsoever to rely upon the provisions contained herein. (g) Landlord and Tenant shall not modify or cancel any provision of this lease affecting any rights of a leasehold mortgage or surrender this lease without the prior written consent of any first leasehold mortgagee, nor shall Landlord and Tenant modify, amend or cancel any other provision of this lease without giving such leasehold mortgagee thirty (30) days prior written notice of the same. (h) Notwithstanding any language contained herein to the contrary, Landlord may proceed to the extent required by law in a timely fashion to pursue its remedies against any person or entity potentially liable to Landlord other than Tenant and the first leasehold mortgagee. SECTION 22.02. If any first leasehold mortgagee or anyone claiming by through or under such leasehold mortgage shall acquire title to Tenant's interest in this lease, by foreclosure of a first mortgage thereon'or by assignment in lieu of foreclosure or by an assignment from a nominee or 37 wholly owned subsidiary corporation or other entity of such mortgagee, or under a new lease pursuant to this Article, such mortgagee or anyone claiming by, through or under such mortgagee may, subject to Landlord's approval which approval shall not be unreasonably withheld, assign such lease and shall thereupon be released from all liability for the performance or observance of the covenants and conditions in such lease contained on Tenant's part to be performed and observed from and after the date of such assignment, provided that the assignee from such leasehold mortgagee shall have assumed such lease by documentation reasonably satisfactory to Landlord. A conditional assignment of Tenant's interest in this lease to a leasehold mortgagee as security for the mortgage shall not constitute an assignment the effect of which is to relieve the assignor of liability.for the Tenant's obligations under this lease until such time as the leasehold mortgagee exercises its rights under such conditional assignment. ARTICLE 23 Quiet Enjoyment SECTION 23.01. Tenant, upon paying the net rent and all additional rent and other charges herein provided for and observing and keeping all covenants, agreements and conditions of this lease on its part to be kept, shall quietly have and enjoy the demised premises during the term of this lease without hindrance by anyone claiming by, through or under Landlord as such, subject, however, to the exceptions, reservations and conditions of this lease. 38 .o ARTICLE 24 Fee Mortgages Landlord shall not, without the prior written consent of Tenant, mortgage, pledge or permit or suffer any lien upon Landlord's fee interest in the demised premises. This Article shall not be construed to in any way restrict Landlord's ability to pledge the revenues of its electric power sales for the issuance of revenue bonds, certificates of obligation, or any similar types of indebtedness, bonded or otherwise. ARTICLE 25 (INTENTIONALLY DELETED] ARTICLE 26 Arbitration And Appraisal SECTION 26.01. Landlord and Tenant each hereby expressly agree that only those issues relating to the enforcement of this lease and the interpretation hereof (to the extent permitted by law), and those issues specifically made subject to arbitration under this lease or the Waste Processing Agreement, and no other issues (including the amount of any payments to be made or received under the express terms of this lease), shall be subject to arbitration in Lubbock, Texas, at the request of either party to the dispute, pursuant to the Texas General Arbitration Act, being Art. 224 et seq., Vernon's Annotated Civil Statutes, in the manner specified in Section 10.14 of the Waste Processing Agreement. 39 ARTICLE 27 Certificates SECTION 27.01. Tenant shall, without charge, at any time and from time to time, within ten days after request by Landlord, certify by written instrument, duly executed, acknowledged and delivered, to Landlord, or any other person, firm, or corporation specified by Landlord: (a) that this lease is unmodified and in full force and effect, or, if there have been any modifications, that the same is in full force and effect as modified and stating the modifications; (b) whether or not, to the best knowledge of the person executing the certificate on behalf of Tenant, there are then existing any claimed set -offs or defenses against the enforcement of any of the agreements, terms, covenants or conditions hereof and any modifications hereof upon the part of Tenant to be performed or complied with, and, if so, specifying the same; (c) the dates, if any, to which the net rent and additional rent and other charges hereunder have been paid; (d) the date of expiration of the current term; and (e) the net rent then payable under this lease. SECTION 27.02. Landlord shall, without charge, at any time and from time to time, within ten days after request by Tenant, certify by written instrument, duly executed, acknowledged and delivered, to the effect that this lease is unmodified and in full force and effect (or if there shall have been modifications, specifying such modifications and that the same is in full force and effect as modified) and the dates to which the net rent, additional rent and other charges have been paid, the date of expiration of the current term, the net rent then payable under this lease, and stating whether or not, to the 40 best knowledge of the officer executing such certificate on behalf of Landlord, Tenant is in default in performance of any covenant, agreement or condition contained in this lease and, if so, specifying each such default of which the person executing such certificate has knowledge. ARTICLE 28 [INTENTIONALLY DELETED] ARTICLE 29 Definition Of Certain Terms SECTION 29.01. For purposes of this lease, unless the context otherwise requires: (a) The term "Landlord" as used herein shall mean the City of Lubbock, a Texas home rule municipal corporation. (b) Any reference herein to termination of this lease shall be deemed to include any termination hereof by expiration, or pursuant to Article 15 or 16 hereof, or otherwise. (c) The term "unavoidable delays" shall mean those delays due to events which are defined in the Waste Processing Agreement as "Service Provider Event of Force Majeure." (d) The term "mortgage", whether or not used in combination with other qualifying words, shall include a deed of trust to a trustee to secure an issue of bonds, debentures, notes or other obligations, and the term "mortgagee", and the term "holder", when used with reference to a mortgage, shall include the trustee under a deed of trust and, when appropriate, the holder or holders of the bonds, debentures, notes or other obligations secured thereby. (e) The terms "leasehold mortgagee" or "holder of leasehold mortgage" shall include the mortgagee named in a mortgage of tenant's interest hereunder or an assignee thereof. 41 (f) The term "fair market value", as used herein in reference to the Facility, shall mean fair market value as that term is defined and applied in actions under the eminent domain statutes of the State of Texas. ARTICLE 30 Brokers SECTION 30.01. Landlord and Tenant mutually represent that they have dealt with no broker in connection with this lease. Landlord agrees to indemnify and save Tenant harmless for any and all loss, cost, damage, or expense incurred arising from Landlord's dealing with a broker. Tenant agrees to indemnify and save Landlord harmless for any and all loss, cost, damage or expense incurred arising from Tenant's dealing with a broker. ARTICLE 31 Consent Of Landlord SECTION 31.01. A. Where any provision of this lease requires the consent or approval of Landlord, Landlord agrees that Landlord will not unreasonably withhold or delay such consent or approval. Where any provision of this lease requires Tenant to do anything to the satisfaction of Landlord, Landlord agrees that Landlord will not unreasonably delay or refuse to state Landlord's satisfaction of such action by Tenant. B. The provisions of subparagraph A, above, shall not apply in the circumstance where either party is vested with the power to act "in its sole discretion" or "in its sole and absolute discretion." 42 ARTICLE 32 Payments Under Protest SECTION 32.01. In case of any dispute between Landlord and Tenant with respect to the amount of money payable by Tenant to Landlord under the provisions of this lease, Tenant shall be privileged to make payment under protest and, in such event, shall be privileged to assert and prosecute a claim or claims for the recovery of the sum, or any part thereof, that shall have been so paid by Tenant under protest. No acceptance by Landlord of a lesser sum than the net rent or additional rent then due shall be deemed to be other than on account of the earliest installment of such rent due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment of rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such installment or pursue any other remedies provided in this lease. ARTICLE 33 No Oral Modification SECTION 33.01. All prior understandings and agreements between the parties are merged within this agreement, which together with the Waste Processing Agreement fully and completely sets forth the understanding of the parties with respect to Tenant's use and operation of the Facility upon the demised premises; and this lease may not be changed or 43 terminated orally or in any manner other than by an agreement in writing and signed by the party against whom enforcement of the change or termination is sought. ARTICLE 34 Covenants To Bind And Benefit Respective Parties SECTION 34.01. The covenants and agreements herein contained shall bind and inure to the benefit of Landlord, its successors and assigns, and Tenant, its successors and assigns; provided, however, that any assignment by Tenant shall be subject to the approval of Landlord. ARTICLE 35 Limited Liability SECTION 35.01 Notwithstanding anything to the contrary contained in this lease, the liability of Landlord and Tenant hereunder shall be limited as more specifically provided in the Waste Processing Agreement and Landlord and Tenant shall have no right to recover hereunder or under the Waste Processing Agreement any amounts from the other party which are in excess of the damages specified in the Waste Processing Agreement. ARTICLE 36 Choice of Law This lease shall be governed by and construed under the laws of the State of Texas. 44 ARTICLE 37 Lease Recording SECTION 37.01. Landlord and Tenant mutually agree that this Lease and all Exhibits attached hereto shall be recorded forthwith in the Official Public Records of Real Property of Lubbock County, Texas. ARTICLE 38 Release and Subrogation SECTION 38.01. Insofar as and to the extent that the following provision may be effective without invalidating or making it impossible to secure insurance coverage obtainable from responsible insurance companies doing business in the State of Texas (even though extra premium may result therefrom), Landlord and Tenant mutually agree that with respect to any loss which is covered by insurance then being carried by them respectively, the one carrying such insurance and suffering said loss releases the other of and from any and all claims with respect to such loss to the extent that payment has been received from the insurer; and each further mutually agrees that their respective insurance companies shall have no right of subrogation against the other on account thereof. ARTICLE 39 [INTENTIONALLY DELETED] 45 ARTICLE 40 Captions And Table Of Contents; Conflicts; Recordation SECTION 40.01. The captions of this lease are for convenience and reference only and in no way define, limit or describe the scope or intent of this lease nor in any way affect this lease. SECTION 40.02. The table of contents preceding this lease but under the same cover is for the purpose of convenience and reference only and is not to be deemed or construed in any way as part of this lease, nor as supplemental thereto or amendatory thereof. SECTION 40.03. In the event of any conflict or inconsistencies between the terms and provisions contained herein and those contained in the Waste Processing Agreement, the terms and provisions of the Waste Processing Agreement shall govern and control the respective obligations of Landlord and Tenant. SECTION 40.04. The parties agree that any amendments mutually agreed between them as to this lease, or any of the documents attached as Exhibits hereto, shall be prepared in a form subject to recordation in the Official Public Records of Real Property of Lubbock County, Texas, shall be promptly recorded therein, and shall not become effective until so recorded. HN. ARTICLE 41 Project Financing SECTION 41.01. Landlord and Tenant mutually acknowledge that the construction and operation of the Facility will require project financing which will be secured by Tenant's interest in this lease. Landlord and Tenant further acknowledge that the lender providing project financing for the Facility may require certain amendments and additions to the provisions of this lease in order to enhance the credit rating of the debt relating to the Facility. Landlord and Tenant A agree to use good faith efforts to negotiate and agree upon reasonable and mutually acceptable changes to this lease which are typical of provisions customarily requested by institutional lenders that extend project financing for energy production facilities, but which are not inconsistent with the material provisions of this lease or the Waste Processing Agreement. EXECUTED as an instrument under seal as of the date first above written. LANDLORD CITY OF LUBBOCK C L,� QC4ityecretary By : -�-!�� APPROVED AS TO FORM: TENANT //, "I L ENVIRO ?ivil Trial ttorney OF LUB By: _ 47 AL PROTECTION RESOURCES INC. rsr , THE STATE OF TEXAS § COUNTY OF LUBBOCK § BEFORE ME, the undersigned authority, a Notary Public in and for the State of Texas, on this day personally appeared B. C. McMINN, Mayor of the City of Lubbock, known to me to be the person whose name is subscribed to the foregoing instrument and acknowledged to me that he executed the same for the purposes and consideration therein expressed and in the capacity therein stated as the act and deed of said City. GIVEN UNDER MY HAND AND SEAL OF OFFICE this _ day of February, 1987. t�lotary Public, State of Texas THE STATE OF TEXAS § COUNTY OF HARRIS § BEFORE ME, the undersigned authority, a Notary Public in and for the State of Texas, on this day personally appeared GARY H. KAPPLER, President of Environmental Protection Resources of Lubbock, Inc., a corporation, and known to me to be the person whose name is subscribed to the above and foregoing instrument and acknowledged to me that he executed the same for the purposes and consideration therein expressed in the capacity as aforesaid as the act and deed of said Corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this _ ddy of February, 1987. No ary Public, State of texas EXHIBIT A To be mutually agreed upon by Landlord and Tenant following completion of engineering studies. 48 EXHIBIT B To be mutually agreed upon by Landlord and Tenant following completion of engineering studies. t— , EXHIBIT C CERTAIN PROVISIONS SET FORTH IN THIS CONTRACT MAY RENDER TERMS HEREOF SUBJECT TO ARBITRATION UNDER THE TEXAS GENERAL ARBITRATION ACT (ARTICLES 224 ET SEQ. OF THE TEXAS REVISED CIVIL STATUTES). WASTE PROCESSING SERVICES CONTRACT This Waste Processing Services Contract is made and entered into by and between the City of Lubbock, Texas (hereinafter referred to as the "City"), and Environmental Protection Resources of Lubbock, Inc., a corporation duly organized and validly existing under and by virtue of the laws of the State of Texas and authorized to do business in the State of Texas (hereinafter referred to as the "Service Provider"). WITNESSETH: WHEREAS, the Service Provider desires to construct, install and operate a solid waste management facility more fully described in Exhibit C hereto (the "Facility"), for the purpose of disposing of waste in an efficient and environmentally sound manner; and WHEREAS, energy produced at the Facility by the Service Provider will be used for the purpose of producing electric power; and WHEREAS, pursuant to this Contract, the Service Provider is agreeing to provide waste processing services to the City over the term of this Contract under and subject to the conditions specified fully herein; NOW THEREFORE, in consideration of the mutual promises and covenants of each to the other contained herein, the parties hereto do hereby covenant and agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 Definitions of Specific Terms. The following terms shall, for the purpose of this Contract, have the following meanings: "Acceptable Waste" shall mean garbage, trash, rubbish and refuse normally disposed of by and collected from residential, commercial, military, institutional and industrial establishments, provided, however, that the term shall not include wastes in quantities and concentrations which require special handling in their processing and disposal such as bulk items, junked automobiles, waste oil and other items of Unacceptable Waste as herein defined. Acceptable Waste may include leaves, twigs, grass and plant cuttings, branches or tree trunks not in excess of three feet long or larger than four inches in diameter, paper, plastics, ferrous and non-ferrous metals, glass, discarded personal property such as bicycles and baby carriages and other constituents that normally appear in household refuse, certain wastes which are difficult to process such as leather or small vehicular tires but which can be processed in small quantities when mixed with other Acceptable Waste provided large quantities of such wastes are not included within any one truckload. If any governmental agency or unit having appropriate jurisdiction shall determine that any chemicals or other substances which are, as of the date of this Contract, included within the definition of Unacceptable Waste because they are considered harmful or of a toxic nature or dangerous, are not harmful or of a toxic nature of dangerous, the City and the Service Provider may mutually agree that such chemicals or other substances shall be Acceptable Waste for purposes of this Contract. "City" shall mean Lubbock, Texas, a home rule municipality and political subdivision of the State of Texas. "City Event of Force Majeure" shall mean acts of God, strikes, lockouts or other industrial disturbances, acts of the public enemy, wars, riots, disorders, civil disturbances, lightning, fires, extraordinary storms, floods, washouts, arrests, prohibitions imposed by the citizens of the City by initiative and/or referendum, restraints of government or judicial bodies other than the City or its agencies including, without limitation, restraints in the form of injunctions, orders, rules, or regulations prohibiting or modifying performance of this Contract or refusal to grant such orders, permits, licenses, approvals or like instruments as may be necessary to effect such performance, sabotage, explosions, governmental preemption of materials in connection with a national emergency (declared by the President of the United States), substantial power failures or limitation or restriction of the City's right of access to the Facility, prohibitions imposed by the citizens of the City by initiative and/or referendum, or any order, judgment or other official government action of any federal, state, local or foreign court, administrative agency, governmental office or body, other than the City , or its agencies, any suspension, termination, interruption, denial or failure of renewal or delay in approval of any permit, license, consent or authorization, or any material change in interpretation by governmental authority of any federal, state or local law, ordinance, code, regulation or court order concerning the modification and operation of the Facility from those as interpreted or otherwise in effect on the date of this Contract, other than the local laws, ordinances, codes or regulations under the control of the City; provided, however, that each of the foregoing shall constitute an Event of Force Majeure only after the City shall have used all diligent efforts 2 and taken all reasonable actions to overcome the same. Force Majeure excludes, among other things, technological inability of the Facility to operate and financial inability of either party to perform its obligations under this Contract. "Commencement Date" shall mean the date upon which the Facility is placed in regular commercial service, as determined by the Service Provider. "Contract" shall mean this Waste Processing Services Contract, including all exhibits and addenda attached hereto, the documents incorporated herein, and, unless the context shall otherwise require, all amendments, supplements or modifications hereto. "Contract Completion Date" shall mean the 25th anniversary of the date on which the Contract shall become effective as set forth in Article III hereof. "Energy Contract" shall mean that certain Energy Purchase Agreement dated as of the date of execution of this Contract, executed by and between the Service Provider and the City of Lubbock, operating through Lubbock Power and Light, as amended from time to time, attached hereto as Exhibit B and made a part hereof for all intents and purposes. "Energy Products" shall mean any electric energy produced as provided in the Energy Contract. "Energy Product Revenues" shall mean any revenues derived from the sale of Energy Products pursuant to the Energy Contract. "Guaranteed Annual Capacity" shall mean one hundred eighty thousand (180,000) tons of Acceptable Waste per year, as adjusted in accordance with this Contract, this amount representing the tonnage capable of being received and processed by the Facility. "Guaranteed Annual Waste Supply" shall mean a minimum of one hundred twenty--five thousand (125,000) tons of Acceptable Waste per year commencing with the Commencement Date as adjusted in accordance with this Contract. Any City supplied Acceptable Waste that, is bypassed by request of Service Provider to a landfill will be credited against this guarantee. "Hazardous Waste" shall mean such waste as from time to time may be declared to be hazardous waste by appropriate local, state or Federal governmental authorities. "Independent Third Party" shall mean a nationally recognized engineering/consulting firm mutually selected by the City and the Service Provider to perform services required by this Contract. 3 "Lease Agreement" shall mean the lease agreement dated as of the date of execution of this Contract, executed by and between the City and the Service Provider, as amended or supplemented from time to time, to which this Contract is attached as an exhibit and made a part for all intents and purposes. "Letter of Intent" shall mean the heretofore mutually executed Letter Agreement dated August 13, 1985, which is attached hereto as Exhibit A, and which may be referred to in the determination of intent. Notwithstanding the foregoing, however, in the event of direct conflict between the Letter of Intent and this Contract, this Contract shall be controlling. "Metal Revenues" shall mean any revenues derived from the sale of ferrous and non-ferrous metals which have been removed from the Acceptable Waste by the Service Provider, which revenues shall be the sole and exclusive property of the Service Provider. "Required Amount" shall mean the amount for which the Service Provider is at risk for (i) required changes to the Facility as provided in Section 2.6 of this Contract, and (ii) required restoration of the Facility as provided in Section 16.05 of the Lease Agreement. Such amount shall equal the amount set forth for the year of required expenditure on Exhibit D attached hereto and made a part hereof, less any amounts expended or expected to be expended by the Service Provider (i) in effecting any changes to the Facility or its operations pursuant to Section 2.6 of this Contract, and/or (ii) in restoring the Facility pursuant to Article XVI of the Lease Agreement to the extent that such expenditures exceed the applicable taking awards. "Residue" shall mean that material remaining after processing and/or incineration of Acceptable Waste, consisting of ash, fly ash and noncombustible portions of Acceptable Waste (whether or not Service Provider has attempted to incinerate such items) and may include combustible or putrescible matter. "Service Provider shall mean Environmental Protection Resources of Lubbock, Inc., a duly organized and validly existing corporation under and by virtue of the laws of the State of Texas and authorized to do business in the State of Texas. "Service Provider Event of Force Majeure" shall mean acts of God, acts of the public enemy, wars, riots, disorders, civil disturbances, lightning, fires, extraordinary storms, floods, washouts, arrests, restraints in the form of injunctions, orders, rules, or regulations prohibiting or materially modifying performance of this Contract or refusal to grant such orders, permits, licenses, approvals or like instruments as may be necessary to effect such performance (except as otherwise provided in Section 2.6 below), sabotage, explosions, governmental preemption of materials in connection with a 4 national emergency (declared by the President of the United States), substantial power failures or limitation or restriction of the Service Provider's right of access to the Facility, any order, judgment or other official government action of any federal, state, local or foreign court, administrative agency, governmental office or body, any suspension, termination, interruption, denial or failure of renewal or delay in approval of any permit, license, consent or authorization, or any material change in interpretation by governmental authority of any federal, state or local law, ordinance, code, regulation, or court order concerning the modification and operation of the Facility from those as interpreted or otherwise in effect on the Commencement Date (except as otherwise provided in Section 2.6 below), any deposit of Hazardous Waste by or on behalf of the City, the unavailability of any landfill to take unprocessed waste or residue, or strikes, lock -outs or other industrial disturbances; provided, however, that each of the foregoing shall constitute an Event of Force Majeure only after the Service Provider shall have used all diligent efforts and taken all reasonable actions to overcome the same. Force Majeure excludes, among other things, technological inability of the Facility to operate and financial inability of either party to perform its obligations under this Contract. "Tipping Fee" shall mean the price paid to the Service Provider by the City for each ton of solid waste delivered to and accepted by the Facility. "Ton" shall mean 2,000 pounds, avoir dupois. "Unacceptable Waste" shall include large castings, transmissions, rear ends, springs, fenders or other major parts of automobiles, motorcycles, other vehicles or marine vessels, explosives, pathological or biological waste, hazardous chemicals, radioactive materials, large quantities of sulphur -containing materials, machinery (other than small household appliances), liquid wastes, dirt, concrete, other non -burnable construction materials, materials which are likely to pose a threat to health or safety, Residue and Hazardous Waste. "Waste Processing Services" shall mean and include all work performed by or on behalf of the Service Provider, without limitation, to process waste at the Facility and to convert waste delivered to the Facility into Energy Products and Residue. "Week" shall mean a seven-day period commencing at 12:01 A.M. on Monday and ending at midnight on the following Sunday. 5 ARTICLE VI ADDITIONAL COVENANTS OF CITY SECTION 6.1 Assistance in Obtaining Permits. City agrees that, throughout the term of this Contract, it shall use its best efforts to assist Service Provider in obtaining any and all permits, licenses, or other similar authority to enable Service Provider to operate the Facility as contemplated hereby. SECTION 6.2 Compensating Adjustments. In the event that the City shall take any action, direct or indirect, which would have any material adverse affect, whether economic or otherwise, upon the Service Provider or the operation of the Facility, specifically including, without limitation, any changes to existing City ordinances, codes, regulations, or practices, the Tipping Fee set forth in Section 7.1 of this Contract shall be amended so as to compensate Service Provider for the adverse economic affect of any such City action upon the Service Provider; provided, however, that the foregoing shall not apply to such action as may be mandated by state or federal law or regulation. In the event that the Service Provider shall take any action, direct or indirect, which would have any material adverse affect, whether economic or otherwise, upon the City, the Tipping Fee set forth in Section 7.1 of this Contract shall be amended so as to compensate the City for the adverse economic affect of any such Service Provider action upon the City; provided, however, that the foregoing shall not apply to such action as may be mandated by state or federal law or regulation. For the purpose of this Section 6.2, "mandated" shall mean either actually required or required in order to avoid penalty or the withholding of funds to which the acting party is otherwise entitled. SECTION 6.3 Hazardous Waste. Each party shall take such action as may be reasonably required in order to procure the assistance, financial or otherwise, of any third party, specifically including, without limitation, the United States Environmental Protection Agency, in connection with the clean-up, transportation and/or disposition of any Hazardous Waste. ARTICLE VII COMPENSATION SECTION 7.1 Service Provider Compensation. The Service Provider, for supplying the Services set forth in Article II of this Contract, shall be compensated by a Tipping Fee (as defined) of $9.00 per ton of Acceptable Waste delivered to the Facility by the City or on the City's behalf. The Service Provider shall bill the City, on a monthly basis, for the Tipping Fee and the City shall pay the same to Service Provider within fifteen (15) days of its receipt of any such invoice. The amount of Tipping Fees shall be determined in accordance with the weighing 23 procedure set forth in Section 2.4. All invoices submitted to the City by the Service Provider shall be accompanied or preceded by the statement of the Service Provider required pursuant to the provisions of Section 2.1. SECTION 7.2 City Compensation. Service Provider shall pay the City $5.00 per ton for landfill disposal of Residue resulting from the processing of Acceptable Waste supplied by persons or entities other than the City, as set forth in Section 2.1 above. The City shall bill the Service Provider, on a monthly basis, for said fee and the Service Provider shall pay the same to the City within fifteen (15.) days of its receipt of any such invoice. ARTICLE VIII CONTRACT ADMINISTRATION SECTION 8.1 Contract Representatives. The City's representative in the administration of this Contract shall be the City Manager, or his designated representative. The Service Provider's Representative in the administration of this Contract shall be Gary H. Kappler, or his designated representative. Either party may change its representative in the administration of this Contract upon five (5) days' notice to the other party to this Contract. SECTION 8.2 Site Representatives. The Service Provider shall designate a representative, headquartered in the City, who will be available and who will have authority to make normal operating decisions for the Service Provider. The City shall designate a representative with authority to make normal decisions on behalf of the City, recognizing that some such decisions may require final action by the City Council of the City of Lubbock. SECTION 8.3 Right of City to Examine Records of the Service Provider Relating to the Facility. The Service Provider shall maintain and keep proper books, records and accounts in which complete and correct entries shall be made of all dealings and transactions relating to the Facility to the extent required to be maintained and kept under this Article in accordance with generally accepted accounting principles. The Service Provider shall be required to keep the following operation records covering the operations of the Facility: (a) The Service Provider shall maintain appropriate records pertaining to delivery of Acceptable Waste. Such records shall be retained for two (2) years after the year to which the records relate and shall be open to inspection by the City at any time within such two (2) year period. Weighing procedures shall be subject to reasonable approval of the City, which may require scale measuring and recording devices if the City deems 24 them to be necessary. Required records in this category include but are not limited to: (i) itemized statements of Acceptable Waste and Unacceptable Waste delivered to the Facility by the City; (ii) itemized statements of the amount of Acceptable Waste and Unacceptable Waste delivered to the Facility by each third party; and (iii) itemized statements of the amount, if any, and source of Acceptable Waste rejected. (b) On or before the fifteenth (15th) day following the end of each calendar month during the term of this Contract, the Service Provider shall submit to the City a summary operation report covering the operations and performance of the Facility for each day during the previous month. The data included in the reports shall be sufficiently detailed to facilitate analyses of the operation and performance of the Facility. The report shall be sufficient to verify that the Facility is operating in compliance with the requirements of this Contract. Such report shall describe major items of operations for the previous month including, but not limited to, a summary of (i) tonnage delivered, processed and rejected, (ii) Residue tonnage stored and shipped, and (iii) materials recovered, quantities stored and quantities shipped. SECTION 8.4 Test Equipment. The Service Provider shall provide and maintain sufficient instrumentation to monitor and control all pollution control equipment installed at the Facility. The Service Provider shall perform or cause to be performed such laboratory analyses as may be reasonably required relating to the operation of the Facility. The Service Provider shall cooperate with the City and. its designated agents for demonstrations of compliance with the requirements of this Contract. ARTICLE IX INSURANCE SECTION 9.1 General Provisions as to Insurance and Condemnation. At all times during the term of this Contract, the Service Provider shall procure and maintain the insurance described in the Lease Agreement. The provisions of this Contract shall not be construed as limiting or prohibiting the Service Provider from obtaining any additional insurance at its own expense. SECTION 9.2 Insurance Coverage. The insurance coverages as provided in this Article represent that amount of insurance coverage considered by the City and the Service Provider in their best judgement to be proper and prudent for this Contract. As 25 provided for in Section 9.1 hereof, the Service Provider may obtain any other insurance coverages of increased coverage as the Service Provider may require for the Service Provider's benefit in addition to that specified in this Article, provided that the terms of such additional insurance shall not have the effect of lessening the coverage required by the Lease Agreement. SECTION 9.3 No Personal Liability. No officer or employee of the City shall incur personal liability to the Service Provider, nor will any officer, director or employee of the Service Provider incur personal liability to the City, for reasonable actions taken in good faith in connection with this Article. ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1 Representation and Warranty of Service Provider. The Service Provider represents and warrants to the City as follows: (a) It is a Corporation duly organized and validly existing under and by virtue of the laws of the State of Texas and is duly authorized to do business in the State of Texas. (b) At all times during the term of this Contract, it will maintain its status under the laws of such State and further that it will maintain its authority to' do business in the State of Texas. (c) It has full power and authority to do business in the State of Texas, including the power and authority to do the business and all related activities contemplated by this Contract and the Lease Agreement. (d) It has full power and authority to execute and deliver this Contract and to perform this Contract in accordance with its terms. (e) Its officers who are here undersigned have been empowered by all necessary authorizations and resolutions to execute this Contract on its behalf. (f) This Contract has been duly authorized, executed and delivered by it and constitutes a legal, valid and binding obligation of it enforceable against it in accordance with its terms. (g) To the best of Service Provider's knowledge, neither the execution nor delivery by it of this Contract, nor the performance by it of its obligation in connection 26 with the transactions contemplated hereby or the fulfillment by it of the terms or conditions here of (i) conflicts with, violates or results in a breach of any constitution, law, or governmental regulation applicable to it, or (ii) conflicts with, violates, or results in a breach of any term or condition of any order, judgment or decree, or any agreement or instrument, to which it is a party or by which it or any of its properties or assets are bound, or constitutes a default thereunder. (h) At the time of execution of this Contract, no approval, authorization, order or consent of, or declaration, registration or filing with any governmental authority is required for the valid execution and delivery of this Contract by it, except such as have been duly obtained or made. (i) There is no action, suit or proceeding, at law or in equity, before or by any court or governmental authority pending or, to the best of its knowledge, threatened against it, which might materially adversely affect the performance by it of its obligations hereunder or under the transactions contemplated hereby, or which, in any way, questions the validity, legality or enforceability of this Contract, of any other agreement or instrument entered into by it in connection with the transactions contemplated hereby. SECTION 10.2 Representations and Warranties of the City. The City represents and warrants to the Service Provider as follows: (a) The City is a city duly organized and validly existing under the constitution and laws of the State of Texas, with full legal right, power and authority to enter into and perform its obligations under this Contract. It is understood that the City is a Home Rule Municipality operating under authority of Article 11, Section 5, of the Texas Constitution and that this Contract is subject to all existing and future laws of the State of Texas applicable to Home Rule Municipal Corporations within the State of Texas and the Charter of the City of Lubbock, Texas. (b) This Contract has been duly authorized, executed and delivered by the City and constitutes a legal, valid and binding obligation of the City, enforceable against the City in accordance with its terms. (c) To the best of the City's knowledge, neither the execution nor delivery by the City of this Contract, 27 nor the performance by the City of its obligations in connection with the transactions contemplated hereby or the fulfillment by the City of the terms or conditions hereof (i) conflicts with, violates or results in a breach of any constitution, law or governmental regulation applicable to the City, or (ii) conflicts with, violates or results in a breach of any term or condition of any order, judgment or decree, or any agreement or instrument, to which the City is a party or by which the City or any of its properties or assets are bound, or constitutes a default thereunder. (d) At the time of execution of this Contract, no approval, authorization, order or consent of, or declaration, registration or filing with, any governmental authority or referendum of voters is required for the valid execution and delivery by the City of this Contract or the performance by the City of its payment or other obligations hereunder except such as have been duly obtained or made, other than the continuing rights of the citizens under the initiative and referendum provisions of the Charter of the City of Lubbock, Texas. (e) There is no action, suit or proceeding, at law or in equity, before or by any court or governmental authority, or proceeding for referendum or other voters initiative, pending or, to the best of the City's knowledge, threatened against the City, which might materially adversely affect the performance by the City of its obligations hereunder or under the other transactions contemplated hereby, or which, in any way, questions the validity, legality or enforceability of this Contract, or any other agreement or instrument entered into by the City in connection with the transactions contemplated hereby, or would materially adversely affect the ability of the Service Provider to perform its obligations hereunder. SECTION 10.3 Further Assurances. Each party agrees to execute and deliver any instruments and to perform any acts that may be necessary or reasonably requested in order to give full effect to this Contract provided such instruments or acts are not inconsistent with, or create obligations in addition to those obligations created by, the terms of this Contract or the Lease Agreement. SECTION 10.4 Relationship of Parties. Except as otherwise explicitly provided herein, no party to this Contract will have any responsibility whatsoever with respect to services provided or contractual obligations assumed by any other party and nothing in this Contract will be deemed to constitute any party a M. partner, agent or legal representative of any other party or to create any fiduciary relationship between or among the parties, nor shall this relationship ever be construed as a joint venture. SECTION 10.5 Assignment of Contract. This Contract may not be assigned by either party hereto without the prior written consent of the other party. Notwithstanding the foregoing, however, the Service Provider shall have the right to assign its interest in this Contract for the purpose of granting a security interest to any party which may provide the Service Provider with the financing necessary for the construction, maintenance, or operation of the Facility. SECTION 10.6 Binding Effect. This Contract shall be binding on the City, the Service Provider and, only to the extent allowed herein, their respective permitted successors and permitted assigns, if any. SECTION 10.7 Governing Law and Jurisdiction. This Contract shall be governed by and construed in accordance with the laws of the State of Texas. The Service Provider hereby agrees to submit to service of process in, and to the jurisdiction of the courts of, the State of Texas in connection with any claim or controversy arising out of the interpretation, application or enforcement of this Contract. All legal actions arising under this Contract or the Lease Agreement shall 'be filed in any appropriate court with jurisdiction in Lubbock County, Texas. SECTION 10.8 Waiver. Unless otherwise specifically provided by the terms of this Contract, no delay or failure to exercise a right resulting from any breach of this Contract will impair such right or shall be construed to be a waiver thereof, but such right may be exercised from time to time and as often as may be deemed expedient. Any waiver must be in writing and signed by the party granting such waiver. If any covenant or agreement contained in this Contract is breached by any party and thereafter waived by any other party, such waiver will be limited to the particular breach so waived and will not be deemed to waive any other breach under this Contract. SECTION 10.9 Approvals, Consents, and Agreements Generally. Whenever in this Contract, the approval, consent or agreement of either the City or the Service Provider is required or contemplated, such approval, consent or agreement shall not be unreasonably withheld except as to those matters where such party is vested with the power to act "in its sole discretion" or "in its sole and absolute discretion." SECTION 10.10 Entire Agreement; Amendments. This Contract, including all exhibits and the Lease Agreement, constitutes the entire understanding and agreement between the City and the Service Provider as to the subject matter hereof. There are no; 29 terms, obligations, covenants or conditions other than those contained herein. No modification or amendment of this Contract shall be valid and effective unless evidenced by an agreement in writing. SECTION 10.11 Severability. In the event any covenant, condition or provision of this Contract is held to be invalid or unenforceable by a final judgment of a court of competent jurisdiction, the invalidity or unenforceability thereof shall in no way affect any of the other covenants, conditions or provisions hereof, provided that such remaining covenants, conditions and provisions can thereafter be applicable and effective without material prejudice to either the City or the Service Provider. In the event of dispute between the parties as to whether the balance of the Contract can remain applicable and effective without material prejudice to either party, the issue shall be submitted to arbitration. SECTION 10.12 Effect of Article and Section Headings and Table of Contents. The headings or titles of the several articles and sections hereof, and any table of contents appended hereto or to copies hereof, shall be solely for convenience of reference and shall not affect the meaning of the construction, interpretation or effect of this Contract. SECTION 10.13 Contract May be Executed in Counterparts. This Contract may be simultaneously executed in counterparts. Each such counterpart so executed shall be deemed to be an original, and all such counterparts together shall constitute but one and the same instrument. SECTION 10.14 Arbitration and Independent Third Party. The Service Provider and the City each hereby expressly agree that only those issues relating to the enforcement of this Contract and the interpretation hereof (to the extent permitted by law), and these issues specifically made subject to arbitration under this Contract or the Lease Agreement, and no other issues (including the amount of any payments to be made or received under the express terms of this Contract), shall be subject to arbitration in Lubbock, Texas, at the request of either party to the dispute, pursuant to the Texas General Arbitration Act, being Art. 224, et seq., Vernon's Annotated Civil Statutes. However, the parties hereto may from time to time mutually agree, each in their sole and absolute discretion, to other and additional issues for submission to arbitration. THE DECISION OF THE ARBITERS UPON ANY QUESTION SO SPECIFICALLY MADE SUBJECT TO ARBITRATION UNDER THIS CONTRACT OR THE LEASE AGREEMENT OR BY SUBSEQUENT MUTUAL AGREEMENT, SHALL BE A CONDITION PRECEDENT TO ANY RIGHT OF LEGAL ACTION. Each party shall be entitled to the exercise of all rights and remedies provided by the said Texas General Arbitration Act. 30 The issue or issues under arbitration shall be heard and decided by a panel of three (3) arbiters, one (1) to be named in writing by the Service Provider, (or Tenant as applicable), one (1) to be named in writing by the City) or Landlord as applicable), and the third shall be selected by mutual agreement of the other two, or in the absence of such agreement, shall be designated by the American Arbitration Association. Should the party demanding arbitration fail to name an arbiter within ten (10) days of the demand, his right to arbitrate shall lapse. Should the other party fail to choose an arbiter within ten (10) days, such arbiter shall be appointed in the manner provided in the Texas General Arbitration Act. Should either party refuse or neglect to supply the arbiters with any papers or information demanded in writing, the arbiters are empowered by both parties to take ex parte proceedings. The arbiters shall act with promptness. The decision of any two shall be binding on both parties to the Contract, unless either or both parties shall appeal within ten (10) days from date of the award by the arbiters, and it is hereby agreed that each party shall have the right of appeal and all proceedings shall be according to and governed by Arbitration Statutes of Texas. The Service Provider (as Tenant where applicable) and the City (as Landlord where applicable) each hereby expressly agree that only those issues specifically made subject to decision by the Independent Third Party under this Contract or the Lease Agreement, and no other issues, shall be subject to decision by the Independent Third Party. However, the parties hereto may from time to time mutually agree, each in their sole and absolute discretion, to other and additional issued for submission to the Independent Third Party for final and binding determination. The City and the Service Provider shall jointly select the Independent Third Party. If City and Service Provider are unable to select such Independent Third Party, the Independent Third Party shall be selected by arbitration in accordance with the immediately preceding paragraph. The Independent Third Party may be relieved of his employment by either the City or the Service Provider, provided, however, during a pending decision the Independent Third Party shall not be relieved of his employment except by mutual agreement of the City and the Service Provider. If such an event occurs the City and Service Provider shall immediately select a new Independent Third Party utilizing the above described procedure. The initial service of the Independent Third Party and the arbitration panel will be paid on a retainer basis in accordance with said Independent Third Party's or arbitration panel's normal retainer practices, with the fee to be paid for equally by the 31 City and the Service Provider. Additional costs incurred in excess of the retainer fee resulting from items submitted for decision shall be paid for by the Party damaged by the final decision. Where the decision is not clearly in the favor of either party then the percentage of such additional costs shall be paid for by the City and the Service Provider as decided by either the Independent Third Party or the arbitration panel as the case may be. SECTION 10.15 Nondiscrimination in Employment. The Service Provider will not discriminate against any applicant for employment because of age, race, color, religion, sex or national origin. The Service Provider will take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their. age, race, color, religion, sex or national origin. Such action shall include, but not be limited to, recruitment and recruitment advertising; layoff or termination; upgrading; demotion, transfer, rates of pay or other form of compensation; and selection for training, including apprenticeship. The Service Provider will post in conspicuous places, available to employees and applicants for employment, notices setting forth the provisions of this nondiscrimination clause. The Service Provider shall, in all solicitations or advertisements for employees, placed by or on behalf of the Service Provider, state that all qualified applicants will receive consideration for employment without regard to age, race, color, religion, sex or national origin. SECTION 10.16 Notices. All notices, approvals, acceptances, consents and the like required or contemplated by this Contract shall be in writing and shall be deemed to have been given when delivered personally or by messenger or received by the addressee by registered or certified first class mail, return receipt requested, with sufficient postage affixed, addressed as follows: If to the City: City Manager City of Lubbock P. O. Box 2000 Lubbock, Texas 79457 If to Service Provider: Environmental Protection Resources of Lubbock, Inc. 1770 One Riverway Houston, Texas 77056 SECTION 10.17 Interest. In the event any payment to be made hereunder is not paid when due, or if any payment to be made hereunder otherwise is to bear interest, such payment shall bear interest from the due date thereof (or such other date specified in the Contract) until paid, at the prime rate quoted by American 32 State Bank, Lubbock, Texas, or any successor thereto, as of such due date (the "prime rate"). SECTION 10.18 Rights of Mortgagees. In the event the Service Provider shall grant a security interest in and to this Contract or the Facility pursuant to the provisions of Section 10.5 above, the Service Provider shall notify the City that such a security interest has been granted and provide the City with a mailing address for the holder of said security interest, and in the event that the Service Provider shall grant a security interest to more than one person or entity, the Service Provider shall provide the City with a singular address to which the City may send to all such security holders any notices required pursuant to this Section 10.18. Thereafter, so long as such security interest shall remain unsatisfied, the following provisions shall apply: (a) The City, upon serving the Service Provider with any notice of default or any other notice under the provisions of or with respect to this Contract, shall also serve copy of such notice upon the holder of such security interest at the address provided for in this Section, and no notice by City to Service Provider shall be deemed to have been duly given as to the holder of such security interest unless and until a copy thereof has been so served. (b) Any holder of such security interest, in case the Service Provider shall be in default hereunder, shall, within the periods and otherwise as provided herein, have the right to remedy such default, or cause the same to be remedied, and the City shall accept such performance by or at the insistence of such holder as if the same had been made by the Service Provider. (c) For the purpose of this Section, no Service Provider Event of Default shall be deemed to exist with respect to the performance of work required to be performed, or of acts to be done, or of conditions to be remedied, if substantial steps shall, in good faith, have been commenced by the Service Provider or the holder of such security interest within the time permitted therefore to rectify the same and shall be prosecuted to completion with due diligence and continuity as required herein. (d) Notwithstanding anything contained herein to the contrary, upon the occurrence of a Service Provider Event of Default, the City shall take no action to effect the termination of this Contract without first giving to the holder of such security interest written notice thereof in a reasonable time thereafter within 33 which to either (i) obtain possession of the mortgage property (including possession by a receiver) or (ii) to institute, prosecute and complete foreclosure proceedings or otherwise acquire the Service Provider's interest under this Contract with diligence, provided such holder shall have, within sixty (60) days of receipt of notice from the City, given the City written notice of its intentions and submitted to the City a plan or alternate plans reasonably acceptable to the City reasonably calculated to remedy default and return the Facility to operational status in conformity with this Contract. A reasonable time shall mean, as to obtaining possession or instituting foreclosure proceedings, not in excess of six (6) months, and as to prosecuting and completing the foreclosure proceedings, shall mean such reasonable time as with due diligence as required in order to effect the same. Such holder, upon obtaining possession or acquiring the Service Provider's interest under this Contract, shall not be obligated to continue such possession or to continue such foreclosure proceedings after such defaults have been cured. It is understood and agreed that such holder, or its Assignee, or any purchaser in foreclosure proceedings (including, without limitation, a corporation or other entity formed by such holder) may become legal owner and holder of this Contract and the Facility through such foreclosure proceedings or by assignment of this Contract and the Facility in lieu of foreclosure. (e) The City shall have the right to approve any party to whom the holder of the security interest desires to assign this Contract, including any purchaser in foreclosure proceedings, provided that such approval shall not be unreasonably withheld. Any party assuming the obligations of Service Provider pursuant to this Section 10.18 shall be required to perform any unfulfilled obligation of Service Provider under this Contract. (f) Any notice or other communication which the City shall desire or is required to give or serve upon the holder .of a security interest in this Lease and/or the Facility shall be in writing and shall be served by registered or certified mail, return receipt requested, addressed to such holder at his address as set forth in any instrument creating such security interest, or in the last assignment thereof delivered to the City, or at such other address as shall be designated by such holder by notice in writing given to the City by registered or certified mail. 34 Any notice or other communication which the holder of a security interest on this Contract and/or the Facility shall desire or is required to give to or serve upon the City shall be deemed to have been duly given or served if sent in compliance with Section 10.16 above. (g) The Service Provider and the City shall not modify, amend, or cancel any provision of this Contract affecting any rights of a holder of a security interest herein without the prior written consent of the holder of such security interest, nor shall they modify, amend, or cancel any other provisions of this Contract without giving the holder of any security interest thirty (30) days prior written notice of the same. (h) Notwithstanding any language contained herein to the contrary, the provisions of this Section 10.18 shall inure only to the benefit of the parties hereto and the holder of such security interest specifically granted by the Service Provider, and no third party, including any other lienholder, shall have any right whatsoever to rely upon the provisions contained herein. (i) Notwithstanding any language contained herein to the contrary, the City may proceed to the extent required by law in a timely fashion to pursue its remedies against any person or entity potentially liable to the City other than the Service Provider or the holder of such security interest. SECTION 10.19 Recordation. Any amendment to this Contract shall be recorded in the manner provided in the Lease Agreement. IN WITNESS WHEREOF, the parties have executed this contract as of the G-�rlay of February, 1987. APPROVED AS TO FORM: ivil Trial Attorney 288608.038(15)gb 35 CITY OF LUBBOCK, TEXAS BY: C .B. C. McMinn, Mayor ENVIRONMENTAL PROTECTION RESOURCE OF LUBBO K INC. BY: Gary H. ppler, P sid t DGV;js Resolution #L1U8 August 8, 1985 EXHIBIT A Agenda Item #33 RESOLUTION WHEREAS, the City Councll of the City of Lubbock believes that the construction of a resource recovery facility within the City of Lubbock to provide for the conversion of municipal waste into electric energy would be of great benefit to the citizens of the City of Lub4ock; and WHEREAS, the City of Lubbock has received proposals fqr the co_nstruc- tion of such a facility from several corporations; and WHEREAS, the proposal received from EPR, Inc., of Houston, Texas, is deemed to be the best and most feasible Rrpppppl for such a facility; NOW THEREFORE: BE IT RESOLVED BY THE PITY COUNCIL. OF THE CITY OF LUBBOCK; SECTION 1. THAT the Mayor of the City of Lubbock BE end is hereby authorized and directed to execute for and on 4ehaif of the City of L4bpck a Letter of Intent to Contract with EPR, Inc., for constructign of a resource recovery facility within the City of Lubbock, a copy of which Letter of Intent is attached herewith which shall be aprepd upon the minutes of the Council and as spread upon the minutes of this Council shall constitute and be a part of this Resolution as if fully copied herein in detail, and SECTION 2. THAT the Mayor of the City of Lubbock BE and is hereby authorized and directed to execute for and on behalf of the City of Luabeck such other associated documents required for construction.of said resource recovery facility, which documents shall be attached herewith and shall constitute and be a past of this Resolution as if fully cppied herein in detail upon execution. - Passed by the City Council this 8th day of August �. , 1985, ATTEST: Ranett6 Boyd, City Secretary APPROVED AS TO CONTENT: Bob Cass Deputy City Manager ENRY; MAYOR APPROVED AS TO FORM; zi�� b L"kL-' DotTtld G. Vandiver Assistant City Attorney ARTICLE II WASTE PROCESSING SERVICES SECTION 2.1 Agreement to Provide Waste Processing Services and Operate and Maintain Facility. The Service Provider hereby covenants and agrees to provide Waste Processing Services for the City. The parties hereby acknowledge and agree that the Service Provider will use the Facility to provide such Waste Processing Services hereunder; that the Service Provider will have possession and control of the Facility, either as an owner or a lessee, including the right and responsibility for the management, operation, maintenance and repair of the Facility; and that the Service Provider shall use the Facility as a principal acting for its own account to provide waste Processing Services to the City; that the Service Provider will have the risks and rewards of operation of the Facility, as more fully set forth in this Contract and shall be construed as an independent contractor in all such activities, except as to matters in which it is only a Tenant under the Lease Agreement. The City covenants and agrees to pay, in accordance with the terms of this Contract, the Service Provider for providing Waste Processing services pursuant to this Contract. The Service Provider shall apply for all necessary construction permits not later than ninety (90) days after the execution of this Contract and will prosecute such application or applications with reasonable diligence. The Service Provider shall commence construction of the Facility within six (6) months of the date that all necessary permits have been granted and received and shall complete such construction within twenty-four (24) months after the construction is commenced. Notwithstanding any language contained herein to the contrary, if the Service Provider is unable to obtain, within two (2) years from the date hereof, (i) all permits, licenses and approvals required for the construction and operation of the Facility, or (ii) project financing for the Facility, either the Service Provider or the City shall have the right, upon ten (10) days' written notice to the other, to terminate this Contract. Subject to the terms and provisions of this Contract, prior to the Commencement Date the City shall deliver, or cause to be delivered, such amount of Acceptable Waste as shall be reasonably requested by the Service Provider in order to test the operation of the Facility. The Service Provider shall give the City reasonable notice of its requirement for such Acceptable Waste. The Service Provider shall be compensated for any such Acceptable Waste received as set forth in Section 7.2. Subject to the terms and provisions of this Contract, beginning on the Commencement Date of this Contract as provided in Article III hereof and throughout the term of this contract, 2. the City shall deliver, or cause to be delivered, the Guaranteed Annual Waste Supply to the Facility's receiving area, all in accordance with the provisions of this Contract. City further agrees that it shall deliver, or cause to be delivered, a minimum of five percent (5%) of the Guaranteed Annual Waste Supply to the Facility's receiving area each month. This Guaranteed Annual Waste Supply, as previously defined, will be escalated annually at a rate of 1.5% per year, but in no event shall exceed the Guaranteed Annual Capacity. In the event the Facility demonstrates the ability to accept and process tonnage greater than the Guaranteed Annual Waste Supply, the City will use its best efforts to deliver, or cause to be delivered, tonnage in excess of the Guaranteed Annual Waste Supply. If the Guaranteed Annual Waste Supply is less than the Guaranteed Annual Capacity, the Service Provider will also use its best efforts to obtain other Acceptable Waste in amounts equal to the difference between the Guaranteed Annual Waste Supply and the Guaranteed Annual Capacity; provided, however, that any such additional waste obtained by Service Provider shall not relieve the City of its obligation to supply the Guaranteed Annual Waste Supply. Service Provider covenants and agrees that it will accept and process Acceptable Waste delivered or caused to be delivered by the City in an amount of up to one thousand one hundred (1,100) tons per day; provided, however, that Service Provider shall not be required to accept more than twelve percent (12%) of the Guaranteed Annual Waste Supply in any month, nor shall it be required to accept, in the aggregate, waste in excess of the Guaranteed Annual Waste Supply. Further, in the event that City desires to deliver more than seven hundred fifty (750) tons of Acceptable Waste per day for more than six (6) consecutive days, it shall give notice of the same to Service Provider not less than five (5) days prior to the commencement of such increased deliveries. Any amount of Acceptable Waste refused by the Service Provider not in excess of the foregoing limits shall be credited against the Guaranteed Annual Waste Supply. Any amount of Acceptable Waste refused by the Service Provider in excess of the foregoing limits shall not be credited against the Guaranteed Annual Waste Supply. The City covenants and agrees that, so long as the Facility is operating in accordance with the terms of this Contract, the City shall deliver the Guaranteed Annual Waste Supply to the Facility and shall not deliver or cause to be delivered or permit, to the extent provided by law, the delivery of such Guaranteed Annual Waste Supply to any person other than the Service Provider or its designee. The City further agrees, if requested by the Service Provider, to make every reasonable effort to utilize all waste control measures available to assure the balance of the waste stream required by Service Provider, including, to the extent within the duties and limitations imposed on its exercise of corporate or police power, the 7 adoption of such ordinances as would increase the delivery of acceptable solid waste generated in the City to the Facility, while Service Provider also agrees to make every reasonable effort to obtain additional outside sources of waste; provided, however, that any such additional waste obtained by Service Provider shall not relievetheCity of its obligation to supply the Guaranteed Annual Waste Supply. The Service Provider hereby agrees to administer, operate, maintain and repair the Facility in a prudent and efficient manner consistent with sound operating practices. The Service Provider shall from time to time during the term of this Contract make all necessary and appropriate repairs, renewals, replacements and substitutions to the Facility, including all necessary repairs, renewals, corrections, replacements and substitutions required due to any deficiency in the design, construction or performance testing of the Facility regardless of when any such deficiencies may arise during this Contract. THE SERVICE PROVIDER IS AWARE OF THE CONDITION OF THE EXISTING FACILITY AND EQUIPMENT AND WILL NOT CLAIM ANY RELIEF FROM THE CITY BASED UPON ANY DEFECTS OF SITING, CONDITION, OR CONSTRUCTION OF THE PREMISES OR EQUIPMENT TO BE LEASED FROM THE CITY. All Residue resulting from the operation of the Facility may be disposed of by the Service Provider at any landfill operated by the City. The City will accept without charge all Residue generated by waste delivered by the City, and will charge the Service Provider on a monthly basis a fee of $5.00 per ton on Residue generated by non -City delivered waste. It is agreed that the Service Provider will pay all costs of transportation of the Residue from the Facility to any landfill and will provide City with a statement by the fifteenth (15th) day of each month indicating what percentage of waste processed by the Facility was furnished by the City and others and City will bill Service Provider for the disposal of Residue on the same percentage basis. SECTION 2.2 Acceptance, Processing and Disposal of Acceptable Waste; Right of Service Provider to Refuse to Accept Waste. The Service Provider shall, subject to the hereinafter stated rights of refusal, accept, process and dispose of all Acceptable Waste delivered to the Facility as provided in this Contract. In addition, it is reasonably expected and understood that in the normal course of operation of the Facility some limited quantity of Unacceptable Waste will be collected and delivered with Acceptable Waste. Consequently, the Service Provider to the extent practicable and with reasonable knowledge of the quantities and characteristics of such waste, as of the date of this Contract, shall use all reasonable efforts to process and dispose of such waste in a manner which would not be likely to (1) pose a threat to health and safety, or (2) cause damage to or materially adversely affect the operation of the Facility. In the event Unacceptable Waste is delivered in such amounts that in the opinion of the Service Provider violates the foregoing, and such waste is received by the Service Provider and not diverted, then (1) the responsible party ("responsible party" as used herein being defined as the party whom delivers such waste to the Facility), shall be immediately notified of such violation, (2) the Service Provider shall remove all such Unacceptable Waste from the Facility if it has not been removed by the responsible party in a reasonable period following notification, and (3) the Service Provider shall be reimbursed its reasonable costs for such removal and disposal. The City shall use all reasonable efforts to limit the delivery of Unacceptable Waste to the Facility to an amount which does not exceed five percent (5%) of the Acceptable Waste delivered to the Facility each month. Notwithstanding the foregoing, City shall not be required to sort through any waste which has been deposited in a Waste Receptacle by a third party and to remove any Unacceptable Waste therefrom, unless the City shall have actual knowledge of the fact that such receptacle contains Unacceptable Waste. The City shall use its best efforts to avoid delivering or causing to be delivered Hazardous Waste to the Facility. In the event the Facility receives any hazardous or toxic waste, then (1) the responsible party shall be notified immediately of such receipt of Hazardous Waste, and (2) the responsible party shall (at its expense) clean up, remove, and dispose of such waste or, at the Service Provider's sole option, the Service Provider shall clean up, remove, and dispose of such waste and the responsible party shall thereupon immediately reimburse the Service Provider for the expenses relating thereto. A detailed program with applicable procedures to insure that Hazardous Waste is not processed by the Facility, in accordance with the Letter of Intent, shall be mutually developed and agreed upon by the Service Provider and the City. The cost of the development of such program and procedures shall be borne equally by Service Provider and City. The cost of the development of such program and procedures does not include implementation or operation costs of the same. The Service Provider is permitted to refuse, but shall not unreasonably refuse, delivery of any waste: (1) other than Acceptable Waste; (2) which is Unacceptable Waste except for that normally collected and delivered with Acceptable Waste in an 9 amount which does not exceed five percent (5%) of the Acceptable Waste delivered each month; (3) delivered at other than the normal receiving hours of the Facility provided that there is no emergency requiring acceptance by the Service Provider as set forth in Section 2.4 below; (4) delivered during shutdowns of the Facility to the extent permitted by this Article; or (5) delivered by the City in excess of the limits set forth in Section 2.1. SECTION 2.3 Services and Utilities. The Service Provider shall operate and maintain all internal on-site services and facilities at the Facility, including water, sanitary sewer facilities, water mains, water meters, fire hydrants, light, power and telephone services and other services and utilities required for the operation of the Facility. To the extent not otherwise provided by utility companies or agencies the Service Provider shall provide for the operation of off-site services and utilities at the Facility of the character referred to above to assure for proper operation and maintenance of the Facility. SECTION 2.4 Hours of Operation and Delivery of Waste at Facility. Except as otherwise provided in this Contract the Facility shall remain open to receive Acceptable Waste on Monday through Saturday from 7:00 A.M. (local time) to 7:00 P.M. (local time), excluding City holidays. The Service Provider may operate the Facility to receive Acceptable Waste during periods in addition to the periods specified above. The City and the Service Provider may by mutual agreement change the times or days during which the Facility will be open to receive Acceptable Waste. Consistent with its obligations under this Section and general practices relating to solid waste handling, the Service Provider shall establish rules relating to the operational practices at the Facility following consultation with the City and the Independent Third Party. Such rules shall be agreed upon by the Service Provider and the City and, in the event that they are not able to agree as to any particular rule, the Independent Third Party shall determine the same. A copy of such rules shall be provided to the City and the Independent Third Party not less than 30 days prior to the Commencement Date. Said rules shall contain provisions that require, among other things, a prohibition against bringing any vehicle onto the site of the Facility which is carrying refuse which may leak, spill or allow waste to be blown or scattered before unloading at the Facility. The Service Provider may charge any responsible party for the y. 10 reasonable cost of correcting any damage or of cleaning any spillage caused by such responsible party. Any rules established by the Service Provider under this Section may be amended or modified from time to time; provided, however, that such amended or modified rules shall not become effective without prior agreement of the City or the Independent Third Party. The Service Provider shall furnish a copy of any rules established under this Section to the City. Where such regulations and rules of Service Provider should become applicable to others than City because of compulsion of City ordinance, then to the extent required by law, such rules shall be provided by ordinance of the City consistent with the duties and limitations imposed upon municipalities in the exercise of their corporate or police power. In the event of a natural disaster or other emergency condition, the City may require the Service Provider to keep the Facility open and, if so required, the Service Provider shall use its best efforts to keep the Facility open to receive accept and process Acceptable Waste for periods extending beyond the normal receiving hours provided in this Section. The Service Provider shall be reimbursed by the City for any additional costs incurred by the Service Provider in connection with the Service Provider's compliance with any such requirement. All vehicles delivering waste to the Facility will be weighed at the Facility scales upon entering the Facility. The Service Provider shall control all traffic flow into and out of the Facility Site and the tipping area. To the extent feasible, each vehicle delivering waste on behalf of the City shall have an identification of the City permanently indicated and conspicuously displayed on the exterior of the vehicle in a location specified by the City. The City shall provide to the Service Provider a list of the tare weights of each City vehicle delivering waste to the Facility, which list shall be confirmed by the City from time to time upon the request of the Service Provider. In addition, the Service Provider may require from time to time the revalidation of the tare weight of any vehicle or the reweighing of unloaded vehicles, and Service Provider shall have the right to be present or verify any such revalidation. Each loaded vehicle shall be weighed, indicating gross weight, tare weight, date and time and vehicle identification on a weight record. The City shall have the right to observe the weighing of vehicles. The scale records will be used as a basis for calculating fees, charges and credits under this Contract. All weight records shall be retained for at least two years and shall be available to the City or other haulers at such times as shall be reasonably requested, and detailed monthly summaries thereof shall be delivered to the City. Acceptable Waste shall be stored in the Facility's receiving area. No Acceptable Waste may be stored outside the buildings except during an emergency and then only if the environmental and 11 esthetic requirements for the Facility are maintained. The Service Provider may deny admission to the Facility to any vehicle carrying Unacceptable Waste or waste which may leak, spill or allow waste to be blown or scattered. SECTION 2.5 Shutdowns of the Facilitv. In the event that the Facility is partially or completely shutdown for any reason of a temporary nature and not constituting an event of default, but including, without limitation, scheduled and unscheduled maintenance and inability to store additional Acceptable Waste, the parties shall assume the following responsibilities: (a) The Service Provider shall notify the City that the City may or shall divert all or a specified portion of the Acceptable Waste normally delivered to the Facility to other disposal sites. At such time as the Service Provider is able to resume normal operations, the City shall resume the normal delivery of Acceptable Waste to the Facility. Any Acceptable Waste diverted during any such period of shutdown not in excess of the limits specified in Section 2.1 shall be credited against the Guaranteed Annual Waste Supply. (b) The Service Provider shall maintain normal security at the Facility and shall protect the equipment by all reasonable means available during the period of the shutdown. (c) Each party shall cooperate with any efforts made toward getting the Facility back in operation. (d) During shutdowns for scheduled maintenance the Service Provider may divert all Acceptable Waste for periods of not more than fourteen (14) consecutive days without penalty. The Service Provider shall provide the City with 30 days written notice prior to any scheduled maintenance shutdown. SECTION 2.6 Changes to Facilit (a) City Requested Change . The City shall have the right at any time during the term of this Contract to request any changes, additions or modifications to the Facility. The Service Provider shall in good faith consider and shall not unreasonably disapprove any such requests provided that, in Service Provider's sole and absolute discretion, such change would have no material adverse economic effect upon Service Provider's operations. In no event whatsoever shall City's request for compliance by Service Provider with the provisions of this Contract or the Lease Agreement ever be 12 construed as a requested change for the purpose of this Section. (b) Required Changes. If any change to the Facility or the operations of the Facility is required by judicial or governmental action, specifically including but not limited to changes in laws, rules, regulations, codes and standards after the Commencement Date, the Service Provider, shall, except as otherwise provided below, bear the responsibility for the same. The Service Provider shall, within ninety (90) days from sending or receiving notice of such change, furnish the City with a statement of required work, including: (1) a firm bid for design and construction, (2) a projected completion schedule, and (3) any adjustment to the Guaranteed Annual Capacity resulting from such change. In the event that the Service Provider shall determine that the costs of effecting any such required changes, specifically including, without limitation, the cost of any capital expenditures incurred in connection there- with, shall exceed the Required Amount, the Service Provider shall have the option, at its sole and absolute discretion, to terminate those provisions of this Contract which require that the Service Provider accept and process waste or any other provisions herein related to the same; provided, however, that any such action shall not have the effect of terminating the Lease Agreement or the Energy Contract and Service Provider shall have the right to operate the Facility in such a manner and utilizing such fuel as it deems appropriate and to sell any electricity which it may produce to the City pursuant to the terms of the Energy Contract. (c) Changes to Facility Deemed Necessary or Desirable by Service Provider. The Service Provider at its expense may make such changes, modifications or additions to the Facility as the Service Provider deems necessary or desirable and which do not adversely affect the Guaranteed Annual Capacity. The Service Provider shall determine a schedule to incorporate such changes, modifications or additions to the Facility and shall bear the expense of design, purchase, delivery, and installation of the required equipment necessary to make such changes, modifications or additions. Any such changes shall be made in such a way as to minimize the impact on the Facility's operations. SECTION 2.7 Compliance with Laws. The Facility and any other properties used in the performance of the Waste Processing Services hereunder shall at all times during the term of this 13 Contract be operated and maintained by the Service Provider in compliance with all applicable federal, state and local laws, ordinances, codes, regulations and court orders concerning the operation and maintenance thereof, as the same may be interpreted and enforced, from time to time, by the appropriate authorities. Neither the City nor the Service Provider shall be deemed to have breached its obligations under the preceding sentence in respect of any period during which it may in good faith be contesting the validity or application of any such law or regulation or be diligently attempting to comply therewith. Notwithstanding any other provisions of this Contract, neither the Service Provider nor the City shall be obligated hereby to take any action which would result in the violation of any statute or governmental rule, regulation or requirement. In the event of any material change in, or material changes in interpretation by governmental authority of any federal, state or local laws, ordinances, codes, regulations or court orders or the option of new laws, ordinances, codes, regulations or court orders or new interpretations by governmental authority of old or new ones shall occur and become effective after the date of this Contract, the Service Provider shall, subject to the provisions of Section 2.6(b) of this Contract, comply with such changes. SECTION 2.8 Performance Guarantee. The Service Provider hereby expressly warrants and guarantees that the Facility shall meet the Guaranteed Annual Capacity, subject to adjustment as provided in this Contract. If the Facility is not achieving the Guaranteed Annual Capacity (as adjusted), and provided that the Contract has not been terminated by the Service Provider or the City, the Service Provider shall take appropriate action to correct the Facility or components thereof by adjustment or repair in place or, at its option, by replacement of defective or inadequate parts, or adjust the methods of operation of the Facility, so that the Facility will be capable of achieving the Guaranteed Annual Capacity. It is understood and agreed that, anything to the contrary in the foregoing notwithstanding, operation of the Facility at less than one hundred percent (100%) of the Guaranteed Annual Capacity set forth shall not relieve the Service Provider of its obligations set forth in this Contract. SECTION 2.9 Exclusion of Other Warranties and Guarantees. Except as set forth in this Contract and the Lease Agreement, the Service Provider makes no guarantees or warranties, expressed or implied, including any warranty of merchantability or fitness for a particular purpose. However, the Service Provider shall pass through to the City, to the extent allowable and subject to the rights of any security interest holder, any warranties which shall be given to the Service Provider by any third parties. Nothing herein shall be deemed to relieve the Service Provider of its obligations and responsibilities as expressly set forth in this Contract. 14 ARTICLE III TERM OF CONTRACT SECTION 3.1 Term of Contract. This Contract shall become effective on the date of execution set forth above, and shall continue for twenty-five (25) years from the Commencement Date, subject to all provisions of this Contract. SECTION 3.2 _Renegotiation of Contract Term. Both parties acknowledge that the Facility is expected to have an economic life beyond the term of this Contract and that it may be mutually economic to the parties for the City to continue having its waste processed at the Facility when compared to other disposal alternatives the City may have at that time. If such is the case, then in the twenty-second (22nd) year of this Contract the parties will commence negotiations to develop a new waste processing services contract. If no new contract is agreed upon prior to the Contract Completion Date, this Contract shall terminate. Upon the termination of this Contract, other than by reason of an Event of Default by the Service Provider, the Service Provider shall have the option to remove its machinery, fixtures, buildings, and other structures except when such removal would materially damage or destroy the property of the City. In the event that the Service Provider does not exercise said option but instead abandons the Facility, the same shall become the property of the City, all as provided in the Lease Agreement; provided, however, that the City shall have no right to use, and hereby expressly covenants that it will not use any such equipment, machinery, fixtures, buildings or other structures for the purpose of waste processing or energy or steam production for a period of five (5) years from the date of termination of this Contract; provided, however, that the foregoing shall not prevent the City from using the equipment, machinery, fixtures, buildings, or other structures which it had leased to the Service Provider so long as such use is for the purpose of energy or steam production and does not involve the processing of waste. ARTICLE IV FORCE MAJEURE AND STRIKES OR WALKOUTS SECTION 4.1 Inability by Service Provider to Perform Due to Force Majeure. Notwithstanding any other provisions to the contrary in this Contract, if the Service Provider shall be unable to operate the Facility as provided herein due to a Service Provider Event of Force Majeure and (i) such Event of Force Majeure does not continue for a period of more than thirty (30) days, or (ii) such Event of Force Majeure is of a nature that requires the Service Provider to rebuild all or any portion of the Facility, then and in any such event such inability shall be excused to the extent of such inability and (a) the Guaranteed Annual Capacity shall be adjusted accordingly and (b) Service 15 Provider shall incur no liability for liquidated damages or penalties as a result of such inability to operate. Upon the occurrence of any such Service Provider Event of Force Majeure which does not require rebuilding of any portion of the Facility and which continues for a period of more than thirty (30) days, the parties hereto may jointly elect, in their sole respective discretion, to suspend any or all terms and conditions or perform only such terms and conditions of this Contract as relate to the operation of the Facility until the cause of the Service Provider's inability to perform has been removed, and the City may provide such reasonable assistance to the Service Provider as may be available to eliminate or mitigate the effects of such Service Provider Event of Force Majeure. SECTION 4.2 Inability by City to Perform Due to Force Majeure. If the City shall be unable to perform any of the terms and conditions of this Contract due to a City Event of Force Majeure and such Event of Force Majeure does not continue for a period of more than thirty (30) days, then in any such event the City shall be excused from any failure to perform as required herein and (a) the Guaranteed Annual Waste Supply shall be adjusted accordingly and (b) the City shall incur no liability for liquidated damages or penalties as a result of such inability to supply Acceptable Waste. Upon the occurrence of any such City Event of Force Majeure which continues for a period of more than thirty (30) days, the parties hereto may jointly elect, in their sole respective discretion, to suspend any or all terms and conditions or perform only such terms and conditions of this Contract as relate to the operation of the Facility until the cause of the City's inability to perform has been removed, and the Service Provider may provide such reasonable assistance to the City as may be available to eliminate or mitigate the effects of such City Event of Force Majeure. SECTION 4.3 Notification of an Event of Force Majeure. No adjustments to this Contract shall be made by reason of Event of Force Majeure unless a written application is filed by the affected party with the other party within seven (7) calendar days after the commencement of any actual suspensions or reduction of operations caused by the Event of Force Majeure stating in reasonable detail the causes, the effect to date and the probable future effect on the performance of this Contract, and the portion or portions of the operation affected. The impact of such Event of Force Majeure if any, shall be determined by documentation submitted by the Service Provider or City. In the event the Service Provider or City does not agree with such documentation, the matter shall be referred to the Independent Third Party for binding resolution. M-1 SECTION 4.4 Waste Processing Services During a Service Provider Event of Force Majeure. During any period in which the Facility is partially or completely shut down due to a Service Provider Event of Force Majeure, then: (a) the Service Provider shall assist the City in determining alternate disposal procedures for Acceptable Waste not processed by the Facility and shall render to the City such alternate Waste Processing Services as the Service Provider and the City shall mutually agree; and (b) the Service Provider shall have the right to direct City's vehicles directly to a sanitary landfill without such vehicles first attempting delivery to the Facility. ARTICLE V DEFAULT; TERMINATION OF CONTRACT SECTION 5.1 Events of Default by Service Provider. The occurrence of any of the following at any time during the term of this contract shall constitute an Event of Default (herein an "Event of Default") by the Service Provider: (a) repeated failure or refusal by the Service Provider to perform its obligations under this Contract, (except as provided in Section 2.6(b) above) and only if such failure or refusal is of a material nature, unless such failure or refusal is caused by a Service Provider Event of Force Majeure or Event of Default by the City or a breach of the Energy Contract by Lubbock Power and Light; or (b) abandonment of the Facility by the Service Provider or the discontinuance by the Service Provider of Waste Processing Services under this Contract (except as provided in Section 2.6(b) above) and only if such discontinuance is of a material nature, except for temporary discontinuances as hereinabove allowed, unless such discontinuance is caused by a Service Provider Event of Force Majeure, a City Event of Force Majeure, an Event of Default by the City, or a breach of the Energy Contract by Lubbock Power and Light; or (c) written admission by the Service Provider that it is bankrupt, or the filing by the Service Provider of a voluntary petition under any bankruptcy or insolvency act, or the consent by the Service Provider to a court appointment of a receiver or trustee for all or substantially all of its property or business, or the making by the Service Provider of any arrangement with IVA or for the benefit of its creditors involving an assignment to or composition with a trustee, receiver or similar fiduciary regardless of how designated of any portion of the Service Provider's property or business, provided that the foregoing shall not be an Event of Default if (i) such event was caused by and would not otherwise have occurred in the absence of a Service Provider Event of Force Majeure, breach of the Energy Contract by Lubbock Power and Light or an Event of Default by the City and (ii) prior to the occurrence of such Event of Default, the Service Provider had taken all reasonable actions to enforce such remedies as may have been available to it at law or equity in an effort to avoid an Event of Default pursuant to this Subsection (c); or (d) the filing of an involuntary petition in bankruptcy under any bankruptcy or insolvency act by a third party against the Service Provider which petitions is not discharged or stayed within sixty (60) days, provided that the foregoing shall not be an Event of Default if (i) such event was caused by and would not otherwise have occurred in the absence of a Service Provider Event of Force Majeure, breach of the Energy Contract by Lubbock Power and Light or an Event of Default by the City and (ii) prior to the occurrence of an Event of Default pursuant to this Subsection (d), the Service Provider had taken all reasonable actions to enforce such remedies as may have been available to it at law or equity in an effort to avoid an Event of Default pursuant to this Subsection (d); or (e) the insolvency of the Service Provider or the Failure or inability of the Service Provider to pay its debts to the City as and when they fall due, provided that the foregoing shall not be an Event of Default if (i) such event was caused by, and would not otherwise have occurred in the absence of, an Event of Default by the City, a Service Provider Event of Force Majeure or a breach of the Energy Contract by Lubbock Power and Light and (ii) prior to the occurrence of such Event of Default, the Service Provider had taken all reasonable actions to enforce such remedies as may have been available to it at law or equity in an effort to avoid an Event of Default pursuant to this Subsection (e). (f) failure to comply with the warranty and guarantee contained in Section 2.8 above. SECTION 5.2 Events of Default by City. The occurrence of any of the following events at any time during the terms of this Contract shall constitute an Event of Default by the City: m (a) repeated failure by the City to pay any amount payable and due under this Contract within thirty (30) days after receipt of invoice, unless such failure or refusal is caused by a City Event of Force Majeure or an event of default by the Service Provider; or (b) the written admission by the City that is is bankrupt, or the filing by the City of a voluntary petition under any bankruptcy or insolvency act, or the consent by the City to the appointment by a court of a receiver or trustee for all or a substantial portion of the property which is the subject of the Lease Agreement, or the making by the City of any arrangement with or for the benefit of its creditors involving an assignment to or composition with a trustee, receiver or similar fiduciary regardless of how designated of any portion of the City's property or business, provided that the foregoing shall not be an Event of Default if (i) such event was caused by and would not otherwise have occurred in the absence of a City Event of Force Majeure or an Event of Default by the Service Provider and (ii) prior to the occurrence of such Event of Default, the City had taken all reasonable actions to enforce such remedies as may have been available to it at law or equity in an effort to avoid an Event of Default pursuant this Subsection (b); or (c) the filing of an involuntary petition in bankruptcy under any bankruptcy or insolvency act by a third party, against the City, which petition is not discharged within sixty (60) days provided that the foregoing shall not be an Event of Default if (i) such event was caused by and would not otherwise have occurred in the absence of a City Event of Force Majeure or an Event of Default by the Service Provider and (ii) prior to the occurrence of such Event of Default, the City had taken all reasonable actions to enforce such remedies as may have been available to it at law or equity in an effort to avoid an Event of Default pursuant this Subsection (c); or (d) the insolvency of the City or the failure or inability of the City to pay its debts to the Service Provider as and when they fall due provided that the foregoing shall not be an Event of Default if (i) such event was caused by and would not otherwise have occurred in the absence of a City Event of Force Majeure or an Event of Default by the Service Provider and (ii) prior to the occurrence of such Event of Default, the City had taken all reasonable actions to enforce such remedies as may have been available to it at law or equity in an effort 19 to avoid an Event of Default pursuant this Subsection (d) ; or SECTION 5.3 Termination on Occurrence of an Event of Default. If any Event of Default by either party shall extend for a period of thirty (30) days after receipt of written notice of such Event of Default from the non -defaulting party, then the non -defaulting party may elect to terminate this Contract by delivering written notice of such termination to the party in default and/or may institute such legal action or proceedings or resort to such other remedies as it deems necessary; provided, however, that except for failure to make any payment due, the party not in default may not terminate this Contract at the end of such thirty (30) day period if the party in default has commenced substantial steps to correct such default and is diligently prosecuting same to completion. Such termination shall be effective on the date of receipt of written notice of termination by the party in default and shall not prejudice any other rights of the non -defaulting party. Failure by either party to exercise any of its rights under this Contract shall not constitute a waiver of such rights. Neither party shall be deemed to have waived any failure to perform by the other unless it has made such waiver specifically in writing. SECTION 5.4 Rights of City on Termination for Service Provider Event of Default. In the event that the City exercises its rights to terminate this Contract upon the occurrence of an Event of Default by the Service Provider, it shall be entitled to either (i) take such action as it deems appropriate in order to prove and collect damages from the Service Provider and any other responsible party resulting from such termination, or (ii) purchase the Facility from the Service Provider on such terms and conditions as the Service Provider and the City may mutually agree. It is acknowledged by the parties that such damages may include, without limitation, any Tipping Fees paid to the Service Provider pursuant to this Contract in excess of the expenses that would have otherwise been incurred by the City in disposing of the Acceptable Waste delivered to the Services Provider. SECTION 5.5 Rights of Service Provider on Occurrence of City Event of Default. Upon the occurrence of an Event of Default by. the City, the Service Provider shall be entitled to take such action as it deems appropriate in order to prove and collect damages from the City resulting from such occurrence. It is acknowledged by the parties that such damages may include, without limitation, lost Tipping Fees, Energy Product Revenues, and Metals Revenues. SECTION 5.6 Indemnification. (a) The Service Provider and the City, to the extent permitted by law, each agree that it will protect, 20 indemnify and hold the other harmless from and against all liabilities, actions, damages, claims, demands, liens, encumbrances, judgments, losses, costs, expenses, suits or actions and attorneys' fees and costs, and will defend the other in any action,suit, or other proceeding, including appeals, for personal injury to, or death of, any person or persons, or loss or damage to property (other than to the Facility) caused by the negligent acts or omissions of the indemnifying party, its agents or employees, in connection with, arising out of or as a result of this Contract or the performance of either party's obligations hereunder. Neither party shall be required to reimburse, defend, or indemnify the other party for loss or claim due to the negligent acts or omission of such other party. In case of joint or concurring negligence of the parties hereto giving rise to a loss or claim against either one or both, each shall have full rights of contribution from the other or, if contribution is not permitted under applicable law, the obligation to indemnify shall be prorated according to each party's respective degree of fault. Each party shall promptly notify the other of the assertion of any claim against which such other party is indemnified hereunder, shall give the other party an opportunity to defend such claim and fully cooperate with the indemnifying party in the defense of such claim and shall not settle such claim without the approval of the indemnifying party. These indemnification provisions are for the protection of the City and the Service Provider only and shall not establish of themselves any liability to third parties. (b) (i) The Service Provider, for the joint benefit of the City and the Service Provider, shall obtain from vendors, manufacturers and suppliers of machines, articles of manufacture, equipment and materials purchased by the Service Provider for operation and maintenance of the Facility, such indemnities against claims and liability for infringement of patents or misappropriation of trade secrets incidental in the use or operation of such machines, articles, equipment and materials as are reasonably obtainable. (ii) The City will promptly advise the Service Provider in writing of any notice or claim of infringement and of the commencement against the City of any suit or action for infringement of patents and/or technical information made or brought against the City and based upon the use of any process, technique, method, operation, machine, article of manufacture or composition of matter by Service Provider. The Service 21 Provider will, upon receipt of such notice, undertake at its own expense and defense of any such suit or action, but the Service Provider shall have sole charge and direction of the defense of such suit or action. The City will render the Service Provider all reasonable non -monetary assistance that may be required by the Service Provider in the defense of such suit or action. The City shall have the right to be represented therein by advisory counsel of its own selection at its own expense. (iii) The Service Provider will hold the City free and harmless from any damages or other sums that may be assessed on or become payable under any final decree or final judgment by any court for infringement to the extent based upon the use hereof by the City or the Service Provider equipment used in accordance with designs and specifications approved by the Service Provider in writing. (iv) Neither the Service Provider nor the City shall settle or compromise any such suit or action affecting this project without the consent of the other if the settlement or compromise obliges the other to make any payment or part with any property or assume any obligation or grant any license or other rights or be subject to any injunction by reason of such settlement or compromise. SECTION 5.7 Additional Obligation Upon Termination. Upon the termination of this contract pursuant to Section 5.3, Service Provider shall, unless the City shall elect to purchase the Facility as set forth in Section 5.4, have a period of one year to remove machinery, fixtures, buildings and other above and below ground structures placed on the leased property. Should any machinery, fixtures, buildings and other above or below ground structures not be removed by the Service Provider within one year after termination of this agreement and such termination was the result of an Event of Default by the Service Provider, the City may either have the same removed and assess the cost to the service Provider or else the City may take possession of such machinery,. fixtures, buildings and other above ground or below ground structures and such shall become the property of the City for all purposes. In the event such termination was the result of an Event of Default by the City, Service Provider may, at its sole option, either remove the machinery, fixtures,. buildings and other structures or abandon the same, with no further obligations relating thereto. 22 J Resolution #2108 The Honorable Alan Henry Mayor, City of Lubbock P.O. Box 2000 Lubbock, Texas 79457 Dear Mayor Henry: It is our understanding that the City of Lubbock, through a legal procurement process, has designated EPR to design, construct, finance, own and operate a Resource Recovery facility for the disposal of acceptable municipal solid waste generated within the City. It is the intention of EPR and the City to enter into conclusive negotiations and to assist Underwood, Neuhaus & Co., the Senior Managing Underwriter of the Industrial Revenue Bonds, in all ways possible to obtain financing on the project in 1985. Both parties recognize the urgency of completing the financing this year due to the uncertainties of tax reforms in 1986. It is mutually understood and agreed that: (1) The City will have the right to name the disposal/ electric plant and to design the entrance to the facility. (2) EPR will immediately commence all necessary efforts and expense to obtain the design engineering, permits and contracts required for the financing. (3) EPR will design and construct a resource recovery plant with a capacity of 500 tons per day, or approximately 180,000 tons per year, of municipal solid waste. EPR and its representatives will be responsible for all engineering and design decisions and for the operation and maintenance of this facility for 25 years in accordance with all federal, state and local permits and requirements. (4) The City shall enter into a 25 year lease with EPR covering the land (and buildings necessary) to con- struct and operate the facility as planned. (5) EPR shall have the right to perform site borings and do demolition work on agreed upon equipment or structure with the express written consent of LP&L prior to finalizing all the agreements. (6) The City shall enter into a 25 year take -or -pay contract with EPR to purchase all of the electric output of the power plant, with a fixed price schedule for the first 10 years. The electric prices for the balance of the contract will be negotiated in the future, with both parties recognizing that certain economic requirements of the bondholders and equity participants must be met. However, the negotiated price will not exceed the amount Lubbock Power and Light would pay for firm purchased power from another utility. (7) The City and EPR shall enter into a 25 year service contract for the disposal of municipal solid waste which will include, among others, the following points: (A) The City shall guarantee to deliver, or have delivered, certain specified quantities of acceptable waste, this amount being 125,000 tons in 1988. Realizing that the plant capacity will be 180,000 tons per year, EPR agrees to make every reasonable effort to obtain additional outside sources of waste, and the City agrees, if re- quired, to pass and make every reasonable effort to enforce a flow control ordinance to assure the balance of the waste stream. The tipping fee charge will be $9.00 per ton for the first 10 years, with charges for the balance of the contract to be negotiated at a later date to a price of not more than $9.00 per ton. (B) The City and EPR will mutually develop a program to minimize the risk of any hazardous or toxic wastes being processed by the facility. The cost of development of such progr.am shall be borne equally by EPR and the City. _ (C) The City will be responsible for providing landfill for the ash residue, as well as for unacceptable waste or waste the facility is unable to process. EPR will guarantee the quantity and quality of the residue and limit the bypassed waste to an agreed upon annual quantity. The cost for disposal of unacceptable waste or hazardous waste not supplied by the City shall be charged to. the person delivering such waste and credited to the City. (D) EPR will obtain and be responsible for insurance coverage on the facility as agreed upon by both parties and as is generally required by under- writers on projects of a similar nature to protect the interests of bondholders and equity partici- pants. If additional insurance is required or desired by any party at a later time, said party CIT BY: ATT � C c'c'• City Secretary will seek to self -insure to avoid any negative impact on the tipping fee. (S) The City is willing to operate the electric power plant pursuant to negotiation of a suitable contract, and the advantages and disadvantages of this will be reviewed by both parties prior to a final decision being made. (9) The City will continue to provide access to the existing power plant to EPR or its designated repre- sentatives. (10) The City and EPR agree to keep each other informed as ,to the expenses relative to the resources recovery project. The parties further agree that all expenses incurred by EPR or its representatives and the City shall be shared in accordance with the following: (A) If the City should decide to cancel this project, the City shall reimburse EPR for direct and reasonable expenditures made by EPR or its agents, including underwriters, design engineers and independent feasibility engineers in an amount not to exceed $200,000.00. (B) If EPR should choose to discontinue the project for reasons within its control, then EPR shall reimburse the City for its direct and reasonable expenses. (C) Both parties shall share equally in the expenses for underwriters, design engineers, and indepen- dent feasibility engineers should the project be terminated due to reasons beyond the control of either party, but in no event shall the City be liable for more than $200,000.00. DATE: EPR, INC. BY: PRESI ENT ATTEST: cretary DATE: W 13/i5 EXHIBIT B ENERGY PURCHASE AGREEMENT This Energy Purchase Agreement, made and entered into by and between the City of Lubbock, Texas, a municipal corporation (hereinafter referred to as the "City") and Environmental Protection Resources of Lubbock, Inc., a Texas corporation (hereinafter referred to as "the Service Provider"), is as follows: WHEREAS, the parties hereto have heretofore entered into a Waste Services Processing Contract which will provide for the conversion of combustion waste provided by the City and other sources into electric power; and WHEREAS, the parties hereto have determined that each of them can realize substantial benefits through waste to energy processing and the sale of electric energy to the City under the terms of this agreement; NOW THEREFORE, for and in consideration of the premises and the covenants and agreements hereinafter set forth, the parties hereto agree as follows: ARTICLE I FACILITIES TO BE PROVIDED Section 1.1. The Service Provider will design and construct a resource recovery plant with the capacity to produce approximately 10 megawatts of electric power. The City will lease a portion of the existing Lubbock Power and Light Generating Plant Number 2, as more fully described in that one certain Lease Agreement entered into by the parties hereto on even date herewith (hereinafter known as the Facility) to the Service Provider for such purpose, on such terms and conditions as may be mutually agreeable. ARTICLE II METERING Section 2.1 The Service Provider will provide, maintain and operate, at its expense, metering equipment for proper indication of electric energy flow to the City. The amounts of electric energy supplied to the City in accordance with the terms of this agreement shall be determined by the metering facilities as hereinabove described. Section 2.2 Metering equipment shall be tested by the Service Provider in accordance with all applicable standards published by the American National Standards Institute. If any meter test requested by the City other than those tests normally performed by the Service Provider discloses metering equipment to be registering outside acceptable limits of accuracy (1% above or below comparison with calibrated standards), then the Service Provider shall bear the expense of such tests; otherwise, the expense of such tests shall be borne by the City. Representatives of the City shall be afforded the opportunity to be present at all tests. Section 2.3 If any metering test discloses that a meter is in error by more than plus or minus one per cent (+ or -1%) the account between the parties hereto shall be adjusted by the Service Provider to correct the full percentage of inaccuracy. Such adjustment shall be made for a maximum period of six (6) months prior to the date of such test or for the period during which such inaccuracy may be determined to have existed, whichever period is shorter. If any metering equipment, at any time, fails to register, or if the registration thereof is so erratic as to be meaningless, all electric energy delivered to the City during such period of time shall be determined by the Service Provider and the City from the City's metering equipment, or if there is not data available from the City's meters, the best available data. Section 2.4 The City shall have the right, at any time, to install its own metering equipment at its sole expense for the purpose of checking the meters installed by the Service Provider. The installation of any such metering equipment shall be done at such time and in such a manner so as to cause no interference with Service Provider's operations or the delivery of electric energy pursuant to this agreement. ARTICLE III AGREEMENT TO PURCHASE, RATES AND TERMS Section 3.1 The City hereby agrees to purchase from the Service Provider any and all electric energy which the Service Provider produces and delivers to the City at the delivery point, up to a maximum of eighty-five (85) million kilowatt hours annually. Section 3.2 Electric energy supplied to the City pursuant to this agreement shall be purchased by the City in accordance with the rates set forth in Service Schedule A. ARTICLE IV DELIVERY POINT Section 4.1 The delivery point (hereinafter called "delivery point") of electric energy provided for hereunder shall be the point where the Service Provider's facilities connect to the City's facilities. 2 ARTICLE V REACTIVE AMPERES Section 5.1 The parties hereto acknowledge that certain operational and technical problems may arise in the control of the flow reactive amperes. It is, therefore, agreed that the operating department of both of the parties hereto, through their duly authorized representatives, shall cooperate with each other in such matters, so that, as nearly as practicable, the delivery and receipt of electric energy shall be accomplished with the least interference with the respective systems of each party. During the term of this agreement, or any extension thereof, the Service Provider shall be obligated to provide reactive current at a monthly average power factor of ninety percent (90%) and the City shall maintain their system in a manner that the Service Provider may operate the Facility at a monthly average power factor of ninety percent (900). ARTICLE VI BILLING AND PAYMENT Section 6.1 The Service Provider will render to the City a monthly statement showing the total amounts due to the Service Provider for the electric energy supplied to the City in accordance with this agreement. All statements for electric energy supplied to the City in accordance with the terms hereof shall be due and payable to the Service Provider on the 20th day following receipt of such statement by the City, and all amounts owing to the Service Provider after the 20th day shall bear interest at the prime rate of interest quoted by American State Bank, Lubbock, Texas, or any successor thereto, as of such due date, plus one percent (lo), but not exceeding the highest rate then not usurious at law. ARTICLE VII INDEMNIFICATION Section 7.1 Electric energy supplied in accordance with the terms of this agreement is supplied upon the express condition that, after it passes the delivery point as hereinabove described, it becomes the property of and the responsibility of the City. Section 7.2 The Service Provider does not guarantee that the supply of electric energy in accordance with the terms hereof will be free from temporary interruptions and it is hereby agreed by the parties hereto that temporary interruptions of the Service Provider's service hereunder shall not constitute a breach of this contract on the part of the Service Provider, and in this regard, the City hereby agrees to indemnify and hold harmless the Service Provider from any damages resulting to the City and to the City's customers, resulting from such temporary 3 interruptions. In the event of temporary interruptions to service, the Service Provider will restore service as soon as it can reasonably do so, and will at all times exert itself toward the end of supplying as nearly constant service as is reasonably practicable. ARTICLE VIII FORCE MAJEURE Section 8.1 If by reason of force majeure the Service Provider is unable in whole or in part to carry out its agreement on its part herein contained, the Service Provider shall not be deemed in default during the continuance of such inability. Section 8.2 The term force majeure as used herein shall have the meaning ascribed to the term "Service Provider Event of Force Majeure" in that one certain Waste Processing Services Contract entered into by the parties hereto on even date herewith (the "Waste Processing Services Contract"). ARTICLE IX TERM Section 9.1 This agreement shall become effective as of the date of the execution hereof by both parties and shall continue until the expiration or termination of the Waste Processing Services Contract, including any extensions or renewals thereof. ARTICLE X SECURITY INTEREST Section 10.1 Service Provider shall have the right to assign its interest in this agreement for the purpose of granting a security interest to any party which may provide the Service Provider with the financing necessary for the construction, maintenance, or operation of the Facility. Section 10.2 In the event that the Service Provider shall grant a security interest in and to this agreement or the Faciltiy pursuant to the provisions of Section 10.1 above, the holder of any such security interest shall have the rights and duties set forth in Section 10.18 of the Waste Processing 4 Services Contract, and said provisions are incorporated herein for all purposes as though they were fully set forth herein. EXECUTED THIS,,Z gday of February, 1987. ATTEST 5 ENVIRONMENTAL PROTECTION RESOURCES OF LUBBOCK, INC. A Texas Corporation BY: ' N " Gary H. K4(ppler, esient Service Schedule A to Agreement between the City of Lubbock, Texas and Environmental Protection Resources, Inc. The City will pay the Service Provider for all kilowatt hours (KWH) of energy actually delivered to the City through the designated delivery point not in excess of eighty-five (85) million KWH per annum, as determined by recorded data, at the following rates: The rate for electric energy delivered to the City by the Service Provider prior to the Commencement Date (as defined in the Waste Processing Services Contract) will be the lesser of (a) the City's cost of generating electric energy, or (b) the lowest cost to the City of purchasing firm electric energy from any other supplier. Said rate shall be determined on a monthly basis and the rate applicable as of the first day of each month shall be applicable for the entire month. The rate for electric energy delivered to the City by the Service Provider for the initial two hundred forty (240) month period beginning on the Commencement Date shall be the greater of (i) the amount set forth opposite the appropriate year in the table set forth below (the "Scheduled Rate"), or (ii) the lesser of (a) the City's cost of generating electric energy or (b) the lowest cost to the City of purchasing firm electric energy from any other supplier (the "Avoided Cost Rate"). The Avoided Cost Rate shall be determined on a monthly basis and the rate applicable as of the first day of each month shall be applicable for the entire month. Year Rate in cents per KWH 1 3.92 2 4.18 3 4.46 4 4.76 5 5.08 6 5.40 7 5.76 8 6.13 9 6.59 10 7.09 11 7.44 12 7.82 13 8.21 14 8.62 15 9.05 16 9.50 17 9.98 18 10.48 19 11.00 20 11.55 M In the event that the City shall pay to Service Provider the Scheduled Rate for any energy purchased pursuant to this agree- ment, the Service Provider shall credit the City in an amount equal to the excess of the Scheduled Rate over the Avoided Cost Rate (the "Credit"). The Credit shall be applied against any payments thereafter owed to the Service Provider by the City for energy purchased for which the Avoided Cost Rate exceeds the Scheduled Rate; provided, however, that such Credit shall not be utilized so as to reduce the City's cost of any energy purchased to a level below the Scheduled Rate. In the event that any Credit remains outstanding at the end of the two hundred fifty- second (252nd) month following the Commencement Date, the Service Provider shall pay to the City a sum equal to the amount of the Credit (the "Rebate"). In order to secure its obligation to pay the Rebate to the City, the Service Provider shall, at its option, (i) provide the City with a payment bond, (ii) establish an escrow account for the benefit of the City, (iii) provide the City with a letter of credit, or (iv) provide the City with such other security as shall be mutually agreeable to both the City and the Service Provider in their mutual sole and absolute discretion. Such security shall be established not later than January 31 of each year and shall be in an amount or otherwise secure an amount equal to the amount of the Credit outstanding as of December 31 of the prior calendar year; provided, however, that no security need be established if there is no Credit outstanding. The security shall remain in force for such period as any Credit shall remain outstanding and shall be adjusted on January 31 of each year to reflect changes in the outstanding amount of the Credit; provided, however, that the Service Provider shall have the right to use such form of security or any combination of forms of security as it shall elect from time to time. In the event that the Service Provider shall fail to provide such security, the City shall have the right, in its sole and absolute discretion, to pay to the Service Provider the Avoided Cost Rate until such time as the Service Provider shall provide the requisite security, and at such time as the Service Provider shall provide the security, the City shall pay to the Service Provider the amount of the Credit; provided, however, that the City shall not be liable to pay to the Service Provider any Credit which has been withheld pursuant to the provisions of this sentence for a period of more than twelve (12) months. No failure by the Service Provider to provide such security shall constitute a breach of this agreement and the sole remedy available to the City in such event is to pay the Service Provider for energy purchased at the Avoided Cost Rate in lieu of the Scheduled Rate. In the event that the Credit has not been paid by the start of the two hundred forty-first (241st) month following the Commencement Date, the City shall have the right to pay only seventy-five percent (750) of the Avoided Cost Rate to the Service Provider for energy purchased, and an amount equal to fifteen percent (15%) of the Avoided Cost Rate shall be applied to reduce the Credit, until such time as the City shall have recovered the amount of the Credit in full. 7 The rate for electric energy delivered to the City by the Service Provider during any period beyond the foregoing initial two hundred forty (240) month period will be ninety percent (90%) of the lesser of (a) the City's cost of generating electric energy, or (b) the lowest cost to the City of purchasing firm electric energy from any other supplier. Said rate shall be determined on a monthly basis and the rate applicable as of the first day of each month shall be applicable for the entire month. 288608.036(10)gb 0 E-YHIBIT C THE FACILITY A facility for the acceptance, processing and disposition of certain municipal solid waste and the generation of electric energy. A more detailed description shall be mutually agreed upon by the City and the Service Provider following completion of engineering studies. YEAR 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 EXHIBIT D REQUIRED AMOUNT (BASE) and thereafter AMOUNT $ 734,561 $1,315,906 $1,870,163 $2,393,366 $2,881,311 $3,328,744 $3,731,733 $4,084,451 $4,366,883 $4,585,979 $4,734,804 $4,805,093 $4,725,266 $4,471,738 $4,016,800 $3,330,409 $2,373,522 $1,108,913 -0-