**Exhibit 10.29**

 

Execution Copy

 

 

 

**CITY OF GARNETT, KANSAS,As Lessor,**

 

 

**AND**

 

 

**EAST KANSAS AGRI-ENERGY, L.L.C.As Lessee**

 

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**LEASE AGREEMENT**

 

**Dated as of December 1, 2005**

 

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**Relating to:**

 

**$50,000,000(Aggregate Maximum Principal Amount)City of Garnett, KansasIndustrial Revenue Bonds(East Kansas Agri-Energy Project)Series 2005**

 

 

 

 

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

 

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**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         |   |

 

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| **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 |   |

 

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| **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 |   |

 

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| **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                     |   |

 

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**LEASE AGREEMENT**

 

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

 

**WITNESSETH:**

 

**WHEREAS**, the City isauthorized under the provisions of K.S.A. 12-1740 to 12-1749d, inclusive, asamended (the “Act”), to acquire, purchase, construct, improve, equip, remodel,sell and lease certain facilities within its jurisdiction for commercialpurposes, and to issue revenue bonds for the purpose of paying the cost of suchfacilities, and to pledge the income and revenues to be derived from theoperation of such facilities to secure the payment of the principal of andinterest on such bonds;

 

**WHEREAS**, pursuant tothe Act, the governing body of the City has heretofore passed Ordinance No. 3602(the “Ordinance”) on June 14, 2005, authorizing the City to issue itsIndustrial Revenue Bonds (East Kansas Agri-Energy Project), Series 2005,in the aggregate maximum principal amount of $50,000,000 (the “Bonds”), for thepurpose of acquiring, purchasing, constructing, installing and equipping acommercial project, consisting of an ethanol production facility, includingland, buildings, structures, improvements, fixtures, machinery and equipment ashereinafter more fully described (the “Project”), and authorizing the City tolease the Project to the Company;

 

**WHEREAS**, pursuant tosuch Ordinance, the City is authorized to enter into, a Trust Indenture of evendate herewith (the “Indenture”), with Security Bank of Kansas City, a statebanking corporation (the “Trustee”), for the purpose of issuing and securingthe Bonds, as therein provided, and to enter into this Lease with the Companyunder which the City will acquire, purchase, construct, improve, equip andremodel the Project and will lease the Project to the Company in considerationof rental payments by the Company which will be sufficient to pay the principalof and interest on the Bonds; and

 

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

 

**NOW, THEREFORE**, inconsideration of the premises and the mutual representations, covenants andagreements 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 thewords and terms defined in **Section 101**of the Indenture which 

 

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

 

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

 

**“Basic Rent”** meansthe 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 coinsuranceprovisions of the applicable fire and casualty insurance policy.

 

**“Indenture”** meansthe Trust Indenture dated as of December 1, 2005, between the City and theTrustee, as from time to time amended and supplemented in accordance with theprovisions thereof.

 

**“Lease”** means thisLease Agreement, between the City and the Company, as from time to time amendedand 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 SecurityAgreement, relating to the Project and any other leasehold mortgage permitted pursuantto the provisions of **Section 10.4(b) **hereof.

 

**“Lease Term”** meansthe period from the effective date of this Lease until the expiration thereofpursuant to **Section 3.2** of this Lease.

 

**“Mortgage”** means theFuture Advance Mortgage dated November 23, 2004 from the Company to HomeFederal Savings Bank, as supplemented and amended.

 

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

 

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

 

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

 

**“Plans and Specifications”**means the plans and specifications prepared. for and showing the Project, asamended by the Company from time to time prior to the Completion Date, the samebeing duly certified by the Company, and on file at the principal office of theCompany in Olathe, Kansas and which shall be available for reasonableinspection by the City, the Trustee and their duly appointed representatives.

 

**“Project Equipment”**means all items of machinery, equipment and parts or other personal propertyinstalled or acquired or to be acquired for installation in the ProjectImprovements or elsewhere on the Project Site pursuant to **Article IV**hereof and paid for in whole or in part from the proceeds of Bonds, asdescribed in **Exhibit B** attached hereto andby this reference made a part hereof, and all replacements thereof andsubstitutions therefor made pursuant to this Lease.

 

**“Project Improvements”**means all buildings, structures, improvements and fixtures located on or to beacquired, purchased, constructed, improved or remodeled on the Project Sitepursuant to **Article IV** hereof, asdescribed in **Exhibit C** attached hereto andby this reference made a part hereof, and all additions, alterations,modifications and improvements thereof made pursuant to this Lease.

 

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

 

**“Trustee”** meansSecurity Bank of Kansas City, a state banking corporation, duly organized andexisting under the laws of the State of Kansas, and its successor or successorsand any other corporation which at the time may be substituted in itsplace pursuant to and at the time serving as Trustee under this Indenture.

 

**Section 1.2.****                                Rules ofInterpretation**.

 

(a)                                  Wordsof the masculine; gender shall be deemed and construed to include correlativewords of the feminine and neuter genders.

 

(b)                                 Unlessthe context shall otherwise indicate, words importing the singular number shallinclude the plural and vice versa, and words importing persons shall includefirms, associations and corporations, including governmental entities, as wellas natural persons.

 

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

 

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

 

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

 

(e)                                  TheTable of Contents and the Article and Section headings of this Leaseshall not be treated as a part of this Lease or as affecting the truemeaning of the provisions hereof.

 

**ARTICLE II**

 

**REPRESENTATIONS**

 

**Section 2.1.****                                Representationsby the City.** The City makes the following representations as the basis forthe undertakings on its part herein contained:

 

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

 

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

 

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

 

(d)                                 TheBonds are to be issued under and secured by the Indenture, pursuant to whichthe Project and the net earnings therefrom, including all rents, revenues andreceipts 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 theprincipal of and interest on the Bonds.

 

(e)                                  TheCity will not mortgage the Project or pledge the revenues derived therefrom forany bonds or other obligations other than the Bonds except with the writtenconsent of the Authorized Company Representative.

 

(f)                                    TheCity shall have no authority to operate the Project as a business or in anyother manner except as the lessor thereof.

 

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(g)                                 Theacquisition, purchase, construction, improvement, equipping and remodeling ofthe Project and the leasing of the Project by the City to the Company willfurther the public purposes of the Act.

 

(h)                                 Nomember of the governing body of the City or any other officer of the City hasany significant or conflicting interest, financial, employment or otherwise, inthe Company or in the transactions contemplated hereby.

 

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

 

(a)                                  TheCompany is a limited liability company validly existing and in good standingunder the laws of the State of Kansas and duly qualified to do business in theState of Kansas.

 

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

 

(c)                                  Theexecution and delivery of this Lease, the consummation of the transactionscontemplated hereby, and the performance of or compliance with the terms andconditions of this Lease by the Company will not conflict with or result in amaterial breach of any of the terms, conditions or provisions of, or constitutea material default under, any mortgage, deed of trust, lease or any othercorporate restrictions or any agreement or instrument to which the Company is aparty or by which it or any of its property is bound, or the Company’s Articlesof Organization or Operating Agreement or any order, rule or regulationapplicable to the Company or any of its property of any court or governmentalbody, or constitute a material default under any of the foregoing, or result inthe creation or imposition of any prohibited lien, charge or encumbrance of anynature whatsoever upon any of the property or assets of the Company under theterms of any instrument or agreement to which the Company is a party.

 

(d)                                 TheProject 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 otherapplicable laws, rules and regulations.

 

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

 

**ARTICLE III**

 

**GRANTING PROVISIONS**

 

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

 

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

 

**Section 3.3.****                                Possessionand Use of the Project**.

 

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

 

(b)           Subject to theprovisions of this Section, the Company shall have the right to use the Projectfor any lawful purpose allowed by law and contemplated by the Act. The Companyshall comply with all statutes, laws, ordinances, orders, judgments, decrees,regulations, directions and requirements of all federal, state, local and othergovernments or governmental authorities, now or hereafter applicable to theProject or to any adjoining public ways, as to the manner of use or the conditionof the Project or of adjoining public ways. The Company shall also comply withthe mandatory requirements, rules and regulations of all insurers underthe 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 imposedas a result of the failure of the Company to comply with the provisions of thisSection. Notwithstanding any provision contained in this Section, however, theCompany shall have the right, at its own cost and expense, to contest or reviewby legal or other appropriate procedures the validity or legality of any suchgovernmental statute, law, ordinance, order, judgment, decree, regulation,direction or requirement, or any such requirement, rule or regulation ofan insurer, and during such contest or review the Company may refrain fromcomplying therewith.

 

**ARTICLE IV**

 

**PURCHASE, CONSTRUCTION, RENOVATION,INSTALLATIONAND EQUIPPING OF THE PROJECT**

 

**Section 4.1.****                                Issuanceof the Bonds**.

 

(a)                                  Inorder to provide funds for the payment of the Project Costs, the City agreesthat it 

 

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will issue, sell and cause to be delivered to the purchaser thereof theBonds in accordance with the provisions of the Indenture and the Bond PurchaseAgreement. The proceeds of the sale of the Bonds, when received, shall be paidover to the Trustee for the account of the City. The Trustee shall promptlydeposit such proceeds, when received, as provided in the Indenture, to be usedand applied as hereinafter provided in this Article and in the Indenture.

 

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

 

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

 

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

 

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

 

(b)                                 TheCompany will, on behalf of the City, acquire, purchase, construct, improve andremodel the Project Improvements on the Project Site and otherwise improve theProject Site in accordance with the Plans and Specifications. The Company may makeminor changes in and to the Construction Contracts and the Plans andSpecifications incorporated therein without the consent of the City. TheCompany shall notify the City in writing of major changes. Major changes shallbe 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 bemade hereunder, result in a Project suitable for use by the Company for itspurposes, and that all real and personal property described therein isnecessary in connection with the Project.

 

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

 

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

 

(d)                                 TheCompany agrees that it will use its best efforts to cause the acquisition,purchase, construction, improvement, equipping and remodeling of the Project tobe completed as soon as practicable with all reasonable dispatch. In the eventsuch acquisition, purchase, construction, improvement, and equipping andremodeling 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 Companyshall seek reimbursement for all such fields advanced.

 

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

 

**Section 4.4.           Payment for Project Costs**. AllProject Costs as specified in **Section 4.3**hereof shall be paid by the Trustee from the Construction Fund as more fullyprovided in the Indenture. The City hereby authorizes and directs the Trusteeto make disbursements from the Construction Fund, upon receipt by the Trusteeof certificates in substantially the form attached hereto as **Exhibit E**, signed by an Authorized CompanyRepresentative:

 

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

 

(b)                                 describingin reasonable detail each item of Project Costs for which payment is beingrequested;

 

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

 

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

 

The Trustee may rely conclusively on any such certificate andshall not be required to make any independent investigation in connectiontherewith.

 

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

 

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acquisition, purchase, construction, improvement, equipping andremodeling of the Project has been completed in accordance with the Plans andSpecifications, (b) that all costs and expenses incurred in theacquisition, purchase, construction, improvement, equipping and remodeling ofthe Project have been paid except costs and expenses the payment of which isnot 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 givenwithout prejudice to any rights against third parties which exist at the dateof such certificate or which may subsequently come into being. The Companyand the City agree to cooperate in causing such certificate to be furnished tothe Trustee.

 

**Section 4.6.****                                Surplusor Deficiency in Construction Fund**.

 

(a)                                  Uponreceipt 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 Fundto the Bond Fund to be applied as directed by the Company solely to (1) thepayment of principal and premium, if any, of the Bonds through the payment(including regularly scheduled principal payments, if any) or redemptionthereof at the earliest date permissible under the terms of the Indenture, or (2) atthe option of the Company, to the purchase of Bonds at such earlier date ordates as the Company may elect. Any amount so deposited in the Bond Fund may beinvested as permitted by **Section 702**ofthe Indenture.

 

(b)                                 Ifthe Construction Fund shall be insufficient to pay fully all Project Costs andto complete the Project lien free, the. Company shall pay, in cash, the fullamount of any such deficiency by making payments thereof directly to thecontractors and to the suppliers of materials and services as the same shallbecome due, and the Company shall save the City and the Trustee whole andharmless from any obligation to pay such deficiency.

 

**Section 4.7.           Project Property of City**. TheProject Site and all Project Improvements located thereon at the executionhereof and which the Company desires to convey to the City, all work andmaterials on the Project Improvements as such work progresses, and alladditions or enlargements thereto or thereof, the Project as fully completed,anything under this Lease which becomes, is deemed to be, or constitutes a part ofthe Project, and the Project as repaired, rebuilt, rearranged, restored orreplaced by the Company under the provisions of this Lease, except as otherwisespecifically provided herein, shall immediately when erected or installedbecome the absolute property of the City, subject only to PermittedEncumbrances.

 

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

 

**ARTICLE V**

 

**RENT PROVISIONS**

 

**Section 5.1.           Basic Rent**. The Company covenantsand agrees to pay to the Trustee in same 

 

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day funds for the account of the City during this Lease Term, fordeposit in the Bond Fund on or before 11:00 A.M., Trustee’s local time, oneach June 1 and December 1, commencing June 1, 2006, the amountof principal of and the interest on the Bonds then due in accordance with theprovisions 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 andavailable for the payment of principal on the Bonds and the interest thereon onsuch payment date, shall be equal to the amount payable on such payment date asprincipal of the Bonds and the interest thereon as provided in the Indenture.All payments of Basic Rent provided for in this Section shall be paiddirectly to the Trustee and shall be deposited in accordance with theprovisions of the Indenture into the Bond Fund and shall be used and applied bythe Trustee in the manner and for the purposes set forth in this Lease and theIndenture. Subject to the other provisions of this Lease and the Indenture, atany time that the Company is the sole Bondowner, the Company may, at itsoption, make payments of Basic Rent by tendering a portion of the principalamount of the Bonds equal to such principal payment thereon to the Trustee forcancellation.

 

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

 

(a)                                  allreasonable fees, charges and expenses, including agent and counsel fees, of theTrustee and the Paying Agent incurred under the Indenture, as and when the samebecome due;

 

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

 

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

 

(d)                                 anamount sufficient to reimburse the City for all expenses reasonably incurred bythe City hereunder and in connection with the performance of its obligationsunder this Lease, the Indenture or the Tax Abatement Agreement;

 

(e)                                  allamounts payable under the Tax Abatement Agreement;

 

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

 

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

 

**Section 5.3.****                                Obligationsof Company Absolute and Unconditional.**

 

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

 

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right of termination or cancellation arising from any circumstance whatsoever,whether now existing or hereafter arising, and irrespective of whether theProject shall have been started or completed, or whether the City’s titlethereto or to any part thereof is defective or nonexistent, andnotwithstanding any damage to, loss, theft or destruction of, the Project orany part thereof, any failure of consideration or frustration ofcommercial purpose, the taking by eminent domain of title to or of the right oftemporary use of all or any part of the Project, legal curtailment of theCompany’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 Stateof Kansas or any political subdivision thereof, any change in the City’s legalorganization or status, or any default of the City hereunder, and regardless ofthe invalidity of any action of the City, and regardless of the invalidity ofany portion of this Lease.

 

(b)                                 Nothingin this Lease shall be construed to release the City from the performance ofany agreement on its part herein contained or as a waiver by the Companyof any rights or claims the Company may have against City under this Leaseor otherwise, but any recovery upon such rights and claims shall be had fromthe City separately, it being the intent of this Lease that the Company shallbe unconditionally and absolutely obligated to perform fully all of itsobligations, agreements and covenants under this Lease (including theobligation to pay Basic Rent and Additional Rent) for the benefit of theBondowners. The Company may, however, at its own cost and expense and in itsown name or in the name of the City, prosecute or defend any action orproceeding or take any other action involving third persons which the Companydeems reasonably necessary in order to secure or protect its right ofpossession, occupancy and use hereunder, and in such event the City herebyagrees to cooperate fully with the Company and to take all action necessary toeffect the substitution of the Company for the City in any such action orproceeding if the Company shall so request.

 

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

 

**Section 5.5.           Redemption of Bonds**. The City andthe Trustee, at the written direction of the Company, at any time the aggregatemoneys in the Bond Fund are sufficient for such purposes, shall (a) if thesame are then redeemable under the provision of **Article III**of the Indenture, take all steps that may be necessary under theapplicable redemption provisions of the Indenture to effect the redemption ofall or such part of the then Outstanding Bonds as may be specified bythe 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 theCompany shall direct, to be applied by the Trustee for the purchase of Bonds inthe open market for the purpose of cancellation at prices not exceeding theprincipal amount thereof, or (c) a combination of (a) and (b) asprovided 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 theProject in as reasonably safe condition as the operation thereof will permit, 

 

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

 

**Section 6.2.           Taxes, Assessments and Other Governmental Charges**.

 

(a)                                  TheCompany shall promptly pay and discharge, as the same become due, all taxes andassessments, general and special, and other governmental charges of any kindwhatsoever that may be lawfully taxed, charged, levied, assessed orimposed upon or against the Project, or any part thereof or interesttherein (including the leasehold estate of the Company therein) or anybuildings, improvements, machinery and equipment at any time installed thereonby the Company, or the income therefrom or Basic Rent and other amounts payableunder this Lease, including any new taxes and assessments not of the kindenumerated above to the extent that the same are lawfully made, levied or assessedin lieu of or in addition to taxes or assessments now customarily leviedagainst 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 thesecurity of the Bonds or materially encumber the City’s title to the Project;provided that with respect to any special assessments or other governmentalcharges that are lawfully levied and assessed which may be paid ininstallments, the Company shall be obligated to pay only such installmentsthereof as become due and payable during the Lease Term.

 

(b)                                 TheCompany shall have the right, in its own name or in the City’s name, to contestthe validity or amount of any tax, assessment or other governmental chargewhich the Company is required to bear, pay and discharge pursuant to the termsof this Article by appropriate legal proceedings instituted before thetax, assessment or other governmental charge complained of becomes delinquentif and provided (1) the Company, before instituting any such contest,gives the City written notice of its intention so to do, (2) the Companydiligently prosecutes any such contest, at all times effectively stays or preventsany official or judicial sale therefor, under execution or otherwise, and (3) theCompany promptly pays any final judgment enforcing the tax, assessment or othergovernmental charge so contested and thereafter promptly procures recordrelease or satisfaction thereof. The City agrees to cooperate fully with theCompany in connection with any and all administrative or judicial proceedingsrelated to any tax, assessment or other governmental charge. The Company shallhold the City whole and harmless from any costs and expenses the City may incurrelated to any of the above.

 

**Section 6.3.           Utilities**. All utilities andutility services used by the Company in, on or about the Project shall be paidfor by the Company and shall be contracted for by the Company in the Company’sown name, and the Company shall, at its sole cost and expense, procure any andall permits, licenses or authorizations necessary in connection therewith.

 

**Section 6.4.           Ad Valorem Taxes**. The City andthe 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 theproceeds of the Bonds is entitled to exemption from general ad valorem andproperty taxes (other than special assessments levied on account of specialbenefits) on real and personal property, other than inventory for a period often (10) calendar years after the calendar year in which the Bonds areissued, provided proper application is made therefor. The City covenants thatit will not voluntarily take any action 

 

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

 

**Section 6.5.****                                Reserved.**

 

**Section 6.6.****                                KansasRetailers’ Sales Tax.**

 

(a)                                  Theparties have entered into this Lease Agreement in contemplation that, under theexisting provisions of K.S.A. 79-3606(d) and other applicable laws, salesof tangible personal property or services purchased in connection withacquisition, purchase, construction, improving, equipping or remodeling of theProject 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 andwith the Company’s assistance, promptly obtain from the State and furnish tothe contractors and suppliers an exemption certificate for the acquisition,purchase, construction, improving, equipping or remodeling of the Project. TheCompany covenants that said exemption shall be used only in connection with thepurchase of tangible personal property or services becoming a part of theProject.

 

(b)                                 Theparties 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 thegross receipts derived by the City from the renting or leasing of personalproperty, if any, purchased from the proceeds of the Bonds. The Company agreesto pay, as Additional Rent hereunder, the full amount of any such tax ashereinafter determined. Such payments, if required, shall be made at the sametime as the installments of Rent provided for hereby, and shall be madedirectly to the City, or in such other manner as the City may from time totime direct in writing. It shall be the duty of the City to promptly file anyreturns and remit any such taxes to the State, or to make suitable provisiontherefor, in accordance with applicable laws, rulings and regulations. The City’staxable gross receipts shall be determined by multiplying that portion of eachinstallment of Basic Rent which represents the payment of principal of theBonds by a fraction in which the total proceeds of the Bonds is thedenominator, and the amount expended from Bond proceeds for the acquisition ofpersonal property, which amount shall be determined by the Company and setforth in a certificate delivered to the City, the Company and the Trusteeimmediately following completion of acquisition, purchase, construction,improving, equipping or remodeling of the Project, is the numerator. The amountof each installment of tax due shall be determined by multiplying the City’staxable gross receipts determined in accordance with the preceding sentence(unless a different determination has been made in a judicial or administrativeproceeding as hereinafter provided), by such other tax rate percentage as may fromtime to time be imposed by applicable law. Notwithstanding the foregoingprovisions, if it shall be determined in any judicial or administrativeproceeding that the City’s taxable gross receipts are in an amount other thanthe amount determined by applying the foregoing provisions, the Company shallbe obligated to pay and hereby agrees to pay the full amount of such tax, basedupon such judicially or administratively determined gross receipts, it beingthe intent of this provision that the Company shall pay in full the amount ofany such tax, but no more than such amount, which the City is obligated tocollect under

 

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the present or any fixture laws of the State.

 

**ARTICLE VII**

 

**INSURANCE**

 

**Section 7.1.****                                TitleInsurance**. The Company has elected not to have the City obtain an owner’spolicy of title insurance.

 

**Section 7.2.****                                CasualtyInsurance**.

 

(a)                                  Subjectto the right of the Company to increase the deductibles described herein and toprovide for self-insurance as provided in subparagraph (c) of thisSection, the Company shall at all times during the Construction Period maintainat its sole cost and expense, or cause the contractors under the ConstructionContracts to maintain, in full force and effect a policy or policies of Builder’sRisk-Completed Value Form Insurance insuring the Project against fire,lightning and all other risks covered by the extended coverage endorsement thenin 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) ofthis Section, prior to or simultaneously with the expiration of said Builder’sRisk Insurance, the Company shall at its sole cost and expense obtain and shallmaintain throughout the Lease Term, a policy or policies of insurance to keepthe Project constantly insured against loss or damage by fire, lightning andall other risks covered by the extended coverage insurance endorsement then inuse in the State of Kansas in an amount equal to the Full Insurable Valuethereof (subject to reasonable loss deductible clauses not to exceed $100,000).The initial determination of Full Insurable Value shall be made at theCompletion Date, and thereafter, the Full Insurable Value of the Project shallbe provided from time to time at the written request of the City’ or theTrustee (but not more frequently than once in every three years) by thecertificate of an Authorized Company Representative or the chief financialofficer of the Company. The insurance required pursuant to this Section shallbe maintained at the Company’s sole cost and expense, shall be maintained withgenerally recognized responsible insurance company or companies authorized todo business in the State of Kansas as may be selected by the Company.Copies of the insurance policies required under this Section, or originals orcertificates thereof, shall be delivered by the Company to the Trustee. Allsuch policies of insurance pursuant to this Section, and all renewals thereof,shall name the City, the Company and the Trustee as insureds as theirrespective interests may appear, and shall contain a provision that suchinsurance may not be canceled by the issuer thereof without at least 30days’ advance written notice to the City, the Company and the Trustee; andshall be payable to the Trustee.

 

(b)                                 Inthe event of loss or damage to the Project, the Net Proceeds of casualtyinsurance carried pursuant to this Section shall be paid over to theTrustee and shall be applied as provided in **Article IX**of this Lease.

 

(c)                                  Inlieu of obtaining all or any part of the insurance required bysubparagraph (a) hereof, the Company may elect to be self-insured forall or any part of the foregoing requirements (which right to self insureshall include the right of the Company to increase the deductibles on such 

 

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

 

**Section 7.3.****                                PublicLiability Insurance**.

 

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

 

(b)                                 Inthe event of a public liability occurrence, the Net Proceeds of liabilityinsurance carried pursuant to this Section shall be applied toward theextinguishment or satisfaction of the liability with respect to which suchproceeds have been paid.

 

(c)                                  Inlieu of obtaining all or any part of the insurance required bysubparagraph (a) hereof, the Company may elect to be self-insured forall or any part of the foregoing requirements (which right to self insureshall include the right of the Company to increase the deductibles on suchpolicies to an amount not to exceed $500,000) provided the Company complieswith each of the following: (i) the Company notifies the City and theTrustee in writing that it has elected to increase one or more of thedeductibles on such policies or to provide such coverages through aself-insurance program, (ii) if the self-insurance program is maintainedby a legal entity other than the Company, the Company notifies the City and theTrustee in writing of an address to which the City and the Trustee may submitclaims under such self-insurance program, and (iii) the provider of suchself insurance program is rated in one of the three highest rating categoriesby a nationally recognized rating agency (without regard to any ratingmodifiers).

 

**Section 7.4.           Blanket Insurance Policies**. TheCompany may satisfy any of the insurance requirements set forth in this Article byusing blanket policies of insurance, provided each and all of the requirementsand specifications of this Article respecting insurance are complied with.

 

**Section 7.5.           Indemnification of Trustee**. TheCompany agrees to indemnify and save the 

 

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Trustee harmless against and from all claims by or on behalf of anyperson, firm or corporation arising from the conduct or management of, or fromany work or thing done on, the Project during the Lease Term, and against andfrom all claims arising during the Lease Term from (a) any condition of theProject caused or permitted by the Company, (b) any breach or default onthe part of the Company in the performance of any of its obligations underthis 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) anyact of negligence of the Company or of any of its agents, contractors,servants, employees or licensees, and (e) any act of negligence of anyassignee 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 andexpense, to make such additions, modifications and improvements in and to any part ofthe Project as the Company from time to time may deem necessary ordesirable for its business purposes. All additions, modifications andimprovements made by the Company pursuant to the authority of this Section shall(a) be made in workmanlike manner and in strict compliance with all lawsand ordinances applicable thereto, (b) when commenced, be prosecuted tocompletion with due diligence, and (c) when completed, be deemed a part ofthe Project; provided, however, that additions of machinery and equipmentinstalled in the Project by the Company not purchased or acquired from fundsdeposited with the Trustee hereunder and not constituting repairs; renewals orreplacements of Project Equipment under **Section 8.2**hereof shall remain the property of the Company and may be removed by theCompany.

 

**Section 8.2.           Removal of Project Equipment**. TheCompany shall have the right, provided the Company is not in default in thepayment of Basic Rent or Additional Rent hereunder, to remove from the Projectand (on behalf of the City) sell, exchange or otherwise dispose of, withoutresponsibility or accountability to the City or the Trustee with respectthereto, any items of machinery and equipment which constitute a part ofthe Project Equipment and which have become inadequate, obsolete, worn out,unsuitable, undesirable or unnecessary or which, in the sound discretion of theCompany, are otherwise no longer useful to the Company in its operationsconducted on or in the Project; provided that, if the aggregate value ofProject Equipment sold, exchanged or disposed of in any fiscal year (on a noncumulative basis) exceeds $1,000,000, then with respect to the proposed removalin such fiscal year of such items of Project Equipment that originally cost$250,000 or more, the Company shall either:

 

(a)                                  Priorto any such removal, deliver to the City and the Trustee a certificate signedby the Company (1) containing a description of any machinery or equipmentconstituting a part of the Project Equipment which it proposes to removefrom the Project, (2) stating the reason for such removal, and (3) settingforth the estimated market value of such machinery or equipment and pay theestimated value of such machinery or equipment as set forth in said certificateto the Trustee for deposit in the Bond Fund or obtain a written waiver from theOwners of all of the Bonds of the requirement that the estimated value bedeposited into the Bond Fund; or

 

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(b)                                 Promptlyreplace any such Project Equipment so removed with machinery and equipment ofthe same or a different kind but with a value equal to or greater than the fairmarket value of the Project Equipment so removed, and such machinery andequipment shall be deemed a part of the Project Equipment; within 30 daysafter any such replacement, deliver to the Trustee a certificate signed by theCompany (1) setting forth a complete description, including make, modeland serial numbers, if any, of the machinery and equipment which the Companyhas acquired to replace the Project Equipment so removed by the Company, (2) statingthe cost thereof, and (3) stating that the machinery and equipmentdescribed in said certificate are fully paid for and have been installed on theProject.

 

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

 

In all cases, the Company shall pay all the costs and expenses of anysuch removal and shall immediately repair at its expense all damage to theProject caused thereby. The Company’s rights under this Section to removefrom the Project machinery and equipment constituting a part of theProject Equipment is intended only to permit the Company to maintain anefficient operation by the removal of machinery and equipment which is nolonger suitable to the Company’s use of the Project for any of the reasons setforth in this Section, and such right is not to be construed to permit aremoval under any other circumstances and specifically is not to be construedto 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 andexpense, to construct on portions of the Project Site not theretofore occupiedby buildings or improvements such additional buildings and improvements as theCompany from time to time may deem necessary or desirable for its businesspurposes. All additional buildings and improvements constructed on the ProjectSite 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 beadded to, altered or razed and removed by the Company at any time. The Companycovenants and agrees (a) to make any repairs and restorations required tobe made to the Project because of the construction of, addition to, alterationor removal of said additional buildings or improvements, (b) to keep andmaintain said additional buildings and improvements in good condition andrepair, ordinary wear and tear excepted, and (c) to promptly and with duediligence either raze and remove in a good and workmanlike manner, or repair,replace or restore any of said additional buildings and improvements as may fromtime to time be damaged by fire or other casualty,

 

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

 

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laws, ordinances, governmental regulations and requirements and inaccordance with the requirements, rules and regulations of all insurersunder the policies required to be carried under the provisions of **Article VII** hereof.

 

**Section 8.5.****                                Mechanics’Liens.**

 

(a)                                  Neitherthe City nor the Company shall do or suffer anything to be done whereby theProject, or any part thereof, may be encumbered by any mechanics’ orother similar lien. Whenever and as often as any mechanics’ or other similarlien is filed against the Project, or any part thereof, purporting to befor or on account of any labor done or materials or services furnished inconnection with any work in or about the Project, the Company shall dischargethe same of record within 90 days after the date of filing. Notice is herebygiven that the City shall not be liable for any labor or materials furnishedthe 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 ormaterials shall attach to or affect the reversionary or other estate of theCity in and to the Project or any part thereof.

 

(b)                                 Notwithstandingparagraph (a) above, the Company shall have the right to contest any suchmechanics’ or other similar lien if within said 90-day period stated above itnotifies the City and the Trustee in writing of its intention so to do, andprovided the Company diligently prosecutes such contest, at all timeseffectively stays or prevents any official or judicial sale of the Project, orany part thereof or interest therein, under execution or otherwise, andpays or otherwise satisfies any final judgment enforcing such contested lienclaim and thereafter promptly procures record release or satisfaction thereof.The Company shall hold the City whole and harmless from any loss, costs orexpenses the City may incur related to any such contest. The City shallcooperate fully with the Company in any such contest.

 

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

 

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

 

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

 

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

 

Upon any purchase of portions of the Project Site pursuant to thisSection, the portions of the Project Site so purchased shall no longer beentitled to the benefits of the Tax Abatement Agreement.

 

**ARTICLE IX**

 

**DAMAGE, DESTRUCTION AND CONDEMNATION**

 

**Section 9.1.****                                Damageor Destruction.**

 

(a)                                  Ifthe 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 bepracticable their condition and character immediately prior to such damage ordestruction, and so that upon completion of such repairs, restoration,replacement or rebuilding such Project shall be of a value not less than thevalue thereof immediately prior to the occurrence of such damage or destructionor, at the Company’s option, shall construct upon the Project Site newbuildings and improvements thereafter together with all new machinery,equipment and fixtures which are either to be attached to or are to be used inconnection with the operation or maintenance thereof, provided that (i) thevalue thereof shall not be less than the value of such destroyed or damagedProject Improvements and/or Project Equipment immediately prior to theoccurrence of such damage or destruction and (ii) the nature of such newbuildings, improvements, machinery, equipment and fixtures will not impair thecharacter of the Project as an enterprise permitted by the Act.

 

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

 

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

 

The Net Proceeds of casualty insurance required by Article VIIhereof received with respect to such damage or loss to the Project shall bedisbursed in accordance with the Mortgage so long as the Mortgage containsprovisions governing the disbursement of casualty insurance proceeds. If thereis no Mortgage, the Net Proceeds of casualty insurance required by Article VIIhereof received with respect to such damage or loss to the Project shall hedisbursed in accordance with, the Leasehold Mortgage (in order of priority ofrecording) so long as the Leasehold Mortgages contain provisions governing thedisbursement of casualty insurance proceeds. If there is no Mortgage and noLeasehold Mortgage, or if the Mortgage or any Leasehold Mortgage do not containprovisions governing the disbursement of casualty insurance proceeds, then (i) ifsuch Net Proceeds are less than $250,000, the Net Proceeds shall be paid to theCompany to be used in accordance with this Lease, and (ii) if such NetProceeds equal or exceed $250,000, the Net Proceeds shall be paid to theTrustee and shall be applied in the following manner:

 

(A)                              there shall be paid tothe Company from the Net Proceeds such part thereof as shall equal the costto 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 protectthe Project pending adjustment of the insurance loss or the making of permanentrepairs, restoration, replacement or rebuilding;

 

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

 

(C)                                payment to the Companypursuant to subdivisions (A) or (B) of this **subsection (a)(ii) **fromsuch Net Proceeds shall be made to the Company from time to time as the workprogresses, in amounts equal to the cost of labor and material incorporatedinto and used in such work, the buildings’, architects’ and engineers’ fees,and other charges in connection with such work, upon delivery to the City andthe 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 theamounts so to be paid to the Company are payable to the Company in accordancewith the provisions of this Article and that such amounts are then due andpayable by the Company or have theretofore been paid by the Company; (2) theprogress of the work; (3) that the work has been done in accordance withthe plans and specifications therefor and all insurance requirements of Article VIIhereof; (4) that the sum requested when added to all sums previously paidout under, this Article for the work does not exceed the value of the workdone to the date of such certificate; (5) the estimated cost of completingthe work, in reasonable detail; and (6) that the remaining Net Proceedsare sufficient to pay the estimated cost of completing the work; and

 

(D)                               at the request of theCity or the Trustee, the Company shall furnish to the person requesting thesame, at the time of any such payment, with an official search, or otherevidence reasonably satisfactory to such person, that there has not been filedwith respect to 

 

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

 

(b)                                 Theinsurance 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 intrust and applied only for the purposes of repairing, reconstructing orrestoring the Project or constructing new buildings and improvements and installingnew machinery, equipment and fixtures thereto.

 

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

 

Company as hereinabove provided, shall remain after the completion ofsuch repairs, restoration, replacement or rebuilding, and this Lease shall nothave terminated, the excess shall be deposited in the Bond Fund. If the NetProceeds shall be insufficient to pay the entire cost of such repairs,restoration, replacement or rebuilding, the Company shall pay the deficiency.

 

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

 

(e)                                  TheCity and the Company agree that they will cooperate with each other, to suchextent as such other party may reasonably require, in connection with theprosecution or defense of any action or proceeding arising out of, or for thecollection of any insurance monies that may be due in the event of, anyloss or damage, and that they will execute and deliver to such other partiessuch instruments as may be required to facilitate the recovery of anyinsurance monies.

 

(f)                                    TheCompany agrees to give prompt notice to the City and the Trustee with respectto all fires and any other casualties occurring in, on, at or about theProject.

 

(g)                                 Ifthe Company shall determine that rebuilding, repairing, restoring or replacingthe Project is not practicable and desirable, any Net Proceeds of casualtyinsurance required by Article VII hereof received with respect to suchdamage or loss shall be paid into the Bond Fund and shall be used to redeemBonds on the earliest practicable redemption date or to pay the principal ofany Bonds as the same become due. The Company agrees to be reasonable inexercising its judgment pursuant to this subsection (g).

 

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

 

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

 

**Section 9.2.****                                Condemnation.**

 

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

 

(b)                                 Ifthe Company shall determine that such substitution is practicable anddesirable, the Company shall proceed promptly with and complete with reasonabledispatch the acquisition or construction of such substitute improvements, so asto place the Project in substantially the same condition as existed prior tothe exercise of the said power of eminent domain, including the acquisition orconstruction of other improvements suitable for the Company’s operations at theProject (which improvements will be deemed a part of the Project andavailable for use and occupancy by the Company without the payment of any rentother than herein provided, to the same extent as if such other improvementswere specifically described herein and demised hereby); provided, that suchimprovements will be acquired by the City subject to no liens, securityinterests or encumbrances prior to the lien and/or security interest affordedby the Indenture other than Permitted Encumbrances. In such case, any NetProceeds received from any award or awards with respect to the Project or any part thereofmade in such condemnation or eminent domain proceedings, or of the saleproceeds, shall be applied in the same manner as provided in **Section 9.1** hereof (with respect to the receipt ofcasualty insurance proceeds).

 

(c)                                  Ifthe Company shall determine that it is not practicable and desirable to acquireor construct substitute improvements, any Net Proceeds of condemnation awardsreceived by the Company shall be disbursed in accordance with the Mortgage orany Leasehold Mortgage (in the order of priority) and, if there is no Mortgageand no Leasehold Mortgage or if the Mortgage or any Leasehold Mortgage do notcontain provisions governing the disbursement of condemnation awards, paid intothe Bond Fund and shall be used to redeem Bonds on the earliest practicableredemption date or to pay the principal of any Bonds as the same becomes dueand payable.

 

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

 

(e)                                  TheCity shall cooperate fully with the Company in the handling and conduct of anyprospective or pending condemnation proceedings with respect to the Project orany 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 behalfof the City. In no event will the City voluntarily settle or consent to thesettlement of any prospective or pending condemnation proceedings with respectto the Project or any 

 

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part thereof without the prior written consent of the Company.

 

**ARTICLE X**

 

**SPECIAL COVENANTS**

 

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

 

**Section 10.2. Surrender of Possession.**Uponaccrual of the City’s right of re-entry because of the Company’s defaulthereunder or upon the cancellation or termination of this Lease for any reasonother than the Company’s purchase of the Project pursuant to **Article XI** hereof, the Company shall peacefullysurrender possession of the Project to the City in good condition and repair,ordinary wear and tear excepted; provided, however, the Company shall have theright within 90 days (or such later date as the City may agree to) afterthe termination of this Lease to remove from the Project Site any buildings,improvements, furniture, trade fixtures, machinery and equipment by the Companyand not constituting part of the project. All repairs to and restorationsof the Project required to be made because of such removal shall be made by andat the sole cost and expense of the Company, and during said 90-day (orextended) period the Company shall bear the sole responsibility for and bearthe sole risk of loss for said buildings, improvements, furniture, tradefixtures, machinery and equipment. All buildings, improvements, furniture,trade fixtures, machinery and equipment owned by the Company and which are notso removed from the Project prior to the expiration of said period shall be theseparate and absolute property of the City.

 

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

 

**Section 10.4. Granting of Easements;Leasehold Mortgages.**

 

(a)                                  Ifno Event of Default under this Lease shall have happened and be continuing, theCompany may at any time or times (1) grant easements, licenses,rights-of-way (including the dedication of public highways) and other rights orprivileges in the nature of easements that are for the direct use of theProject, or part thereof, by the grantee, (2) release existingeasements, licenses, rights-of-way and other rights or privileges, all with orwithout consideration and upon such terms 

 

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and conditions as the Company shall determine, or (3) incurPermitted Encumbrances. The City agrees that it will execute and deliver andwill cause and direct the Trustee to execute and deliver any instrumentnecessary or appropriate to confirm and grant or release any such easement,license, right-of-way or other right or privilege or any such agreement orother arrangement, upon receipt by the City and the Trustee of:  (i) a copy of the instrument of grant orrelease or of the agreement or other arrangement, (ii) a writtenapplication signed by an Authorized Company Representative requesting suchinstrument, and (iii) a certificate executed by an Authorized CompanyRepresentative stating that such grant or release is not detrimental to theproper conduct of the business of the Company, will not impair the effectiveuse or interfere with the efficient and economical operation of the Project, andwill not materially adversely affect the security intended to be given by orunder the Indenture. If the instrument of grant shall provide that any sucheasement or right and the rights of such other parties thereunder shall besuperior to the rights of City and the Trustee under this Lease and theIndenture and shall not be affected by any termination of this Lease or defaulton the part of the Company hereunder then such easement shall not have anyeffect whatsoever without the written consent of the City. If no Event ofDefault shall have happened and be continuing beyond any applicable graceperiod, any payments or other consideration received by the Company for anysuch grant or with respect to or under any such agreement or other arrangementshall be and remain the property of the Company, but, in the event of thetermination 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 grantshall inure to the benefit of and be exercisable by the City and the Trustee.

 

(b)                                 TheCompany may mortgage the leasehold estate created by this Lease, withoutthe City’s consent, provided and upon condition that:

 

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

 

(ii)                                  such LeaseholdMortgage shall contain a covenant to the effect that the net proceeds of allinsurance policies and the condemnation award shall be held, used and appliedfor the purposes and in the manner provided for in this Lease.

 

(c)                                  Notwithstandinganything contained to the contrary in this Lease, (a) the Company shallhave the right to assign this Lease and any subleases to any LeaseholdMortgagee or to the designee or nominee of such Leasehold Mortgagee, withoutthe consent of the City, and (b) if the leasehold mortgagee or itsdesignee or nominee shall acquire ownership of the leasehold estate, eitherfollowing foreclosure of such Leasehold Mortgage or in liquidation of theindebtedness and in lieu of foreclosure thereof, the leasehold mortgagee or itsdesignee or nominee shall have the further right to further assign this Leaseand any subleases and any purchase money mortgage accepted in connectiontherewith, without the consent of the City and such assignee shall enjoy allrights, powers and privileges granted herein to leasehold mortgagees.

 

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

 

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address of such leasehold mortgagee; then.

 

(i)                                     this Lease may notbe modified, amended, canceled or surrendered by agreement between the City andthe Company, without the prior written consent of such leasehold mortgagee;

 

(ii)                                  there shall be nomerger of this Lease or of the leasehold estate created hereby with the feetitle to the Project, notwithstanding that this Lease or said leasehold estateand said fee title shall be owned by the same person or persons, without theprior written consent of such leasehold mortgagee;

 

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

 

(iv)                              each leasehold mortgageeshall have the same period of time after the service of such notice upon itwithin which the Company may remedy or cause to be remedied the defaultwhich is the basis of the notice plus twenty (20) days; and the City shallaccept performance by such leasehold mortgagee as timely performance by theCompany;

 

(v)                                 such leaseholdmortgagee shall not be required to continue possession or continue foreclosureproceedings under paragraph (vii) of this subsection if theparticular default has been cured;

 

(vi)                              the City may exerciseany of its rights or remedies with respect to any other default by the Companyoccurring during the period of such forbearance provided for under saidparagraph (g), subject to the rights of the leasehold mortgagee under this Section asto such other defaults;

 

(vii)                           in case of default by theCompany under this Lease, other than a default in the payment of money, theCity shall take no action to effect a termination of this Lease by service of anotice or otherwise, without first giving to such leasehold mortgagee areasonable time within which either to obtain possession of the Project and toremedy such default in the case of a default which is susceptible of beingcured when such leasehold mortgagee has obtained possession of the Project, orto institute and with reasonable diligence to complete foreclosure proceedingsor otherwise acquire the Company’s leasehold estate under this Lease in thecase of a default which is not so susceptible of being remedied by suchleasehold mortgagee, provided that the leasehold mortgagee shall deliver to theCity within thirty (30) days after the expiration of the grace periodapplicable to the particular default, an instrument unconditionally agreeing toremedy such default other, than a default not susceptible of being remedied bysuch leasehold mortgagee. The City’s right to terminate this Lease by reason ofa default which is not susceptible of being remedied by such leaseholdmortgagee shall end with respect to such default when the leasehold mortgageeobtains possession of the Project as aforesaid, which possession shall bedeemed to include possession by a receiver;

 

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(viii)                        if this Lease shall terminateprior to the expiration of the Lease Term, the City shall enter into a newlease for the Project with any such leasehold mortgagee, or its designee ornominee, for the remainder of the term, effective as of the date of suchtermination, at the same rent and upon the same terms, covenants and conditionscontained herein, except that such new lease shall not guarantee possession ofthe Project to the new tenant as against the Company and/or anyone claimingunder the Company, and the City, simultaneously with the execution and deliveryof such new lease, shall turn over to the new tenant all monies, if any, thenheld by the City under the Lease on behalf of the Company, on condition that:

 

(A)                              such leasehold mortgageeshall make written request for such new lease within thirty (30) days after thedate of such termination, and

 

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

 

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

 

If more that one leasehold mortgagee shall request such new lease, suchnew lease shall be made with and delivered to the leasehold mortgagee (or itsnominee 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 toreal property in the State of Kansas, setting forth the order of priority of suchmortgage liens, may be relied on by the City as conclusive evidence ofsuch priority.

 

**Section 10.5. Indemnification of Cityand Trustee.** The Company shall indemnify and save theCity and the Trustee harmless from and against all claims by or on behalf ofany person; fire, or corporation arising from the conduct or management of, orfrom 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) anycondition of the Project caused by the Company, (b) any breach or defaulton the part of the Company in the performance of any of its obligationsunder this Lease, (c) any contract entered into in by the Company or itssublesee, if any, in connection with the acquisition, purchase, construction,improving, equipping or remodeling of the Project, (d) any act ofnegligence of the Company or of any of its agents, contractors, servants,employees or licensees, and (e) any act of negligence of any assignee orsublessee of the Company, or of any agents, contractors, servants, employees orlicensees of any assignee or sublessee of the Company; provided, however, theindemnification contained in this **Section 10.5**shall not extend to the City or the Trustee if (i) such 

 

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

 

**Section 10.6. Depreciation, InvestmentTax Credit and Other Tax Benefits.**The City agreesthat any depreciation, investment tax credit or any other tax benefits withrespect to the Project or any part thereof shall be made available to theCompany, and the City will fully cooperate with the Company in any effort bythe Company to avail itself of any such depreciation, investment tax credit orother tax benefits.

 

**Section 10.7. Company to Maintain itsCorporate Existence**. The Company agrees that until theBonds are paid or payment is provided for in accordance with the terms of theIndenture, it will maintain its corporate existence, and will not dissolve orotherwise 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., acorporation incorporated and existing under the laws of one of the states ofthe United States) or permit one or more other domestic corporations toconsolidate with or merge into it, or may sell or otherwise transfer toanother domestic corporation all or substantially all of its assets as anentirety and thereafter dissolve, provided, the surviving, resulting ortransferee corporation expressly assumes in writing all the obligations of theCompany contained in this Lease; and, further provided, that the surviving,resulting or transferee corporation, as the case may be, has aconsolidated net worth (after giving effect to said consolidation, merger ortransfer) at least equal to or greater than that of the Company immediatelyprior to said consolidation, merger or transfer. The term “net worth”, as usedin this Section, shall mean the difference obtained by subtracting totalliabilities (not including as a liability any capital or surplus item) fromtotal assets of the Company and all of its subsidiaries. In any suchconsolidation, merger or transfer the Company shall comply with the provisionsof 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 Companyagree to enter into all instruments (including financing statements andstatements of continuation) necessary for perfection of and continuance of theperfection of the security interests of the City and the Trustee in theProject. Upon the written instructions of the Owner of the Bonds, the Trusteeshall file all instruments the Owner of the Bonds shall deem necessary to befiled and shall continue or cause to be continued the liens of such instrumentsfor so long as the Bonds shall be Outstanding. The City and the Company shallcooperate with the Trustee in this regard by executing such continuationstatements and providing such information as the Trustee may require torenew such liens. The Trustee shall maintain a file showing a description ofall Project Equipment, said file to be compiled from the certificates furnishedto the Trustee pursuant to **Section 4.4**and **Section 8.2** hereof.

 

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**ARTICLE XI**

** **

**OPTION AND OBLIGATION TO PURCHASE THE PROJECT**

 

**Section 11.1. Option to Purchase theProject**. The Company shall have, and is herebygranted, the option to purchase the Project at any time, prior to theexpiration of the Lease Term upon payment in full of all Bonds then Outstandingor provision for their payment having been made pursuant to **Article XIII** of the Indenture. To exercise such optionthe 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 nothave been made in accordance with the provisions of the Indenture, and shallspecify therein the date of closing such purchase, which date shall be not lessthan 30 nor more than 180 days from the date such notice is mailed, and in caseof a redemption of the Bonds in accordance with the provisions of the Indenturethe Company shall make arrangements satisfactory to the Trustee for the givingof the required notice of redemption. The purchase price payable by the Companyin the event of its exercise of the option granted in this Section shallbe the sum of the following:

 

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

 

(b)                                 an amount of moneyequal to the Trustee’s and the Paying Agent’s agreed to and reasonable fees andexpenses under the Indenture accrued and to accrue until such redemption of theBonds; plus

 

(c)                                  thesum of $100.

 

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

 

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

 

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

 

**Section 11.3. Relative Position ofOption and Indenture.**The options and obligation topurchase the Project granted to the Company in this Article shall be andremain prior and superior to the Indenture and may be exercised whether ornot the Company is in default wader this Lease, 

 

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

 

**Section 11.4. Obligation to Purchase theProject.** The Company hereby agrees to purchase, andthe City hereby agrees to sell, the Project for the sum of $100 at theexpiration of the Lease Term following full payment of the Bonds or provisionfor payment thereof having been made in accordance with the provisions of theIndenture.

 

ARTICLE XII

 

DEFAULTS AND REMEDIES

 

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

 

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

 

(b)                                 Default in the dueobservance or performance of any other covenant, agreement, obligation orprovision 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 hasgiven the Company written notice specifying such default (or such longer periodas shall be reasonably required to cure such default; provided that (1) theCompany has commenced such cure within said 60-day period, and (2) theCompany diligently prosecutes such cure to completion); or

 

(c)                                  The Company shall: (1) admitin writing its inability to pay its debts as they become due; or (2) filea petition in bankruptcy or for reorganization, arrangement, composition,readjustment, liquidation, dissolution or similar relief under the BankruptcyCode as now or in the future amended or any other similar present or futurefederal or state statute or regulation, or file a pleading asking for suchrelief, or (3) make an assignment for the benefit of creditors; or (4) consentto the appointment of a trustee, receiver or liquidator for all or a majorportion 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 orinsolvent under any federal or state law; or (6) be subject to anyproceeding, or suffer the entry of a final and non-appealable court order,under any federal or state law appointing a trustee, receiver or liquidator forall or a major part of its property or ordering the winding-up orliquidation of its affairs, or approving a petition filed against it under theBankruptcy Code, as now or in the future amended, which order or proceeding, ifnot consented to by it, shall not be dismissed, vacated, denied, set aside orstayed within 60 days after the day of entry or commencement; or (7) suffera writ or warrant of attachment or any similar process to be issued by anycourt against all or any substantial 

 

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

 

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

 

(e)                                  The occurrence andcontinuance of an “Event of Default” by the Company under the Tax AbatementAgreement 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 theCity’s election (subject, however, to any restrictions against acceleration ofthe maturity of the Bonds or termination of this Lease in the Indenture), thenor at any time thereafter, and while such default shall continue, take any oneor more of the following actions:

 

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

 

(b)                                 give the Companywritten notice of intention to terminate this Lease on a date specifiedtherein, which date shall not be earlier than 30 days after such notice isgiven, 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 Leaseshall thereupon be terminated, and the City may re-enter and takepossession of the Project; or

 

(c) without terminating this Lease,re-enter the Project to take possession thereof pursuant to legal proceedingsor pursuant to any notice provided for by law, and having elected to re-enteror take possession of the Project without terminating this Lease, the Cityshall use reasonable diligence to relet the Project, or parts thereof, for suchterm or terms and at such rental and upon such other terms and conditions asthe City may deem advisable, with the right to make alterations andrepairs to the Project, and no such re-entry or taking of possession of theProject by the City shall be construed as an election on the City’s part toterminate this Lease, and no such re-entry or taking of possession by the Cityshall relieve the Company of its obligation to pay Basic Rent or AdditionalRent (at the time or times provided herein), or any of its other obligationsunder this Lease, all of which shall survive such re-entry or taking ofpossession, and the Company shall continue to pay the Basic Rent and AdditionalRent provided for in this Lease until the end of this Lease Term, whether ornot the Project shall have been relet, less the Net Proceeds, if any, of anyreletting of the Project after deducting all of the City’s reasonable expensesin or in connection with such reletting, including without limitation allrepossession costs, brokerage commissions, legal expenses, expenses ofemployees, alteration costs and expenses of preparation for reletting. Said NetProceeds of any reletting shall be deposited in the Bond Fund. Having electedto re-enter or take possession of the Project without terminating this Lease,the City may (subject, however, to any restrictions against termination ofthis Lease in the Indenture), by notice to the 

 

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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, whichdate shall be not earlier than 30 days after re-entry under (c) above, andif all defaults shall not have then been cured, on the date so specified thisLease shall thereupon be terminated. If in accordance with any of the foregoingprovisions of this Article the City shall have the right to elect tore-enter and take possession of the Project, the City may enter and expelthe Company and those claiming through or under the Company and remove theproperty and effects of both or either (forcibly if necessary) without beingguilty of any manner of trespass and without prejudice to any remedies forarrears of rent or preceding breach of covenant. The City may takewhatever action at law or in equity which may appear necessary ordesirable to collect rent then due and thereafter to become due, or to enforceperformance and observance of any obligation, agreement or covenant of theCompany under this Lease.

 

**Section 12.3. Survival of Obligations.**The Company covenants and agrees with the City and Bondowners that itsobligations under this Lease shall survive the cancellation and termination ofthis Lease, for any cause, and that the Company shall continue to pay the BasicRent and Additional Rent and perform all other obligations provided for inthis 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 anddischarge of the Indenture under **Section 1301**thereof, the Company’s obligation under this Lease shall thereupon cease andterminate in full.

 

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

 

**Section 12.5. Performance of the Company’sObligations by the City.**If the Company shall fail tokeep or perform any of its obligations as provided in this Lease in themaking of any payment or performance of any obligation, then the City, or theTrustee in the City’s name, may (but shall not be obligated so to do) uponthe continuance of such failure on the Company’s part for 30 days afterwritten 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, asan additional but not exclusive remedy, make any such payment or perform anysuch obligation, and all reasonable sums so paid by the City or the Trustee andall necessary incidental reasonable costs and expenses incurred by the City orthe Trustee in performing such obligations shall be deemed Additional Rent andshall be paid to the City or the Trustee on demand, and if not so paid by theCompany, the City or the Trustee shall have the same rights and remediesprovided for in **Section 12.2** hereof in thecase of default by the Company in the payment of Basic Rent.

 

**Section 12.6. Rights and RemediesCumulative.** The rights and remedies reserved by theCity and the Company hereunder and those provided by law shall be construed ascumulative and continuing rights. No one of them shall be exhausted by theexercise thereof on one or more occasions. The City and the Company shall eachbe entitled to specific performance and injunctive or 

 

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

 

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

 

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

 

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

 

(b)                                 Anythingherein to the contrary notwithstanding, no default specified in **Section 12.1(b) **shall constitute an Event ofDefault until actual notice of such default by registered or certified mailshall be given (i) at any time the Company is the Owner of 100% inaggregate principal amount of all Bonds Outstanding, by the Owner of 100% inaggregate principal amount of all Bonds Outstanding, and (ii) at any timethe Company is not the Owner of 100% in aggregate principal amount of all BondsOutstanding, the Trustee or by the Owners of 25% in aggregate principal amountof all Bonds Outstanding, to the Company and the Company shall have had 30 daysafter receipt of such notice to correct said default or cause said default tobe corrected, and shall not have corrected said default or caused said defaultto be corrected within such period; provided, however, if any such defaultshall be such that it cannot be corrected within such period, it shall notconstitute an Event of Default if corrective action is instituted by theCompany within such period and diligently pursued until the default iscorrected.

 

(c)                                  Withregard to any alleged default concerning which notice is given to the Companyunder the provisions of this Section, the City hereby grants the Company fullauthority 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 andacts to the same extent that the City could do and perform any such thingsand acts in order to remedy such default.

 

**Section 12.9. Trustee’s Exercise of theCity’s Remedies.** Whenever any Event of Default 

 

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shall have occurred and be continuing, the Trustee may, but except asotherwise provided in the Indenture shall not be obliged to, exercise any orall of the rights of the City under this Article, upon notice as required ofthe 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 theIndenture.

 

**ARTICLE XIII**

 

**ASSIGNMENT AND SUBLEASE**

 

**Section 13.1. Assignment; Sublease.**

 

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

 

(1)                                  Such assignment shallbe in writing, duly executed and acknowledged by the assignor and in proper form forrecording;

 

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

 

(3)                                  A duplicate originalof such assignment shall be delivered to the City within ten (10) daysafter the execution thereof, together with an assumption agreement, dulyexecuted and acknowledged by the assignee in proper form for recording, bywhich the assignee shall assume all of the terms, covenants and conditions ofthis Lease on the part of the Company to be performed and observed; and

 

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

 

Upon the satisfaction of the conditions set forth herein; the assignorshall be relieved of all further liability occurring on and after the effectivedate of such assignment. The consent of the City to any assignment, transfer,encumbrance or disposition described in this subsection (a) shall notbe unreasonably withheld or .delayed.

 

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

 

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

 

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

 

Any consent of the City required by this subsection (b) shallnot be unreasonably withheld or delayed.

 

**Section 13.2. Assignment of Revenues byCity.** The City shall assign and pledge any rents,revenues and receipts receivable under this Lease, to the Trustee pursuant tothe 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 andassignment.

 

**Section 13.3. Prohibition Against FeeMortgage of Project.** The City shall not mortgage itsfee interest in the Project, but may assign its interest in and pledge anymoneys receivable under this Lease to the Trustee pursuant to the Indenture assecurity for payment of the principal of and interest on the Bonds.

 

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

 

**ARTICLE XIV**

 

**AMENDMENTS, CHANGES AND MODIFICATIONS**

 

**Section 14.1. Amendments, Changes andModifications.** Except as otherwise provided in thisLease or in the Indenture, subsequent to the issuance of Bonds and prior to thepayment in full of the. Bonds (or provision for the payment thereof having beenmade in accordance with the provisions of the Indenture), this Lease may notbe effectively amended, changed, modified, altered or terminated without theprior written consent of the Trustee, given in accordance with the provisionsof the Indenture.

 

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**ARTICLE XV**

 

**MISCELLANEOUS PROVISIONS**

 

**Section 15.1. Notices.**All notices, certificates or other communications required or desired to begiven hereunder shall be in writing and shall be deemed duly given when (z)mailed by registered or certified mail, postage prepaid, or (ii) sent byovernight delivery or other delivery service which requires writtenacknowledgment 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 bedeemed fully given as of the date they are so mailed. A duplicate copy of eachnotice, certificate or other communication given hereunder by either the Cityor the Company to the other shall also be given to the Trustee. The City, theCompany and the Trustee may from time to time designate, by notice given hereunderto 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 andApprovals. Wherever in this Lease it is provided that the City shall, may ormust give its approval or consent, or execute supplemental agreements orschedules, the City shall not unreasonably, arbitrarily or unnecessarilywithhold or refuse to give such approvals or consents or refuse to execute suchsupplemental agreements or schedules.

 

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

 

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

 

**Section 15.4. No Pecuniary Liability.**No provision, covenant or agreement contained in this Lease, the Indenture orthe Bonds, or any obligation herein or therein imposed upon the City, or thebreach thereof, shall constitute or give rise to or impose upon the City apecuniary liability or a charge upon the general credit or taxing powers of theCity of Olathe or the State of Kansas. Such limitation shall not apply to anyliability 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 ofKansas.

 

**Section 15.6. Electronic Storage.**The parties agree that the transaction described herein may be conductedand 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 andthe 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 invalidor unenforceable, the validity and enforceability of the other provisionshereof shall not be affected thereby.

 

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

 

[Remainder of page intentionally blank.]

 

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

 

 
|    | CITY OF GARNETT, KANSAS |
|---------|-------------------------|
|    |                    |
|    | By:                     | /s/ James A. Shmudl |   |
|    |                    | Mayor |
|    |                    |   |
| (Seal)  |                    |   |
|    |                    |   |
| ATTEST: |                    |   |
|    |                    |   |
|    |                    |   |
| By:     | /s/ Joyce E. Martin     |   |   |   |
|    | City Clerk              |   |   |
|         |                         |  |  |  |  |

 

S-1

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|   | **EAST KANSAS AGRI-ENERGY, L.L.C.** |
|--------|-------------------------------------|
|   |                                |
|   |                                |
|   | By:                                 | /s/ William R. Pracht |   |
|   |                                | William R Pracht |
|   |                                | Chairman and President |

 

S-2

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**EXHIBIT A**

 

**EXCLUDED PROPERTY**

 

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

 

A-1

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**EXHIBIT B**

 

**PROJECT EQUIPMENT**

 

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

 

B-1

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**EXHIBIT C**

 

**PROJECT IMPROVEMENTS**

 

All buildings, structures, improvements and fixtures located on or tobe acquired or purchased for the construction, improvement, equipping orremodeling of the Project Site pursuant to **Article IV**hereof and paid for in whole or in part from the proceeds of Bonds and alladditions, alterations, modifications and improvements thereof made pursuant tothis Lease.

 

C-1

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**EXHIBIT D**

 

**PROJECT SITE**

 

Tract1:

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

 

Astrip 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;

 

togetherwith the southern half of vacated NE 1700 Road abutting the northern boundaryof the land described above.

 

Tract2:

Beginningat 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 PrincipalMeridian, 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” Eastfor a distance of 428.02 feet to a 1/2” rebar; THENCE South 02°14’48” East fora distance of 444.00 feet to a 1/2” rebar on the. South line of said SoutheastQuarter (SE/4); THENCE South 88°15’01” West for a distance of 1228.00 feetalong said South line to the point of beginning;

 

togetherwith the northern half of vacated NE 1700 Road abutting-the southerly boundaryof the land described above.

 

Tract3:

LotFive (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.

 

Tract4:

Grantof 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:

 

Commencingat 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 ofGarnett, Anderson County., Kansas; THENCE North 02 degrees 14 minutes 48seconds West for a distance of 798.23 feet along the East line of saidSouthwest Quarter; THENCE North 70 degrees 59 minutes 38 seconds West for adistance of 51.33 feet to the East line of the Rail Road Depot as described inDeed Book 16, Page 605, the POINT OF BEGINNING; THENCE North 70 degrees 59minutes 38 seconds West for a distance of 301.01 feet to the West line of saidRail Road Depot; THENCE North 12 degrees 22 minutes 55 seconds East for adistance of 60.40. feet along said West line; THENCE South 70 degrees 59minutes 38 seconds East for a distance of 305.09 feet to the East line of saidRail Road Depot; THENCE South 16 degrees 15 minutes 12 seconds West for adistance of 60.06 feet to the POINT OF BEGINNING. Together with and subject tocovenants, easements, and restrictions of record. Said property contains 18182.9square feet more or less in Anderson County, Kansas, as shown on survey byTaylor Design Group, P.A., dated March, 2005.

 

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**EXHIBIT E**

 

**[FORM OF REQUISITION CERTIFICATE]**

 
|   | Requisition No. |
|--------|-----------------|
|   | Date:           |

 

**REQUISITION CERTIFICATE**

 

TO:                            SECURITY BANK OF KANSASCITY, AS TRUSTEE UNDER A TRUST INDENTURE DATED AS OF DECEMBER 1, 2005,BETWEEN THE CITY OF GARNETT, KANSAS, AND THE TRUSTEE, AND LEASE AGREEMENT DATEDAS OF DECEMBER 1, 2005, BETWEEN THE CITY OF GARNETT, KANSAS, AND EASTKANSAS 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 suchpayees and for such purposes as set forth on **Schedule 1**attached hereto.

 

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

 

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

 
| ** ** | **EAST KANSAS AGRI-ENERGY, L.L.C.** |
|------------|-------------------------------------|
|       |                                |
|       |                                |
|       | By:                                 |   |
|       | Name:                               |   |
|       | Title:                              |   |
|            |                                     |  |  |  |

 

E-1

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**SCHEDULE 1 TO REQUISITION CERTIFICATE**

 
| **Amount** | ** ** | **Payee and Address** | ** ** | **Description** | ** ** |
|------------|------------|---------------------------------|------------|-----------------|------------|
|       |       |                            |       |            |       |
| $          |       |                            |       |            |       |

 

I-1

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