Exhibit 10.1

LOAN AGREEMENT

between

GULF COAST INDUSTRIAL DEVELOPMENT AUTHORITY

and

MICROGY HOLDINGS, LLC

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Gulf Coast Industrial Development Authority has granted a security interest in
and assigned to Wells Fargo Bank, National Association, as Trustee under the
Trust Indenture, dated as of the date hereof, all of its interests in all “Loan
Payments” due pursuant to and under this Loan Agreement to secure its
Environmental Facilities Revenue Bonds (Microgy Holdings Project) Series 2006.

 

            DEBTOR:                LENDER: Microgy Holdings, LLC   
Gulf Coast Industrial Development One Cate Street    Authority 4th Floor    910
Bay Area Blvd. Portsmouth, New Hampshire 03801    Houston, Texas 77058

 

ASSIGNEE AND SECURED PARTY:

Wells Fargo Bank, National Association

4 Penn Center, Suite 810

1600 JFK Boulevard

Philadelphia, Pennsylvania 19103

Attention: Corporate Trust Services Group

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TABLE OF CONTENTS

 

General Recitals and Findings    1

ARTICLE I

Definitions

   Section 1.01.    Definitions    2 Section 1.02.    Article and Section
Headings    7 Section 1.03.    Interpretation    7

ARTICLE II

Representations

   Section 2.01.    Representations by Issuer    7 Section 2.02.   
Representations by Company    8

ARTICLE III

The Project

   Section 3.01.    Approvals and Permits    9 Section 3.02.    Acquisition and
Construction    9 Section 3.03.    Construction Fund    11 Section 3.04.   
Termination of Construction; Completion Certificate    12 Section 3.05.    Title
   13 Section 3.06.    Insurance    13 Section 3.07.    Maintenance and Repairs;
Remodeling    13 Section 3.08.    Right to Discontinue Operation of Project   
13 Section 3.09.    Insurance and Condemnation Award    13 Section 3.10.   
Taxation of Project    14 Section 3.11.    Issuer’s Limited Liability    14
Section 3.12.    Governmental Regulation    14

ARTICLE IV

Issuance of Bonds; The Loan/ Refunding and Redemption of Bonds

   Section 4.01.    Issuance of Bonds    14 Section 4.02.    The Loan    14
Section 4.03.    Security for the Bonds    15 Section 4.04.    Refunding and
Redemption of Bonds    15

ARTICLE V

The Company’s Payments

   Section 5.01.    Company Approval of Issuance of Bonds    15 Section 5.02.   
Payment upon Redemption of Bonds    16 Section 5.03.    Loan Payments    16
Section 5.04.    Payments to Issuer and Governmental Unit    16 Section 5.05.   
Payments to Replenish Debt Service Reserve Fund    17 Section 5.06.    Issuer’s
Rights Assigned to Trustee    17

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Section 5.07.    Payments to Trustee    17 Section 5.08.    Usury    18

ARTICLE VI

Defaults and Remedies

   Section 6.01.    Events of Default    18 Section 6.02.    Remedies on Default
   19 Section 6.03.    Agreement to Pay Attorneys’ Fees and Expenses    20

ARTICLE VII

Special Covenants

   Section 7.01.    No Defense or Set-Off; Unconditional Obligation    20
Section 7.02.    Consolidation and Merger    21 Section 7.03.    Indemnities   
21 Section 7.04.    Tax-Exempt Status of the Bonds    22 Section 7.05.   
Payment to Rebate Fund    24 Section 7.06.    Qualification in Texas    24
Section 7.07.    Recordation    24

ARTICLE VIII

General Provisions

   Section 8.01.    General Provisions    24 Section 8.02.    Financial
Statements    25 Section 8.03.    Amendment of Agreement    25 Section 8.04.   
Assignment    25 Section 8.05.    Term of Agreement    26 Section 8.06.   
Notices    26 Section 8.07.    Severability    27 Section 8.08.    Execution of
Counterparts    27 Section 8.09.    Governing Law    27 Section 8.10.    No
Personal Liability    27 Section 8.11.    Final Agreement of the Parties    27
Execution   

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LOAN AGREEMENT

between

GULF COAST INDUSTRIAL DEVELOPMENT AUTHORITY

and

MICROGY HOLDINGS, LLC

This Loan Agreement dated as of October 1, 2006 (the “Agreement”), by and
between GULF COAST INDUSTRIAL DEVELOPMENT AUTHORITY (the “Issuer”) and MICROGY
HOLDINGS, LLC (the “Company”):

WITNESSETH:

GENERAL RECITALS AND FINDINGS

(a) The Issuer is a non-stock, non-profit industrial development corporation
organized and existing under the laws of the State of Texas, including
particularly the Development Corporation Act of 1979, as amended, Article
5190.6, Vernon’s Texas Civil Statutes, as amended (the “Act”), to act on behalf
of the Gulf Coast Waste Disposal Authority (the “Governmental Unit”) to provide
financing for certain “projects,” as defined in the Act, located within the
boundaries of the Issuer;

(b) Pursuant to law, and particularly the Act, the Issuer is empowered to
finance the acquisition, construction and improvement of solid waste disposal
facilities, and to issue revenue bonds for such purpose and for the purpose of
refunding any such bonds;

(c) The Company has requested that the Issuer issue its revenue bonds for the
purpose of financing a portion of the Project Costs (hereinafter defined);

(d) The Company has agreed to make Loan Payments (hereinafter defined) and other
payments hereunder in consideration of the Issuer’s issuing the Bonds and
utilizing the proceeds from the sale of the Bonds for the acquisition,
construction and improvement of the Project (hereinafter defined);

(e) The governing body of the Governmental Unit has approved this Agreement by
written resolution as required by the Act;

(f) This Agreement is authorized and executed pursuant to applicable laws,
including the Act; and

(g) The Issuer and the Company have taken all action and have complied with all
provisions of law with respect to the execution, delivery and performance of
this Agreement and the due authorization of the consummation of the transactions
contemplated hereby, and this Agreement has been duly executed and delivered by,
and constitutes a valid and legally binding agreement of, the Issuer and the
Company, enforceable against the respective parties in accordance with its
terms.

 

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NOW, THEREFORE, in consideration of the covenants and agreements herein made,
and subject to the conditions herein set forth, the Issuer and the Company
contract and agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01. DEFINITIONS. Each of the following terms shall have the respective
meanings assigned to them in this Section 1.01 whenever they are used in this
Agreement, unless the context in which they are used clearly requires otherwise:

Accountant-shall mean a firm of independent certified public accountants
selected by the Company.

Act - shall mean the Development Corporation Act of 1979, Article 5190.6,
Vernon’s Texas Civil Statutes, as amended.

Act of Bankruptcy - shall mean any of the following events:

(a) the Company shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee, liquidator or the like
of the Company or of all or any substantial part of its property, (ii) commence
a voluntary case under the United States Bankruptcy Code (as now or hereafter in
effect), or (iii) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, winding-up or composition or adjustment of
debts; or

(b) a proceeding or case shall be commenced without the application or consent
of the Company in any court of competent jurisdiction, seeking (i) the
liquidation, reorganization, dissolution, winding-up, or composition or
adjustment of debts, of the Company, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of the Company or of all or any
substantial part of its property, or (iii) similar relief in respect of the
Company under any law relating to bankruptcy, insolvency, winding-up or
composition or adjustment of debts.

Agreement - shall mean this Loan Agreement, dated as of October 1, 2006, by and
between the Issuer and the Company, including all amendments hereof or
supplements hereto.

Authorized Company Representative - shall mean the Company’s Chief Executive
Officer, its President, its Chief Financial Officer, its Treasurer, or any
Assistant Treasurer or such persons at the time designated to act on behalf of
the Company, such designation in each case to be evidenced by a certificate
furnished to the Issuer and the Trustee containing the specimen signature of
such person and signed on behalf of the Company by its Chief Executive Officer,
President, Chief Financial Officer, Treasurer or any Assistant Treasurer
authorized to act on behalf of the Company. Such certificate may designate an
alternate or alternates.

Authorized Issuer Representative - shall mean such person or persons at the time
and from time to time designated by written certificate furnished to the Company
and the Trustee containing the specimen signature of such person and signed on
behalf of the Issuer by its President or Secretary.

Board or Board of Directors - shall mean the lawfully qualified Board of
Directors of the Issuer.

 

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Bond Counsel - shall mean McCall, Parkhurst & Horton L.L.P. or such other firm
of attorneys of nationally recognized standing in the field of law relating to
municipal bond law and the excludability of interest on state or local bonds
from gross income of the owners of the Bonds for purposes of federal income
taxation, selected by the Issuer and acceptable to the Trustee and the Company.

Bond Fund - shall mean the Fund by that name established by Section 6.2 of the
Indenture.

Bond Owner, Bondowner, Owner, owner, Bondholder, bondholder, holder, Registered
Owner, registered owner or owner of the Bonds - shall mean the registered owner
of any Bond.

Bond Registrar - shall have the meaning as specified in Section 2.3 of the
Indenture.

Bond Resolution or Resolution - shall mean the Resolution of the Board of
Directors authorizing the issuance of the Bonds (including the Indenture
prescribed and authorized to be executed in the Bond Resolution) together with
any supplemental resolutions or amendments to the Resolution or such Indenture.

Bonds - shall mean the Gulf Coast Industrial Development Authority Environmental
Facilities Revenue Bonds (Microgy Holdings Project) Series 2006, executed and
delivered pursuant to the Indenture.

Business Day - shall mean any day other than (i) a Saturday or Sunday or legal
holiday or a day on which banking institutions in the City of New York or in the
cities in which the Principal Offices of the Trustee or the Paying Agent are
located are required or authorized by law or executive order to close or (ii) a
day on which the New York Stock Exchange is closed.

Code - shall mean the Internal Revenue Code of 1986, as amended, and the rulings
and regulations (including temporary and proposed regulations) promulgated
thereunder or, to the extent applicable, under the Internal Revenue Code of
1954, as amended.

Collateral Trust Agreement shall mean the Collateral Trust Agreement, dated as
of October 1, 2006, among the Collateral Trustee, the Company, and the
Subsidiary Guarantors, as amended from time to time.

Company - shall mean Microgy Holdings, LLC, a Delaware limited liability
company, and any successors and assigns as permitted by Section 7.02 hereof.

Completion Certificate - shall mean a certificate of the Authorized Company
Representative to the effect stated in Section 3.04(b) hereof.

Construction Consultant - shall mean R.W. Beck, Inc. or any successor to its
duties and functions with respect to construction of the Project.

Costs of Issuance - shall mean all costs and expenses incurred by the Issuer or
the Company in connection with the issuance and sale of the Bonds, including
without limitation (i) fees and reasonable expenses of accountants, attorneys,
engineers, and financial advisors, (ii) materials, supplies, and printing and
engraving costs, (iii) recording and filing fees, (iv) Rating Service fees,
(v) compensation to the Underwriter, whether paid as a fee or as a discount from
issue price, (v) Trustee’s fees and expenses, and (vii) the Issuer’s and the
Governmental Unit’s administrative expenses as provided in Section 5.04 hereof.

Debt Service Reserve Fund - shall mean the fund of that name created and
established in Section 4.1 of the Indenture.

 

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Debt Service Reserve Requirement - shall mean the amount of $5,151,500.

Division - shall mean the Texas Economic Development and Tourism Office, an
office within the Offices of the Governor of the State and any successor to its
functions and duties.

Default - shall mean an event which with notice or lapse of time, or both, would
become an Event of Default.

Event of Default - used with respect to this Agreement, shall mean any event
specified in Section 6.01 hereof.

Facility or Facilities - shall mean one or more, as the case may be, of the
solid waste disposal facilities identified on Exhibit A to this Agreement.

Favorable Opinion - shall mean an opinion of Bond Counsel addressed to the
Issuer, the Company and the Trustee to the effect that the action proposed to be
taken is authorized or permitted by the Act and the Indenture and will not
adversely affect the excludability from gross income for federal income tax
purposes of interest on the Bonds (other than as held by a “substantial user” of
the Project or a “related person” within the meaning of the Code).

GAAP - shall mean generally accepted accounting principles as in effect as of
the time of application to the provisions hereof (unless otherwise noted).

Governmental Unit - shall mean the Gulf Coast Waste Disposal Authority and any
successor to its functions and duties.

Guarantee - shall mean the Guarantee Agreement, dated as of October 1, 2006,
among the Company, the Subsidiary Guarantors, and the Trustee.

Indenture - shall mean the Trust Indenture, dated as of October 1, 2006, between
the Issuer and the Trustee, as originally executed and as amended, modified or
supplemented thereafter in accordance with the terms thereof.

Issue Date - shall mean the date on which the Bonds are first authenticated and
delivered to the Underwriter against payment therefor.

Issuer - shall mean Gulf Coast Industrial Development Authority, a nonstock,
nonprofit industrial development corporation existing under the laws of the
State, including particularly, the Act.

Loan - shall mean the loan made by the Issuer to the Company from the proceeds
of the Bonds pursuant to this Agreement.

Loan Payment - shall mean each payment required to pay amounts due and owing on
the Bonds issued pursuant to this Agreement, as defined in Section 5.01 hereof
and as provided for in the Indenture, including the principal of, redemption
premium, if any, and interest on such Bonds.

Majority Holders - shall mean the owners of a majority in principal amount of
the Bonds Outstanding.

 

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Net Income - shall have the meaning given to that term in the Guarantee.

Outstanding or outstanding - shall mean when used with reference to Bonds, as of
the time in question, all Bonds authenticated and delivered under the Indenture,
except:

(a) Bonds canceled or required to be canceled under Section 2.11 of the
Indenture;

(b) Bonds deemed tendered or deemed to be paid in accordance with Article XVI of
the Indenture;

(c) Bonds in lieu of which others have been authenticated and delivered pursuant
to Article II of the Indenture and Bonds paid pursuant to Section 2.9(a) of the
Indenture;

(d) Bonds registered in the name of the Issuer; and

(e) For purposes of any consent, request, demand, authorization, direction,
notice, waiver or other action to be taken by the holders of a specified
percentage of outstanding Bonds hereunder, all Bonds held by or for the account
of the Issuer or the Company, except that for purposes of any such consent,
request, demand, authorization, direction, notice, waiver or action the Trustee
shall be obligated to consider as not being outstanding only Bonds known by a
Responsible Officer of the Trustee by actual notice thereof to be so held.

Paying Agent - shall mean the Trustee or any successor paying agent or co-paying
agent serving as such under the Indenture. If at any time there is no qualified
paying agent serving as such, the Trustee shall act as paying agent under the
Indenture. Principal Office of the Paying Agent shall mean the office thereof
designated in writing to the Trustee.

Person - shall mean an individual, a corporation, a partnership, an association,
a joint stock company, a trust, an unincorporated organization, a governmental
body or a political subdivision, a municipal corporation, a public corporation
or any other group or organization of individuals.

Primary Job - shall mean a job that is:

(i) available at a company for which a majority of the products or services of
that company are ultimately exported to regional, statewide, national, or
international markets infusing new dollars into the local economy; and

(ii) included in one of the following sectors of the North America Industry
Classification System (NAICS):

311-339                    Manufacturing

Principal Office - is defined in the definitions of Trustee, Paying Agent, and
Remarketing Agent, herein.

Project - shall mean all of the Facilities to the extent financed with proceeds
of the Bonds.

Project Costs - shall mean costs incurred by the Issuer or the Company, whether
before or after the issuance of the Bonds, and reimbursed not later than three
years after the payment thereof, with respect to

 

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the acquisition, construction and improvement of the Project, including but not
limited to, the following items:

(i) The cost of acquisition, cleanup, construction, reconstruction, improvement,
and expansion, including the cost of the acquisition of all land, rights-of-way,
property rights, easements, and interests, the cost of all machinery and
equipment, financing charges, inventory, raw materials and other supplies,
research and development costs, interest prior to and during construction and
for one year after completion of construction whether or not capitalized,
necessary reserve funds, cost of estimates and of engineering and legal
services, plans, specifications, surveys, estimates of cost and of revenue,
other expenses necessary or incident to determining the feasability and
practicability of acquiring, cleaning, constructing, reconstructing, improving,
and expanding any such project, administrative expense and such other expenses
as may be necessary or incident to the acquisition, cleanup, construction,
reconstruction, improvement, and expansion thereof, the placing of the same in
operation, and the financing or refinancing of any such project, including the
refunding of any outstanding obligations, mortgages or advances issued, made or
given by any person for any of the aforementioned costs;

(ii) To the extent authorized by the Act, costs of all other items related to
the acquisition, construction and improvement of the Project; and

(iii) All Costs of Issuance.

Rebate Fund - shall mean the fund by that name established in Section 8.5 of the
Indenture.

Regulations - shall mean the Income Tax Regulations promulgated pursuant to the
Internal Revenue Code of 1986, as amended.

Requesting Governmental Units - shall mean, collectively, Erath County, Texas
and Deaf Smith County, Texas, as applicable.

Responsible Officer - shall mean an officer of the Trustee who customarily
handles corporate trusts and is assigned to supervise the Indenture, and any
other officer of the Trustee to whom a matter is referred because of his
knowledge of and familiarity with the particular subject.

SEC - shall mean the United States Securities and Exchange Commission.

Subsidiary Guarantors - shall mean each of MST Production Ltd., MST GP, LLC, MST
Estates, LLC, Rio Leche Estates, L.L.C., Mission Biogas, L.L.C., and Hereford
Biogas, L.L.C.

State - shall mean the State of Texas.

Tax Letter of Representation - shall mean the letter of representation regarding
the use of the proceeds of the Bonds and other facts that are within the
Company’s knowledge, furnished by the Company to the Issuer in connection with
the issuance of the Bonds.

Trustee - shall mean Wells Fargo Bank, National Association or any successor
trustee or co-trustee serving as such under the Indenture. Principal Office of
the Trustee shall mean the business address designated in writing to the Issuer
and the Company as its principal office for its duties hereunder, and which
initially shall be as specified in Section 8.06 hereof.

 

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Unassigned Rights - shall mean the rights of the Issuer under Sections 5.04,
6.03 and 7.03(a) of this Agreement and the right to receive notices hereunder.

Underwriter - shall mean the initial underwriter of the Bonds, Ziegler Capital
Markets Group.

Section 1.02. ARTICLE AND SECTION HEADINGS. The headings or titles of the
several Articles and Sections of this Agreement, and the Table of Contents
appended hereto, are solely for convenience of reference and shall not affect
the meaning or construction of the provisions hereof.

Section 1.03. INTERPRETATION. The singular form of any word used herein shall
include the plural, and vice versa, if applicable. The use of a word of any
gender shall include all genders, if applicable. This Agreement and all of the
terms and provisions hereof shall be construed so as to effectuate the purposes
contemplated hereby and to sustain the validity hereof. All references to any
person or entity defined in Section 1.01 shall be deemed to include any person
or entity succeeding to the rights, duties and obligations of such person or
entity. Unless otherwise specified herein, all references to specific times
shall be deemed to refer to New York time.

ARTICLE II

REPRESENTATIONS

Section 2.01. REPRESENTATIONS BY ISSUER. The Issuer makes the following
representations as the basis for the undertakings on its part herein contained:

(a) The Issuer is a nonstock, nonprofit industrial development corporation
organized and existing under the laws of the State, including particularly, the
Act. The Issuer has all requisite power and authority under the Act (i) to adopt
the Bond Resolution, (ii) to issue the Bonds, and (iii) to enter into, and
perform its obligations under, this Agreement and the Indenture.

(b) The Issuer is a duly constituted authority and public instrumentality of the
Governmental Unit, a political subdivision of the State, within the meaning of
the Regulations and the rulings of the Internal Revenue Service prescribed and
promulgated pursuant to Section 103 of the Code, and the Issuer is functioning
and acting solely on behalf of the Governmental Unit.

(c) There are no actions, suits, proceedings, inquiries or investigations
pending or to the knowledge of the Issuer threatened, against or affecting the
Issuer in any court or before any governmental authority or arbitration board or
tribunal, which involve the possibility of materially and adversely affecting
the transactions contemplated by this Agreement or the Indenture or which, in
any way, would adversely affect the validity or enforceability of the Bonds, the
Indenture or this Agreement or the ability of the Issuer to perform its
obligations under the Indenture or this Agreement.

(d) The adoption of the Bond Resolution, the issuance and sale of the Bonds and
the execution and delivery by the Issuer of this Agreement and the Indenture,
and the compliance by the Issuer with all of the provisions of each thereof and
of the Bonds (i) are within the powers and authority of the Issuer, (ii) have
been done in full compliance with the provisions of the Act, are legal and will
not conflict with or constitute on the part of the Issuer a violation of or a
breach of or default under, or result in the creation of any lien, charge or
encumbrance upon any property of the Issuer (other than as contemplated by this
Agreement and the Indenture) under the provisions of, any charter instrument,
by-law, indenture, mortgage, deed of trust, note agreement or other agreement or
instrument to which the Issuer is a party or by which the Issuer is bound, or
any license, judgment, decree, law, statute, order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Issuer or any
of its activities or properties, and (iii) have been duly authorized by all
necessary action on the part of the Issuer.

 

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(e) Neither the nature of the Issuer nor any of its activities or properties,
nor any relationship between the Issuer and any other person, nor any
circumstance in connection with the offer, issue, sale or delivery of any of the
Bonds is such as to require the consent, approval or authorization of, or the
filing, registration or qualification with, any governmental authority on the
part of the Issuer in connection with the execution, delivery and performance of
this Agreement and the Indenture or the offer, issue, sale or delivery of the
Bonds, other than those already obtained as of the date of issue of the Bonds;
provided, however, no representation is made herein as to compliance with the
securities or “blue sky” laws of any jurisdiction.

(f) No event has occurred and no condition exists with respect to the Issuer
which would constitute an “Event of Default” under this Agreement or under the
Indenture or which, with the lapse of time or with the giving of notice or both,
would become an “Event of Default” under this Agreement or under the Indenture.

(g) Neither this Agreement nor the security for the Bonds has been pledged or
hypothecated in any manner or for any purpose other than as provided in the
Indenture as security for the payment of the Bonds.

(h) Notwithstanding anything herein contained to the contrary, any obligation
the Issuer may hereby incur for the payment of money shall not constitute an
indebtedness of the State or of any political subdivision thereof within the
meaning of any state constitutional provision or statutory limitation and shall
not give rise to a pecuniary liability of the State or a political subdivision
thereof, or constitute a charge against the general credit or taxing power of
the State or a political subdivision thereof or general funds or assets of the
Issuer (including funds relating to other Issuer loans or activities), but shall
be limited obligations of the Issuer payable solely from (i) the security for
the Bonds, (ii) revenues derived from the sale of the Bonds, and (iii) amounts
on deposit from time to time under the Indenture, subject to the provisions of
this Agreement and the Indenture permitting the application thereof for the
purposes and on the terms and conditions set forth herein and therein.

(i) The Huckabay Ridge Facility and the Rio Leche Facility are located within
the boundaries of Erath County, Texas which has requested the Issuer to exercise
its powers of financing therein and the Mission Dairy Facility and the Cnossen
Dairy Facility are located within the boundaries of Deaf Smith County, Texas
which has requested the Issuer to exercise its powers of financing therein.

Section 2.02. REPRESENTATIONS BY COMPANY. The Company makes the following
representations as the basis for the undertakings on its part herein contained:

(a) The Company (i) is a limited liability company duly organized and in good
standing in the state of Delaware, (ii) is not in violation of any provision of
its operating agreement, (iii) has full corporate power to own its properties
and conduct its business, (iv) has full legal right, power and authority to
enter into this Agreement and consummate, or cause to be consummated, all
transactions contemplated by this Agreement and (vi) by proper corporate action
has duly authorized the execution and delivery of this Agreement.

(b) Neither the execution and delivery by the Company of this Agreement nor the
consummation by the Company of the transactions contemplated by this Agreement
conflicts with, will result in a breach of or default under or will result in
the imposition of any lien on any property of the Company pursuant to the
operating agreement of the Company or the terms, conditions or provisions of any
statute, order, rule, regulation, agreement or instrument to which the Company
is a party or by which it is bound.

(c) This Agreement has been duly authorized, executed and delivered by the
Company and

 

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constitutes the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except as the enforcement
thereof may be subject to (i) the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’
rights generally, and (ii) general principles of equity.

(d) There is no litigation or proceeding pending, or to the knowledge of the
Company threatened, against the Company which could adversely affect the
validity of this Agreement or the ability of the Company to comply with its
obligations under this Agreement.

(e) All material statements of facts or other information furnished by the
Company to the Issuer and Bond Counsel in connection with Bond Counsel’s opinion
relating to the Bonds, including particularly the Tax Letter of Representation,
were true and correct when made and nothing has come to the Company’s attention
that would change the truth or correctness of such statements of facts or other
information furnished to Bond Counsel.

(f) The Company represents to the Issuer and the Division that (i) the Project
will contribute to the economic growth or stability of the Requesting
Governmental Units by (A) increasing or stabilizing employment opportunities
within the boundaries of the Requesting Governmental Units, (B) significantly
increasing or stabilizing the property tax base of the Requesting Governmental
Units and (C) promoting commerce within the boundaries of the Requesting
Governmental Units and the State; (ii) it has no present intention of using or
moving any portion of the Project outside the State or disposing of or
abandoning the Project; (iii) it has no present intention of directing the
Project to a use other than the purposes represented to the Governmental Unit,
the Requesting Governmental Units, and the Division; and (iv) the Project is for
the creation or retention of Primary Jobs.

(g) The Project consists of properties and facilities for the collection,
transportation, treatment, or disposal of solid waste and properties and
facilities which are functionally related and subordinate thereto, and the
acquisition, construction, and improvement of the Project is and will be for the
specific purpose of providing safe and economical collection, transportation,
treatment, and disposal of solid waste in order to abate, prevent and control
pollution of water in the State.

ARTICLE III

THE PROJECT

Section 3.01. APPROVALS AND PERMITS. The Issuer and the Company agree to use
their best efforts to obtain the necessary approval of this Agreement by the
Division as required by the Act prior to the issuance of the Bonds, and the
Company agrees to obtain, or cause to be obtained, all other permits necessary
with respect to the acquisition, construction, equipping, and furnishing of the
Project.

Section 3.02. ACQUISITION AND CONSTRUCTION. (a) The Project shall be acquired,
constructed, equipped, and furnished with all reasonable dispatch, and the
Company will use its best efforts to cause such acquisition, construction,
equipping, and furnishing to be completed as soon as reasonably commercially
practicable, delays incident to strikes, riots, acts of God, or the public
enemy, or other causes beyond the reasonable control of the Company only
excepted; but if for any reason there should be delays in such acquisition,
construction, equipping, and furnishing there shall be no diminution in or
postponement of the Loan Payments to be made by the Company hereunder, and no
resulting liability on the part of the

 

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Issuer. The Company agrees, however, to use its best efforts to remedy with all
commercially reasonable dispatch the cause or causes preventing it from carrying
out its agreements; provided, that the settlement of strikes, lockouts and other
industrial disturbances shall be entirely within the discretion of the Company,
and the Company shall not be required to make settlement of strikes, lockouts
and other industrial disturbances by acceding to the demands of the opposing
party or parties when such course is, in the judgment of the Company,
unfavorable to the Company.

(b) The Company shall acquire, construct, and improve the Project or cause the
Project to be acquired, constructed, and improved in the manner provided in the
Act and this Agreement and in accordance with the Plans and Specifications on
file and available to the Issuer at each Facility during the construction period
(subject to the restrictions of subsection (c) below) and the Trustee shall have
no responsibility or liability whatsoever with respect to the Project and the
acquisition, construction, or improvement thereof. The Company may amend, or
cause to be amended, such Plans and Specifications, provided, however, that such
Plans and Specifications shall not be amended in any material respect except as
provided in subsection (d) below. It is agreed and understood that the Company
will cause to be entered into and executed all agreements and contracts
necessary to assure and accomplish the actual acquisition, construction,
equipping, and furnishing of the Project (and that the Issuer shall not execute
any such agreements or contracts) and that the Company will cause to be carried
out, paid, supervised, and enforced all such agreements and contracts, and will
cause to be provided such insurance on and in connection with the acquisition,
construction, equipping, and furnishing of the Project as it deems necessary or
advisable or as is required by law and this Agreement in accordance with its
customary insurance practices, which may include self insurance. The Company
shall pay or cause to be paid, from proceeds from the sale and delivery of the
Bonds loaned to it pursuant to Section 4.02 of this Agreement, and from any
available income or earnings derived therefrom, and if such proceeds or income
or earnings derived therefrom are insufficient, from other funds of the Company
or available to the Company to the extent necessary, all Project Costs. The
Issuer shall loan the proceeds from the sale of the Bonds to the Company to be
used by the Company to pay all or part of the Project Costs, in accordance with
procedures established in Section 3.03 hereof for reimbursing the Company for
paying all or any part of such Project Costs under the aforesaid agreements and
contracts for the acquisition, construction, equipping, and furnishing of the
Project prior to the Company’s receipt of the Loan as hereinafter provided. It
is specifically provided, however, that none of the proceeds from the sale of
the Bonds will be used to reimburse the Company for, or to pay (and the Company
hereby covenants and agrees not to request reimbursement of or payment for) any
part of the Project Costs if such use or payment would result in a violation of
any of the Company’s representations contained in Sections 2.02 or 7.04 hereof
or the Tax Letter of Representation.

(c) The Company hereby grants to the Issuer, its employees and agents, at all
reasonable times during normal business hours and upon reasonable notice such
necessary and reasonable rights of ingress and egress to the Project as are
available to the Company and required in connection with the acquisition,
construction, and improvement of the Project and the Company agrees that it will
cooperate with the Issuer, its employees and agents, so that such Project shall
be acquired, constructed, and improved as provided in this Agreement. The
Issuer, its employees and agents shall not unnecessarily disrupt or interfere
with the operation of the Project and shall cooperate with and observe the
reasonable regulations of the Company so as to avoid any unnecessary disruption
or interference with said operation. Unless the Company shall be in default
hereunder or under the Indenture, the Company may require that the rights of
access hereby reserved to the Issuer, its employees and agents, may be exercised
only after such employees or agents have executed release of liability
agreements in the form then used by the Company. The Issuer recognizes that the
drawings, designs, specifications, material lists, and other engineering
documents and information contained in the Plans and Specifications or otherwise
provided or made available to the Issuer in connection with the Project are
proprietary to, and are the property of the Company and/or its affiliates. The
Issuer agrees to

 

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retain in confidence and not to disclose to others (except as required by
applicable law) or to use or permit the use for the benefit of or by others,
without the prior written consent of the Company in each such instance, any such
drawings, designs, specifications, material lists and other engineering
documents and information contained in the Plans and Specifications or otherwise
provided or made available to the Issuer. Nothing in this Section or in any
other provision of this Agreement shall be construed to entitle the Issuer or
the Trustee, to any information or inspection involving the confidential
know-how of the Company.

(d) If the Plans and Specifications are materially amended at any time prior to
the completion of the Project, the Company shall (i) deliver to the Issuer a
certificate of an Authorized Company Representative stating that the Project
constructed pursuant to the Plans and Specifications, as amended, will be solid
waste disposal facilities within the meaning of Section 142(a)(6)of the Code or
any substantially similar successor provision, and (ii) furnish the Issuer with
a Favorable Opinion with respect to such proposed amendment and the expenditure
of moneys from the Construction Fund to pay the Project Costs as shown on the
Plans and Specifications as so amended.

(e) If, for any reason, the proceeds from the sale of the Bonds are not
sufficient to pay all the Project Costs, the Company shall complete or cause to
be completed the Project and pay or cause to be paid all Project Costs which are
not or cannot be paid or reimbursed from proceeds of the Bonds from its own
funds or other funds available to the Company or its affiliates, but it shall
not be entitled to reimbursement from the Issuer therefor, or to any diminution
in or postponement of any payments required to be made by the Company hereunder.

Section 3.03. CONSTRUCTION FUND. The Construction Fund, as defined in and
required by the Indenture, shall be drawn on and used to pay the Costs of
Issuance of the Bonds and Project Costs when due and payable. The Issuer shall
pay to the Trustee for deposit the proceeds from the sale and delivery of the
Bonds as follows: (1) the amount of capitalized interest, if any, specified in
the Indenture in the Bond Fund, (2) an amount equal to the Debt Service Reserve
Requirement in the Debt Service Reserve Fund, and (3) the remainder in the
Construction Fund. The Trustee, pursuant to request of the Company, shall draw
on and use the Construction Fund as follows:

(a) Immediately after the delivery of the Bonds authorized hereby, the Company,
or the Trustee, upon written direction of the Authorized Company Representative,
shall pay directly (i) to the Issuer, the amount specified in Section 5.04
hereof and (ii) to such other parties submitting invoices, the other Costs of
Issuance.

(b) The Trustee shall make payments to the Company or, at the Company’s written
request, to a third party, from the Construction Fund for any Costs of Issuance
(in addition to those paid under Section 3.03(a) above) and, subject to
subsection (c) below, other Project Costs from time to time upon receipt by the
Trustee of a request of the Company signed by the Authorized Company
Representative. Such request shall be accompanied by a certificate signed by an
Authorized Company Representative, and, in the case of Project Costs other than
Costs of Issuance, accompanied by the Certificate of the Construction Consultant
approving such payment, stating with respect to each payment as follows:

(i) the name of the Facility to which the Project Costs apply;

(ii) the name and address of the person, firm or corporation to whom payment is
to be made;

(iii) the amount of expenditures for which payment or reimbursement is
requested;

 

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(iv) the amount requested to be paid has been or will be incurred and is for
Project Costs;

(v) no part of the several amounts requested to be paid, as stated in such
certificate, has been or is the basis for the payment of any money in any
previous or then pending request;

(vi) the payment of the amount requested will not result in a breach of the
covenants of the Company contained in this Agreement;

(vii) the expenditure of such amount to be disbursed, when added to all
disbursements under previous requisitions, will result in at least 95% of the
total of such disbursements being used to provide”solid waste disposal
facilities” within the meaning of Section 142(a)(6) of the Code or facilities
functionally related and subordinate thereto;

(viii) in the case of requisitions for Costs of Issuance, that the cumulative
total amount disbursed thereunder for Costs of Issuance, together with any
compensation to the Underwriter as a discount, does not exceed 2% of the
proceeds of the Bonds; and

(c) the Company shall not request payments from the Construction Fund in excess
of $15,000,000 for any one of the Facilities. The Trustee shall rely fully on
any such request and certificate delivered pursuant to this Section and shall
not be required to make any investigation in connection therewith. If amounts
paid by the Trustee pursuant to subsection (b) above with respect to any portion
of the Project exceed the cost thereof, the Company shall promptly repay such
overpayment into the Construction Fund.

(d) The Issuer hereby gives its express written authority to the Company, absent
an Event of Default, to direct the investment of the Construction Fund by the
Trustee as hereinafter provided and as permitted by the Indenture. Any money
held as part of the Construction Fund shall be invested or reinvested by the
Trustee in the same manner as provided for money on deposit in the Bond Fund.
Upon acceleration of the maturity of the Bonds pursuant to the Indenture,
subject to Section 6.4 of the Indenture, any amounts held in or on deposit in
the Construction Fund shall be transferred by the Trustee to the Bond Fund.

(e) If, upon delivery of the Completion Certificate for the Project, there shall
be any surplus funds remaining in the Construction Fund not required to provide
for the payment of the costs of acquisition, construction, and improvement of
the Project, such funds shall, upon the written request of the Authorized
Company Representative to the Trustee, be used by the Trustee (i) to purchase
for cancellation Bonds at any reasonable price as determined by the Authorized
Company Representative, which price, however, shall not exceed the principal
amount thereof plus accrued interest thereon or (ii) to redeem Bonds in the
largest principal amount then subject to redemption at par (together with
accrued interest thereon) that does not exceed the amount of such funds.

Section 3.04. TERMINATION OF CONSTRUCTION; COMPLETION CERTIFICATE. (a) Anything
in this Agreement to the contrary notwithstanding, the Company shall have the
right at any time to terminate the construction of a Facility if: (i) the
Company shall have determined that the construction or operation of such
Facility is impracticable, uneconomical or undesirable due to (A) the imposition
of taxes, other than ad valorem taxes currently levied upon privately owned
property used for the same general purpose as such Facility, or other
liabilities or burdens with respect to such Facility or the construction or
operation thereof, (B) changes in technology, in environmental standards or
legal requirements or in the economic availability of materials, supplies,
equipment or labor or (C) destruction of or damage to all or part of such
Facility; or (ii) all or substantially all of such Facility shall have been
condemned or taken by eminent

 

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domain; or (iii) the construction or operation of such Facility shall have been
enjoined or shall have otherwise been prohibited by, or shall conflict with, any
order, decree, rule or regulation of any court or any federal, state or local
regulatory body, administrative agency or other governmental body.

(b) At such time as the Company determines that construction of the Project has
been completed or has determined to terminate any further construction of the
Project, it shall deliver a Completion Certificate to that effect to the Issuer
and the Trustee. In the case of termination of construction prior to operation,
delivery of a Completion Certificate is conditional upon receipt by the Issuer
and the Trustee of a certificate of an independent engineer reasonable
acceptable to the Trustee and the Majority Holders that continuation of
construction is not feasible under the circumstances.

Section 3.05. TITLE. The Issuer shall have no right, title, or interest in and
to the Project. The Issuer shall not be responsible or liable in any manner for
any claims, losses, damages, penalties, costs, taxes, or fines with respect to
the acquisition, construction, equipping, furnishing, installation, operation,
maintenance, or ownership of the Project.

Section 3.06. INSURANCE. Subject to the provisions of Section 3.08 hereof, the
Company agrees to maintain, or cause to be maintained, all necessary insurance
with respect to the Project in accordance with customary insurance practices,
which may include self-insurance. All costs of maintaining insurance with
respect to the Project shall be paid or caused to be paid by the Company, and
the Issuer shall have no obligation or liability in this regard. All such
insurance shall designate the Trustee as loss payee and an additional insured.

Section 3.07. MAINTENANCE AND REPAIR; REMODELING. Subject to the provisions of
Section 3.08 hereof, the Company agrees that it will (i) maintain, or cause to
be maintained, the Project in as reasonably safe condition as its operations
shall permit and (ii) maintain, or cause to be maintained, the Project in good
repair and in good operating condition, ordinary wear and tear excepted, making
from time to time all necessary repairs thereto and renewals and replacements
thereof. All costs of operating and maintaining the Project shall be paid or
caused to be paid by the Company, and the Issuer shall have no obligation or
liability in this regard. It is understood and agreed that the Issuer shall have
no duties or responsibilities whatsoever with respect to the operation or
maintenance of the Project, or the performance of the Project for its designed
purposes. After the Completion Date, the Company may at its own expense cause
the Project to be remodeled or cause substitutions, modifications and
improvements to be made to the Project from time to time as it, in its
discretion, may deem to be desirable for its uses and purposes, which
remodeling, substitutions, modifications and improvements shall be included
under the terms of this Agreement as part of the Project.

Section 3.08. RIGHT TO DISCONTINUE OPERATION OF PROJECT. Although the Company
intends to operate, or cause to be operated, the Project for its designed
purposes until the date on which no Bonds are Outstanding, the Company is not
required to operate, or cause to be operated, any portion of the Project after
the Company shall deem in its discretion that such continued operation is not
advisable and in such event it is not prohibited from selling, leasing or
retiring all or any such portion of the Project; provided, however, that, prior
to any such sale, lease, or retirement, the Company shall have provided to the
Issuer and the Trustee a Favorable Opinion with respect to any such sale, lease,
or retirement. Upon discontinuance of operation of the Project in accordance
with this Section 3.08, the Company shall be discharged from its obligations to
insure, maintain and repair the Project as set forth in Sections 3.06 and 3.07
hereof.

Section 3.09. INSURANCE AND CONDEMNATION AWARDS. The net proceeds of any
insurance or condemnation award as a result of the destruction or condemnation
of the Project or any portion

 

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thereof shall, at the option of the Company, either (a) be paid by the Company
to the Trustee for deposit into the Bond Fund under the Indenture to be used to
redeem Bonds under Section 9.1(d)(i) or (ii), as the case may be, or (b), if
determined to be feasible by an independent feasibility study obtained by the
Company at its expense, be used by the Company to rebuild, restore, or relocate,
as the case may be, the affected portion of the Project.

Section 3.10. TAXATION OF PROJECT. During the term of this Agreement, the
Company will promptly remit or cause to be remitted when due all taxes,
including specifically all sales taxes and ad valorem taxes, levied in respect
of the Project or the Loan Payments payable hereunder to the appropriate taxing
body. The Company has not and will not maintain that it is entitled, by virtue
of the Project being financed under the Act, to any additional exemption from ad
valorem taxes on the Project or sale and use taxes on personal property acquired
in connection with the Project. Except as provided in the preceding sentence,
the Company may, at its own expense and in its own name, in good faith contest
any such taxes, assessments and other charges and, in the event of such contest,
may permit the taxes, assessments or other charges so contested to remain unpaid
during the period of such contest and any appeal therefrom. All taxes,
assessments and other charges levied or imposed with respect to the Project
shall be the obligation of the Company and/or any of its affiliates, and the
Issuer shall have no obligation or liability in this regard.

Section 3.11. ISSUER’S LIMITED LIABILITY. It is recognized that the Issuer’s
only source of funds with which to carry out its commitments under this
Agreement will be from the proceeds from the sale of the Bonds or from any
available income or earnings derived therefrom, or from any funds which
otherwise might be made available by the Company; and it is expressly agreed
that the Issuer shall have no financial liability, obligation, or responsibility
with respect to this Agreement or the Project except to the extent of funds
available from such sources.

Section 3.12. GOVERNMENTAL REGULATION. The Company recognizes and agrees that
this Agreement and the issuance of the Bonds pursuant hereto will not diminish
or limit the authority of the United States Environmental Protection Agency, the
Texas Commission on Environmental Quality, the Texas Water Development Board, or
any other State agency or local governments in performing any of the powers,
functions and duties vested in such entities by federal and state laws, and that
all applicable laws shall be enforced without regard to ownership of the
Project; and that the Company will not be relieved of any responsibility under
any applicable federal or state laws or regulations pertaining to pollution
control, either now, or during, or after the acquisition, construction and
improvement of the Project.

ARTICLE IV

ISSUANCE OF BONDS; THE LOAN; REFUNDING AND REDEMPTION OF BONDS

Section 4.01. ISSUANCE OF BONDS. On the Issue Date, the Issuer will issue the
Bonds and instruct the Trustee in writing to deliver the Bonds to the
Underwriter, all in accordance with the Indenture.

Section 4.02. THE LOAN. (a) The Issuer shall make the Loan to the Company by the
deposit into the Construction Fund, the Debt Service Reserve Fund, and the Bond
Fund of the proceeds from the sale of the Bonds in such amounts as are provided
in the Indenture. The amounts so deposited shall be advanced in the manner
provided herein and in the Indenture; and the Company shall repay the Loan by
making the Loan Payments as provided in this Agreement and the Indenture.

 

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(b) Notwithstanding any provision expressly or inferentially to the contrary
contained herein, the Company unconditionally agrees that it shall make or cause
to be made Loan Payments in immediately available funds to the Trustee (pursuant
to an assignment by the Issuer to the Trustee, as hereinafter described) in
lawful money of the United States of America. Upon the issuance and delivery of
the Bonds to the Underwriter, and the deposit of the proceeds derived therefrom
into the accounts established in the Indenture, the Company shall have received,
and the Issuer shall have given, full and complete consideration for the
Company’s obligation hereunder to make Loan Payments.

Section 4.03. SECURITY FOR THE BONDS. The obligations of the Company under this
Agreement, including specifically the obligation to make Loan Payments as
provided in Sections 5.01 and 5.03 hereof, shall be direct general obligations
of the Company. As additional security for the payments of the Loan Payments and
as further consideration for the loan made hereunder, the Guarantee Agreement
whereunder the Company and the Subsidiary Guarantors have guaranteed payment,
when due, of the principal of, redemption premium, if any, and interest on the
Bonds and the Collateral Trust Agreement have been executed and will be
delivered simultaneously herewith. Prior to or simultaneously with the issuance
of the Bonds, the Issuer will assign to the Trustee under the terms of the
Indenture all of the Issuer’s right, title, and interest in and to the Loan
Payments and certain other rights under this Agreement as provided in the
Indenture.

Section 4.04. REFUNDING AND REDEMPTION OF BONDS. No additional or refunding
bonds will be issued or delivered without prior Division approval. After the
issuance of any Bonds, the Issuer shall not refund any of the Bonds or change or
modify the Bonds in any way, except as provided for in the Indenture, without
the prior written approval of the Authorized Company Representative; nor shall
the Issuer redeem any Bonds prior to their scheduled maturities except upon the
written direction of the Authorized Company Representative, unless such
redemption is required by the Indenture.

ARTICLE V

THE COMPANY’S PAYMENTS

Section 5.01. COMPANY APPROVAL OF ISSUANCE OF BONDS. (a) Simultaneously with the
authorization of this Agreement by the Board of Directors of the Issuer, such
Board has adopted the Bond Resolution. In consideration of the covenants and
agreements set forth in this Agreement, and to enable the Issuer to issue the
Bonds to carry out the intents and purposes hereof, this Agreement is executed
to assure the issuance of such Bonds, and to provide for the due and punctual
payment by the Company to the Issuer, or to the Trustee under the Indenture
securing the Bonds, of amounts not less than those required to pay, as and when
due (whether at stated maturity, upon redemption, acceleration of maturity,
tender, deemed tender, or otherwise), and at such time as will assure payment on
the due date thereof, all of the principal of, redemption premium, if any, and
interest on, the Bonds, and all other payments required in connection with such
Bonds, this Agreement, or the Indenture. Each such payment is hereby designated
as a “Loan Payment”, and collectively such payments are hereby designated as
“Loan Payments”. The Company hereby agrees to make, or cause to be made, each
Loan Payment, as and when due, for the benefit of the owners of the Bonds into
the Bond Fund, as provided in the Indenture.

(b) By execution and delivery of this Agreement, the Company hereby approves the
Bond Resolution and the Indenture. It is hereby agreed that the foregoing
approval of the Bond Resolution and the Indenture constitutes the acknowledgment
and agreement of the Company that the Bonds, when issued, sold, and delivered as
provided in the Bond Resolution and the Indenture, will be issued in accordance
with and

 

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in compliance with this Agreement, notwithstanding any other provisions of this
Agreement or any other contract or agreement to the contrary. Any Bondholder is
entitled to rely fully and unconditionally on the foregoing approval.
Notwithstanding any provisions of this Agreement or any other contract or
agreement to the contrary, the Company’s approval of the Bond Resolution and the
Indenture shall be the Company’s agreement that all covenants and provisions in
this Agreement and the Indenture affecting the Company shall, upon the delivery
of the Bonds and the Indenture, become unconditional, valid, and binding
covenants and obligations of the Company so long as the Bonds and the interest
thereon are outstanding and unpaid. Particularly, the obligation of the Company
to make, promptly when due, all Loan Payments specified in this Agreement and
the Indenture shall be absolute and unconditional, and said obligation may be
enforced as provided in this Agreement and the Indenture.

Section 5.02. PAYMENT UPON REDEMPTION OF BONDS. The Issuer, upon the written
request of the Company (and provided that the affected Bonds are subject to
redemption or prepayment prior to maturity at the option of the Issuer, or the
Company, and provided that such request is received in sufficient time prior to
the date upon which such redemption or prepayment is proposed), forthwith shall
take or cause to be taken all action that may be necessary under the applicable
redemption provisions of the Indenture to effect such redemption prior to
maturity, to the full extent of funds either made available for such purpose by
the Company or already on deposit under the Indenture and available for such
purpose. The redemption of any outstanding Bonds prior to maturity at any time
shall not relieve the Company of its absolute and unconditional obligation to
pay each remaining Loan Payment with respect to any outstanding Bonds, as
specified in the Indenture. If a redemption of Bonds is required pursuant to the
provisions of the Indenture, the Company agrees as provided herein to forthwith
make Loan Payments sufficient to pay the principal of, premium, if any, and
interest on the Bonds.

Section 5.03. LOAN PAYMENTS. Payment of all Loan Payments shall be made and
deposited directly with the Trustee, no later than five days prior to any date
of payment on the Bonds as required by the Indenture, including all such
payments which may come due because of the acceleration of the maturity or
maturities of the Bonds upon default, call for redemption, purchase, or
otherwise, under the provisions of the Indenture. If any available funds in
excess of current requirements are held on deposit in the Bond Fund at the time
payment of any Loan Payment is due, such Loan Payment shall be reduced by the
amount of the available funds so held on deposit, to the benefit of the Company.
The Loan Payments, together with available funds held on deposit in the Bond
Fund, except funds held therein for payment of matured installments of principal
on the Bonds or interest payable thereon, shall be sufficient to pay when due
all principal of, redemption premium, if any, and interest on the Bonds. The
Company shall have the right to prepay or cause to be prepaid all or a portion
of each Loan Payment at any time, and shall be obligated to do so in a timely
manner if and to the extent the Company requests redemption or prepayment of the
Bonds. Any such prepayment by the Company shall not relieve it of liability for
each remaining Loan Payment with respect to the Outstanding Bonds except as
provided in this Agreement and the Indenture. In the event the Company should
fail to make any of the payments required in this Section 5.03, the amount so in
default shall continue as an obligation of the Company until such amount in
default shall have been fully paid.

Section 5.04. PAYMENTS TO ISSUER AND GOVERNMENTAL UNIT. Out of money from the
proceeds from the sale and delivery of the Bonds or out of funds provided by the
Company, there shall be paid all of the Issuer’s and Governmental Unit’s
reasonable actual out-of-pocket expenses and Costs of Issuance in connection
with the Bonds. In addition, the Governmental Unit shall receive out of proceeds
of the Bonds or out of other funds provided by the Company on or before the
Issue Date, an amount equal to one-half of one percent (.50%) of the original
principal amount of the Bonds to pay and reimburse the Governmental Unit for its
administrative expenses directly attributable and chargeable to the issuance of
the Bonds. Also the Company agrees to pay directly to the Governmental Unit on
October 1 of each year while

 

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any of the Bonds are outstanding, an amount sufficient to pay and reimburse the
Governmental Unit for any of its actual costs reasonably and necessarily
incurred in connection with the Bonds and the Project during the prior twelve
month period. The amount to be paid by the Company to the Governmental Unit
hereunder on each October 1 shall be the greater of the following two amounts:
(i) the actual costs reasonably and necessarily incurred by the Governmental
Unit during the prior twelve month period as set forth in a bill or statement
submitted by the Governmental Unit to the Company prior to said October 1, or
(ii) an amount of money equal to $100.00 for each $1,000,000, or part thereof,
of principal amount of the Bonds which are outstanding and unpaid as of the last
day of the month preceding said October 1 (the “alternate fee”). If the Company
shall not have received a bill or statement on or before October 1 for the
Governmental Unit’s actual costs incurred during the prior twelve month period,
the Company shall pay the alternate fee on said October 1. Although the amounts
payable to the Governmental Unit hereunder are due on October 1 of each year,
the Company shall not be in default in the payment of such amounts so long as
they are paid to the Governmental Unit within thirty days of receiving written
notice of non-payment thereof.

Section 5.05. PAYMENTS TO REPLENISH DEBT SERVICE RESERVE FUND. In the event of a
deficiency in the Debt Service Reserve Fund, the Company shall, by the first day
of each of the next three calendar months following such deficiency, pay into
the Debt Service Reserve Fund an amount equal to one-third of such deficiency.

Section 5.06. ISSUER’S RIGHTS ASSIGNED TO TRUSTEE. The Company is advised and
recognizes that as security for the payment of the Bonds, the Issuer will assign
to the Trustee the Issuer’s rights under this Agreement, including the right to
receive payments hereunder (except the right to receive payments, if any, under
Section 5.04, 6.03, and 7.03(a) hereof) and except the right to receive notices
hereunder, and hereby directs the Company to make said payments directly to the
Trustee. The Company herewith assents to such assignment and will make such
payments directly to the Trustee without defense or set-off by reason of any
dispute between the Company and the Issuer or the Trustee. All rights against
the Company arising under this Agreement or the Bond Resolution or Indenture and
assigned to the Trustee under the Indenture may be enforced by the Trustee, or
the owners of the Bonds, to the extent provided in the Indenture, and the
Trustee, or the owners of the Bonds, shall be entitled to bring any suit,
action, or proceeding against the Company, to the extent provided in the Bond
Resolution or Indenture, for the enforcement of this Agreement, and it shall not
be necessary in any such suit, action, or proceeding to make the Issuer a party
thereto.

Section 5.07. PAYMENTS TO TRUSTEE. The Company agrees to pay (i) the initial
acceptance fee of the Trustee and reasonable costs and expenses, including
reasonable attorneys’ fees and expenses, incurred by the Trustee in entering
into and executing the Indenture and (ii) until the principal of, premium, if
any, and interest on the Bonds shall have been fully paid or provision for the
payment thereof shall have been made in accordance with the provisions of the
Indenture, (A) an amount equal to the annual fee of the Trustee for the ordinary
services of the Trustee, as trustee, rendered and its reasonable ordinary
expenses incurred under the Indenture, including reasonable attorneys’ fees and
expenses, as and when the same become due, (B) the fees, charges and expenses of
the Trustee, as Bond Registrar and as Paying Agent, and any other Bond Registrar
or Paying Agent on the Bonds, as and when the same become due, (C) the
reasonable fees, charges and expenses of the Trustee for the necessary
extraordinary services rendered by it and extraordinary expenses incurred by it
under the Indenture or this Agreement, including, without limitation, the
additional compensation described in Section 8.5(f) of the Indenture, as and
when the same become due, including reasonable attorneys’ fees and expenses,
(D) the reasonable fees and expenses of any co-trustee appointed under the
Indenture, and (E) the cost of printing any Bonds required to be furnished by
the Issuer. In the event the Company should fail to make any of the payments
required in this Section 5.06, the item or installments so in default shall
continue as an obligation of the Company until the amount in default shall have
been fully paid. The provisions of this Section 5.06 shall survive termination
of this Agreement.

 

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Section 5.08. USURY. Anything herein to the contrary notwithstanding, it is the
intention of the parties hereto to conform strictly to the usury laws in force
that are applicable to this transaction. Accordingly, all agreements among the
parties hereto and beneficiaries hereof and their assigns or any of them,
whether now existing or hereafter arising, and whether written or oral, are
hereby limited so that in no contingency, whether by reason of acceleration of
amounts due hereunder or any part thereof or otherwise, shall the interest
(including all sums that are deemed to be interest) contracted for, charged or
received hereunder and/or with respect to the purchase of the Project exceed the
maximum amount permissible under applicable law.

ARTICLE VI

DEFAULTS AND REMEDIES

Section 6.01. EVENTS OF DEFAULT. The occurrence and continuation of any one of
the following shall constitute an “Event of Default” under this Agreement (an
“Event of Default”):

(a) failure by the Company to pay, when due, Loan Payments with respect to
principal of, premium, if any, or interest on any Bond or failure to make any
payments required by Section 5.05 hereof with respect to any deficiency in the
Debt Service Reserve Fund; or

(b) failure by the Company to observe and perform any covenant, condition or
agreement on its part required to be observed or performed in this Agreement,
other than as referred to in (a) above, for a period of 90 days after receipt by
the Company of written notice specifying such failure and requesting that it be
remedied, given to the Company by the Issuer or the Trustee, unless the Issuer
and the Trustee shall agree in writing to an extension of such time prior to its
expiration; provided further, however, if the failure stated in the notice
cannot be corrected within the applicable period, the Issuer and the Trustee
will not unreasonably withhold their consent to an extension of such time if
corrective action is instituted within the applicable period and diligently
pursued until the default is corrected; provided further, if any such failure
obligates the Company to prepay Loan Payments because of mandatory redemption of
Bonds pursuant to Section 9.1(c) of the Indenture, and such prepayment is in
fact made by the Company and Bonds are redeemed as provided in the Indenture,
then such failure by the Company shall not constitute an Event of Default under
this Agreement; or

(c) the occurrence of an Act of Bankruptcy and, if occurring by reason of clause
(b) of the definition thereof, such petition resulting therefrom shall not be
stayed or denied, or a proceeding resulting therefrom shall not be discharged,
within 90 days after the filing of such petition or the commencement of such
proceeding, as the case may be; or

(d) the occurrence of an “Event of Default” under the Indenture.

 

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Section 6.02. REMEDIES ON DEFAULT. Whenever any Event of Default shall have
happened and is existing, the Issuer, with the consent of the Trustee, or the
Trustee may take any one or more of the following remedial steps, but only if
acceleration of the principal amount of the Bonds has been declared pursuant to
Section 11.2 of the Indenture:

(a) By notice in writing to the Company, declare the unpaid Loan Payments to be
due and payable immediately, if concurrently with or prior to such notice the
unpaid principal amount of the Bonds has been declared to be due and payable
under the Indenture, and upon any such declaration the amounts payable under
Sections 5.01 and 5.03 hereof shall become and shall be immediately due and
payable in the amount set forth in Section 11.2 of the Indenture; provided,
however, that an Event of Default shall be deemed waived and a declaration
accelerating payment of unpaid Loan Payments payable under this Agreement shall
be deemed rescinded without further action on the part of the Trustee or the
Issuer upon any annulment by the Trustee of the corresponding declaration of
acceleration of the Bonds under Section 11.2 of the Indenture.

(b) Whatever action at law or in equity may appear necessary or desirable to
collect the payment and other amounts then due or to enforce performance and
observance of any obligation, agreement or covenant of the Company under this
Agreement.

In case the Issuer, with the consent of the Trustee, or the Trustee shall have
proceeded to enforce its rights under this Agreement and such proceedings shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to the Issuer and/or the Trustee, then and in every such case the
Issuer, the Company and the Trustee shall be restored respectively to their
several positions and rights hereunder, and all rights, remedies and powers of
the Issuer, the Company and the Trustee shall continue as though no such
proceeding had been taken.

The Company covenants that, in case an Event of Default shall occur with respect
to the payment of any Loan Payment payable under Sections 5.01 and 5.03 hereof,
then, upon written demand of the Trustee, the Company will pay to the Trustee
the whole amount that then shall have become due and payable under said Sections
5.01 and 5.03.

In case the Company shall fail forthwith to pay such amounts upon such demand,
the Trustee shall be entitled and empowered to institute any action or
proceeding at law or in equity for the collection of the sums so due and unpaid,
and may prosecute any such action or proceeding to judgment or final decree, and
may enforce any such judgment or final decree against the Company and collect in
the manner provided by law out of the property of the Company, the moneys
adjudged or decreed to be payable. Any sums collected by the Trustee shall be
applied as provided in the Indenture. The Issuer or the Trustee may pursue all
remedies now or hereafter existing at law or in equity to enforce the
performance and observance of any other obligation or agreement of the Company
under this Agreement including, without limitation, exercise the remedies of
mandamus or the appointment of a receiver in equity with the power to charge and
collect rents, purchase price payments, and loan payments and to apply revenues
from the Project in accordance with the terms hereof and of the Indenture.

If an Event of Default under Section 6.01(c) hereof shall occur and be
continuing, the Trustee shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole
amount owing and unpaid pursuant to this Agreement, irrespective of whether the
principal of the Bonds or any amount hereunder shall then be due and payable as
therein or herein expressed or by declaration or otherwise, and irrespective of
whether the Trustee shall have made any demand pursuant to the provisions of
this Section 6.02, and, in case of any judicial proceedings, to file such proofs
of claim and other papers or documents as may be necessary or advisable in order
to have the claims of the Trustee allowed in such judicial proceedings relative
to the Company, its creditors, or its property, and to collect and receive any
moneys or other property payable or deliverable on any such claims, and to
distribute the same after the deduction of its fees, charges and expenses; and
any receiver, assignee or trustee in bankruptcy or reorganization is hereby
authorized to make such payments to the Trustee, and to pay to the Trustee any
amount due it for compensation and expenses, including reasonable counsel fees
and expenses incurred by it up to the date of such distribution.

 

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The remedies for any “Event of Default” under the Indenture shall be as
specified in Article XI of the Indenture and are in addition to any remedies
hereunder.

In acting or omitting to act pursuant to the provisions of this Agreement, the
Trustee shall be entitled to all of the rights, protections and immunities
accorded to the Trustee under the terms of the Indenture, including but not
limited to those set out in Article XII thereof.

Section 6.03 AGREEMENT TO PAY ATTORNEYS’ FEES AND EXPENSES. In the event the
Company should default under any of the provisions of this Agreement and the
Issuer or the Trustee should employ attorneys or incur other expenses for the
collection of the payments due under this Agreement or the enforcement of
performance or observance of any obligation or agreement on the part of the
Company herein contained, the Company agrees that it will on demand therefor,
and upon presentation of an itemized bill, pay to the Issuer or the Trustee the
reasonable fees and expenses of such attorneys and such other expenses so
incurred by the Issuer or the Trustee, including such fees and expenses of
in-house counsel and legal staff of the Trustee.

ARTICLE VII

SPECIAL COVENANTS

Section 7.01. NO DEFENSE OR SET-OFF; UNCONDITIONAL OBLIGATION. The obligations
of the Company to make the payments required by this Agreement and to perform
and observe the other agreements on its part contained herein shall be absolute
and unconditional, irrespective of any defense or any rights of set-off,
recoupment or counterclaim it might otherwise have against the Issuer or any
other person, and the Company shall pay during the term of this Agreement the
payments to be made as prescribed in Article V and all other payments required
hereunder free of any deductions and without abatement, diminution or set-off;
and until such time as the principal of, premium, if any, and interest on the
Bonds shall have been fully paid, or provision for the payment thereof shall
have been made in accordance with the Indenture, the Company: (i) will not
suspend or discontinue any payments provided for in Article V hereof; (ii) will
perform and observe all of its other agreements contained in this Agreement; and
(iii) except as permitted herein, will not terminate this Agreement for any
cause, including, without limiting the generality of the foregoing, failure of
the Project to be acquired, constructed, improved, or completed, failure of the
Company to approve, receive, accept or use the Project, destruction of or damage
to the Project, commercial frustration of purpose, any change in the tax laws of
the United States of America or of the State of Texas or any political
subdivision of either of these, or any failure of the Issuer or the Trustee to
perform and observe any agreement, whether express or implied, or any duty,
liability or obligation arising out of or connected with this Agreement or the
Indenture, except to the extent permitted by this Agreement. Nothing contained
in this Section shall be construed to relieve the Issuer or the Trustee from the
performance of any agreements on their respective parts contained herein and the
Company shall be entitled to institute such action against the Issuer or the
Trustee as the Company shall deem appropriate to compel performance of any such
agreement, duty or obligation; provided, however, neither the Issuer nor the
Trustee shall be required to carry out any such agreement, duty or obligation
unless it is reimbursed for its costs and expenses to the extent set forth in
this Agreement.

 

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Section 7.02. CONSOLIDATION AND MERGER. The Company covenants that during the
term hereof it will maintain its existence, will not transfer all or
substantially all of its assets to, and will not consolidate with or merge into,
another entity; provided that, subject to the provisions of the Guarantee and
the Collateral Trust Agreement and with the consent of the Majority Holders, the
Company may consolidate with or merge into another domestic entity(i.e., a
entity existing under the laws of one of the states of the United States or the
District of Columbia), or transfer to another domestic entity all or
substantially all of its assets; provided that the surviving, resulting or
transferee corporation, as the case may be, if it is other than the Company,
(i) is a domestic entity as aforesaid and qualified to do business in the State,
and (ii) assumes in writing all of the obligations of the Company under this
Agreement. The Company shall within fifteen days after the execution thereof,
furnish to the Issuer and the Trustee appropriate documentation demonstrating
that the surviving, resulting or transferee corporation, as the case may be, is
a domestic entity, is qualified to do business in the State, and has assumed in
writing all of the obligations of the Company under this Agreement.

Section 7.03. INDEMNITIES. (a) Except as otherwise provided in Section 7.03
(c) below, the Company releases the Division, its directors, employees, and
agents, and the Issuer and the Governmental Unit, their officers, directors,
employees, agents, and attorneys (the “Indemnified Parties”) from, and the
Indemnified Parties shall not be liable for, and the Company agrees and shall
protect, indemnify, defend, and hold the Indemnified Parties harmless from, any
and all liability, cost, expense, damage, or loss of whatever nature (including,
but not limited to, attorneys’ fees, litigation and court costs, amounts paid in
settlement, and amounts paid to discharge judgments) directly or indirectly
resulting from, arising out of, in connection with, or related to (i) the
issuance, offering, sale, delivery, payment of the Bonds and the interest
thereon, or redemption of the Bonds, the provisions and rate of interest on the
Bonds, the Bond Resolution, the Indenture, and this Agreement and the
obligations imposed on the Issuer hereby and thereby; or the design,
construction, installation, operation, use, occupancy, maintenance, or ownership
of the Project; (ii) any written statements or representations made or given by
the Company or any of its officers or employees, to the Indemnified Parties, the
Trustee, or any underwriters or purchasers of any of the Bonds, with respect to
the Issuer, the Company, the Project, or the Bonds or the offer or issuance
thereof, including, but not limited to, statements or representations of facts,
financial information, or corporate affairs; (iii) damage to property or any
injury to or death of any person that may be occasioned by any cause whatsoever
pertaining to the Project; (iv) any loss or damage incurred by the Issuer as a
result of violation by the Company of the provisions of Sections 7.04 or 7.05
hereof; and (v) any action required to be taken by the Issuer under this
Agreement, the Bond Resolution, or the Indenture.

(b) The Company hereby agrees to indemnify and hold the Trustee and its
directors, officers, agents, and employees (collectively, the “Indemnitees”)
harmless from and against any and all claims, liabilities, losses, damages,
fines, penalties, and expenses, including out-of-pocket, incidental expenses,
legal fees and expenses, and the allocated costs and expenses of in-house
counsel and legal staff (“Losses”) that may be imposed on, incurred by, or
asserted against, the Indemnitees or any of them for following any instruction
or other direction upon which the Trustee is authorized to rely pursuant to the
terms of the Indenture, this Agreement or any of the financing documents. In
addition to and not in limitation of the immediately preceeding sentence, the
Company also agrees to indemnify and hold the Indemnitees and each of them
harmless from and against any and all Losses that may be imposed on, incurred
by, or asserted against the Indemnitees or any of them in connection with or
arising out of the Trustee’s performance under the Indenture, this Agreement or
any other financing document.

(c) If any claim is asserted under (a) above, the party seeking indemnity will
give prompt notice to the Company, and the Company shall have the sole right and
duty to assume, and will assume, the defense thereof, with full power to
litigate, compromise, or settle the same in its sole discretion. THE

 

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PROVISIONS OF SECTIONS 7.03(a) AND (b) SHALL REMAIN AND BE IN FULL FORCE AND
EFFECT EVEN IF ANY SUCH LIABILITY, COST, EXPENSE, DAMAGE, OR LOSS OR CLAIM
THEREFOR BY ANY PERSON, DIRECTLY OR INDIRECTLY RESULTS FROM, ARISES OUT OF, OR
RELATES TO, OR IS ASSERTED TO HAVE RESULTED FROM, ARISE OUT OF, OR BE RELATED
TO, IN WHOLE OR IN PART, ONE OR MORE NEGLIGENT ACTS OR OMISSIONS (OTHER THAN, IN
THE CASE OF AN INDEMNIFIED PARTY UNDER (a) ABOVE, AS A RESULT OF WILLFUL
MISCONDUCT OR BAD FAITH OF THE PARTY SEEKING INDEMNITY OR, IN THE CASE OF THE
TRUSTEE, AS A RESULT OF GROSS NEGLIGENCE, WILLFUL MISCONDUCT, OR BAD FAITH ON
THE PART OF THE TRUSTEE) OF THE PARTY SEEKING INDEMNITY, IN CONNECTION WITH THE
MATTERS SET FORTH THEREIN. Notwithstanding the foregoing, in any action naming
the Trustee as defendant, the Trustee shall have the right to retain separate
legal counsel at the expense of the Company; provided that, in the event that
the Company is not in Default under this Agreement, the Company shall have the
right of approval of any such legal counsel retained by the Trustee for the
Trustee’s defense, which approval shall not be unreasonably withheld and shall
be given promptly upon request by the Trustee. The Trustee and the Company shall
reasonably cooperate with each other in the defense of any such action.

(d) The provisions of this Section 7.03 shall survive the termination of this
Agreement and, with respect to the Trustee, the resignation or removal of the
Trustee for any reason.

Section 7.04. TAX-EXEMPT STATUS OF THE BONDS. It is the intention of the Company
and the Issuer that the interest on the Bonds be excludable from the gross
income of the holders thereof for federal income tax purposes, except for any
Bond for any period that such Bond is owned by a person who is a “substantial
user” of the proceeds or the Project or a “related person” within the meaning of
Section 147(a) of the Code. To that end, the Company and the Issuer (to the
extent reasonably within the control of the Issuer) covenant with each other,
and with the Trustee for the benefit of the Bondholders, to refrain from any
action which would adversely affect, and to take such action to assure, the
treatment of the Bonds as obligations described in Section 103(a) of the Code,
the interest on which is not includable in the “gross income” of the holder
(other than the income of a “substantial user” of the Project or a “related
person” within the meaning of Section 147(a) of the Code) for purposes of
federal income taxation. The Issuer agrees to submit, and the Company agrees to
cause the Issuer to submit, such closing documents for the Bonds, in accordance
with the rules of the Texas Bond Review Board, as may be necessary, and to take
such action as reasonably required, to cause the Texas Bond Review Board to
provide the certificate of allocation of state volume cap. Furthermore, the
Company hereby covenants as follows:

(a) to take such action as is necessary to ensure that at least 95% of the net
proceeds of the Bonds will be used to provide solid waste disposal facilities
within the meaning of Section 142(a)(6) of the Code;

(b) to refrain from taking any action that would result in the Bonds being
“federally guaranteed” within the meaning of Section 149(b) of the Code;

(c) to refrain from using any portion of the proceeds of the Bonds, directly or
indirectly, to acquire or to replace funds which were used, directly or
indirectly, to acquire investment property (as defined in Section 148(b)(2) of
the Code) which produces a materially higher yield over the term of the Bonds
than the yield on the Bonds, other than investment property acquired with

(i) proceeds of the Bonds invested for a period of three years or less until
such proceeds are used for the purposes for which the Bonds were issued,

 

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(ii) amounts invested in a bona fide debt service fund, within the meaning of
Section 1.148-1(b) of the Regulations, and

(iii) amounts deposited in any reasonably required reserve or replacement fund
to the extent such amounts do not exceed 10 percent of the proceeds of the Bonds
and to the extent that at no time during any bond year will the aggregate amount
so invested exceed 150 percent of debt service on the Bonds for such year;

(d) to otherwise restrict the use or investment of the proceeds of the Bonds or
amounts treated as proceeds of the Bonds, as may be necessary, to satisfy the
requirements of Section 148 of the Code (relating to arbitrage) and
Section 149(d) of the Code (relating to advance refundings);

(e) to use no more than 2 percent of the proceeds received from the sale of the
Bonds for the payment of Costs of Issuance (including underwriters’ discount, if
any);

(f) to use no portion of the proceeds of the Bonds to provide any airplane,
sky-box or other private luxury box, health club facility, facility primarily
used for gambling, or store the principal business of which is the sale of
alcoholic beverages for consumption off premises;

(g) to comply with the limitations imposed by Section 147(c) of the Code
(relating to the limitation on the use of proceeds to acquire land) and
Section 147(d) of the Code (relating to restrictions on the use of bond proceeds
to acquire existing buildings, structures or other property);

(h) to pay to the United States of America (to the extent not paid by the
Trustee pursuant to the Indenture) at least once during each five-year period
(beginning on the date of delivery of the Bonds) an amount that is at least
equal to 90 percent of the “Excess Earnings,” within the meaning of
Section 148(f) of the Code and to pay to the United States of America, not later
than 60 days after the Bonds have been paid in full, 100 percent of the amount
then required to be paid as a result of Excess Earnings under Section 148(f) of
the Code, unless the Bonds qualify for the exception to rebate set forth in
Section 148(f)(4)(B) of the Code or the Regulations thereunder; and

(f) to provide to the Trustee, at such time as required by the Trustee, all
information required by the Trustee with respect to Nonpurpose Investments (as
defined in Section 148 of the Code) not held in any fund under the Indenture.

For purposes of the foregoing (a) and (b), the term “proceeds” includes
“disposition proceeds” as defined in the Treasury Regulations and, in the case
of refunding bonds, transferred proceeds (if any) and proceeds of the refunded
bonds expended prior to the date of issuance of the Bonds.

It is the understanding of the Issuer and the Company that the covenants
contained herein are intended to assure compliance with the Code and any
regulations or rulings promulgated by the United States Department of the
Treasury pursuant thereto. In the event that regulations or rulings are
hereafter promulgated which modify or expand provisions of the Code, as
applicable to the Bonds, the Issuer and the Company will not be required to
comply with any covenant contained herein to the extent that such failure to
comply, in the opinion of Bond Counsel delivered to the Issuer, the Company, and
the Trustee, will not adversely affect the exclusion of interest on the Bonds
from the gross income of the owners of the Bonds for federal income tax purposes
under Section 103 of the Code. In the event that regulations or rulings are
hereafter promulgated which impose additional requirements which are applicable
to the Bonds, the Company agrees to comply with the additional requirements to
the extent necessary, in the opinion of Bond Counsel delivered to the Issuer,
the Company, and the Trustee, to preserve the exclusion of interest on the Bonds
from the gross income of the owners of the Bonds for federal income tax purposes
under Section 103

 

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of the Code. In furtherance of such intention, the Issuer hereby authorizes and
directs the President, the Vice President, Secretary, or Assistant Secretary to
execute any documents, certificates or reports required by the Code and to make
such elections, on behalf of the Issuer, which may be permitted by the Code as
are consistent with the purpose for the issuance of the Bonds.

Section 7.05. PAYMENT TO REBATE FUND. The Company hereby covenants and agrees to
make the determinations and to pay any deficiency in the Rebate Fund, at the
times and as described in Section 8.5 of the Indenture. In any event, if the
amount of cash held in the Rebate Fund shall be insufficient to permit Trustee
to make payment to the United States of any amount due under Section 148(f)(2)
of the Code, the Company forthwith shall pay the amount of such insufficiency on
such date to Trustee in immediately available funds. The obligations of the
Company under this Section 7.05 are direct obligations of the Company, acting
under the authorization of, and on behalf of, the Issuer and the Issuer shall
have no further obligation or duty with respect to the Rebate Fund.

Section 7.06. QUALIFICATION IN TEXAS. The Company agrees that, so long as it or
its affiliates own and operate the Project, it or any such affiliate will be
qualified to do business in the State.

Section 7.07. RECORDATION. The Company agrees that it will record and re-record
and file and refile any of the financing statements and all supplements and
necessary continuation statements with respect thereto, and such other
instruments as may be required from time to time to be recorded or filed, in
such manner and in such places as from time to time may be required by law in
order fully to preserve and protect any security interests of the Owners of the
Bonds and the rights of the Trustee hereunder and under the Indenture. The
Company shall promptly provide copies of such instruments to the Trustee.

ARTICLE VIII

GENERAL PROVISIONS

Section 8.01. GENERAL PROVISIONS. (a) The terms of this Agreement may be
enforced as to one or more breaches either separately or cumulatively.

(b) No remedy conferred upon or reserved to the Issuer, the Company or the
Trustee in this Agreement is intended to be exclusive of any other available
remedy or remedies, but each and every such remedy shall be cumulative and shall
be in addition to every other remedy now or hereafter existing at law or in
equity or by statute. No delay or omission to exercise any right or power
accruing upon any default, omission, or failure of performance hereunder shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to time and as often as may
be deemed expedient. In the event any provision contained in this Agreement
should be breached by the Issuer or the Company and thereafter duly waived, such
waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other breach of this Agreement. No waiver by either party of
any breach by the other party of any of the provisions of this Agreement shall
be construed as a waiver of any subsequent breach, whether of the same or of a
different provision of this Agreement. In view of the assignment of the Issuer’s
rights in and under this Agreement to the Trustee under the Indenture, the
Issuer shall have no power to waive any default hereunder by the Company without
the consent of the Trustee. Any waiver of any “Event of Default” under the
Indenture and a rescission and annulment of its consequences shall constitute a
waiver of the corresponding Event of Default hereunder and a rescission and
annulment of the consequences thereof.

 

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(c) Headings of the Sections of this Agreement have been inserted for
convenience of reference only and in no way shall they affect the interpretation
of any of the provisions of this Agreement.

(d) This Agreement is made for the exclusive benefit of the Issuer, the Trustee,
the owners of the Bonds and the Company, and their respective successors and
assigns herein permitted, and not for any third party or parties; and nothing in
this Agreement, expressed or implied, is intended to confer upon any party or
parties other than the Issuer, the Trustee, and the Company, and their
respective successors and assigns herein permitted, any rights or remedies under
or by reason of this Agreement. In particular, but not by way of limitation, the
Trustee shall be a third-party beneficiary for purposes of enforcing its rights
and the Company’s obligations under Sections 5.06 and 7.03(b) and (c) of this
Agreement as fully as if the Trustee had been a party in privity of contract
with the Company hereunder.

Section 8.02. FINANCIAL STATEMENTS. The Company shall furnish to the Trustee as
soon as available and in any event within 120 days after the end of its fiscal
year (currently December 31) a balance sheet of the Company and its consolidated
subsidiaries as of the end of such fiscal year and the related statements of
income, cash flows, and change in stockholder’s equity for such fiscal year, all
prepared in accordance with GAAP and reported on by an Accountant whose report
shall state that such financial statements present fairly the Company’s
financial position as of the end of such fiscal year and the results of
operations and cash flows for such fiscal year. Notwithstanding the foregoing,
if and when and so long as the Company shall file regular and periodic reports
with the SEC pursuant to Section 13 and 15 of the Securities Exchange Act of
1934, the delivery by the Company to the Trustee of copies of its reports on
Forms 10K and 10Q promptly following filing thereof with the SEC shall
constitute full compliance with this Section 8.02. The Trustee is authorized to
provide to any Bondholder, upon written request and payment of all costs by such
Bondholder, copies of any of such financial statements and reports but the
Trustee shall have no other responsibility with respect thereto.

Section 8.03. AMENDMENT OF AGREEMENT. No amendment, change, addition to, or
waiver of any of the provisions of this Agreement shall be binding upon the
parties hereto unless in writing signed by the Authorized Company Representative
and the Authorized Issuer Representative, and acknowledged in writing by the
Trustee and the Bank, if any. Notwithstanding any of the foregoing, it is
covenanted and agreed, for the benefit of the holders of the Bonds, and the
Trustee that the provisions of this Agreement shall not be amended, changed,
added to, or waived in any way which would relieve, reduce or abrogate the
obligations of the Company to make or pay, or cause to be made or paid, when
due, all Loan Payments with respect to any then outstanding Bonds which have
been issued and delivered pursuant to this Agreement, in the manner and under
the terms and conditions provided herein and in the Bond Resolution or
Indenture, or which would change or affect Article II, Sections 5.01, 5.02,
5.03, 5.05, 5.06, 6.01, 7.01, 7.02, 7.04, 7.05, 8.03, or 8.04 hereof unless, in
the judgment of the Trustee, which may be made in reliance upon an opinion of
Counsel, such change or amendment would not materially adversely affect the
interests of the Bondholders.

Section 8.04. ASSIGNMENT. The Company may assign its interest in this Agreement
in whole or in part, provided, however, no assignment (other than pursuant to
Section 7.02 hereof) shall relieve the Company from primary liability for any of
its obligations hereunder, and without limiting the generality of the foregoing,
in the event of any such assignment, the Company shall continue to remain
primarily liable for its payments specified herein and for performance and
observance of the other covenants and agreements on its part herein provided;
and further provided that no assignment shall be effective unless there is
delivered a Favorable Opinion with respect to such assignment. The Company
shall, on or prior to the effective date of any such assignment, furnish or
cause to be furnished to the Issuer and the Trustee notice of such assignment,
together with the referenced Favorable Opinion.

 

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Section 8.05. TERM OF AGREEMENT. The term of this Agreement shall be from the
date hereof until all payments and indemnities required to be made by the
Company pursuant hereto shall have been made.

Section 8.06. NOTICES. Any notice, request or other communication under this
Agreement shall be given in writing and shall be deemed to have been given by
either party to the other party at the addresses shown below upon any of the
following dates:

(a) The date of notice by telefax, telecopy, or similar telecommunications,
which is confirmed promptly in writing;

(b) Three Business Days after the date of the mailing thereof, as shown by the
post office receipt if mailed to the other party hereto by registered or
certified mail;

(c) The date of actual receipt thereof by such other party if not given pursuant
to (a) or (b) above.

The address for notice for each of the parties shall be as follows:

If to the Issuer:

Gulf Coast Industrial Development Authority

910 Bay Area Boulevard

Houston, Texas 77058

Attention: President

Fax #: (713)488-3331

If to the Company:

Microgy Holdings, LLC

One Cate Street, 4th Floor

Portsmouth, New Hampshire 03801

Attention: Richard E. Kessel

Fax #: (603)431-2650

with a copy to:

General Counsel

Fax #: (603)433-6372

If to the Trustee:

Wells Fargo Bank, National Association

4 Penn Center, Suite 810

1600 JFK Boulevard

Philadelphia, Pennsylvania 19103

Attention: Corporate Trust Services Group

Fax #: (215) 861-9460

or the latest address specified by such other party in writing.

 

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Section 8.07. SEVERABILITY. If any clause, provision or Section of this
Agreement should be held illegal or invalid by any court, the invalidity of such
clause, provision or Section shall not affect any of the remaining clauses,
provisions or Sections hereof and this Agreement shall be construed and enforced
as if such illegal or invalid clause, provision or Section had not been
contained herein. In case any agreement or obligation contained in this
Agreement should be held to be in violation of law, then such agreement or
obligation shall be deemed to be the agreement or obligation of the Company or
the Issuer, as the case may be, to the full extent permitted by law.

Section 8.08. EXECUTION OF COUNTERPARTS. This Agreement may be simultaneously
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.

Section 8.09. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED EXCLUSIVELY BY AND
CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF TEXAS. VENUE
FOR ANY ACTIONS BROUGHT HEREUNDER TO WHICH THE ISSUER IS A PARTY SHALL LIE IN
HARRIS COUNTY, TEXAS.

Section 8.10. NO PERSONAL LIABILITY. No covenant or agreement contained in this
Agreement shall be deemed to be the covenant or agreement of any official,
officer, agent, or employee of the Issuer or the Company in his or her
individual capacity, and no such person shall be subject to any personal
liability or accountability by reason of the issuance thereof.

Section 8.11. FINAL AGREEMENT OF THE PARTIES. THIS AGREEMENT CONSTITUTES A LOAN
AGREEMENT FOR PURPOSES OF SECTION 26.02(a) OF THE TEXAS BUSINESS AND COMMERCE
CODE, AND REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
in multiple counterparts, each of which shall be considered an original for all
purposes, as of the day and year first set out above.

 

  GULF COAST INDUSTRIAL DEVELOPMENT AUTHORITY   By  

/s/ Ron Crowder

    President ATTEST:    

/s/ [illegible]

    Secretary     (SEAL)    

 

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    MICROGY HOLDINGS, LLC   By:  

/s/ John F. O’Neill

  Title:   Vice President and Treasurer ATTEST:        

/s/ Dennis Haines

        Title: Vice President and Secretary    

 

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EXHIBIT A

DESCRIPTION OF FACILITIES

ERATH COUNTY, TEXAS - Huckabay Ridge Facility

The Facility consists of a large-scale biogas production and gas conditioning
facility intended to produce and sell pipeline-grade methane by interconnecting
directly with the local natural gas pipeline. The Facility is expected to entail
the construction of digesters to process the manure from cattle. The Facility is
expected to produce biogas to be treated and compressed to produce and deliver
pipeline-grade methane that will be sold as a commodity directly into a natural
gas pipeline. The Facility will be located on a 72.3 acre parcel in Erath
County, Texas. Access to the facility is provided by County Roads 403 and 404
intersect at the northern-most corner of the property.

ERATH COUNTY, TEXAS - Rio Leche Facility

The Facility consists of a large-scale biogas production and gas conditioning
facility intended to produce and sell pipeline-grade methane by interconnecting
directly with the local natural gas pipeline. The Facility is expected to entail
the construction of digesters to process the manure from cattle. The Facility is
expected to produce biogas to be treated and compressed to produce and deliver
pipeline-grade methane that will be sold as a commodity directly into a natural
gas pipeline. The Facility is located on 94 acres in Erath County, Texas. County
Road 390 provides access to the property.

DEAF SMITH COUNTY, TEXAS - Mission Dairy Facility

The Facility consists of a large-scale biogas production and gas conditioning
facility intended to produce and sell pipeline-grade methane by interconnecting
directly with the local natural gas pipeline. The Facility is expected to entail
the construction of digesters to process the manure from cattle. The Facility is
expected to produce biogas to be treated and compressed to produce and deliver
pipeline-grade methane that will be sold as a commodity directly into a natural
gas pipeline. The Facility will be located on 11.8 acres from Mission Dairy on
which the Mission Plant is located. Mission Plant site is located in Deaf Smith
County, approximately 17 miles north of Hereford, Texas. Also, located
approximately one mile east of U.S. Highway 385, access to the site is provided
by County Road GG, between County Road 20 and County Road 21.

DEAF SMITH COUNTY, TEXAS - Cnossen Dairy Facility

The Facility consists of a large-scale biogas production and gas conditioning
facility intended to produce and sell pipeline-grade methane by interconnecting
directly with the local natural gas pipeline. The Facility is expected to entail
the construction of digesters to process the manure from cattle. The Facility is
expected to produce biogas to be treated and compressed to produce and deliver
pipeline-grade methane that will be sold as a commodity directly into a natural
gas pipeline. The Facility is known as the Cnossen Facility and is located
adjacent to the Mission Dairy on which the Mission Plant Facility is to be
located in Deaf Smith County, Texas.

 

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