Exhibit 10.29


 


Execution Copy


 




 





 


CITY OF GARNETT, KANSAS,

As Lessor,


 


 


AND


 


 


EAST KANSAS AGRI-ENERGY, L.L.C.

As Lessee


 






 


LEASE AGREEMENT


 


Dated as of December 1, 2005


 






 


Relating to:


 


$50,000,000

(Aggregate Maximum Principal Amount)

City of Garnett, Kansas

Industrial Revenue Bonds

(East Kansas Agri-Energy Project)

Series 2005


 




 





 


 


The interest of the City of Garnett, Kansas (the “City”) in this Lease
Agreement has been pledged and assigned to Security Bank of Kansas City, as
Trustee under the Trust Indenture dated as of December 1, 2005, between
the City and the Trustee.


 

















 


LEASE AGREEMENT


 


TABLE OF CONTENTS


 


	
   

  	
  Page

  
	
   

  	
   

  
	
  Parties

  	
  1

  	
   

  
	
  Recitals

  	
  1

  	
   

  
	
   

  	
   

  
	
  ARTICLE I

  
	
   

  	
   

  
	
  DEFINITIONS

  
	
   

  	
   

  
	
  Section 1.1. Definitions of Words and Terms

  	
  2

  	
   

  
	
  Section 1.2. Rules of Interpretation

  	
  4

  	
   

  
	
   

  	
   

  
	
  ARTICLE II

  
	
   

  
	
  REPRESENTATIONS

  
	
   

  	
   

  
	
  Section 2.1. Representations by the City

  	
  5

  	
   

  
	
  Section 2.2. Representations by the Company

  	
  5

  	
   

  
	
   

  	
   

  
	
  ARTICLE III

  
	
   

  
	
  GRANTING PROVISIONS

  
	
   

  	
   

  
	
  Section 3.1. Granting of Leasehold Estate

  	
  6

  	
   

  
	
  Section 3.2. Lease Term

  	
  7

  	
   

  
	
  Section 3.3. Possession and Use of the Project

  	
  7

  	
   

  
	
   

  	
   

  
	
  ARTICLE IV

  
	
   

  
	
  PURCHASE, CONSTRUCTION, INSTALLATION AND

  
	
  EQUIPPING OF THE PROJECT

  
	
   

  	
   

  
	
  Section 4.1. Issuance of the Bonds

  	
  7

  	
   

  
	
  Section 4.2. Purchase, Construction, Installation and Equipping
  of the Project

  	
  8

  	
   

  
	
  Section 4.3. Project Costs

  	
  9

  	
   

  
	
  Section 4.4. Payment for Project Costs

  	
  9

  	
   

  
	
  Section 4.5. Establishment of Completion Date

  	
  9

  	
   

  
	
  Section 4.6. Surplus or Deficiency in Construction Fund

  	
  10

  	
   

  
	
  Section 4.7. Project Property of City

  	
  10

  	
   

  
	
  Section 4.8. Machinery and Equipment Purchased by the Company

  	
  10

  	
   

  



 


ii

















 


	
  ARTICLE V

  
	
   

  
	
  RENT PROVISIONS

  
	
   

  	
   

  
	
  Section 5.1. Basic Rent

  	
  10

  	
   

  
	
  Section 5.2. Additional Rent

  	
  11

  	
   

  
	
  Section 5.3. Obligations of Company Absolute and Unconditional

  	
  11

  	
   

  
	
  Section 5.4. Prepayment of Basic Rent

  	
  12

  	
   

  
	
  Section 5.5. Redemption of Bonds

  	
  12

  	
   

  
	
   

  	
   

  
	
  ARTICLE VI

  
	
   

  
	
  MAINTENANCE, TAXES AND UTILITIES

  
	
   

  	
   

  
	
  Section 6.1. Maintenance and Repairs

  	
  12

  	
   

  
	
  Section 6.2. Taxes, Assessments and Other Governmental Charges

  	
  12

  	
   

  
	
  Section 6.3. Utilities

  	
  13

  	
   

  
	
  Section 6.4. Ad Valorem Taxes

  	
  13

  	
   

  
	
  Section 6.5. Reserved

  	
  13

  	
   

  
	
  Section 6.6. Kansas Retailer’s Sales Tax

  	
  13

  	
   

  
	
   

  	
   

  
	
  ARTICLE VII

  
	
   

  
	
  INSURANCE

  
	
   

  	
   

  
	
  Section 7.1. Title Insurance

  	
  14

  	
   

  
	
  Section 7.2. Casualty Insurance

  	
  14

  	
   

  
	
  Section 7.3. Public Liability Insurance

  	
  15

  	
   

  
	
  Section 7.4. Blanket Insurance Policies

  	
  15

  	
   

  
	
  Section 7.5. Indemnification of Trustee

  	
  15

  	
   

  
	
   

  	
   

  
	
  ARTICLE VIII

  
	
   

  
	
  ALTERATION OF THE PROJECT

  
	
   

  	
   

  
	
  Section 8.1. Additions, Modifications and Improvements of the
  Project

  	
  16

  	
   

  
	
  Section 8.2. Removal of Project Equipment

  	
  16

  	
   

  
	
  Section 8.3. Additional Improvements on the Project Site

  	
  17

  	
   

  
	
  Section 8.4. Permits and Authorizations

  	
  18

  	
   

  
	
  Section 8.5. Mechanics’ Liens

  	
  18

  	
   

  
	
  Section 8.6. Option to Purchase Unimproved Portions of the
  Project Site

  	
  18

  	
   

  



 


iii

















 


	
  ARTICLE IX

  
	
   

  
	
  DAMAGE, DESTRUCTION AND CONDEMNATION

  
	
   

  	
   

  
	
  Section 9.1. Damage or Destruction

  	
  19

  	
   

  
	
  Section 9.2. Condemnation

  	
  21

  	
   

  
	
   

  	
   

  
	
  ARTICLE X

  
	
   

  
	
  SPECIAL COVENANTS

  
	
   

  	
   

  
	
  Section 10.1. No Warranty of Condition or Suitability by the
  City; Exculpation And Indemnification

  	
  22

  	
   

  
	
  Section 10.2. Surrender of Possession

  	
  22

  	
   

  
	
  Section 10.3. City’s Right of Access to the Project

  	
  23

  	
   

  
	
  Section 10.4. Granting of Easements; Leasehold Mortgages

  	
  23

  	
   

  
	
  Section 10.5. Indemnification of City and Trustee

  	
  25

  	
   

  
	
  Section 10.6. Depreciation, Investment Tax Credit and Other Tax
  benefits

  	
  27

  	
   

  
	
  Section 10.7. Company to Maintain its Corporate Existence

  	
  27

  	
   

  
	
  Section 10.8. Security Interests

  	
  27

  	
   

  
	
   

  	
   

  
	
  ARTICLE XI

  
	
   

  
	
  OPTION AND OBLIGATION TO PURCHASE THE
  PROJECT

  
	
   

  	
   

  
	
  Section 11.1. Option to Purchase the Project

  	
  27

  	
   

  
	
  Section 11.2. Conveyance of the Project

  	
  27

  	
   

  
	
  Section 11.3. Relative Position of Option and Indenture

  	
  27

  	
   

  
	
  Section 11.4. Obligation to Purchase the Project

  	
  27

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII

  
	
   

  
	
  DEFAULTS AND REMEDIES

  
	
   

  	
   

  
	
  Section 12.1. Events of Default

  	
  28

  	
   

  
	
  Section 12.2. Remedies on Default

  	
  28

  	
   

  
	
  Section 12.3. Survival of Obligations

  	
  29

  	
   

  
	
  Section 12.4. Limitation of Liability and Indemnity

  	
  29

  	
   

  
	
  Section 12.5. Performance of the Company’s Obligations by the
  City

  	
  30

  	
   

  
	
  Section 12.6. Rights and Remedies Cumulative

  	
  30

  	
   

  
	
  Section 12.7. Waiver of Breach

  	
  30

  	
   

  
	
  Section 12.8. Notice of Defaults Under Section 12.1;
  Opportunity of Company To Cure Defaults

  	
  30

  	
   

  
	
  Section 12.9. Trustee’s Exercise of the City’s Remedies

  	
  31

  	
   

  



 


iv

















 


	
  ARTICLE XIII

  
	
   

  
	
  ASSIGNMENT AND SUBLEASE

  
	
   

  	
   

  
	
  Section 13.1. Assignment; Sublease

  	
  31

  	
   

  
	
  Section 13.2. Assignment of Revenues by City

  	
  32

  	
   

  
	
  Section 13.3. Prohibition Against Fee Mortgage of Project

  	
  32

  	
   

  
	
  Section 13.4. Restrictions on Sale or Encumbrance of Project by
  City

  	
  32

  	
   

  
	
   

  	
   

  
	
  ARTICLE XIV

  
	
   

  
	
  AMENDMENTS, CHANGES AND MODIFICATIONS

  
	
   

  	
   

  
	
  Section 14.1. Amendments, Changes and Modifications

  	
  32

  	
   

  
	
   

  	
   

  
	
  ARTICLE XV

  
	
   

  
	
  MISCELLANEOUS PROVISIONS

  
	
   

  	
   

  	
   

  
	
  Section 15.1. Notices

  	
  33

  	
   

  
	
  Section 15.2. City Shall Not Unreasonably Withhold Consents and
  Approvals

  	
  33

  	
   

  
	
  Section 15.3. Net Lease

  	
  34

  	
   

  
	
  Section 15.4. No Pecuniary Liability

  	
  34

  	
   

  
	
  Section 15.5. Governing Law

  	
  34

  	
   

  
	
  Section 15.6. Electronic Storage

  	
  34

  	
   

  
	
  Section 15.7. Binding Effect

  	
  34

  	
   

  
	
  Section 15.8. Severability

  	
  34

  	
   

  
	
  Section 15.9. Execution in Counterparts

  	
  34

  	
   

  
	
   

  	
   

  	
   

  
	
  Signatures and Seals

  	
   

  
	
  Acknowledgments

  	
   

  
	
   

  	
   

  
	
  Exhibit A – Excluded Property

  	
   

  
	
  Exhibit B – Project Equipment

  	
   

  
	
  Exhibit C – Project Improvements

  	
   

  
	
  Exhibit D – Project Site

  	
   

  
	
  Exhibit E – Form of Requisition
  Certificate

  	
   

  



 


v

















 


LEASE AGREEMENT


 


THIS LEASE AGREEMENT,
dated as of December 1, 2005 (the “Lease”), between the CITY OF GARNETT, KANSAS, a municipal corporation organized
and existing under the laws of the State of Kansas (the “City”), as lessor, and
EAST KANSAS AGRI-ENERGY, L.L.C., a
Kansas limited liability company (the “Company”); as lessee;


 


WITNESSETH:


 


WHEREAS, the City is
authorized under the provisions of K.S.A. 12-1740 to 12-1749d, inclusive, as
amended (the “Act”), to acquire, purchase, construct, improve, equip, remodel,
sell and lease certain facilities within its jurisdiction for commercial
purposes, and to issue revenue bonds for the purpose of paying the cost of such
facilities, and to pledge the income and revenues to be derived from the
operation of such facilities to secure the payment of the principal of and
interest on such bonds;


 


WHEREAS, pursuant to
the Act, the governing body of the City has heretofore passed Ordinance No. 3602
(the “Ordinance”) on June 14, 2005, authorizing the City to issue its
Industrial Revenue Bonds (East Kansas Agri-Energy Project), Series 2005,
in the aggregate maximum principal amount of $50,000,000 (the “Bonds”), for the
purpose of acquiring, purchasing, constructing, installing and equipping a
commercial project, consisting of an ethanol production facility, including
land, buildings, structures, improvements, fixtures, machinery and equipment as
hereinafter more fully described (the “Project”), and authorizing the City to
lease the Project to the Company;


 


WHEREAS, pursuant to
such Ordinance, the City is authorized to enter into, a Trust Indenture of even
date herewith (the “Indenture”), with Security Bank of Kansas City, a state
banking corporation (the “Trustee”), for the purpose of issuing and securing
the Bonds, as therein provided, and to enter into this Lease with the Company
under which the City will acquire, purchase, construct, improve, equip and
remodel the Project and will lease the Project to the Company in consideration
of rental payments by the Company which will be sufficient to pay the principal
of and interest on the Bonds; and


 


WHEREAS, pursuant to
the foregoing, the City desires to lease the Project to the Company and the
Company desires to lease the Project from the City, for the rentals and upon
the terms and conditions hereinafter set forth.


 


NOW, THEREFORE, in
consideration of the premises and the mutual representations, covenants and
agreements herein contained, the City and the Company do hereby represent,
covenant and agree as follows:


 


ARTICLE I


 



DEFINITIONS


 


Section 1.1.           Definitions of Words and Terms.
In addition to any words and terms defined elsewhere in this Lease and the
words and terms defined in Section 101
of the Indenture which 


 


1

















 


definitions are hereby incorporated herein by reference, and terms
defined, the following words and terms as used in this Lease shall have the
following meanings:


 


“Additional Rent”
means the additional rental described in Sections 5.2
and 6.2 of this Lease and, in addition, all
payments required to be made to the Anderson County Treasurer, if any, in lieu
of general ad valorem and personal property taxes pursuant to the Tax Abatement
Agreement.


 


“Basic Rent” means
the rental described in Section 5.1
of this Lease.


 


“Event of Default”
means any Event of Default as described in Section 12.1
of this Lease.


 


“Excluded Property”
means the personal property described on Exhibit A
attached hereto and by this reference made a part hereof


 


“Full Insurable Value”
means an amount at least sufficient to avoid the effect of any coinsurance
provisions of the applicable fire and casualty insurance policy.


 


“Indenture” means
the Trust Indenture dated as of December 1, 2005, between the City and the
Trustee, as from time to time amended and supplemented in accordance with the
provisions thereof.


 


“Lease” means this
Lease Agreement, between the City and the Company, as from time to time amended
and supplemented in accordance with the provisions of this Lease and Article XII of the Indenture.


 


“Leasehold Mortgage”
means any Leasehold Mortgage, Assignment of Rents and Leases and Security
Agreement, relating to the Project and any other leasehold mortgage permitted pursuant
to the provisions of Section 10.4(b) hereof.


 


“Lease Term” means
the period from the effective date of this Lease until the expiration thereof
pursuant to Section 3.2 of this Lease.


 


“Mortgage” means the
Future Advance Mortgage dated November 23, 2004 from the Company to Home
Federal Savings Bank, as supplemented and amended.


 


“Net Proceeds”
means, when used with respect to any insurance or condemnation award with
respect to the Project, the gross proceeds from the insurance or condemnation
award with respect to which that term is used remaining after payment of all
expenses (including attorneys’ fees, trustee’s fees and any extraordinary
expenses of the City and the Trustee) incurred in the collection of such gross
proceeds.


 


“Permitted Encumbrances”
means, as of any particular time (a) liens for ad valorem taxes and
special assessments not then delinquent, (b) the Indenture, (c) this
Lease, (d) utility, access and other easements and rights-of-way, mineral
rights, restrictions, exceptions and encumbrances that will not materially
interfere with or impair the operations being conducted on the Project Site or
easements granted to the City, (e) such minor defects, irregularities,
encumbrances, easements, 


 


2

















 


mechanic’s liens, rights-of-way and clouds on title as normally exist
with respect to properties similar in character to the Project and as do not in
the aggregate materially impair the property affected thereby for the purpose
for which it was acquired or is held by the City, (f) the Mortgage and any
Leasehold Mortgage, and (g) any other lien, encumbrance, lease, easements,
restrictions or covenants consented to by the Owner of 100% of the principal
amount of the Bonds.


 


“Plans and Specifications”
means the plans and specifications prepared. for and showing the Project, as
amended by the Company from time to time prior to the Completion Date, the same
being duly certified by the Company, and on file at the principal office of the
Company in Olathe, Kansas and which shall be available for reasonable
inspection by the City, the Trustee and their duly appointed representatives.


 


“Project Equipment”
means all items of machinery, equipment and parts or other personal property
installed or acquired or to be acquired for installation in the Project
Improvements or elsewhere on the Project Site pursuant to Article IV
hereof and paid for in whole or in part from the proceeds of Bonds, as
described in Exhibit B attached hereto and
by this reference made a part hereof, and all replacements thereof and
substitutions therefor made pursuant to this Lease.


 


“Project Improvements”
means all buildings, structures, improvements and fixtures located on or to be
acquired, purchased, constructed, improved or remodeled on the Project Site
pursuant to Article IV hereof, as
described in Exhibit C attached hereto and
by this reference made a part hereof, and all additions, alterations,
modifications and improvements thereof made pursuant to this Lease.


 


“Project Site” means
all of the real estate described in Exhibit D
attached hereto and by this reference made a part hereof.


 


“Trustee” means
Security Bank of Kansas City, a state banking corporation, duly organized and
existing under the laws of the State of Kansas, and its successor or successors
and any other corporation which at the time may be substituted in its
place pursuant to and at the time serving as Trustee under this Indenture.


 


Section 1.2.                                Rules of
Interpretation.


 


(a)                                  Words
of the masculine; gender shall be deemed and construed to include correlative
words of the feminine and neuter genders.


 


(b)                                 Unless
the context shall otherwise indicate, words importing the singular number shall
include the plural and vice versa, and words importing persons shall include
firms, associations and corporations, including governmental entities, as well
as natural persons.


 


(c)                                  Wherever
in this Lease it is provided that either part shall or will make any
payment or perform or refrain from performing any act or obligation, each
such provision shall, even though not so expressed, be construed as an express
covenant to make such payment or to perform, or not to perform, as the case may be,
such act or obligation.


 


(d)                                 All
references in this instrument to designated “Articles,” “Sections” and other 


 


3

















 


subdivisions are, unless otherwise specified, to the designated
Articles, Sections and subdivisions of this instrument as originally executed.
The words “herein,” “hereof,” “hereunder” and other words of similar import
refer to this Lease Agreement as a whole and not to any particular Article, Section or
other subdivision.


 


(e)                                  The
Table of Contents and the Article and Section headings of this Lease
shall not be treated as a part of this Lease or as affecting the true
meaning of the provisions hereof.


 


ARTICLE II


 


REPRESENTATIONS


 


Section 2.1.                                Representations
by the City. The City makes the following representations as the basis for
the undertakings on its part herein contained:


 


(a)                                  The
City is a municipal corporation duly organized and validly existing under the
laws of the State of Kansas. Under the provisions of the Act, the City has
lawful power and authority to enter into the transactions, contemplated by this
Lease and to carry out its obligations hereunder. By proper action of its
governing body, the City has been duly authorized to execute and deliver this
Lease, acting by and through its duly authorized officers.


 


(b)                                 The
City proposes to acquire the Project Site, subject to Permitted Encumbrances,
and proposes to acquire, purchase, construct, improve, equip and remodel or
cause to be acquired, purchased, constructed, improved, equipped and remodeled
on the Project Site the Project Improvements, and proposes to acquire and
install, or cause to be acquired and installed, the Project Equipment in the
Project Improvements or on the Project Site. The City proposes to lease the
Project to the Company and sell the Project to the Company if the Company
exercises its option to purchase the Project, all for the purpose of furthering
the public purposes of the Act, and the governing body of the City has found
and determined that the acquisition, purchase, construction, improving,
equipping and remodeling of the Project will further the public purposes of the
Act.


 


(c)                                  To
finance the costs of the Project, the City proposes to issue the Bonds which
will be scheduled to mature as set forth in Article II
of the Indenture and will be subject to redemption prior to maturity in
accordance with the provisions of Article III
of the Indenture.


 


(d)                                 The
Bonds are to be issued under and secured by the Indenture, pursuant to which
the Project and the net earnings therefrom, including all rents, revenues and
receipts to be derived by the City from the leasing or sale of the Project,
will be pledged and assigned to the Trustee as security for payment of the
principal of and interest on the Bonds.


 


(e)                                  The
City will not mortgage the Project or pledge the revenues derived therefrom for
any bonds or other obligations other than the Bonds except with the written
consent of the Authorized Company Representative.


 


(f)                                    The
City shall have no authority to operate the Project as a business or in any
other manner except as the lessor thereof.


 


4

















 


(g)                                 The
acquisition, purchase, construction, improvement, equipping and remodeling of
the Project and the leasing of the Project by the City to the Company will
further the public purposes of the Act.


 


(h)                                 No
member of the governing body of the City or any other officer of the City has
any significant or conflicting interest, financial, employment or otherwise, in
the Company or in the transactions contemplated hereby.


 


Section 2.2.           Representations by the Company.
The Company makes the following representations as the basis for the
undertakings on its part herein contained:


 


(a)                                  The
Company is a limited liability company validly existing and in good standing
under the laws of the State of Kansas and duly qualified to do business in the
State of Kansas.


 


(b)                                 The
Company has lawful power and authority to enter into this Lease and to carry
out its obligations hereunder and by proper corporate action of its Members,
the Company has been duly authorized to execute and deliver this Lease.


 


(c)                                  The
execution and delivery of this Lease, the consummation of the transactions
contemplated hereby, and the performance of or compliance with the terms and
conditions of this Lease by the Company will not conflict with or result in a
material breach of any of the terms, conditions or provisions of, or constitute
a material default under, any mortgage, deed of trust, lease or any other
corporate restrictions or any agreement or instrument to which the Company is a
party or by which it or any of its property is bound, or the Company’s Articles
of Organization or Operating Agreement or any order, rule or regulation
applicable to the Company or any of its property of any court or governmental
body, or constitute a material default under any of the foregoing, or result in
the creation or imposition of any prohibited lien, charge or encumbrance of any
nature whatsoever upon any of the property or assets of the Company under the
terms of any instrument or agreement to which the Company is a party.


 


(d)                                 The
Project will comply with all presently applicable building and zoning, health,
environmental and safety ordinances and laws, and to the best of its knowledge,
without independent investigation, the Project will comply with all other
applicable laws, rules and regulations.


 


(e)                                  The
Project is located wholly within the corporate limits of the City of Garnett,
Kansas.


 


ARTICLE III


 


GRANTING PROVISIONS


 


Section 3.1.           Granting of Leasehold Estate. The
City hereby rents, leases and lets the Project to the Company, subject to
Permitted Encumbrances, and the Company hereby rents, leases and hires the
Project from the City, subject to Permitted Encumbrances, for the rentals and
upon and subject to the terms and conditions herein contained.


 


5

















 


Section 3.2.           Lease Term. This Lease shall
become effective upon its delivery, and subject to sooner termination pursuant
to the provisions of this Lease, shall have an initial term commencing as of
the date of this Lease and terminating on June 1, 2016.


 


Section 3.3.                                Possession
and Use of the Project.


 


(a)           The City covenants
and agrees that as long as neither the City nor the Trustee has exercised any
of the remedies set forth in Section 12.2(c) following
the occurrence and continuance of an Event of Default, the Company shall have
sole and exclusive possession of the Project (subject to Permitted Encumbrances
and the City’s and the Trustee’s right of access pursuant to Section 10.3 hereof) and shall and may peaceably
and quietly have, hold and enjoy the Project during the Lease Term. The City
covenants and agrees that it will not take any action, other than expressly
pursuant to Article XII of this Lease, to
prevent the Company from having quiet and peaceable possession and enjoyment of
the Project during the Lease Term and will, at the request and expense of the
Company, cooperate with the Company in order that the Company may have
quiet and peaceable possession and enjoyment of the Project and will defend the
Company’s enjoyment and possession thereof against all parties


 


(b)           Subject to the
provisions of this Section, the Company shall have the right to use the Project
for any lawful purpose allowed by law and contemplated by the Act. The Company
shall comply with all statutes, laws, ordinances, orders, judgments, decrees,
regulations, directions and requirements of all federal, state, local and other
governments or governmental authorities, now or hereafter applicable to the
Project or to any adjoining public ways, as to the manner of use or the condition
of the Project or of adjoining public ways. The Company shall also comply with
the mandatory requirements, rules and regulations of all insurers under
the policies carried under the provisions of Article VII
hereof. The Company shall pay all costs, expenses, claims, fines,
penalties and damages that may in any manner arise out of, or be imposed
as a result of the failure of the Company to comply with the provisions of this
Section. Notwithstanding any provision contained in this Section, however, the
Company shall have the right, at its own cost and expense, to contest or review
by legal or other appropriate procedures the validity or legality of any such
governmental statute, law, ordinance, order, judgment, decree, regulation,
direction or requirement, or any such requirement, rule or regulation of
an insurer, and during such contest or review the Company may refrain from
complying therewith.


 


ARTICLE IV


 


PURCHASE, CONSTRUCTION, RENOVATION,
INSTALLATION

AND EQUIPPING OF THE PROJECT


 


Section 4.1.                                Issuance
of the Bonds.


 


(a)                                  In
order to provide funds for the payment of the Project Costs, the City agrees
that it 


 


6

















 


will issue, sell and cause to be delivered to the purchaser thereof the
Bonds in accordance with the provisions of the Indenture and the Bond Purchase
Agreement. The proceeds of the sale of the Bonds, when received, shall be paid
over to the Trustee for the account of the City. The Trustee shall promptly
deposit such proceeds, when received, as provided in the Indenture, to be used
and applied as hereinafter provided in this Article and in the Indenture.


 


(b)                                 The
City may authorize the issuance of Additional Bonds from time to time upon
the terms and conditions provided in Section 209
of the Indenture for the purposes described therein.


 


(c)                                  If
the Company is not in default hereunder, the City will, at the request of the
Company, from time to time, use its best efforts to issue the amount of
Additional Bonds specified by the Company; provided that the terms of such
Additional Bonds, the purchase price to be paid therefor and the manner in
which the proceeds therefrom are to be disbursed shall have been approved in
writing by the Company; provided further that the Company and the City shall
have entered into an amendment to this Lease to provide for rent in an amount
at least sufficient to pay principal and interest on the Additional Bonds when
due and the City shall have otherwise complied with the provisions of the
Indenture with respect to the issuance of such Additional Bonds.


 


Section 4.2.           Purchase, Construction, Renovation, Installation and
Equipping of the Project. The City and the Company
agree that the City will and the Company as the agent of the City shall, but
solely from the Construction Fund except as otherwise provided herein, acquire,
purchase, construct, improve, equip and remodel the Project as follows.


 


(a)                                  Concurrently
with the execution of this Lease, the City will acquire the Project Site and
any Project Improvements and Project Equipment located on the Project Site and
which the Company desires to convey to the City. In no event will the City
acquire title to the Excluded Property. Concurrently with the execution of this
Lease (1) a deed and any other necessary instruments of transfer will be
delivered to the City, (2) said deed will be placed of record, and (3) the
title insurance policies required by Article VII
hereof or commitments to issue such policies will be delivered to the Trustee.


 


(b)                                 The
Company will, on behalf of the City, acquire, purchase, construct, improve and
remodel the Project Improvements on the Project Site and otherwise improve the
Project Site in accordance with the Plans and Specifications. The Company may make
minor changes in and to the Construction Contracts and the Plans and
Specifications incorporated therein without the consent of the City. The
Company shall notify the City in writing of major changes. Major changes shall
be any change that has an estimated cost (increase or decrease) of $1,000,000.
The Company agrees that the aforesaid acquisition, purchase, construction,
improvement and remodeling will, with such changes and additions as may be
made hereunder, result in a Project suitable for use by the Company for its
purposes, and that all real and personal property described therein is
necessary in connection with the Project.


 


(c)                                  The
Company will, on behalf of the City, purchase and install the Project Equipment
in the Project Improvements or on the Project Site in accordance with the Plans
and Specifications. The City and the Company recognize that the Project
Equipment is subject to change during the Construction Period and thereafter
pursuant to the provisions of this Lease, and agree that the 


 


7

















 


definitive list of the Project Equipment shall be the list maintained
by the Trustee pursuant to Section 10.8
of this Lease.


 


(d)                                 The
Company agrees that it will use its best efforts to cause the acquisition,
purchase, construction, improvement, equipping and remodeling of the Project to
be completed as soon as practicable with all reasonable dispatch. In the event
such acquisition, purchase, construction, improvement, and equipping and
remodeling commences prior to the receipt of proceeds from the sale of the Bonds,
the Company agrees to advance all funds necessary for such purpose. The Company
shall seek reimbursement for all such fields advanced.


 


Section 4.3.           Project Costs. The term Project
Costs shall have the meaning set forth in the Indenture. The City hereby agrees
to pay for, but solely from the Construction Fund, and hereby authorizes and
directs the Trustee to pay for, but solely from the Construction Fund, all
Project Costs upon receipt by the Trustee of a certificate pursuant to Section 4.4 hereof.


 


Section 4.4.           Payment for Project Costs. All
Project Costs as specified in Section 4.3
hereof shall be paid by the Trustee from the Construction Fund as more fully
provided in the Indenture. The City hereby authorizes and directs the Trustee
to make disbursements from the Construction Fund, upon receipt by the Trustee
of certificates in substantially the form attached hereto as Exhibit E, signed by an Authorized Company
Representative:


 


(a)                                  requesting
payment of a specified amount of such funds and directing to whom such amount
shall be paid (whose name and address shall be stated);


 


(b)                                 describing
in reasonable detail each item of Project Costs for which payment is being
requested;


 


(c)                                  stating
that each item for which payment is requested is or was necessary and
appropriate in connection with the acquisition, purchase, construction,
improvement, equipping or remodeling of the Project, has been properly incurred
and is a proper charge against the Construction Fund, that the amount requested
either has been paid, or is justly due, and has not been the basis of any
previous requisition from the Construction Fund; and


 


 (d)          stating that, except for the amounts, if any, stated in
said certificate, to the best of their knowledge there are no outstanding
statements which are then due and payable for labor, wages, materials, supplies
or services in .connection with the purchase, acquisition, construction,
improving, equipping or remodeling of the Project which, if unpaid, might
become the basis of a vendors’, mechanics’, laborers’ or materialmen’s
statutory or other similar lien upon the Project or any part thereof, or
setting out (i) all disputed statements and the reason for such disputes,
and (ii) all statements in process but not yet presented to the Trustee
for payment.


 


The Trustee may rely conclusively on any such certificate and
shall not be required to make any independent investigation in connection
therewith.


 


Section 4.5.           Establishment of Completion Date.
The Completion Date shall be evidenced to the Trustee by a certificate signed
by the Authorized Company Representative stating (a) that the 


 


8

















 


acquisition, purchase, construction, improvement, equipping and
remodeling of the Project has been completed in accordance with the Plans and
Specifications, (b) that all costs and expenses incurred in the
acquisition, purchase, construction, improvement, equipping and remodeling of
the Project have been paid except costs and expenses the payment of which is
not yet due or is being retained or contested in good faith by the Company, and
(c) amounts to be retained by Trustee with respect to item (b) above.
Notwithstanding the foregoing, such certificate shall state that it is given
without prejudice to any rights against third parties which exist at the date
of such certificate or which may subsequently come into being. The Company
and the City agree to cooperate in causing such certificate to be furnished to
the Trustee.


 


Section 4.6.                                Surplus
or Deficiency in Construction Fund.


 


(a)                                  Upon
receipt of the certificate described in Section 4.5
hereof, the Trustee shall, as provided in Section 504
of the Indenture, transfer any remaining moneys then in the Construction Fund
to the Bond Fund to be applied as directed by the Company solely to (1) the
payment of principal and premium, if any, of the Bonds through the payment
(including regularly scheduled principal payments, if any) or redemption
thereof at the earliest date permissible under the terms of the Indenture, or (2) at
the option of the Company, to the purchase of Bonds at such earlier date or
dates as the Company may elect. Any amount so deposited in the Bond Fund may be
invested as permitted by Section 702 of
the Indenture.


 


(b)                                 If
the Construction Fund shall be insufficient to pay fully all Project Costs and
to complete the Project lien free, the. Company shall pay, in cash, the full
amount of any such deficiency by making payments thereof directly to the
contractors and to the suppliers of materials and services as the same shall
become due, and the Company shall save the City and the Trustee whole and
harmless from any obligation to pay such deficiency.


 


Section 4.7.           Project Property of City. The
Project Site and all Project Improvements located thereon at the execution
hereof and which the Company desires to convey to the City, all work and
materials on the Project Improvements as such work progresses, and all
additions or enlargements thereto or thereof, the Project as fully completed,
anything under this Lease which becomes, is deemed to be, or constitutes a part of
the Project, and the Project as repaired, rebuilt, rearranged, restored or
replaced by the Company under the provisions of this Lease, except as otherwise
specifically provided herein, shall immediately when erected or installed
become the absolute property of the City, subject only to Permitted
Encumbrances.


 


Section 4.8.           Machinery and Equipment Purchased by the Company.
Any item of machinery or equipment the entire purchase price of which is paid
for by the Company with the Company’s own funds, and no part of the
purchase price of which is paid for from funds deposited pursuant to the terms
of this Lease in the Construction Fund, shall be the property of the Company.


 


ARTICLE V


 


RENT PROVISIONS


 


Section 5.1.           Basic Rent. The Company covenants
and agrees to pay to the Trustee in same 


 


9

















 


day funds for the account of the City during this Lease Term, for
deposit in the Bond Fund on or before 11:00 A.M., Trustee’s local time, on
each June 1 and December 1, commencing June 1, 2006, the amount
of principal of and the interest on the Bonds then due in accordance with the
provisions of the Indenture, as Basic Rent for the Project, in an amount which,
when added to any collected funds then on deposit in the Bond Fund and
available for the payment of principal on the Bonds and the interest thereon on
such payment date, shall be equal to the amount payable on such payment date as
principal of the Bonds and the interest thereon as provided in the Indenture.
All payments of Basic Rent provided for in this Section shall be paid
directly to the Trustee and shall be deposited in accordance with the
provisions of the Indenture into the Bond Fund and shall be used and applied by
the Trustee in the manner and for the purposes set forth in this Lease and the
Indenture. Subject to the other provisions of this Lease and the Indenture, at
any time that the Company is the sole Bondowner, the Company may, at its
option, make payments of Basic Rent by tendering a portion of the principal
amount of the Bonds equal to such principal payment thereon to the Trustee for
cancellation.


 


Section 5.2.                                Additional
Rent. The Company shall pay as Additional Rent the following amounts:


 


(a)                                  all
reasonable fees, charges and expenses, including agent and counsel fees, of the
Trustee and the Paying Agent incurred under the Indenture, as and when the same
become due;


 


(b)                                 all
costs incident to the payment of the principal of and interest on the Bonds as
the same becomes due and payable, including all costs and expenses in
connection with the call, redemption and payment of all Outstanding Bonds;


 


(c)                                  all
expenses. reasonably incurred in connection with the enforcement of any rights
against the Company or the Project under this Lease or the Indenture by the
City, the Trustee or the Bondowners, except for such expenses as may be
incurred solely as a result of the gross negligence or wrongful misconduct of
the City, the Trustee or both;


 


(d)                                 an
amount sufficient to reimburse the City for all expenses reasonably incurred by
the City hereunder and in connection with the performance of its obligations
under this Lease, the Indenture or the Tax Abatement Agreement;


 


(e)                                  all
amounts payable under the Tax Abatement Agreement;


 


(f)                                    all
annual fees of the City or the Kansas Board of Tax Appeals; and


 


(f)                                    all other payments
of whatever nature which the Company has agreed to pay or assume under the
provisions of this Lease.


 


Section 5.3.                                Obligations
of Company Absolute and Unconditional.


 


(a)                                  The
obligations of the Company under this Lease to make payments of Basic Rent and
Additional Rent on or before the date the same become due, and to perform all
of its other obligations, covenants and agreements hereunder shall be absolute
and unconditional, without notice or demand, and without abatement, deduction,
set-off counterclaim, recoupment or defense or any 


 


10

















 


right of termination or cancellation arising from any circumstance whatsoever,
whether now existing or hereafter arising, and irrespective of whether the
Project shall have been started or completed, or whether the City’s title
thereto or to any part thereof is defective or nonexistent, and
notwithstanding any damage to, loss, theft or destruction of, the Project or
any part thereof, any failure of consideration or frustration of
commercial purpose, the taking by eminent domain of title to or of the right of
temporary use of all or any part of the Project, legal curtailment of the
Company’s use thereof, the eviction or constructive eviction of the Company,
any change in the tax or other laws of the United States of America, the State
of Kansas or any political subdivision thereof, any change in the City’s legal
organization or status, or any default of the City hereunder, and regardless of
the invalidity of any action of the City, and regardless of the invalidity of
any portion of this Lease.


 


(b)                                 Nothing
in this Lease shall be construed to release the City from the performance of
any agreement on its part herein contained or as a waiver by the Company
of any rights or claims the Company may have against City under this Lease
or otherwise, but any recovery upon such rights and claims shall be had from
the City separately, it being the intent of this Lease that the Company shall
be unconditionally and absolutely obligated to perform fully all of its
obligations, agreements and covenants under this Lease (including the
obligation to pay Basic Rent and Additional Rent) for the benefit of the
Bondowners. The Company may, however, at its own cost and expense and in its
own name or in the name of the City, prosecute or defend any action or
proceeding or take any other action involving third persons which the Company
deems reasonably necessary in order to secure or protect its right of
possession, occupancy and use hereunder, and in such event the City hereby
agrees to cooperate fully with the Company and to take all action necessary to
effect the substitution of the Company for the City in any such action or
proceeding if the Company shall so request.


 


Section 5.4.           Prepayment of Basic Rent. The
Company may at any time prepay all or any part of the Basic Rent  provided for hereunder. During such times as
the amount held by the Trustee in the Bond Fund shall be sufficient to pay, at
the time required, the principal of and interest on all the Bonds then
remaining unpaid, the Company shall not be obligated to make payments of Basic
Rent under the provisions of this Lease.


 


Section 5.5.           Redemption of Bonds. The City and
the Trustee, at the written direction of the Company, at any time the aggregate
moneys in the Bond Fund are sufficient for such purposes, shall (a) if the
same are then redeemable under the provision of Article III
of the Indenture, take all steps that may be necessary under the
applicable redemption provisions of the Indenture to effect the redemption of
all or such part of the then Outstanding Bonds as may be specified by
the Company, on such redemption date as may be specified by the Company or
(b) cause such moneys in the Bond Fund or such part thereof as the
Company shall direct, to be applied by the Trustee for the purchase of Bonds in
the open market for the purpose of cancellation at prices not exceeding the
principal amount thereof, or (c) a combination of (a) and (b) as
provided in such direction.


 


ARTICLE VI


 


MAINTENANCE, TAXES AND UTILITIES


 


Section 6.1.           Maintenance and Repairs.
Throughout the Lease Term the Company shall, at its own expense, keep the
Project in as reasonably safe condition as the operation thereof will permit, 


 


11

















 


and keep the Project in good repair and in good operating condition,
making from time to time all necessary repairs thereto and renewals and replacements
thereof.


 


Section 6.2.           Taxes, Assessments and Other Governmental Charges.


 


(a)                                  The
Company shall promptly pay and discharge, as the same become due, all taxes and
assessments, general and special, and other governmental charges of any kind
whatsoever that may be lawfully taxed, charged, levied, assessed or
imposed upon or against the Project, or any part thereof or interest
therein (including the leasehold estate of the Company therein) or any
buildings, improvements, machinery and equipment at any time installed thereon
by the Company, or the income therefrom or Basic Rent and other amounts payable
under this Lease, including any new taxes and assessments not of the kind
enumerated above to the extent that the same are lawfully made, levied or assessed
in lieu of or in addition to taxes or assessments now customarily levied
against real or personal property, and further including all utility charges,
assessments and other general governmental charges and impositions whatsoever,
foreseen or unforeseen, which if not paid when due would materially impair the
security of the Bonds or materially encumber the City’s title to the Project;
provided that with respect to any special assessments or other governmental
charges that are lawfully levied and assessed which may be paid in
installments, the Company shall be obligated to pay only such installments
thereof as become due and payable during the Lease Term.


 


(b)                                 The
Company shall have the right, in its own name or in the City’s name, to contest
the validity or amount of any tax, assessment or other governmental charge
which the Company is required to bear, pay and discharge pursuant to the terms
of this Article by appropriate legal proceedings instituted before the
tax, assessment or other governmental charge complained of becomes delinquent
if and provided (1) the Company, before instituting any such contest,
gives the City written notice of its intention so to do, (2) the Company
diligently prosecutes any such contest, at all times effectively stays or prevents
any official or judicial sale therefor, under execution or otherwise, and (3) the
Company promptly pays any final judgment enforcing the tax, assessment or other
governmental charge so contested and thereafter promptly procures record
release or satisfaction thereof. The City agrees to cooperate fully with the
Company in connection with any and all administrative or judicial proceedings
related to any tax, assessment or other governmental charge. The Company shall
hold the City whole and harmless from any costs and expenses the City may incur
related to any of the above.


 


Section 6.3.           Utilities. All utilities and
utility services used by the Company in, on or about the Project shall be paid
for by the Company and shall be contracted for by the Company in the Company’s
own name, and the Company shall, at its sole cost and expense, procure any and
all permits, licenses or authorizations necessary in connection therewith.


 


Section 6.4.           Ad Valorem Taxes. The City and
the Company acknowledge that under the existing provisions of K.S.A. 79-201a,
as amended, the property purchased, acquired, constructed, reconstructed,
improved, equipped, furnished, repaired, enlarged or remodeled with the
proceeds of the Bonds is entitled to exemption from general ad valorem and
property taxes (other than special assessments levied on account of special
benefits) on real and personal property, other than inventory for a period of
ten (10) calendar years after the calendar year in which the Bonds are
issued, provided proper application is made therefor. The City covenants that
it will not voluntarily take any action 


 


12

















 


which may be reasonably construed as tending to cause or induce
the levy or assessment of such ad valorem or property taxes on the Project so
long as any of the Bonds are Outstanding and unpaid or for said ten (10) year
period, whichever shall be the shorter time, and at the Company’s request,
fully cooperate with the Company in all reasonable ways to prevent any such
levy or assessment. The City shall timely file the Application for Exemption to
effect the property tax abatement described in K.S.A. 79-201a. The Company
agrees to pay any such levies or assessments that are lawful on the Project.


 


Section 6.5.                                Reserved.


 


Section 6.6.                                Kansas
Retailers’ Sales Tax.


 


(a)                                  The
parties have entered into this Lease Agreement in contemplation that, under the
existing provisions of K.S.A. 79-3606(d) and other applicable laws, sales
of tangible personal property or services purchased in connection with
acquisition, purchase, construction, improving, equipping or remodeling of the
Project are entitled to exemption from the tax imposed by the Kansas Retailers’
Sales Tax Act. The parties agree that the City shall, upon the request of and
with the Company’s assistance, promptly obtain from the State and furnish to
the contractors and suppliers an exemption certificate for the acquisition,
purchase, construction, improving, equipping or remodeling of the Project. The
Company covenants that said exemption shall be used only in connection with the
purchase of tangible personal property or services becoming a part of the
Project.


 


(b)                                 The
parties further acknowledge that, under the existing provisions of K.S.A.
79-3603(h), a tax may be levied at the currently lawful rate upon the
gross receipts derived by the City from the renting or leasing of personal
property, if any, purchased from the proceeds of the Bonds. The Company agrees
to pay, as Additional Rent hereunder, the full amount of any such tax as
hereinafter determined. Such payments, if required, shall be made at the same
time as the installments of Rent provided for hereby, and shall be made
directly to the City, or in such other manner as the City may from time to
time direct in writing. It shall be the duty of the City to promptly file any
returns and remit any such taxes to the State, or to make suitable provision
therefor, in accordance with applicable laws, rulings and regulations. The City’s
taxable gross receipts shall be determined by multiplying that portion of each
installment of Basic Rent which represents the payment of principal of the
Bonds by a fraction in which the total proceeds of the Bonds is the
denominator, and the amount expended from Bond proceeds for the acquisition of
personal property, which amount shall be determined by the Company and set
forth in a certificate delivered to the City, the Company and the Trustee
immediately following completion of acquisition, purchase, construction,
improving, equipping or remodeling of the Project, is the numerator. The amount
of each installment of tax due shall be determined by multiplying the City’s
taxable gross receipts determined in accordance with the preceding sentence
(unless a different determination has been made in a judicial or administrative
proceeding as hereinafter provided), by such other tax rate percentage as may from
time to time be imposed by applicable law. Notwithstanding the foregoing
provisions, if it shall be determined in any judicial or administrative
proceeding that the City’s taxable gross receipts are in an amount other than
the amount determined by applying the foregoing provisions, the Company shall
be obligated to pay and hereby agrees to pay the full amount of such tax, based
upon such judicially or administratively determined gross receipts, it being
the intent of this provision that the Company shall pay in full the amount of
any such tax, but no more than such amount, which the City is obligated to
collect under


 


13

















 


the present or any fixture laws of the State.


 


ARTICLE VII


 


INSURANCE


 


Section 7.1.                                Title
Insurance. The Company has elected not to have the City obtain an owner’s
policy of title insurance.


 


Section 7.2.                                Casualty
Insurance.


 


(a)                                  Subject
to the right of the Company to increase the deductibles described herein and to
provide for self-insurance as provided in subparagraph (c) of this
Section, the Company shall at all times during the Construction Period maintain
at its sole cost and expense, or cause the contractors under the Construction
Contracts to maintain, in full force and effect a policy or policies of Builder’s
Risk-Completed Value Form Insurance insuring the Project against fire,
lightning and all other risks covered by the extended coverage endorsement then
in use in the State of Kansas to the Full Insurable Value of the Project
(subject to reasonable loss deductible clauses not to exceed $100,000).


 


Subject to the rights of the Company provided in subparagraph (c) of
this Section, prior to or simultaneously with the expiration of said Builder’s
Risk Insurance, the Company shall at its sole cost and expense obtain and shall
maintain throughout the Lease Term, a policy or policies of insurance to keep
the Project constantly insured against loss or damage by fire, lightning and
all other risks covered by the extended coverage insurance endorsement then in
use in the State of Kansas in an amount equal to the Full Insurable Value
thereof (subject to reasonable loss deductible clauses not to exceed $100,000).
The initial determination of Full Insurable Value shall be made at the
Completion Date, and thereafter, the Full Insurable Value of the Project shall
be provided from time to time at the written request of the City’ or the
Trustee (but not more frequently than once in every three years) by the
certificate of an Authorized Company Representative or the chief financial
officer of the Company. The insurance required pursuant to this Section shall
be maintained at the Company’s sole cost and expense, shall be maintained with
generally recognized responsible insurance company or companies authorized to
do business in the State of Kansas as may be selected by the Company.
Copies of the insurance policies required under this Section, or originals or
certificates thereof, shall be delivered by the Company to the Trustee. All
such policies of insurance pursuant to this Section, and all renewals thereof,
shall name the City, the Company and the Trustee as insureds as their
respective interests may appear, and shall contain a provision that such
insurance may not be canceled by the issuer thereof without at least 30
days’ advance written notice to the City, the Company and the Trustee; and
shall be payable to the Trustee.


 


(b)                                 In
the event of loss or damage to the Project, the Net Proceeds of casualty
insurance carried pursuant to this Section shall be paid over to the
Trustee and shall be applied as provided in Article IX
of this Lease.


 


(c)                                  In
lieu of obtaining all or any part of the insurance required by
subparagraph (a) hereof, the Company may elect to be self-insured for
all or any part of the foregoing requirements (which right to self insure
shall include the right of the Company to increase the deductibles on such 


 


14

















 


policies to an amount not to exceed $500,000 provided the Company
complies with each of the following: (i) the Company notifies the City and
the Trustee in writing that it has elected to increase one or more of the
deductibles on such policies or to provide such coverages through a
self-insurance program, (ii) if the self-insurance program is maintained
by a legal entity other than the Company, the Company notifies the City and the
Trustee in writing of an address to which the City and the Trustee may submit
claims under such self-insurance program, and (iii) the provider of such
self insurance program is rated in one of the three highest rating categories
by a nationally recognized rating agency (without regard to any rating modifiers).


 


Section 7.3.                                Public
Liability Insurance.


 


(a)                                  Subject
to the right of the Company to increase the deductibles described herein and to
provide for self-insurance as provided in subparagraph (c) of this
Section, the Company shall at its sole cost and expense maintain or cause to be
maintained at all times during the Lease Term general accident and public
liability insurance (including but not limited to coverage for all losses
whatsoever arising from the ownership, maintenance, operation or use of any
automobile, truck or other motor vehicle), under which the City, the Company
and the Trustee shall be named as additional insureds, properly protecting and
indemnifying the City and the Trustee, in an amount not less than $2,000,000
for bodily injury (including death) in any one occurrence (subject to
reasonable loss deductible clauses not to exceed $100,000)), and not less than
$1,000,000 for property damage in any one occurrence (subject to reasonable
loss deductible clauses not to exceed $100,000). The policies of said insurance
shall contain a provision that such insurance may not be canceled by the
issuer thereof without at least 30 days’ advance written notice to the City,
the Company and the Trustee. Such policies or copies or certificates thereof shall
be furnished to the Trustee.


 


(b)                                 In
the event of a public liability occurrence, the Net Proceeds of liability
insurance carried pursuant to this Section shall be applied toward the
extinguishment or satisfaction of the liability with respect to which such
proceeds have been paid.


 


(c)                                  In
lieu of obtaining all or any part of the insurance required by
subparagraph (a) hereof, the Company may elect to be self-insured for
all or any part of the foregoing requirements (which right to self insure
shall include the right of the Company to increase the deductibles on such
policies to an amount not to exceed $500,000) provided the Company complies
with each of the following: (i) the Company notifies the City and the
Trustee in writing that it has elected to increase one or more of the
deductibles on such policies or to provide such coverages through a
self-insurance program, (ii) if the self-insurance program is maintained
by a legal entity other than the Company, the Company notifies the City and the
Trustee in writing of an address to which the City and the Trustee may submit
claims under such self-insurance program, and (iii) the provider of such
self insurance program is rated in one of the three highest rating categories
by a nationally recognized rating agency (without regard to any rating
modifiers).


 


Section 7.4.           Blanket Insurance Policies. The
Company may satisfy any of the insurance requirements set forth in this Article by
using blanket policies of insurance, provided each and all of the requirements
and specifications of this Article respecting insurance are complied with.


 


Section 7.5.           Indemnification of Trustee. The
Company agrees to indemnify and save the 


 


15

















 


Trustee harmless against and from all claims by or on behalf of any
person, firm or corporation arising from the conduct or management of, or from
any work or thing done on, the Project during the Lease Term, and against and
from all claims arising during the Lease Term from (a) any condition of the
Project caused or permitted by the Company, (b) any breach or default on
the part of the Company in the performance of any of its obligations under
this Lease, (c) any contract entered into by the Company, its agents,
employees or contracting obligees in connection with the acquisition, purchase,
construction, improving, equipping or remodeling of the Project, (d) any
act of negligence of the Company or of any of its agents, contractors,
servants, employees or licensees, and (e) any act of negligence of any
assignee or sublessee of the Company, or of any agents, contractors, servants,
employees or licensees of any assignee or sublessee of the Company.


 


ARTICLE VIII


 


ALTERATION OF THE PROJECT


 


Section 8.1.           Additions, Modifications and Improvements of the Project.
The Company shall have and is hereby given the right, at its sole cost and
expense, to make such additions, modifications and improvements in and to any part of
the Project as the Company from time to time may deem necessary or
desirable for its business purposes. All additions, modifications and
improvements made by the Company pursuant to the authority of this Section shall
(a) be made in workmanlike manner and in strict compliance with all laws
and ordinances applicable thereto, (b) when commenced, be prosecuted to
completion with due diligence, and (c) when completed, be deemed a part of
the Project; provided, however, that additions of machinery and equipment
installed in the Project by the Company not purchased or acquired from funds
deposited with the Trustee hereunder and not constituting repairs; renewals or
replacements of Project Equipment under Section 8.2
hereof shall remain the property of the Company and may be removed by the
Company.


 


Section 8.2.           Removal of Project Equipment. The
Company shall have the right, provided the Company is not in default in the
payment of Basic Rent or Additional Rent hereunder, to remove from the Project
and (on behalf of the City) sell, exchange or otherwise dispose of, without
responsibility or accountability to the City or the Trustee with respect
thereto, any items of machinery and equipment which constitute a part of
the Project Equipment and which have become inadequate, obsolete, worn out,
unsuitable, undesirable or unnecessary or which, in the sound discretion of the
Company, are otherwise no longer useful to the Company in its operations
conducted on or in the Project; provided that, if the aggregate value of
Project Equipment sold, exchanged or disposed of in any fiscal year (on a non
cumulative basis) exceeds $1,000,000, then with respect to the proposed removal
in such fiscal year of such items of Project Equipment that originally cost
$250,000 or more, the Company shall either:


 


(a)                                  Prior
to any such removal, deliver to the City and the Trustee a certificate signed
by the Company (1) containing a description of any machinery or equipment
constituting a part of the Project Equipment which it proposes to remove
from the Project, (2) stating the reason for such removal, and (3) setting
forth the estimated market value of such machinery or equipment and pay the
estimated value of such machinery or equipment as set forth in said certificate
to the Trustee for deposit in the Bond Fund or obtain a written waiver from the
Owners of all of the Bonds of the requirement that the estimated value be
deposited into the Bond Fund; or


 


16

















 


(b)                                 Promptly
replace any such Project Equipment so removed with machinery and equipment of
the same or a different kind but with a value equal to or greater than the fair
market value of the Project Equipment so removed, and such machinery and
equipment shall be deemed a part of the Project Equipment; within 30 days
after any such replacement, deliver to the Trustee a certificate signed by the
Company (1) setting forth a complete description, including make, model
and serial numbers, if any, of the machinery and equipment which the Company
has acquired to replace the Project Equipment so removed by the Company, (2) stating
the cost thereof, and (3) stating that the machinery and equipment
described in said certificate are fully paid for and have been installed on the
Project.


 


The Trustee shall amend the list of Project Equipment maintained by it
pursuant to Section 10.8 hereof upon receipt
of such certificate. All machinery and equipment that replaces Project
Equipment removed from the Project by the Company pursuant to paragraph (b) of
this Section shall become and be deemed a part of the Project.


 


In all cases, the Company shall pay all the costs and expenses of any
such removal and shall immediately repair at its expense all damage to the
Project caused thereby. The Company’s rights under this Section to remove
from the Project machinery and equipment constituting a part of the
Project Equipment is intended only to permit the Company to maintain an
efficient operation by the removal of machinery and equipment which is no
longer suitable to the Company’s use of the Project for any of the reasons set
forth in this Section, and such right is not to be construed to permit a
removal under any other circumstances and specifically is not to be construed
to permit the Company to make a wholesale removal of the Project Equipment.


 


Section 8.3.           Additional Improvements on the Project Site.
The Company shall have and is hereby given the right, at its sole cost and
expense, to construct on portions of the Project Site not theretofore occupied
by buildings or improvements such additional buildings and improvements as the
Company from time to time may deem necessary or desirable for its business
purposes. All additional buildings and improvements constructed on the Project
Site by the Company pursuant to the authority of this Section shall,
during the life of this Lease, remain the property of the Company and may be
added to, altered or razed and removed by the Company at any time. The Company
covenants and agrees (a) to make any repairs and restorations required to
be made to the Project because of the construction of, addition to, alteration
or removal of said additional buildings or improvements, (b) to keep and
maintain said additional buildings and improvements in good condition and
repair, ordinary wear and tear excepted, and (c) to promptly and with due
diligence either raze and remove in a good and workmanlike manner, or repair,
replace or restore any of said additional buildings and improvements as may from
time to time be damaged by fire or other casualty,


 


Section 8.4.           Permits and Authorizations. The
Company shall not do or permit others under its control to do any work on the
Project related to any repair, rebuilding, restoration, replacement,
modification or addition to the Project, or any part thereof, unless all
requisite municipal and other governmental permits and authorizations shall
have been first procured. The City agrees not to charge the Company any fees
for any such permits or authorizations. All such work shall be done in a good
and workmanlike manner and in compliance with all applicable building, zoning
and other 


 


17

















 


laws, ordinances, governmental regulations and requirements and in
accordance with the requirements, rules and regulations of all insurers
under the policies required to be carried under the provisions of Article VII hereof.


 


Section 8.5.                                Mechanics’
Liens.


 


(a)                                  Neither
the City nor the Company shall do or suffer anything to be done whereby the
Project, or any part thereof, may be encumbered by any mechanics’ or
other similar lien. Whenever and as often as any mechanics’ or other similar
lien is filed against the Project, or any part thereof, purporting to be
for or on account of any labor done or materials or services furnished in
connection with any work in or about the Project, the Company shall discharge
the same of record within 90 days after the date of filing. Notice is hereby
given that the City shall not be liable for any labor or materials furnished
the Company or anyone claiming by, through or under the Company upon credit,
and that no mechanics’ or other similar lien for any such labor, services or
materials shall attach to or affect the reversionary or other estate of the
City in and to the Project or any part thereof.


 


(b)                                 Notwithstanding
paragraph (a) above, the Company shall have the right to contest any such
mechanics’ or other similar lien if within said 90-day period stated above it
notifies the City and the Trustee in writing of its intention so to do, and
provided the Company diligently prosecutes such contest, at all times
effectively stays or prevents any official or judicial sale of the Project, or
any part thereof or interest therein, under execution or otherwise, and
pays or otherwise satisfies any final judgment enforcing such contested lien
claim and thereafter promptly procures record release or satisfaction thereof.
The Company shall hold the City whole and harmless from any loss, costs or
expenses the City may incur related to any such contest. The City shall
cooperate fully with the Company in any such contest.


 


Section 8.6. Option to Purchase Unimproved Portions of the Project
Site. The City hereby grants to the Company the right
at any time and from time to time to purchase any unimproved portion or
portions of the Project Site. For the purposes of this Section “unimproved”
shall mean real property upon which no improvements are located, excluding
improvements relating to streets, sidewalks, bridges, stormwater, grading,
utility or other similar improvements. As conditions to such purchase the City
and the Trustee shall receive from the Company at least 30 days prior to the
proposed date for completing the purchase the following (1) a written
certificate from the Company to the effect (i) that the Company desires to
purchase an unimproved portion of the Project Site, (ii) the proposed date
for completing the purchase, and (iii) that the Company is not in default
under any of the provisions of this Legal Agreement, (2) providing the
City and the Trustee with an adequate legal description of that portion
(together with the interest in such portion) of the property to be purchased
and a copy of a title commitment with respect to such property, (3) a
certificate of an independent engineer or surveyor, dated not more than 30 days
prior to the date of the request stating that, in the opinion of the person signing
such certificate, (i) the unimproved portion of the Project Site is
unimproved within the definition contained in this Section (ii) the
unimproved portion of the Project Site so proposed to be purchased is not
needed for the operation of the Project, and (iii) the proposed purchase
will not impair the usefulness of the Project for its intended purposes and
will not destroy the means of ingress thereto and egress therefrom, and (4) the
written consent of the Owners of all of the Bonds.


 


The purchase price for such unimproved portion of the Project Site
shall be determined by the 


 


18

















 


Owners of all of the Bonds and shall be received in writing by the City
and the Trustee at least 10 days prior to the proposed date for completing the
purchase. Such purchase price shall be paid to the Trustee at the time the City
executes and delivers a Warranty Deed conveying the property which is to be
purchased to the Company. The Trustee shall deposit such amount (if any) into
the Bond Fund. If such amount is more than $1,000, such amount shall be used by
the Trustee to redeem Bonds in accordance with Section 302(a) of
the Indenture. If such amount is $1,000 or less the Trustee shall apply such
amount to the next interest payment on the Bonds.


 


Upon the City’s receipt of written notice from the Trustee that the
Trustee has received all of the items required by this Section, the Mayor and
City Clerk of the City shall execute a Warranty Deed conveying such property to
the Company and shall deliver such deed to the Company. Such Warranty Deed
shall be subject to the following: (1) those liens and encumbrances, if
any, to which title to that portion of the Project Site was subject when
conveyed to the City; (2) those liens and encumbrances created by the
Company or to the creation or suffering of which the Company consented; (3) those
liens and encumbrances resulting from the failure of the Company to perform or
observe any of the agreement on its part contained in this Lease; (4) Permitted
Encumbrances other than the Indenture and this Lease; and (5) if the
unimproved portion of the Project Site or any part thereof is being
condemned, the rights and title of any condemning authority.


 


Upon any purchase of portions of the Project Site pursuant to this
Section, the portions of the Project Site so purchased shall no longer be
entitled to the benefits of the Tax Abatement Agreement.


 


ARTICLE IX


 


DAMAGE, DESTRUCTION AND CONDEMNATION


 


Section 9.1.                                Damage
or Destruction.


 


(a)                                  If
the Project shall be damaged or destroyed by fire or any other casualty,
whether or not covered by insurance, the Company, as promptly as practicable,
shall either repair, restore, replace or rebuild the same to as nearly as may be
practicable their condition and character immediately prior to such damage or
destruction, and so that upon completion of such repairs, restoration,
replacement or rebuilding such Project shall be of a value not less than the
value thereof immediately prior to the occurrence of such damage or destruction
or, at the Company’s option, shall construct upon the Project Site new
buildings and improvements thereafter together with all new machinery,
equipment and fixtures which are either to be attached to or are to be used in
connection with the operation or maintenance thereof, provided that (i) the
value thereof shall not be less than the value of such destroyed or damaged
Project Improvements and/or Project Equipment immediately prior to the
occurrence of such damage or destruction and (ii) the nature of such new
buildings, improvements, machinery, equipment and fixtures will not impair the
character of the Project as an enterprise permitted by the Act.


 


If the Company shall elect to construct any such new buildings and
improvements, for all purposes of this Lease, any reference to the words “Project
Improvements” shall be deemed to also include any such new buildings and
improvements and all additions thereto and all replacements and alterations
thereof and any reference to the words “Project Equipment” shall be deemed to
include 


 


19

















 


any such new machinery, equipment and fixtures which are either
attached to or are used in connection with the operation or maintenance of such
new buildings and improvements and all additions or replacements thereof.


 


The Net Proceeds of casualty insurance required by Article VII
hereof received with respect to such damage or loss to the Project shall be
disbursed in accordance with the Mortgage so long as the Mortgage contains
provisions governing the disbursement of casualty insurance proceeds. If there
is no Mortgage, the Net Proceeds of casualty insurance required by Article VII
hereof received with respect to such damage or loss to the Project shall he
disbursed in accordance with, the Leasehold Mortgage (in order of priority of
recording) so long as the Leasehold Mortgages contain provisions governing the
disbursement of casualty insurance proceeds. If there is no Mortgage and no
Leasehold Mortgage, or if the Mortgage or any Leasehold Mortgage do not contain
provisions governing the disbursement of casualty insurance proceeds, then (i) if
such Net Proceeds are less than $250,000, the Net Proceeds shall be paid to the
Company to be used in accordance with this Lease, and (ii) if such Net
Proceeds equal or exceed $250,000, the Net Proceeds shall be paid to the
Trustee and shall be applied in the following manner:


 


(A)                              there shall be paid to
the Company from the Net Proceeds such part thereof as shall equal the cost
to the. Company of making such temporary repairs or doing such other work, as,
in the Company’s reasonable opinion, may be necessary in order to protect
the Project pending adjustment of the insurance loss or the making of permanent
repairs, restoration, replacement or rebuilding;


 


(B)                                there shall be paid to
the Company from the Net Proceeds such part thereof as shall equal the
cost to the Company of repairing, restoring, replacing or rebuilding the
Project or any part thereof;


 


(C)                                payment to the Company
pursuant to subdivisions (A) or (B) of this subsection (a)(ii) from
such Net Proceeds shall be made to the Company from time to time as the work
progresses, in amounts equal to the cost of labor and material incorporated
into and used in such work, the buildings’, architects’ and engineers’ fees,
and other charges in connection with such work, upon delivery to the City and
the Trustee of a certificate of the Company’s architect or general contractor,
as the case may be, in charge of such work, certifying: (1) that the
amounts so to be paid to the Company are payable to the Company in accordance
with the provisions of this Article and that such amounts are then due and
payable by the Company or have theretofore been paid by the Company; (2) the
progress of the work; (3) that the work has been done in accordance with
the plans and specifications therefor and all insurance requirements of Article VII
hereof; (4) that the sum requested when added to all sums previously paid
out under, this Article for the work does not exceed the value of the work
done to the date of such certificate; (5) the estimated cost of completing
the work, in reasonable detail; and (6) that the remaining Net Proceeds
are sufficient to pay the estimated cost of completing the work; and


 


(D)                               at the request of the
City or the Trustee, the Company shall furnish to the person requesting the
same, at the time of any such payment, with an official search, or other
evidence reasonably satisfactory to such person, that there has not been filed
with respect to 


 


20

















 


the Project Site or the Project Improvements any mechanic’s or other
lien which has not been discharged of record, in respect of any work, labor,
services or materials performed, furnished or supplied, in connection with the
work and that all of said materials have been purchased free and clear of all
security interest or other encumbrances. The Trustee shall not pay out any such
sum when the Project Site or the Project Improvements shall be encumbered with
any such security interest or encumbrance. Upon the termination of this Lease
and the payment in fill of the Bonds, any monies then held by the Trustee shall
be paid over to the Company.


 


(b)                                 The
insurance monies, if any, paid to the Company as provided under this Article,
on account of any loss or destruction to the Project, shall be held by it in
trust and applied only for the purposes of repairing, reconstructing or
restoring the Project or constructing new buildings and improvements and installing
new machinery, equipment and fixtures thereto.


 


(c)                                  If
any of the insurance monies paid by the insurance company to the Trustee or the


 


Company as hereinabove provided, shall remain after the completion of
such repairs, restoration, replacement or rebuilding, and this Lease shall not
have terminated, the excess shall be deposited in the Bond Fund. If the Net
Proceeds shall be insufficient to pay the entire cost of such repairs,
restoration, replacement or rebuilding, the Company shall pay the deficiency.


 


(d)                                 Except
as otherwise provided in this Lease, in the event of any such damage by fire or
any other casualty, the provisions of this Lease shall be unaffected and the
Company shall remain and continue liable for the payment of all Basic Rent and
Additional mental and all other charges required hereunder to be paid by the
Company, as though no damage by fire or any other casualty has occurred.


 


(e)                                  The
City and the Company agree that they will cooperate with each other, to such
extent as such other party may reasonably require, in connection with the
prosecution or defense of any action or proceeding arising out of, or for the
collection of any insurance monies that may be due in the event of, any
loss or damage, and that they will execute and deliver to such other parties
such instruments as may be required to facilitate the recovery of any
insurance monies.


 


(f)                                    The
Company agrees to give prompt notice to the City and the Trustee with respect
to all fires and any other casualties occurring in, on, at or about the
Project.


 


(g)                                 If
the Company shall determine that rebuilding, repairing, restoring or replacing
the Project is not practicable and desirable, any Net Proceeds of casualty
insurance required by Article VII hereof received with respect to such
damage or loss shall be paid into the Bond Fund and shall be used to redeem
Bonds on the earliest practicable redemption date or to pay the principal of
any Bonds as the same become due. The Company agrees to be reasonable in
exercising its judgment pursuant to this subsection (g).


 


(h)                                 The
Company shall not, by reason of its inability to use all or any part of
the Project during any period in which the Project is damaged or destroyed or
is being repaired, rebuilt, restored or replaced, nor by reason of the payment
of the costs of such rebuilding, repairing, restoring or replacing, be entitled
to any reimbursement from the City, the Trustee or the Bondowners or to any
abatement or diminution of the rentals payable by the Company under this Lease
or of any other 


 


21

















 


obligations of the Company under this Lease except as expressly
provided in this Section.


 


Section 9.2.                                Condemnation.


 


(a)                                  If
during the Lease Term, title to, or the temporary use of, all or any part of
the Project shall be condemned by or sold under threat of condemnation to any
authority possessing the power of eminent domain, to such extent that the claim
or loss resulting from such condemnation is greater than $250,000, the Company
shall, within 90 days after the date of entry of a final order in any eminent
domain proceedings granting condemnation or the date of sale under threat of
condemnation, notify the City and the Trustee in writing as to the nature and
extent of such condemnation or loss of title and whether it is practicable and
desirable to acquire or construct substitute improvements.


 


(b)                                 If
the Company shall determine that such substitution is practicable and
desirable, the Company shall proceed promptly with and complete with reasonable
dispatch the acquisition or construction of such substitute improvements, so as
to place the Project in substantially the same condition as existed prior to
the exercise of the said power of eminent domain, including the acquisition or
construction of other improvements suitable for the Company’s operations at the
Project (which improvements will be deemed a part of the Project and
available for use and occupancy by the Company without the payment of any rent
other than herein provided, to the same extent as if such other improvements
were specifically described herein and demised hereby); provided, that such
improvements will be acquired by the City subject to no liens, security
interests or encumbrances prior to the lien and/or security interest afforded
by the Indenture other than Permitted Encumbrances. In such case, any Net
Proceeds received from any award or awards with respect to the Project or any part thereof
made in such condemnation or eminent domain proceedings, or of the sale
proceeds, shall be applied in the same manner as provided in Section 9.1 hereof (with respect to the receipt of
casualty insurance proceeds).


 


(c)                                  If
the Company shall determine that it is not practicable and desirable to acquire
or construct substitute improvements, any Net Proceeds of condemnation awards
received by the Company shall be disbursed in accordance with the Mortgage or
any Leasehold Mortgage (in the order of priority) and, if there is no Mortgage
and no Leasehold Mortgage or if the Mortgage or any Leasehold Mortgage do not
contain provisions governing the disbursement of condemnation awards, paid into
the Bond Fund and shall be used to redeem Bonds on the earliest practicable
redemption date or to pay the principal of any Bonds as the same becomes due
and payable.


 


(d)                                 The
Company shall not, by reason of its inability to use all or any part of
the Project during any such period of restoration or acquisition nor by reason
of the payment of the costs of such restoration or acquisition, be entitled to
any reimbursement from the City, the Trustee or the Bondowners or to any
abatement or diminution of the rentals payable by the Company under this Lease
nor of any other obligations hereunder except as expressly provided in this
Section.


 


(e)                                  The
City shall cooperate fully with the Company in the handling and conduct of any
prospective or pending condemnation proceedings with respect to the Project or
any part thereof, and shall, to the extent it may lawfully do so;
permit the Company to litigate in any such proceeding in the name and on behalf
of the City. In no event will the City voluntarily settle or consent to the
settlement of any prospective or pending condemnation proceedings with respect
to the Project or any 


 


22

















 


part thereof without the prior written consent of the Company.


 


ARTICLE X


 


SPECIAL COVENANTS


 


Section 10.1. No Warranty of Condition
or Suitability by the City; Exculpation and Indemnification. The
City makes no warranty, either express or implied, as to the condition of the
Project or that it will be suitable for the Company’s purposes or needs. The
Company releases the City from, agrees that the City shall not be liable for
and agrees to hold the City harmless against, any loss or damage to property or
any injury to or death of any person that may be occasioned by any cause
whatsoever pertaining to the Project or the use thereof, unless such loss is
the result of the City’s gross negligence or willful misconduct.


 


Section 10.2. Surrender of Possession. Upon
accrual of the City’s right of re-entry because of the Company’s default
hereunder or upon the cancellation or termination of this Lease for any reason
other than the Company’s purchase of the Project pursuant to Article XI hereof, the Company shall peacefully
surrender possession of the Project to the City in good condition and repair,
ordinary wear and tear excepted; provided, however, the Company shall have the
right within 90 days (or such later date as the City may agree to) after
the termination of this Lease to remove from the Project Site any buildings,
improvements, furniture, trade fixtures, machinery and equipment by the Company
and not constituting part of the project. All repairs to and restorations
of the Project required to be made because of such removal shall be made by and
at the sole cost and expense of the Company, and during said 90-day (or
extended) period the Company shall bear the sole responsibility for and bear
the sole risk of loss for said buildings, improvements, furniture, trade
fixtures, machinery and equipment. All buildings, improvements, furniture,
trade fixtures, machinery and equipment owned by the Company and which are not
so removed from the Project prior to the expiration of said period shall be the
separate and absolute property of the City.


 


Section 10.3. City’s Right of Access to
the Project. In addition to the inspection rights of
the City pursuant to Section 3.1
of the Tax Abatement Agreement, the Company agrees that the City and the
Trustee and their duly authorized agents shall have the right to enter upon the
Project Site after delivering written notice to the Company (a) as may be
reasonably necessary to cause to be completed the acquisition, purchase,
construction, improving, equipping or remodeling provided for in Section 4.2
hereof, (b) to perform such work in and about the Project made
necessary by reason of the Company’s default under any of the provisions of
this Lease, and (c) following an Event of Default, to exhibit the
Project to prospective purchasers, lessees or trustees.


 


Section 10.4. Granting of Easements;
Leasehold Mortgages.


 


(a)                                  If
no Event of Default under this Lease shall have happened and be continuing, the
Company may at any time or times (1) grant easements, licenses,
rights-of-way (including the dedication of public highways) and other rights or
privileges in the nature of easements that are for the direct use of the
Project, or part thereof, by the grantee, (2) release existing
easements, licenses, rights-of-way and other rights or privileges, all with or
without consideration and upon such terms 


 


23

















 


and conditions as the Company shall determine, or (3) incur
Permitted Encumbrances. The City agrees that it will execute and deliver and
will cause and direct the Trustee to execute and deliver any instrument
necessary or appropriate to confirm and grant or release any such easement,
license, right-of-way or other right or privilege or any such agreement or
other arrangement, upon receipt by the City and the Trustee of:  (i) a copy of the instrument of grant or
release or of the agreement or other arrangement, (ii) a written
application signed by an Authorized Company Representative requesting such
instrument, and (iii) a certificate executed by an Authorized Company
Representative stating that such grant or release is not detrimental to the
proper conduct of the business of the Company, will not impair the effective
use or interfere with the efficient and economical operation of the Project, and
will not materially adversely affect the security intended to be given by or
under the Indenture. If the instrument of grant shall provide that any such
easement or right and the rights of such other parties thereunder shall be
superior to the rights of City and the Trustee under this Lease and the
Indenture and shall not be affected by any termination of this Lease or default
on the part of the Company hereunder then such easement shall not have any
effect whatsoever without the written consent of the City. If no Event of
Default shall have happened and be continuing beyond any applicable grace
period, any payments or other consideration received by the Company for any
such grant or with respect to or under any such agreement or other arrangement
shall be and remain the property of the Company, but, in the event of the
termination of this Lease or during the continuation of an Event of Default,
all rights then existing of the Company with respect to or under such grant
shall inure to the benefit of and be exercisable by the City and the Trustee.


 


(b)                                 The
Company may mortgage the leasehold estate created by this Lease, without
the City’s consent, provided and upon condition that:


 


(i)                                     a duplicate
original or certified copy or photostatic copy of each such Leasehold Mortgage,
and the note or other obligation secured thereby, is delivered to the City
within thirty (30) days after the execution thereof; and


 


(ii)                                  such Leasehold
Mortgage shall contain a covenant to the effect that the net proceeds of all
insurance policies and the condemnation award shall be held, used and applied
for the purposes and in the manner provided for in this Lease.


 


(c)                                  Notwithstanding
anything contained to the contrary in this Lease, (a) the Company shall
have the right to assign this Lease and any subleases to any Leasehold
Mortgagee or to the designee or nominee of such Leasehold Mortgagee, without
the consent of the City, and (b) if the leasehold mortgagee or its
designee or nominee shall acquire ownership of the leasehold estate, either
following foreclosure of such Leasehold Mortgage or in liquidation of the
indebtedness and in lieu of foreclosure thereof, the leasehold mortgagee or its
designee or nominee shall have the further right to further assign this Lease
and any subleases and any purchase money mortgage accepted in connection
therewith, without the consent of the City and such assignee shall enjoy all
rights, powers and privileges granted herein to leasehold mortgagees.


 


(d)                                 If
(1) the Company shall execute and deliver a Leasehold Mortgage, and (2) the
provisions and conditions of subsection (b) above shall have been
fully complied with and observed with respect to such Leasehold Mortgage, and (3) the
Company or the mortgagee under such Leasehold Mortgage shall have notified the
City in writing of the making thereof and of the name and 


 


24

















 


address of such leasehold mortgagee; then.


 


(i)                                     this Lease may not
be modified, amended, canceled or surrendered by agreement between the City and
the Company, without the prior written consent of such leasehold mortgagee;


 


(ii)                                  there shall be no
merger of this Lease or of the leasehold estate created hereby with the fee
title to the Project, notwithstanding that this Lease or said leasehold estate
and said fee title shall be owned by the same person or persons, without the
prior written consent of such leasehold mortgagee;


 


(iii)                               the City shall serve
upon each such leasehold mortgagee a copy of each notice of default and each
notice of termination given to the Company under this Lease, at the same time
as such notice is served upon the Company. No such notice to the Company shall
be effective unless a copy thereof is thus served upon each leasehold
mortgagee;


 


(iv)                              each leasehold mortgagee
shall have the same period of time after the service of such notice upon it
within which the Company may remedy or cause to be remedied the default
which is the basis of the notice plus twenty (20) days; and the City shall
accept performance by such leasehold mortgagee as timely performance by the
Company;


 


(v)                                 such leasehold
mortgagee shall not be required to continue possession or continue foreclosure
proceedings under paragraph (vii) of this subsection if the
particular default has been cured;


 


(vi)                              the City may exercise
any of its rights or remedies with respect to any other default by the Company
occurring during the period of such forbearance provided for under said
paragraph (g), subject to the rights of the leasehold mortgagee under this Section as
to such other defaults;


 


(vii)                           in case of default by the
Company under this Lease, other than a default in the payment of money, the
City shall take no action to effect a termination of this Lease by service of a
notice or otherwise, without first giving to such leasehold mortgagee a
reasonable time within which either to obtain possession of the Project and to
remedy such default in the case of a default which is susceptible of being
cured when such leasehold mortgagee has obtained possession of the Project, or
to institute and with reasonable diligence to complete foreclosure proceedings
or otherwise acquire the Company’s leasehold estate under this Lease in the
case of a default which is not so susceptible of being remedied by such
leasehold mortgagee, provided that the leasehold mortgagee shall deliver to the
City within thirty (30) days after the expiration of the grace period
applicable to the particular default, an instrument unconditionally agreeing to
remedy such default other, than a default not susceptible of being remedied by
such leasehold mortgagee. The City’s right to terminate this Lease by reason of
a default which is not susceptible of being remedied by such leasehold
mortgagee shall end with respect to such default when the leasehold mortgagee
obtains possession of the Project as aforesaid, which possession shall be
deemed to include possession by a receiver;


 


25

















 


(viii)                        if this Lease shall terminate
prior to the expiration of the Lease Term, the City shall enter into a new
lease for the Project with any such leasehold mortgagee, or its designee or
nominee, for the remainder of the term, effective as of the date of such
termination, at the same rent and upon the same terms, covenants and conditions
contained herein, except that such new lease shall not guarantee possession of
the Project to the new tenant as against the Company and/or anyone claiming
under the Company, and the City, simultaneously with the execution and delivery
of such new lease, shall turn over to the new tenant all monies, if any, then
held by the City under the Lease on behalf of the Company, on condition that:


 


(A)                              such leasehold mortgagee
shall make written request for such new lease within thirty (30) days after the
date of such termination, and


 


(B)                                on the commencement
date of the term of the new lease, such leasehold mortgagee shall cure all
defaults of the Company under the Lease (susceptible of being cured by such
leasehold mortgagee) which remain uncured on that date, and shall pay or cause
to be paid all unpaid sums which at such time would have been payable under
this Lease but for such termination, and shall pay or cause to be paid to the
City on that date all expenses, including reasonable counsel fees, court costs
and disbursements, incurred by the City in connection with any such default and
termination as well as in connection with the execution and delivery of such
new lease; and


 


(ix) if such leasehold mortgagee or its
designee or nominee shall become the owner of this Lease either following
foreclosure of such Leasehold Mortgage or in liquidation of the indebtedness
and in lieu of foreclosure thereof and such leasehold mortgagee or its designee
or nominee shall have assigned this Lease, such leasehold mortgagee or its designee
or nominee so assigning shall be released from all liability accruing from and
after the date of such assignment.


 


If more that one leasehold mortgagee shall request such new lease, such
new lease shall be made with and delivered to the leasehold mortgagee (or its
nominee or designee) whose mortgage is prior in lien to those of any others.
The opinion of a reputable title insurance company, licensed to insure title to
real property in the State of Kansas, setting forth the order of priority of such
mortgage liens, may be relied on by the City as conclusive evidence of
such priority.


 


Section 10.5. Indemnification of City
and Trustee. The Company shall indemnify and save the
City and the Trustee harmless from and against all claims by or on behalf of
any person; fire, or corporation arising from the conduct or management of, or
from any work or thing done in, on or about, the Project during the Lease Term,
and against and from all claims arising during the Lease Term from (a) any
condition of the Project caused by the Company, (b) any breach or default
on the part of the Company in the performance of any of its obligations
under this Lease, (c) any contract entered into in by the Company or its
sublesee, if any, in connection with the acquisition, purchase, construction,
improving, equipping or remodeling of the Project, (d) any act of
negligence of the Company or of any of its agents, contractors, servants,
employees or licensees, and (e) any act of negligence of any assignee or
sublessee of the Company, or of any agents, contractors, servants, employees or
licensees of any assignee or sublessee of the Company; provided, however, the
indemnification contained in this Section 10.5
shall not extend to the City or the Trustee if (i) such 


 


26

















 


claim is the result of work being performed at the Project by employees
of the City, or (ii) such claim is the result of the City’s gross
negligence or willful misconduct. The Company shall indemnify and save the City
and the Trustee harmless from and against all costs and expenses (except those
which have arisen from the willful misconduct or gross negligence of the City
or the Trustee) incurred in or in connection with any action or proceeding
brought in connection with claims arising from circumstances described in
clauses (a) through (e), and upon notice from the City or the Trustee, the
Company shall defend them or either of them in any such action or proceeding.


 


Section 10.6. Depreciation, Investment
Tax Credit and Other Tax Benefits. The City agrees
that any depreciation, investment tax credit or any other tax benefits with
respect to the Project or any part thereof shall be made available to the
Company, and the City will fully cooperate with the Company in any effort by
the Company to avail itself of any such depreciation, investment tax credit or
other tax benefits.


 


Section 10.7. Company to Maintain its
Corporate Existence. The Company agrees that until the
Bonds are paid or payment is provided for in accordance with the terms of the
Indenture, it will maintain its corporate existence, and will not dissolve or
otherwise dispose of all or substantially all of its assets; provided, however,
that the Company may, without violating the agreement contained in this Section,
consolidate with or merge into another domestic corporation (i.e., a
corporation incorporated and existing under the laws of one of the states of
the United States) or permit one or more other domestic corporations to
consolidate with or merge into it, or may sell or otherwise transfer to
another domestic corporation all or substantially all of its assets as an
entirety and thereafter dissolve, provided, the surviving, resulting or
transferee corporation expressly assumes in writing all the obligations of the
Company contained in this Lease; and, further provided, that the surviving,
resulting or transferee corporation, as the case may be, has a
consolidated net worth (after giving effect to said consolidation, merger or
transfer) at least equal to or greater than that of the Company immediately
prior to said consolidation, merger or transfer. The term “net worth”, as used
in this Section, shall mean the difference obtained by subtracting total
liabilities (not including as a liability any capital or surplus item) from
total assets of the Company and all of its subsidiaries. In any such
consolidation, merger or transfer the Company shall comply with the provisions
of Section 10.1 hereof to the extent applicable.


 


Section 10.8. Security Interests.
At the written request of the Owner of the Bonds, the City and the Company
agree to enter into all instruments (including financing statements and
statements of continuation) necessary for perfection of and continuance of the
perfection of the security interests of the City and the Trustee in the
Project. Upon the written instructions of the Owner of the Bonds, the Trustee
shall file all instruments the Owner of the Bonds shall deem necessary to be
filed and shall continue or cause to be continued the liens of such instruments
for so long as the Bonds shall be Outstanding. The City and the Company shall
cooperate with the Trustee in this regard by executing such continuation
statements and providing such information as the Trustee may require to
renew such liens. The Trustee shall maintain a file showing a description of
all Project Equipment, said file to be compiled from the certificates furnished
to the Trustee pursuant to Section 4.4
and Section 8.2 hereof.


 


27

















 


ARTICLE XI


 


OPTION AND OBLIGATION TO PURCHASE THE PROJECT


 


Section 11.1. Option to Purchase the
Project. The Company shall have, and is hereby
granted, the option to purchase the Project at any time, prior to the
expiration of the Lease Term upon payment in full of all Bonds then Outstanding
or provision for their payment having been made pursuant to Article XIII of the Indenture. To exercise such option
the Company shall give written notice to the City and to the Trustee, if any,
of the Bonds as shall then be unpaid or provision for their payment shall not
have been made in accordance with the provisions of the Indenture, and shall
specify therein the date of closing such purchase, which date shall be not less
than 30 nor more than 180 days from the date such notice is mailed, and in case
of a redemption of the Bonds in accordance with the provisions of the Indenture
the Company shall make arrangements satisfactory to the Trustee for the giving
of the required notice of redemption. The purchase price payable by the Company
in the event of its exercise of the option granted in this Section shall
be the sum of the following:


 


(a)                                  an amount of money
which, when added to the amount then on deposit in the Bond Fund, will be
sufficient to redeem all the then Outstanding Bonds on the earliest redemption
date next succeeding the closing date, including, without limitation, principal
and interest to accrue to said redemption date and redemption expense; plus


 


(b)                                 an amount of money
equal to the Trustee’s and the Paying Agent’s agreed to and reasonable fees and
expenses under the Indenture accrued and to accrue until such redemption of the
Bonds; plus


 


(c)                                  the
sum of $100.


 


Section 11.2. Conveyance of the Project.
At the closing of the purchase of the Project pursuant to this Article, the
City will upon receipt of the purchase price deliver to the Company the
following:


 


(a)                                  If the Indenture
shall not at the time have been satisfied in full, a release from the Trustee
of the Project from the lien and/or security interest of the Indenture.


 


(b)                                 Documents conveying to
the Company legal title to the Project, as it then exists, subject to the
following: (1) those liens and encumbrances, if any, to which title to the
Project was subject when conveyed to the City; (2) those liens and
encumbrances created by the Company or to the creation or suffering of which
the Company consented; (3) these liens and encumbrances resulting from the
failure of the Company to perform or observe any of the agreement on its part contained
in this Lease; (4) Permitted Encumbrances other than the Indenture and
this Lease; and (5) if the Project or any part thereof is being
condemned, the rights and title of any condemning authority.


 


Section 11.3. Relative Position of
Option and Indenture. The options and obligation to
purchase the Project granted to the Company in this Article shall be and
remain prior and superior to the Indenture and may be exercised whether or
not the Company is in default wader this Lease, 


 


28

















 


provided t hat such default will not result in nonfulfillment of any
condition to the exercise of any such option and further provided that all
options herein granted shall terminate upon the termination of this Lease.


 


Section 11.4. Obligation to Purchase the
Project. The Company hereby agrees to purchase, and
the City hereby agrees to sell, the Project for the sum of $100 at the
expiration of the Lease Term following full payment of the Bonds or provision
for payment thereof having been made in accordance with the provisions of the
Indenture.


 


ARTICLE XII


 


DEFAULTS AND REMEDIES


 


Section 12.1. Events of Default.
If any one or more of the following events shall occur and be continuing, it is
hereby defined as and declared to be and to constitute an “Event of Default” or
“default” under this Lease:


 


(a)                                  Default in the due
and punctual payment of Basic Rent for a period of 5 days following written
notice to the Company by the City or the Trustee or default in the due and
punctual payment Additional Rent for a period of 30 days following written
notice to the Company by the City or the Trustee; or


 


(b)                                 Default in the due
observance or performance of any other covenant, agreement, obligation or
provision of this Lease on the Company’s part to be observed or performed,
and such default shall continue for 60 days after the City or the Trustee has
given the Company written notice specifying such default (or such longer period
as shall be reasonably required to cure such default; provided that (1) the
Company has commenced such cure within said 60-day period, and (2) the
Company diligently prosecutes such cure to completion); or


 


(c)                                  The Company shall: (1) admit
in writing its inability to pay its debts as they become due; or (2) file
a petition in bankruptcy or for reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the Bankruptcy
Code as now or in the future amended or any other similar present or future
federal or state statute or regulation, or file a pleading asking for such
relief, or (3) make an assignment for the benefit of creditors; or (4) consent
to the appointment of a trustee, receiver or liquidator for all or a major
portion of its property or shall fail to have the appointment of any trustee,
receiver or liquidator made without the Company’s consent or acquiescence,
vacated or set aside; or (5) be finally adjudicated as bankrupt or
insolvent under any federal or state law; or (6) be subject to any
proceeding, or suffer the entry of a final and non-appealable court order,
under any federal or state law appointing a trustee, receiver or liquidator for
all or a major part of its property or ordering the winding-up or
liquidation of its affairs, or approving a petition filed against it under the
Bankruptcy Code, as now or in the future amended, which order or proceeding, if
not consented to by it, shall not be dismissed, vacated, denied, set aside or
stayed within 60 days after the day of entry or commencement; or (7) suffer
a writ or warrant of attachment or any similar process to be issued by any
court against all or any substantial 


 


29

















 


portion of its property, and such writ or warrant of attachment or any
similar process is not contested, stayed, or is not released within 60 days
after the final entry, or levy or after any contest is finally adjudicated or
any stay is vacated or set aside; or


 


(d)                                 The Company shall
vacate or abandon the Project, or shall have been ejected from the Project or
any portion thereof by reason of a defect in title to the Project, and the same
shall remain uncared for and unoccupied for a period of 60 days; or


 


(e)                                  The occurrence and
continuance of an “Event of Default” by the Company under the Tax Abatement
Agreement following any applicable notice and grace period provided therein.


 


Section 12.2. Remedies on Default.
If any Event of Default referred to in Section 12.1
hereof shall have occurred and be continuing, then the City may at the
City’s election (subject, however, to any restrictions against acceleration of
the maturity of the Bonds or termination of this Lease in the Indenture), then
or at any time thereafter, and while such default shall continue, take any one
or more of the following actions:


 


(a)                                  cause all amounts payable
with respect to the Bonds for the remainder of the term of this Lease to become
due and payable, as provided in the Indenture;


 


(b)                                 give the Company
written notice of intention to terminate this Lease on a date specified
therein, which date shall not be earlier than 30 days after such notice is
given, and if all defaults have not then been cured, on the date so specified,
the Company’s rights to possession of the Project shall cease and this Lease
shall thereupon be terminated, and the City may re-enter and take
possession of the Project; or


 


(c) without terminating this Lease,
re-enter the Project to take possession thereof pursuant to legal proceedings
or pursuant to any notice provided for by law, and having elected to re-enter
or take possession of the Project without terminating this Lease, the City
shall use reasonable diligence to relet the Project, or parts thereof, for such
term or terms and at such rental and upon such other terms and conditions as
the City may deem advisable, with the right to make alterations and
repairs to the Project, and no such re-entry or taking of possession of the
Project by the City shall be construed as an election on the City’s part to
terminate this Lease, and no such re-entry or taking of possession by the City
shall relieve the Company of its obligation to pay Basic Rent or Additional
Rent (at the time or times provided herein), or any of its other obligations
under this Lease, all of which shall survive such re-entry or taking of
possession, and the Company shall continue to pay the Basic Rent and Additional
Rent provided for in this Lease until the end of this Lease Term, whether or
not the Project shall have been relet, less the Net Proceeds, if any, of any
reletting of the Project after deducting all of the City’s reasonable expenses
in or in connection with such reletting, including without limitation all
repossession costs, brokerage commissions, legal expenses, expenses of
employees, alteration costs and expenses of preparation for reletting. Said Net
Proceeds of any reletting shall be deposited in the Bond Fund. Having elected
to re-enter or take possession of the Project without terminating this Lease,
the City may (subject, however, to any restrictions against termination of
this Lease in the Indenture), by notice to the 


 


30

















 


Company given at any time thereafter following an Event of Default,
elect to terminate this Lease on a date to be specified in such notice, which
date shall be not earlier than 30 days after re-entry under (c) above, and
if all defaults shall not have then been cured, on the date so specified this
Lease shall thereupon be terminated. If in accordance with any of the foregoing
provisions of this Article the City shall have the right to elect to
re-enter and take possession of the Project, the City may enter and expel
the Company and those claiming through or under the Company and remove the
property and effects of both or either (forcibly if necessary) without being
guilty of any manner of trespass and without prejudice to any remedies for
arrears of rent or preceding breach of covenant. The City may take
whatever action at law or in equity which may appear necessary or
desirable to collect rent then due and thereafter to become due, or to enforce
performance and observance of any obligation, agreement or covenant of the
Company under this Lease.


 


Section 12.3. Survival of Obligations.
The Company covenants and agrees with the City and Bondowners that its
obligations under this Lease shall survive the cancellation and termination of
this Lease, for any cause, and that the Company shall continue to pay the Basic
Rent and Additional Rent and perform all other obligations provided for in
this Lease, all at the time or times provided in this Lease; provided, however,
that upon the payment of all Basic Rent and Additional Rent required under Article V hereof, and upon the satisfaction and
discharge of the Indenture under Section 1301
thereof, the Company’s obligation under this Lease shall thereupon cease and
terminate in full.


 


Section 12.4. Limitation of Liability
and Indemnity. Notwithstanding anything contained to
the contrary in this Lease, it is agreed that the City will look only to the
Company’s interest in and to the Project and any sublease with respect thereto
for the collection of any judgment (or other judicial process) requiring the
payment of money by the Company in the event of a breach or default under this
Lease by the Company, and no other property or assets of the Company or its partners
or principal, disclosed or undisclosed, shall be subject to levy, execution or
other enforcement procedures for the satisfaction of any such judgment (or
other judicial process).


 


Section 12.5. Performance of the Company’s
Obligations by the City. If the Company shall fail to
keep or perform any of its obligations as provided in this Lease in the
making of any payment or performance of any obligation, then the City, or the
Trustee in the City’s name, may (but shall not be obligated so to do) upon
the continuance of such failure on the Company’s part for 30 days after
written notice of such failure is given the Company by the City or the Trustee,
and without waiving or releasing the Company from any obligation hereunder, as
an additional but not exclusive remedy, make any such payment or perform any
such obligation, and all reasonable sums so paid by the City or the Trustee and
all necessary incidental reasonable costs and expenses incurred by the City or
the Trustee in performing such obligations shall be deemed Additional Rent and
shall be paid to the City or the Trustee on demand, and if not so paid by the
Company, the City or the Trustee shall have the same rights and remedies
provided for in Section 12.2 hereof in the
case of default by the Company in the payment of Basic Rent.


 


Section 12.6. Rights and Remedies
Cumulative. The rights and remedies reserved by the
City and the Company hereunder and those provided by law shall be construed as
cumulative and continuing rights. No one of them shall be exhausted by the
exercise thereof on one or more occasions. The City and the Company shall each
be entitled to specific performance and injunctive or 


 


31

















 


other equitable relief for any breach or threatened breach of any of
the provisions of this Lease, notwithstanding availability of an adequate
remedy at law, and each party hereby waives the right to raise such defense in
any proceeding in equity.


 


Section 12.7. Waiver of Breach.
No waiver of any breach of any covenant or agreement herein contained shall
operate as a waiver of any subsequent breach of the same covenant or agreement
or as a waiver of any breach of any other covenant or agreement, and in case of
a breach by the Company of any covenant, agreement or undertaking by the
Company, the City may nevertheless accept from the Company any payment or
payments hereunder without in any way waiving City’s right to exercise any of
its rights and remedies provided for herein with respect to any such breach or
breaches of the Company which were in existence at the time such payment or
payments were accepted by the City.


 


Section 12.8. Notice of Defaults Under Section 12.1;
Opportunity of Company to Cure Defaults.


 


(a)                                  Anything
herein to the contrary notwithstanding, no default specified in Section 12.1(c) through (e) shall constitute
an Event of Default until actual notice of such default by registered or
certified mail shall be given by the Trustee or by the Owners of 25% in
aggregate principal amount of all Bonds Outstanding to the Company and the
Company shall have had 30 days after receipt of such notice to correct said
default or cause said default to be corrected, and shall not have corrected
said default or caused said default to be corrected within such period;
provided, however, if any such default shall be such that it cannot be
corrected within such period, it shall not constitute an Event of Default if
corrective action is instituted by the Company within such period and
diligently pursued until the default is corrected.


 


(b)                                 Anything
herein to the contrary notwithstanding, no default specified in Section 12.1(b) shall constitute an Event of
Default until actual notice of such default by registered or certified mail
shall be given (i) at any time the Company is the Owner of 100% in
aggregate principal amount of all Bonds Outstanding, by the Owner of 100% in
aggregate principal amount of all Bonds Outstanding, and (ii) at any time
the Company is not the Owner of 100% in aggregate principal amount of all Bonds
Outstanding, the Trustee or by the Owners of 25% in aggregate principal amount
of all Bonds Outstanding, to the Company and the Company shall have had 30 days
after receipt of such notice to correct said default or cause said default to
be corrected, and shall not have corrected said default or caused said default
to be corrected within such period; provided, however, if any such default
shall be such that it cannot be corrected within such period, it shall not
constitute an Event of Default if corrective action is instituted by the
Company within such period and diligently pursued until the default is
corrected.


 


(c)                                  With
regard to any alleged default concerning which notice is given to the Company
under the provisions of this Section, the City hereby grants the Company full
authority for account of the City to perform any covenant or obligation,
the nonperformance of which is alleged in said notice to constitute a default,
in the name and stead of the City, with full power to do any and all things and
acts to the same extent that the City could do and perform any such things
and acts in order to remedy such default.


 


Section 12.9. Trustee’s Exercise of the
City’s Remedies. Whenever any Event of Default 


 


32

















 


shall have occurred and be continuing, the Trustee may, but except as
otherwise provided in the Indenture shall not be obliged to, exercise any or
all of the rights of the City under this Article, upon notice as required of
the City unless the City has already given the required notice. In addition,
the Trustee shall have available to it all of the remedies prescribed by the
Indenture.


 


ARTICLE XIII


 


ASSIGNMENT AND SUBLEASE


 


Section 13.1. Assignment; Sublease.


 


(a)                                  The
Company shall have the right to assign, transfer, encumber or dispose of this
Lease or any interest therein or part thereof, with the written consent of
the City, for any lawful purpose under the Act. With respect to any assignment,
the Company shall comply with the following conditions:


 


(1)                                  Such assignment shall
be in writing, duly executed and acknowledged by the assignor and in proper form for
recording;


 


(2)                                  Such assignment shall
include the entire then unexpired term of this. Lease;


 


(3)                                  A duplicate original
of such assignment shall be delivered to the City within ten (10) days
after the execution thereof, together with an assumption agreement, duly
executed and acknowledged by the assignee in proper form for recording, by
which the assignee shall assume all of the terms, covenants and conditions of
this Lease on the part of the Company to be performed and observed; and


 


(4)                                  At the time of any
such assignment there shall be no damage or destruction to the Project which
has not been repaired, restored and replaced in accordance with the provisions
of this Lease, unless any funds then held by the Company for the purposes of
such repair, restoration and replacement are simultaneously transferred to the
assignee.


 


Upon the satisfaction of the conditions set forth herein; the assignor
shall be relieved of all further liability occurring on and after the effective
date of such assignment. The consent of the City to any assignment, transfer,
encumbrance or disposition described in this subsection (a) shall not
be unreasonably withheld or .delayed.


 


(b) The Company shall have the right, with the written consent of
the City, to sublet all of the Project to a single entity for any lawful
purpose under the Act. The Company shall have the right, without the consent of
the City, to sublet any part of the Project to more than one entity in the
ordinary course of its business for any lawful purpose under the Act. No
sublease of the Project shall release or discharge the Company from its primary
liability for the payment of the Basic Rent and Additional Rent hereunder and
the performance of each and all of the covenants and agreements herein
contained, and its duties and obligations under this Lease s hall continue as
if no such sublease had been made. The Company shall, within 10 days after the
delivery thereof, furnish or cause to be 


 


33

















 


furnished to the City and the Trustee a true and correct copy of each
such sublease. Any sublease may provide, at the Company’s option, that the
City’s consent shall not be required in respect of any further subletting
thereunder if such further subletting is for a similar purpose as the original
sublease and is for a purpose permissible under the Act.


 


If for any reason this Lease and the leasehold estate of the Company
hereunder is terminated by the City by summary proceedings or otherwise in
accordance with the terms of this Lease, the City covenants and agrees that
such termination of this Lease shall not result in a termination of any
sublease affecting the Project or any part or parts thereof and that they
shall all continue for the duration of their respective terms and any
extensions thereof as a direct lease between the City hereunder and the
sublessee thereunder, with the same force and effect as if the City hereunder
had originally entered into such sublease as landlord thereunder_ Any such
sublessee shall not be named or joined in any action or proceeding by the City
under this Lease to recover possession of the Project or for any other relief
if such sublessee is not then in default under the terms of its sublease beyond
any applicable grace period for curing the same. The City shall, upon request,
execute, acknowledge and deliver such agreements evidencing and agreeing to the
foregoing in a form reasonably satisfactory to the Company.


 


Any consent of the City required by this subsection (b) shall
not be unreasonably withheld or delayed.


 


Section 13.2. Assignment of Revenues by
City. The City shall assign and pledge any rents,
revenues and receipts receivable under this Lease, to the Trustee pursuant to
the Indenture as security for payment of the principal of interest and premium,
if any, on the Bonds and the Company hereby consents to such pledge and
assignment.


 


Section 13.3. Prohibition Against Fee
Mortgage of Project. The City shall not mortgage its
fee interest in the Project, but may assign its interest in and pledge any
moneys receivable under this Lease to the Trustee pursuant to the Indenture as
security for payment of the principal of and interest on the Bonds.


 


Section 13.4. Restrictions on Sale or
Encumbrance of Project by City. During the Lease Term,
the City agrees that,. except to secure the Bonds to be issued pursuant to the
Indenture, it will not sell, assign, encumber, mortgage, transfer or convey the
Project or any interest therein.


 


ARTICLE XIV


 


AMENDMENTS, CHANGES AND MODIFICATIONS


 


Section 14.1. Amendments, Changes and
Modifications. Except as otherwise provided in this
Lease or in the Indenture, subsequent to the issuance of Bonds and prior to the
payment in full of the. Bonds (or provision for the payment thereof having been
made in accordance with the provisions of the Indenture), this Lease may not
be effectively amended, changed, modified, altered or terminated without the
prior written consent of the Trustee, given in accordance with the provisions
of the Indenture.


 


34

















 


ARTICLE XV


 


MISCELLANEOUS PROVISIONS


 


Section 15.1. Notices.
All notices, certificates or other communications required or desired to be
given hereunder shall be in writing and shall be deemed duly given when (z)
mailed by registered or certified mail, postage prepaid, or (ii) sent by
overnight delivery or other delivery service which requires written
acknowledgment of receipt by the addressee, addressed as follows:


 


	
  (a)

  	
   

  	
  To the City:

  	
   

  	
  City of Garnett, Kansas

  
	
   

  	
   

  	
   

  	
   

  	
  City Hall

  
	
   

  	
   

  	
   

  	
   

  	
  131 W. 5th Avenue

  
	
   

  	
   

  	
   

  	
   

  	
  Garnett, Kansas 66032

  
	
   

  	
   

  	
   

  	
   

  	
  Attention: City Clerk

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  To the Company:

  	
   

  	
  East Kansas Agri-Energy, L.L.C.

  
	
   

  	
   

  	
   

  	
   

  	
  1304 South Main

  
	
   

  	
   

  	
   

  	
   

  	
  Garnett, Kansas 66032

  
	
   

  	
   

  	
   

  	
   

  	
  Attention: President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  To the Trustee;

  	
   

  	
  Security Bank of Kansas City

  
	
   

  	
   

  	
   

  	
   

  	
  701 Minnesota Avenue

  
	
   

  	
   

  	
   

  	
   

  	
  Kansas City, Kansas 66101

  
	
   

  	
   

  	
   

  	
   

  	
  Attention: Corporate Trust Department

  



 


All notices given by certified or registered mail as aforesaid shall be
deemed fully given as of the date they are so mailed. A duplicate copy of each
notice, certificate or other communication given hereunder by either the City
or the Company to the other shall also be given to the Trustee. The City, the
Company and the Trustee may from time to time designate, by notice given hereunder
to the others of such parties, such other address to which subsequent notices,
certificates or other communications shall be sent.


 


Section 15.2. City Shall Not Unreasonably Withhold Consents and
Approvals. Wherever in this Lease it is provided that the City shall, may or
must give its approval or consent, or execute supplemental agreements or
schedules, the City shall not unreasonably, arbitrarily or unnecessarily
withhold or refuse to give such approvals or consents or refuse to execute such
supplemental agreements or schedules.


 


Section 15.3. Net Lease.
The parties hereto agree (a) that this Lease shall be deemed and construed
to be a net lease, (b) that the payments of Basic Rent are designed to
provide the City and the Trustee funds adequate in amount to pay all principal
of and interest accruing on the Bonds as the same become due and payable, and (c) that
if after the principal of and interest on the Bonds and all costs incident to
the payment of the Bonds have been paid in full the Trustee or the City holds
unexpended fluids received in accordance with the terms hereof such unexpended
funds shall, after 


 


35

















 


payment therefrom of all sums then due and owing by the Company under
the terms of this Lease, and except as otherwise provided in this Lease and the
Indenture, become the absolute property of and be paid over forthwith to the
Company.


 


Section 15.4. No Pecuniary Liability.
No provision, covenant or agreement contained in this Lease, the Indenture or
the Bonds, or any obligation herein or therein imposed upon the City, or the
breach thereof, shall constitute or give rise to or impose upon the City a
pecuniary liability or a charge upon the general credit or taxing powers of the
City of Olathe or the State of Kansas. Such limitation shall not apply to any
liability or charge directly resulting from the City’s breach of any provision,
covenant or agreement contained herein.


 


Section 15.5. Governing Law.
This Lease shall be construed in accordance with and governed by the laws of
Kansas.


 


Section 15.6. Electronic Storage.
The parties agree that the transaction described herein may be conducted
and related documents may be stored by electronic means.


 


Section 15.7. Binding Effect.
This Lease shall be binding upon and shall inure to the benefit of the City and
the Company and their respective successors and assigns.


 


Section 15.8. Severability.
If for any reason any provision of this Lease shall be determined to be invalid
or unenforceable, the validity and enforceability of the other provisions
hereof shall not be affected thereby.


 


Section 15.9. Execution in Counterparts.
This Lease may be executed simultaneously in several counterparts, each of
which shall be deemed to be an original and all of which shall constitute but
one and the same instrument.


 


[Remainder of page intentionally blank.]


 


36

















 


IN WITNESS WIIEREOF,
the parties hereto have caused this Lease to be executed in their respective
corporate names and their respective corporate seals to be hereunto affixed and
attested by their duly authorized officers, all as of the date first above
written.


 


 


	
   

  	
  CITY OF GARNETT, KANSAS

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James A. Shmudl

  	
   

  
	
   

  	
   

  	
  Mayor

  
	
   

  	
   

  	
   

  
	
  (Seal)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Joyce E. Martin

  	
   

  	
   

  	
   

  
	
   

  	
  City Clerk

  	
   

  	
   

  
						



 


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  EAST KANSAS AGRI-ENERGY, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William R. Pracht

  	
   

  
	
   

  	
   

  	
  William R Pracht

  
	
   

  	
   

  	
  Chairman and President

  



 


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EXHIBIT A


 


EXCLUDED PROPERTY


 


Any and all personal property located on the project Site purchased by
the Company from moneys other than the proceeds of the Bonds.


 


A-1

















 


EXHIBIT B


 


PROJECT EQUIPMENT


 


All items of machinery, equipment and parts or other personal property
installed or acquired or to be acquired for installation in the Project
Improvements or elsewhere on the Project Site, or for use in connection with
the Company’s business, pursuant to Article IV hereof and paid for in
whole or in part from the proceeds of Bonds; and all replacements thereof
and substitutions therefor made pursuant to this Lease.


 


B-1

















 


EXHIBIT C


 


PROJECT IMPROVEMENTS


 


All buildings, structures, improvements and fixtures located on or to
be acquired or purchased for the construction, improvement, equipping or
remodeling of the Project Site pursuant to Article IV
hereof and paid for in whole or in part from the proceeds of Bonds and all
additions, alterations, modifications and improvements thereof made pursuant to
this Lease.


 


C-1

















 


EXHIBIT D


 


PROJECT SITE


 


Tract
1:


All
of Lots One (1), Two (2), Three (3) and Four (4), except the West 450 feet
of said Lot Two (2) and Lot Three (3), in the Golden Prairie Industrial
Park Addition to the City of Garnett, Anderson County, Kansas.


 


A
strip of land described as the South 50 feet of the West 450 feet of Lot Two
(2), in the Golden Prairie Industrial Park Addition to the City of Garnett,
Anderson County, Kansas;


 


together
with the southern half of vacated NE 1700 Road abutting the northern boundary
of the land described above.


 


Tract
2:


Beginning
at a 1/2” rebar at the Southwest corner of the Southeast Quarter (SE/4) of Section Thirty
(30), Township Twenty (20) South, Range Twenty (20) East of the Sixth Principal
Meridian, THENCE North 02°14’48” West for a distance of 925.52 feet to a 1/2”
rebar on the West line of said Southeast Quarter (SE/4), THENCE South 68°39’56”
East for a distance of 896.17 feet to a 1/2” rebar; THENCE South 74°03’04” East
for a distance of 428.02 feet to a 1/2” rebar; THENCE South 02°14’48” East for
a distance of 444.00 feet to a 1/2” rebar on the. South line of said Southeast
Quarter (SE/4); THENCE South 88°15’01” West for a distance of 1228.00 feet
along said South line to the point of beginning;


 


together
with the northern half of vacated NE 1700 Road abutting-the southerly boundary
of the land described above.


 


Tract
3:


Lot
Five (5) and Lot Six-A (6-A), less the North 100 feet of s aid Lot Six-A
(6 A), in Golden Prairie Industrial Park Addition to the City of Garnett,
Anderson County, Kansas.


 


Tract
4:


Grant
of Easement and Right of Way dated April 5, 2005 recorded April 7,
2005 in Book 77, of MCL, page 59, in the office of the Register of Deeds,
Anderson County, Kansas, covering the following property:


 


Commencing
at a 1/2” rebar at the Southeast Corner of the Southwest Quarter of Section 30,
Township 20 South, Range 20 East of the Sixth Principal Meridian, City of
Garnett, Anderson County., Kansas; THENCE North 02 degrees 14 minutes 48
seconds West for a distance of 798.23 feet along the East line of said
Southwest Quarter; THENCE North 70 degrees 59 minutes 38 seconds West for a
distance of 51.33 feet to the East line of the Rail Road Depot as described in
Deed Book 16, Page 605, the POINT OF BEGINNING; THENCE North 70 degrees 59
minutes 38 seconds West for a distance of 301.01 feet to the West line of said
Rail Road Depot; THENCE North 12 degrees 22 minutes 55 seconds East for a
distance of 60.40. feet along said West line; THENCE South 70 degrees 59
minutes 38 seconds East for a distance of 305.09 feet to the East line of said
Rail Road Depot; THENCE South 16 degrees 15 minutes 12 seconds West for a
distance of 60.06 feet to the POINT OF BEGINNING. Together with and subject to
covenants, easements, and restrictions of record. Said property contains 18182.9
square feet more or less in Anderson County, Kansas, as shown on survey by
Taylor Design Group, P.A., dated March, 2005.


 

















 


EXHIBIT E


 


[FORM OF REQUISITION CERTIFICATE]


 


	
   

  	
  Requisition No.

  
	
   

  	
  Date:

  



 


REQUISITION CERTIFICATE


 


TO:                            SECURITY BANK OF KANSAS
CITY, AS TRUSTEE UNDER A TRUST INDENTURE DATED AS OF DECEMBER 1, 2005,
BETWEEN THE CITY OF GARNETT, KANSAS, AND THE TRUSTEE, AND LEASE AGREEMENT DATED
AS OF DECEMBER 1, 2005, BETWEEN THE CITY OF GARNETT, KANSAS, AND EAST
KANSAS AGRI-ENERGY, L.L.C.


 


The undersigned hereby requests that a total of $                          
be paid for Project Costs (as defined in said Lease) in such amounts, to such
payees and for such purposes as set forth on Schedule 1
attached hereto.


 


I hereby state and certify that: (i) the amounts requested are or
were necessary and appropriate in connection with the acquisition, purchase,
construction, improving, equipping or remodeling of the Project, have been
properly incurred and are a proper charge against the Construction Fund, and
have been paid by or are justly due to the persons whose names and addresses
are stated above, and have not been the basis of any previous requisition from
the Construction Fund; (ii) as of this date, except for the amounts referred
to above, there are no, to the best of my knowledge, outstanding statements
which are due and payable for labor, wages, materials, supplies or services in
connection with the acquisition, purchase, construction, improving, equipping
or remodeling of said buildings and improvements which, if unpaid, might become
the basis of a vendors’, mechanics’, laborers’ or materialmen’s statutory or
similar lien upon the Project or any part thereof; and (iii) no part of
the several amounts paid or due as stated above has been or is being made the
basis for the withdrawal of any moneys from the. Construction Fund in any
previous or pending application for payment made pursuant to said Lease.


 


For any payee which is the Company the undersigned hereby instructs the
Trustee to make such payment by wire transfer to the following account:                                                            ,
ABA No.                  ,Credit
Account No.                    
(EAST KANSAS AGRI-ENERGY, L.L.C.).


 


	
   

  	
  EAST KANSAS AGRI-ENERGY, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 


E-1

















 


SCHEDULE 1 TO REQUISITION CERTIFICATE


 


	
  Amount

  	
   

  	
  Payee and Address

  	
   

  	
  Description

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  $

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


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