HomeMy WebLinkAboutResolution - 2498 - Contract - EPR Inc - Waste Processing Services - 01/08/1987JPB:js
'RESOLUTION
Resolution #2498
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 Waste Pro-
cessing Services Contract by between the City of Lubbock and Environmental
Protection Resources, 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 8th
A
Ranette Boy&,-_Cit-� Secretary
APPROVED AS TO CONTENT:
Bob Cass, Deputy City Manager
APPROVED AS TO FORM:
James P. Brewster, Civil Trial
Attorney
day of January , 1987.
B. C. McMINN, MAYOR
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
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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.
"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
In
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.
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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 (5a) 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 (120) 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
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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 relieve the City 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
E:3
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
G''
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
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
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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 Facility. 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 Chanaes to Facilit
(a) City Requested Changes. 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 (1000)
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 C:
which continues for a period of more t
parties hereto may jointly elect,
discretion, to suspend any or all terms
only such terms and conditions of this
operation of the Facility until the cau
to perform has been removed, and the Se
such reasonable assistance to the Cit
eliminate or mitigate the effects of
Majeure.
ty Event of Force Majeure
han thirty (30) days, the
n their sole respective
and conditions or perform
Contract as relate to the
>e of the City's inability
.vice Provider may provide
as may be available to
such City Event of Force
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.
16
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
17
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 payitsdebts
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
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,
5
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 thebestof 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
W
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, day of February, 1987.
ATTEST:
CITY OF LUBBOCK, TEXAS
City ecretary
B. C. McMinn, Mayor
APPROVED AS TO FORM: ENVIRONMENTAL PROTECTION
RESOURC OF U O , INC.
BY:
ivil Trial Attorney Gary H. $appl6r,esildent
288608.038(15)gb
35
e
PGV.js
Resolution #2108
August 8, 1985
EXHIBIT A Agenda Itsm #33
RESOLUTION
WHEREAS, the City Councll of the City of Lybbock 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 wguld be
of great benefit to the citizens of the City of Lub'ock; and
WHEREAS, the City of Lubbock has received proposals fqr the co_nstruc-
tion of such a facility from several corporations; qnd
WHEREAS, the proposal received from EPR, Inc., of Houston, Texas, is
deemed to be the best and most feasible Aropgspl fqr sych a fgcility; NOW
THEREFORE:
BE IT RESOLVED BY THE PITY COUNCIL. OF THE CITY OF LUPPO s
SECTION 1. THAT the Mayor of the City of Luhbock BE qnd is hereby
authorized and directed to execute for and on hehalf of the City of Luhbpck
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 uePn 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 Margin 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 Lubbeck
such other associated documents required for constrggc ion of said resource
recovery facility, which documents shall be attached herewith and shall
constitute and be a part of this Resolution as if fully cppied herein in
detail upon execution.
Passed by the City Council this 8th
ATTEST:
Ranett6 Boyd, City Secretary
APPROVED AS TO CONTENT:
G - elinlict ----
APPROVED AS TO FORM;
Bob Cass Doh6ld G, Vandiver
Deputy City Manager Assistant City Attorney
4
4
Resolution #2108
The Honorable Alan Henry
Mayor, City of Lubbock
P.O. Box 2000
Lubbock, Texas 79457
Dear Mayor Henry:
It is our understandinq 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 program 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
City Secretary
will seek to self -insure to avoid any negative
impact on the tipping fee.
(8) 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
existinq 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 followings
(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: --
P R E SM
Y:PRESI NT
ATTEST:
cretary .
DATE:
el 13 /�i 5-
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.
�A
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 GY day of February, 1987.
ATTEST: CITY OF LUBBOCK
A Municipal Corporation
City Secretary BY:
B. C. McMinn, Mayor
APPROVED AS TO FORM:
ENVIRONMENTAL PROTECTION
RESOURCES OF LUBBOCK, INC.
/ A Texas Corporation
BY:
Gary H. ppler, Pfr6si6ent
5
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
G
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 (75%) of the Avoided Cost Rate to
the Service Provider for energy purchased, and an amount equal to
fifteen percent (150) 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
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-
CITY OF LUBBOCK
MEMO
T0: Honorable Mayor B.C. "Peck" McMinn
Larry J. Cunningham, City Manager
FROM: Bob Cass, Deputy City Manager
SUBJECT: EPR Contracts
-DATE: February 26, 1987
Jim Brewster, Carroll McDonald, Tommy Buchanan, Robert Massengale,
Max Cunningham, and I have reviewed the attached documents and
find them to be worded in a manner that complies with Council
directive. We would recommend that the Mayor execute these docu-
ments.
Bob Cass
Deputy City Manager
BNC:nb
xc: Jim Brewster, Assistant City Attorney
Carroll McDonald, Director of Electric Utilities
Tommy Buchanan, Associate Director of System Planning
Robert Massengale, Assistant City Manager
Max Cunningham, Sanitation Superintendent
f
CITY OF LUBBOCK
f441co
TO: Mayor and City Council
Robert Massengale, Assistant City Manager
Bob Cass, Deputy City Manager
FROM: James P. Brewster, Civil Trial Attorney
SUBJECT: Required Changes to EPR Contracts
DATE: February 9, 1987
At the Council meeting of January 8, 1987, the execution of
the above described documents were approved subject to (1)
approval of bond attorney and (2) modifications to satisfy
concerns as to two provisions.
We have now, subject to verification informally from the
Council, redrafted the two questioned provisions which would now
appear to substantially conform to Council concerns. We still
await approval by the bond attorney.
Point 1
The first point of concern was over Section 15.04 of the
Lease Agreement which, as it existed on January 8, 1987, would
have allowed EPR the sole option to terminate the contract if in
the last five years of the term the facilities were damaged by
fire or other casualty to the extent the cost of replacement or
restoration exceeded 500 of the then fair market value of the
facility.
We have now agreed, subject to Council approval, to a
revision that would limit this right of termination to the last
three (3) years of the Contract, and then only if we as landlord
and EPR as tenant then "mutually agree." If we don't then agree
EPR can't terminate!
These revisions would appear to me to substantially satisfy
with the concerns of the Council. Section 15.04 as modified, now
will read as follows:
"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
T1 J
Mayor and City Council
Robert Massengale
Bob Cass
February 9, 1987
Page 2
other casualty such that the cost of replacement or
restoration thereof shall exceed fifty (500) 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."
Point II
The second point of Council concern was the need to secure
the "credit" which might be due the City accumulating until the
21st year of the contract for any differences between the floor
price of electricity to be purchasedandavoided costs.
We have experienced considerable difficulties here because
of the uncertain nature, duration and amount that might be
involved. Our first efforts were to secure such funds by a
payment bond. However, due to the length of the payment period
and an inability to forecast the total probable extent of the
potential secured amount the arrangement was not subject to
acceptance by a bonding company, except perhaps upon conditions,
objectionable to one party or the other. It is difficult to get
a bonding company to commit now as to terms of a bond to be
issued 5 or 10 years from now.
We have then turned to the study of alternatives that could
afford the protection the Council requires but allowing
flexability for changes in conditions over the next 21 years with
a practical recognition that such "credit" may never come into
existence, and, if it does, it could vary from year to year.
Subject to Council informal approval I would submit the
following as a probable acceptable solution that should
substantially satisfy the concerns as I understand them. Under
this solution EPR would have the following options for its
selection of a vehicle for security if and when such "credit"
arose:
(1) provide the City a payment bond; or,,
(2) establish an escrow account for the benefit of the
City; or,
(3) provide the City a letter of credit for the amount; or,
(4) provide the City with such other security as then
mutually agreeable in our respective sole and absolute
disactions; or,
(5) a combination of the above._
Mayor and City Council
Robert Massengale
Bob Cass
February 9, 1987
Page 3
In any event the security would be required to be updated
annually no matter which form or combination of forms of security
was utilized.
If they did not provide the required security, then we would
simply pay avoided cost rate and "hold" the difference to the
extent of the credit in our own escrow account until the security
was provided or updated. Once the security was provided they
could claim the temporary escrow.
This would be accomplished by adding the following new
language to the Energy Purchase Agreement:
In the event that any Credit remains outstanding
at the end of the twenty-first (21st) year of this
agreement, 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 shallremainin 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, the City shall not be liable to pay
to the Service Provider any credit which has been held
pursuant to this provision for a period exceeding more
than twelve months. No failure by the Service Provider
to provide such security shall constitute a breach of
Mayor and City Council
Robert Massengale
Bob Cass
February 9, 1987
Page 4
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 credit has not
been paid by the start of the 21st year of this
agreement, the City shall have the right to pay only
seventy-five percent (75%) of the avoided cost rate to
the Service Provider for energy purchased and an amount
equal to fifteen percent (150) 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.
The finance officer and LP&L have reviewed these changes and
find no problems to their concern.
I am able to provide for copying a "master" copy of all
agreements with all modifications made, should anyone request a
final complete set of documents.
PJArMESP. B EWSTER
Trial Attorney
JPB:da
FU LB RIGHT & J AWO R S K I
2001 Bryan Tower, Suite 1400 Houston
Dallas, Texas 75201 Washington, D.C.
Austin
Telephone: 2141969-0022 San Antonio
Dallas
February 25, 1987 [onion
Zurich
Mr. Jim Brewster
Assistant City Attorney
P. O. Box 2000
Lubbock, Texas 79457
Dear Jim:
We have reviewed drafts dated "2/5/87" of an Energy
Purchase Agreement (the "Energy Contract") and a Waste
Processing Services Contract (the "Waste Contract") to be
entered into between the City of Lubbock, Texas (the "City")
and Environmental Protection Resources of Lubbock, Inc., a
Texas corporation (the "Service Provider"), and a draft dated
"01/09/87" of a Lease Agreement (the "Lease," together with the
Energy Contract and the Waste Contract, the "Agreements")
between the City and the Service Provider. None of the drafts
of the Agreements have the exhibits referred to therein
attached to them.
We understand that the transaction contemplated by the
Agreements involves a lease by the City to the Service Provider
of certain land and improvements (the "Leased Premises")
including a portion of the existing Lubbock Power and Light
Generating Plant No. 2 (the "Plant"), and that the Service
Provider will design and construct a waste -to -energy plant (the
"Facility") on the Leased Premises to be used in connection
with the Plant. The Waste Contract provides that the City will
sell to the Service Provider solid waste in an amount equal to
at least the Guaranteed Annual Waste Supply, but not more than
the Guaranteed Annual Capacity, as such terms are defined in
the Waste Contract, during the term of such agreement for a
tipping fee of $9.00 per ton. We understand that it is
contemplated that the Service Provider will then convert such
waste into energy through use of the Facility in conjunction
with the Plant and will resell the energy to the City pursuant
to the Energy Contract at the rates established therein. The
Leased Premises will be leased from the City to the Service
Provider for a term equal to the term of the Waste Contract at
an annual rental of the greater of $25,000.00 or 1% of the
gross annual electric sales revenue generated by the Facility.
Mr. Jim Brewster
February 25, 1987
Page 2
We understand that the Plant is no longer in regular
use by the City as a part of its electric light and power
system but has been abandoned by the City as no longer
economically viable. We further understand that such Plant.may
be or become a part of the City's solid waste disposal system,
and that any obligation the proceeds of which were used, in
whole or in part, to acquire, construct, or otherwise provide
the Plant or any of the facilities to be included in the Leased
Premises are no longer outstanding and have been fully
discharged. In addition, we understand that the rental
payments received by the City pursuant to the Lease will not
constitute or be deposited with revenues from the City's
electric light and power system.
As you are aware, the Tax Reform Act of 1986 (the
"Act") which adopted the Internal Revenue Code of 1986, as
amended to the date hereof (the "Code"), made a number of
changes in the law regarding the tax-exempt status of interest
on obligations issued by a state or local governmental unit to
finance facilities used in the trade or business of a person
other than a state or local governmental unit. Briefly stated,
and ignoring the separate private loan test which seems
inapplicable here, section 141 of the Code would treat
obligations of the City as "private activity bonds", making the
interest thereon taxable in the absence of a specific
exception, if two tests are met. The first test, the "private
business use test," is met if more than 10% of the proceeds of
the issue is used in the trade or business of any person other
than a state or local governmental unit. Proceeds of an issue
are considered to be so used if they are used to acquire,
construct, or otherwise provide a facility more than 10% of
which is to be used in the trade or business of any person
other than a state or local governmental unit. The second
test, the "private security or payment test," is met if the
City receives, directly or indirectly, payments equalling more
than 10% of the principal of, or the interest on, obligations
and any of such payments are secured by, or derived from or in
respect of property, or borrowed money, used or to be used in
the trade or business of a person other than a state or local
governmental unit. In the case of certain "output facilities",
which are undefined in the Code but include electric and gas
generation, transmission and related facilities, according to
the Statement of Managers of the Conference Committee with
respect to the Act, the 10% limits of the private business use
test and the private security or payment test are reduced to
the lesser of 10% or $15,000,000.
5 7 5 6 s
Mr. Jim Brewster
February 25, 1987
Page 3
Because the Leased Premises will be used by an entity
other than a state or local governmental unit in its trade or
business, obligations issued by the City to finance any of its
obligations with respect to, or which are secured by, the
Leased Premises during the term of the Agreements set forth
above would be private activity bonds within the meaning of
Section 141 of the Code. In addition, because of the Waste
Contract between the City and the Service Provider with respect
to the disposal of the City's solid waste, it is possible that
any obligations issued to finance additions to or improvements
of the City's solid waste disposal system may also be private
activity bonds. However, because any obligations the proceeds
of which were used, in whole or in part, to acquire, construct,
or otherwise provide the Leased Premises are no longer
outstanding and because the rental payments under the Lease do
not constitute revenues of the City's electric light and power
system, the transaction contemplated by the Agreements should
not in and of itself make private activity bonds of any future
obligations which are secured by the revenues from the City's
electric light and power system, other than those obligations
described above in this paragraph.
In rendering the foregoing advice, we are interpreting
a new law based solely on its literal language and accompanying
legislative history. It is possible that the Internal Revenue
Service may interpret this law in a contrary manner in
regulations or published or private rulings. In addition, we
make no comment with respect to the other terms of the
Agreements, including especially the financial and other
business terms.
Very truly yours,
5 7 5 6 5