Document:

Exhibit
10.6

GILMORE & BELL, P.C.

Execution Copy

 

CITY OF ATCHISON, KANSAS

AS ISSUER

 

AND

 

MGP INGREDIENTS, INC.

AS TENANT

 

 

LEASE

DATED AS OF THE ISSUE DATE OF THE
BONDS

 

 

$7,000,000

TAXABLE INDUSTRIAL REVENUE BONDS

SERIES 2006

(MGP INGREDIENTS PROJECT)

 

LEASE

TABLE OF
CONTENTS

	
  

  	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE
  I

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.1.

  	
  Definitions

  	
   

  	
  1

  
	
  Section 1.2.

  	
  Representations and Covenants by the Tenant

  	
   

  	
  1

  
	
  Section 1.3.

  	
  Representations and Covenants by the Issuer

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  II

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.1.

  	
  Granting of Leasehold

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  III

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
  Basic Rent

  	
   

  	
  4

  
	
  Section 3.2.

  	
  Additional Rent

  	
   

  	
  4

  
	
  Section 3.3.

  	
  Rent Payable Without Abatement or Setoff

  	
   

  	
  4

  
	
  Section 3.4.

  	
  Prepayment of Basic Rent

  	
   

  	
  4

  
	
  Section 3.5.

  	
  Deposit of Rent by the Trustee

  	
   

  	
  4

  
	
  Section 3.6.

  	
  Acquisition of Bonds

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  IV

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
  Disposition of Original Proceeds; Project Fund

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  V

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.1

  	
  Acquisition of Land and Improvements

  	
   

  	
  5

  
	
  Section 5.2

  	
  Project Contracts

  	
   

  	
  5

  
	
  Section 5.3

  	
  Payment of Project Costs for Buildings and
  Improvements

  	
   

  	
  6

  
	
  Section 5.4.

  	
  Payment of Project Costs for Machinery and Equipment

  	
   

  	
  6

  
	
  Section 5.5.

  	
  Completion of Improvements

  	
   

  	
  7

  
	
  Section 5.6.

  	
  Deficiency of Project Fund

  	
   

  	
  7

  
	
  Section 5.7.

  	
  Right of Entry by the Issuer and the Trustee

  	
   

  	
  7

  
	
  Section 5.8.

  	
  Machinery and Equipment Purchased by the Tenant

  	
   

  	
  7

  
	
  Section 5.9.

  	
  Project Property of the Issuer

  	
   

  	
  7

  
	
  Section 5.10.

  	
  Kansas
  Retailers’ Sales Tax

  	
   

  	
  8

  

 

 i
 

 

	
  ARTICLE VI

  	
   

  	
   

  
	
  Section 6.1.

  	
  Insurance

  	
   

  	
  8

  
	
  Section 6.2.

  	
  Evidence of Title

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.1.

  	
  Impositions

  	
   

  	
  8

  
	
  Section 7.2.

  	
  Receipted Statements

  	
   

  	
  9

  
	
  Section 7.3.

  	
  Contest of Impositions

  	
   

  	
  9

  
	
  Section 7.4.

  	
  Ad Valorem Taxes

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.1.

  	
  Use of Project

  	
   

  	
  10

  
	
  Section 8.2.

  	
  Environmental Provisions

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  IX

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.1.

  	
  Sublease by the Tenant

  	
   

  	
  11

  
	
  Section 9.2.

  	
  Assignment by the Tenant

  	
   

  	
  12

  
	
  Section 9.3.

  	
  Release of the Tenant

  	
   

  	
  12

  
	
  Section 9.4.

  	
  Mergers and Consolidations

  	
   

  	
  12

  
	
  Section 9.5.

  	
  Covenant Against Other Assignments

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  X

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.1.

  	
  Repairs and Maintenance

  	
   

  	
  12

  
	
  Section 10.2.

  	
  Removal, Disposition and Substitution of Machinery
  or Equipment

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XI

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.1.

  	
  Alteration of Project

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.1.

  	
  Additional Improvements

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XIII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 13.1.

  	
  Securing of Permits and Authorizations

  	
   

  	
  14

  

 

 ii
 

 

	
  Section 13.2.

  	
  Mechanic’s Liens

  	
   

  	
  14

  
	
  Section 13.3.

  	
  Contest of Liens

  	
   

  	
  14

  
	
  Section 13.4.

  	
  Utilities

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XIV

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 14.1.

  	
  Indemnity

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XV

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 15.1.

  	
  Access to Project

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XVI

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 16.1.

  	
  Option to Extend Basic Term

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XVII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 17.1.

  	
  Option to Purchase Project

  	
   

  	
  16

  
	
  Section 17.2.

  	
  Quality of Title and Purchase Price

  	
   

  	
  16

  
	
  Section 17.3.

  	
  Closing of Purchase

  	
   

  	
  17

  
	
  Section 17.4.

  	
  Effect of Failure to Complete Purchase

  	
   

  	
  17

  
	
  Section 17.5.

  	
  Application of Condemnation Awards if the Tenant
  Purchases Project

  	
   

  	
  17

  
	
  Section 17.6.

  	
  Option to Purchase Unimproved Portions of Land

  	
   

  	
  17

  
	
  Section 17.7.

  	
  Quality of Title - Purchase Price

  	
   

  	
  18

  
	
  Section 17.8.

  	
  Closing of Purchase

  	
   

  	
  18

  
	
  Section 17.9.

  	
  Effect of Purchase on Lease

  	
   

  	
  19

  
	
  Section 17.10.

  	
  Effect of Failure to Complete Project

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XVIII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 18.1.

  	
  Damage and Destruction

  	
   

  	
  19

  
	
  Section 18.2.

  	
  Condemnation

  	
   

  	
  20

  
	
  Section 18.3.

  	
  Effect of Tenant’s Defaults

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XIX

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 19.1.

  	
  Change of Circumstances

  	
   

  	
  21

  
					

 

 iii
 

 

	
  ARTICLE XX

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 20.1.

  	
  Remedies on Default

  	
  21

  
	
  Section 20.2.

  	
  Survival of Obligations

  	
  22

  
	
  Section 20.3.

  	
  No Remedy Exclusive

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XXI

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 21.1.

  	
  Performance of the Tenant’s Obligations by the
  Issuer

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XXII

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 22.1.

  	
  Surrender of Possession

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XXIII

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 23.1.

  	
  Notices

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XXIV

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 24.1.

  	
  Triple-Net Lease

  	
  24

  
	
  Section 24.2.

  	
  Funds Held by the Trustee After Payment of Bonds

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XXV

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 25.1.

  	
  Rights and Remedies

  	
  24

  
	
  Section 25.2.

  	
  Waiver of Breach

  	
  24

  
	
  Section 25.3.

  	
  The Issuer Shall Not Unreasonably Withhold Consents
  and Approvals

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XXVI

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 26.1.

  	
  The Issuer May Not Sell

  	
  25

  
	
  Section 26.2.

  	
  Quiet Enjoyment and Possession

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XXVII

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 27.1.

  	
  Investment Tax Credit; Depreciation

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XXVIII

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 28.1.

  	
  Amendments

  	
  25

  
				

 

 iv
 

 

	
  Section 28.2.

  	
  Granting of Easements

  	
  26

  
	
  Section 28.3.

  	
  Security Interests

  	
  26

  
	
  Section 28.4.

  	
  Construction and Enforcement

  	
  27

  
	
  Section 28.5.

  	
  Invalidity of Provisions of Lease

  	
  27

  
	
  Section 28.6.

  	
  Covenants Binding on Successors and Assigns

  	
  27

  
	
  Section 28.7.

  	
  Section Headings

  	
  27

  
	
  Section 28.8.

  	
  Execution of Counterparts

  	
  27

  
	
   

  	
   

  
	
  Signatures and Acknowledgments

  	
  28

  
	
  Appendix A, Form of Requisition for Payment of
  Project Costs

  	
  A-1

  
	
  Appendix B, Form of Certificate of Completion

  	
  B-1

  
	
  Appendix C, Glossary of Words and Terms

  	
  D-1

  
	
  Schedule I, Description of Property

  	
  S-1

  

 

 v

LEASE

THIS LEASE, made and entered into as of the Issue Date of the
Bonds hereinafter defined between the City of Atchison, Kansas (the “Issuer”),
and MGP Ingredients, Inc. (the “Tenant”).

WITNESSETH:

WHEREAS, the Issuer is a municipal corporation incorporated
as a city of the first class, duly organized and existing under the laws of the
State, with full lawful power and authority to enter into this Lease by and
through its governing body; and

WHEREAS, the Issuer, in furtherance of the purposes and
pursuant to the provisions of the laws of the State, particularly K.S.A. 12-1740
et seq., as amended (the “Act”), and in
order to provide for the economic development and welfare of the City of
Atchison, Kansas and its environs and to provide employment opportunities for
its citizens and to promote the economic stability of the State, has proposed
and does hereby propose that it shall:

(a)  Acquire the Project (as defined in
the Indenture);

(b)  Lease the Project to the Tenant for
the rentals and upon the terms and conditions hereinafter set forth; and

(c)  Issue, for the purpose of paying
Project Costs (as defined in the Indenture), the Series 2006 Bonds under and
pursuant to and subject to the provisions of the Act and the Indenture (herein
defined), said Indenture being incorporated herein by reference and authorized
by an ordinance of the governing body of the Issuer; and

WHEREAS, the Tenant, pursuant to the foregoing proposals
of the Issuer, desires to lease the Project from the Issuer for the rentals and
upon the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, Issuer and the Tenant do hereby
covenant and agree as follows:

ARTICLE I

Section 1.1.  Definitions.  Capitalized terms not otherwise defined in
this Lease shall have the meanings set forth in Appendix B to
the Indenture.  In addition to the words,
terms and phrases defined in Appendix B to
the Indenture and elsewhere in this Lease, the capitalized words, terms and
phrases as used herein shall have the meanings set forth in the Glossary of
Words and Terms attached as Appendix C, unless
the context or use indicates another or different meaning or intent.

Section 1.2.  Representations
and Covenants by the Tenant. 
The Tenant makes the following covenants and representations as the
basis for the undertakings on its part herein contained:

(a)  The Tenant is a
Kansas corporation, duly organized and existing under the laws of said state,
and is duly authorized and qualified to do business in the State, with lawful
power and authority to enter into this Lease, acting by and through its duly
authorized officers.

(b)  Except as
otherwise permitted herein, the Tenant shall (1) maintain and preserve its
existence and organization as a corporation and its authority to do business in
the State and to operate the Project, and (2) shall not initiate any
proceedings of any kind whatsoever to dissolve or liquidate without in either
case (A) securing the prior written consent thereto of the Issuer or (B) making
provision for the payment in full of the principal of and interest and
redemption premium, if any, on the Bonds.

(c)  Neither the
execution and/or delivery of this Lease, the consummation of the transactions
contemplated hereby or by the Indenture, nor the fulfillment of or compliance
with the terms and conditions of this Lease contravenes in any material respect
any provisions of its articles of incorporation or bylaws, or conflicts in any
material respect with or results in a material breach of the terms, conditions
or provisions of any mortgage, debt, agreement, indenture or instrument to
which the Tenant is a party or by which it is bound, or to which it or any of
its properties is subject, or would constitute a material default (without
regard to any required notice or the passage of any period of time) under any
of the foregoing, or would result in the creation or imposition of any lien,
charge or encumbrance upon any of the property or assets of the Tenant under the
terms of any mortgage, debt, agreement, indenture or instrument, or violates in
any material respect any existing law, administrative regulation or court order
or consent decree to which the Tenant is subject.

(d)  This Lease
constitutes a legal, valid and binding obligation of the Tenant enforceable
against the Tenant in accordance with its terms.

(e)  The Tenant agrees
to operate and will operate the Project, or cause the Project to be operated as
a “facility,” as that term is contemplated in the Act, from the date of the
Issuer’s acquisition of the Project to the end of the Term.

(f)  The Tenant has
obtained or will obtain any and all permits, authorizations, licenses and
franchises necessary to construct the Improvements and to enable it to operate
and utilize the Project for the purposes for which it was leased by the Tenant
under this Lease.

(g)  The estimated
total cost of the Improvements to be financed by the proceeds of the Series
2006 Bonds, plus interest on the Series 2006 Bonds during acquisition, and
Costs of Issuance of the Series 2006 Bonds, will not be less than the original
aggregate principal amount of the Series 2006 Bonds.

(h)  After reasonable
inquiry and investigation, the Tenant is not aware of (A) any Hazardous
Substances generated from or located on the Project; (B) any prior use of the
Land which might reasonably involve Hazardous Substances; or (C) any
investigations, complaints or inquiries of any kind, from any source,
concerning Hazardous Substances with respect to the Project or properties
adjoining the Project.

 2
 

(i)  The Tenant will
not use or permit the Project to be used by any other person or entity in any
manner which would involve the generation, storage, disposal or transportation
of Hazardous Substances, except in strict compliance with applicable
Environmental Laws.

Section 1.3.  Representations
and Covenants by the Issuer. 
The Issuer makes the following representations and covenants as the
basis for the undertakings on its part herein contained:

(a)  It is a municipal corporation duly
incorporated and existing as a city of the first class under the constitution
and laws of the State.  Under the
provisions of the Act and the Ordinance, the Issuer has the power to enter into
and perform the transactions contemplated by this Lease and the Indenture and
to carry out its obligations hereunder and thereunder.

(b)  It has not, in whole or in part,
assigned, leased, hypothecated or otherwise created any other interest in, or
disposed of, or caused or permitted any lien, claim or encumbrance to be placed
against, the Project, except for this Lease, the assignment of this Lease to
the Trustee, any Permitted Encumbrances, any Impositions, and the pledge of the
Project pursuant to the Indenture.

(c)  Except as otherwise provided herein
or in the Indenture, it will not during the Term, in whole or in part, assign,
lease, hypothecate or otherwise create any other interest in, or dispose of, or
cause or permit any lien, claim or encumbrance to be placed against, the
Project, except Permitted Encumbrances, this Lease, any Impositions and the
pledge of the Project pursuant to the Indenture.

(d)  It has pledged the Project and the
net rentals therefrom generated under the Lease to payment of the Bonds in the
manner prescribed by the Act, and has duly authorized the execution and
delivery of this Lease and the Indenture and the issuance, sale and delivery of
the Series 2006 Bonds.

(f)  It has notified or obtained the
consent to and/or approval of the issuance of the Series 2006 Bonds by each municipal
corporation and political subdivision the notification, consent or approval of
which is required by the provisions of the Act.

ARTICLE II

Section 2.1.  Granting of
Leasehold.  The Issuer by
these presents hereby rents, leases and lets the Project unto the Tenant and
the Tenant hereby rents, leases and hires the Project for the Term from the
Issuer, for the rentals and upon and subject to the terms and conditions
hereinafter set forth.

 3
 

ARTICLE III

Section 3.1.  Basic Rent.  The
Issuer reserves and the Tenant covenants and agrees to pay Basic Rent to the
Trustee as assignee of the Issuer, for the account of the Issuer, for deposit
in the Debt Service Fund, on each Basic Rent Payment Date.  Basic Rent shall be payable at the principal
office of the Trustee on each Basic Rent Payment Date.

Section 3.2.  Additional
Rent. Within 30 days after receipt of written notice thereof, the
Tenant shall pay any Additional Rent required to be paid pursuant to this Lease
not already paid.

Section 3.3.  Rent Payable
Without Abatement or Setoff. 
The Tenant covenants and agrees with and for the express benefit of the
Issuer and the Bondowners that all payments of Basic Rent and Additional Rent
shall be made by the Tenant as the same become due, and that the Tenant shall perform
all of its obligations, covenants and agreements hereunder without notice or
demand and without abatement, deduction, setoff, counterclaim, recoupment or
defense or any right of termination or cancellation arising from any
circumstance whatsoever, whether now existing or hereafter arising, and
irrespective of whether the Improvements shall have been acquired, started or
completed, or whether the Issuer’s title to the Project or any part thereof is
defective or non-existent, and notwithstanding any failure of
consideration or commercial frustration of purpose, the eviction or
constructive eviction of the Tenant or any subtenant, any Change of
Circumstances, any change in the tax or other laws of the United States of
America, the State, or any municipal corporation of either, any change in the
Issuer’s legal organization or status, or any default of the Issuer hereunder,
and regardless of the invalidity of any action of the Issuer or any other event
or condition whatsoever, and regardless of the invalidity of any portion of
this Lease, and the Tenant hereby waives the provisions of any statute or other
law now or hereafter in effect contrary to any of its obligations, covenants or
agreements under this Lease or which releases or purports to release the Tenant
therefrom.  Nothing in this Lease shall
be construed as a waiver by the Tenant of any rights or claims the Tenant may
have against the Issuer under this Lease or otherwise, but any recovery upon
such rights and claims shall be had from the Issuer separately, it being the
intent of this Lease that the Tenant shall be unconditionally and absolutely
obligated to perform fully all of its obligations, agreements and covenants
under this Lease (including the obligation to pay Basic Rent and Additional
Rent) for the benefit of the Bondowners.

Section 3.4.  Prepayment
of Basic Rent.  The Tenant may
at any time prepay all or any part of the Basic Rent.  Prepayments of Basic Rent will be applied to
redemption of Bonds, including payment of redemption premium, as directed in
writing by the Tenant, to the extent that Bonds are subject to optional
redemption at the time of prepayment. 
Otherwise, prepayments of Basic Rent will be deposited in the Debt
Service Fund to be applied to purchase of Bonds, or to optional redemption of
Bonds (including redemption premium and interest) at the earliest date on which
Bonds are subject to optional redemption.

Section 3.5.  Deposit of
Rent by the Trustee.  As
assignee of the Issuer’s rights hereunder, the Trustee shall deposit, use and
apply all payments of Basic Rent and Additional Rent in accordance with the
provisions of this Lease and the Indenture.

 4
 

Section 3.6.  Acquisition
of Bonds.  If the Tenant
acquires any Outstanding Bonds, it may present the certificate(s) representing
such part of the Bonds to the Trustee for cancellation, and upon such
cancellation, the Tenant’s obligation to pay Basic Rent shall be reduced in the
same manner as provided for prepayments by the Tenant of Basic Rent.  In no event, however, shall the Tenant’s
obligation to pay Basic Rent be reduced in such a manner that the Trustee shall
not have on deposit in the Debt Service Fund, on the next succeeding Payment
Date, funds sufficient to pay the maturing principal of, redemption premium, if
any, and interest on Outstanding Bonds as and when the same shall become due
and according to the terms of the Bonds.

ARTICLE IV

Section 4.1.  Disposition
of Original Proceeds; Project Fund. 
The Original Proceeds shall be paid over to the Trustee for the account
of the Issuer.  The Trustee shall pay
from such Original Proceeds into the Debt Service Fund the full amount of any
accrued interest received upon such sale. 
The remainder of such proceeds shall be deposited by the Trustee in the
Project Fund to be used and applied as provided in this Lease and the
Indenture.

ARTICLE V

Section 5.1.  Acquisition
of Land and Improvements.  The
Tenant shall prior to or concurrently with the issuance of the Bonds, assign or
cause to be conveyed to the Issuer by special warranty deed, subject to
Permitted Encumbrances, the Land as described in Schedule I.  The Tenant shall also concurrently with such
conveyance make provisions for the discharge or subordination to the interests
acquired by the Issuer of any liens or encumbrances incurred by it in
connection with the construction, installation or development of any
Improvements, other than Permitted Encumbrances.

Section 5.2.  Project
Contracts.  Prior to the
delivery of this Lease, the Tenant has or may have entered into a contract or
contracts with respect to the acquisition and/or construction of
Improvements.  Those contracts, and any
such contracts entered into by the Tenant after delivery of this Lease are
hereinafter referred to as the “Project Contracts.”  Prior to the delivery hereof, certain work
has been or may have been performed on the Improvements pursuant to said
Project Contracts or otherwise.  The
Tenant hereby covenants with the Issuer to perform the Project Contracts for
the benefit of the Issuer as holder of title to the Project as well as its own
benefit as tenant under this Lease, and the Issuer hereby designates the Tenant
as the Issuer’s agent for the purpose of executing and performing the Project
Contracts.  After the execution hereof,
the Tenant shall cause the Project Contracts to be fully performed by the
contractor(s), subcontractor(s) and supplier(s) thereunder in accordance with
the terms thereof, and the Tenant covenants to cause the Improvements to be
acquired, constructed, installed and/or completed in accordance with the
Project Contracts.  The Tenant warrants
that the construction and/or acquisition of the Improvements in accordance with
said Project Contracts will result in the Project being suitable for use by the
Tenant as a commercial office building and tech center facility.”  Any and all amounts received by the Issuer,
the Trustee or the Tenant from any of the contractors or other suppliers by way
of breach of contract, refunds or adjustments shall become a part of and be
deposited in the

 5
 

Project Fund.  The Trustee may, at
its option, appoint an agent to review the Project Contracts, and make periodic
inspections of the Improvements during construction to determine the
satisfactory progress and completion of the work.  The reasonable fees and expenses of such
agent shall be paid by the Tenant as Additional Rent.

Section 5.3.  Payment of
Project Costs for Buildings and Improvements.  The Issuer hereby agrees to pay for the
acquisition or construction of the Improvements to be paid for from the proceeds
of Bonds, or any repairs or replacements to be made pursuant to Article XVIII of this Lease, but solely from Original
Proceeds of the Bonds (or Net Proceeds, as applicable) as deposited in the
Project Fund, and hereby authorizes and directs the Trustee to pay for the
same, but solely from the Project Fund, from time to time, after issuance of
the Bonds while the Tenant is in compliance with the requirements of Section 6.1 hereof, upon receipt by the Trustee of a
requisition certificate signed by the Authorized Tenant Representative in the
form set forth as Appendix A hereto which is
incorporated herein by reference.  With
regard to materials and/or labor furnished to the Project site at the order of
the Tenant without formal contract, or by subcontract with the Tenant acting as
general contractor, which could form the basis of a statutory mechanic’s or
subcontractor’s lien, unless Tenant is sole owner of the Bonds, the Trustee may
disburse payment therefor only upon receipt of releases or waivers of statutory
mechanic’s or subcontractor’s liens by all vendors or subcontractors receiving
payment or furnishing labor or materials as a subcontractor of the vendor or
subcontractor receiving payment.

The sole obligation of the Issuer under this
paragraph shall be to cause the Trustee to make such disbursements upon receipt
of such certificates and releases or waivers. 
The Trustee may rely fully on any such certificates and shall not be
required to make any investigation in connection therewith.

Section 5.4.  Payment of
Project Costs for Machinery and Equipment.  The Issuer hereby agrees to pay for the
purchase and acquisition of any machinery and equipment constituting a part of
the Improvements, but solely from the Project Fund, from time to time, upon
receipt by the Trustee of a certificate signed by the Authorized Tenant
Representative in the form provided by Appendix A
hereto which is incorporated herein by reference and accompanied by the
following specific information:

(a)                                  A copy of the seller’s invoice, purchase order or
other like document evidencing the purchase by the Tenant of such machinery
and/or equipment;

(b)                                 Common descriptive name of machinery or equipment;

(c)                                  Serial number, if any; and

(d)                                 Model number, if any.

The sole obligation of the Issuer under this Section shall be to cause
the Trustee to make such disbursements upon receipt of said certificates and
proof of mechanic’s or subcontractor’s lien waiver or release, if the item is
to become a fixture on the Land.  The
Trustee may rely fully on any such certificate and supporting documentation and
shall not be required to make any independent

 6
 

investigation in connection therewith. 
All machinery, equipment and/or personal property acquired, in whole or
in part, from funds deposited in the Project Fund pursuant to this Section will
be considered a part of the Project. With respect to items of machinery and
equipment constituting a part of the Improvements, the Tenant shall maintain a
running master list of such machinery and equipment, and within 30 days after
the Completion Date, the Tenant shall prepare an accurate detailed final list
of machinery and equipment constituting a part of the Improvements (but not
installed as fixtures therein or thereon), which list shall be filed with the
Trustee, and shall constitute a part of this Lease by reference.  All machinery and equipment constituting a
part of the Improvements shall be appropriately identified by separate schedule
or other means acceptable to the Trustee.

Section 5.5.  Completion
of Improvements .  The Tenant
warrants that the Project, when completed, will be occupied and used by the
Tenant for its lawful business purposes. 
The Tenant covenants and agrees to proceed diligently to complete any
Improvements to be acquired with the proceeds of the Series 2006 Bonds.  Upon completion of Improvements, the Tenant
shall cause the Authorized Tenant Representative to deliver a Certificate of
Completion, in the form substantially as attached hereto as Appendix B, to the Trustee. 
In the event funds remain on hand in the Project Fund on the date the
Certificate of Completion is furnished to the Trustee, such remaining funds
shall be transferred by the Trustee to the Debt Service Fund on the receipt of
the Certificate of Completion and shall be applied in accordance with the
provisions of the Indenture.

Section 5.6.  Deficiency
of Project Fund.  If Original
Proceeds in the Project Fund shall are insufficient to pay fully any Project
Costs (including reimbursements to the Tenant for Project Costs advanced by the
Tenant prior to issuance of the Bonds) and to fully complete any Improvements,
lien free (except for Permitted Encumbrances), the Tenant covenants to pay the
full amount of any such deficiency by making payments directly to the
contractors and to the suppliers of materials, machinery, equipment, property
and services as the same shall become due, and the Tenant shall save the Issuer
and the Trustee whole and harmless from any obligation to pay such deficiency.

Section 5.7. 
Right of Entry by the Issuer and the Trustee.  The duly authorized agents of the Issuer
and/or the Trustee shall have the right at any reasonable time and upon
reasonable notice to the Tenant prior to the completion of the Improvements to
have access to the Project or any part thereof for the purpose of inspecting
the acquisition, installation or construction thereof.

Section 5.8. 
Machinery and Equipment Purchased by the Tenant.  If no part of the purchase price of an item
of machinery, equipment or personal property is paid from Original Proceeds
deposited in the Project Fund pursuant to the terms of this Lease, then such
item of machinery, equipment or personal property will not be considered a part
of the Project.

Section 5.9.  Project
Property of the Issuer.  All
Improvements, all work and materials on Improvements as such work progresses,
any Project Additions, anything under this Lease which becomes, is deemed to
be, or constitutes a part of the Project, and the Project as fully completed,
repaired, rebuilt, rearranged, restored or replaced by the Tenant under the
provisions of this Lease, except as otherwise specifically provided herein,
shall immediately when erected or installed become the absolute property of the
Issuer.  Any Improvements that become a
part of the real

 7
 

estate as fixtures shall remain separate from the Tenant’s property
unless and until purchased by the Tenant from the Issuer as provided in this
Lease.

Section 5.10.  Kansas
Retailers’ Sales Tax.

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

ARTICLE VI

Section 6.1.  Insurance.  During the Term of this Lease, the Tenant
shall obtain and maintain such general accident and public liability insurance
covering the Tenant’s operations in or upon the Project (including coverage for
losses arising from the ownership, maintenance, use or operation of any
automobile, truck or other vehicle in or upon the Project), such insurance
insuring the Project against loss or damage by fire, lightning and all other
risks covered by the broadest form extended coverage insurance endorsement then
in use in the State, and such other property, casualty, liability and worker’s
compensation insurance as is customarily carried by business of the type in
which the Tenant is engaged, subject to reasonable deductibles, all of which
insurance shall name the Tenant, the Issuer, and the Trustee as insureds and
loss payees, as their interests appear. 
The Trustee shall have no duty to review the insurance required by this Article VI (or certificates thereof) or to
inquire as to the compliance thereof with this Article
VI.

Section 6.2.  Evidence of
Title.  The Tenant shall
furnish evidence of title in the form of an updated title report describing
Tenant’s fee simple title to the Land (the “Updated Title Report”).  The Issuer and the Tenant agree that any and
all proceeds therefrom during the Basic Term (a) if received before the
completion of the building Improvements shall be paid into and become a part of
the Project Fund, (b) if received thereafter but before the Bonds and interest
thereon have been paid in full, shall be paid into and become a part of the
Debt Service Fund, and (c) if received after the Bonds, redemption premium, if
any, and interest thereon have been paid in full, shall belong and be paid to
the Tenant.

ARTICLE VII

Section 7.1.  Impositions.  The Tenant shall, during the Term of this
Lease, bear, pay and discharge, before the delinquency thereof, any and all
Impositions.  In the event any
Impositions may be lawfully paid in installments, the Tenant shall be required
to pay only such installments

 8
 

thereof as become due and payable during the term of this Lease as and
when the same become due and payable.

Section 7.2.  Receipted
Statements.  Unless the Tenant
exercises its right to contest any Impositions in accordance with Section 7.3 hereof, the Tenant shall, within 30 days after
the last day for payment without penalty or interest of an Imposition which the
Tenant is required to bear, pay and discharge pursuant to the terms hereof,
deliver to the Trustee a copy of the statement issued therefor duly receipted
to show the payment thereof.

Section 7.3.  Contest of
Impositions.  The Tenant shall
have the right, in its own or the Issuer’s name or both, to contest the
validity or amount of any Imposition by appropriate legal proceedings
instituted before the Imposition complained of becomes delinquent if, and
provided, the Tenant (i) before instituting any such contest, shall give the
Issuer and the Trustee written notice of its intention to do so and, if
requested in writing by the Issuer or the Trustee, shall deposit with the
Trustee a surety bond of a surety company acceptable to the Issuer as surety,
in favor of the Issuer and the Trustee, as their interests may appear, or cash,
in a sum of at least the amount of the Imposition so contested, assuring the
payment of such contested Impositions together with all interest and penalties
to accrue thereon and court costs, (ii) diligently prosecutes any such contest
and at all times effectively stays or prevents any official or judicial sale
therefor, under execution or otherwise, and (iii) promptly pays any final
judgment enforcing the Imposition so contested and thereafter promptly procures
record release or satisfaction thereof. 
The Tenant shall indemnify and hold the Issuer whole and harmless from
any costs and expenses the Issuer may incur related to any such contest.

Section 7.4.  Ad Valorem
Taxes.  The parties
acknowledge that under the existing provisions of K.S.A. 79-201a, as
amended, the property acquired, constructed or purchased with the proceeds of
the Bonds (except such property used for certain retail uses) is eligible to
receive exemption from ad valorem
taxation for a period up to 10 calendar years after the calendar year in which
the Bonds are issued, provided the Issuer has complied with certain notice,
hearing and procedural requirements established by law, and proper application
has been made.  The Issuer represents
that such notice, hearing and procedural requirements will have been complied
with at the Issue Date.  Subject to the
provisions of Section 7.5 of this Lease, the
Issuer will, at the Tenant’s request, with information furnished by Tenant and
the Trustee, make all necessary filings regarding the application for 100% ad valorem tax exemption for the full 10-year period on or
before March 1 in the calendar year following the calendar year in which the
Bonds were issued, and will renew said application from time to time and take
any other action as may be necessary to maintain such ad valorem
tax exemption in full force and effect, in accordance with K.S.A. 79-201a, 79-210
et seq. and the requirements of the
State Board of Tax Appeals.  If it
becomes necessary to litigate the issue of availability or applicability of the
ad valorem tax exemption, the Issuer
will cooperate fully with Tenant in pursuing such litigation, but all
litigation costs and reasonable attorney fees must be paid by Tenant, either
directly or as Additional Rent.

 9
 

ARTICLE VIII

Section 8.1.  Use of Project. 
Subject to the provisions of this Lease, the Tenant shall have the right
to use the Project for any and all purposes allowed by law and contemplated by
the constitution of the State and the Act. 
The Tenant shall comply in all material respects with all statutes,
laws, ordinances, orders, judgments, decrees, regulations, directions and
requirements of all federal, state, local and other governments or governmental
authorities, now or hereafter applicable to the Project or to any adjoining
public ways, as to the manner of use or the condition of the Project or of
adjoining public ways.  The Tenant shall
comply with the mandatory requirements, rules and regulations of all insurers
under the policies required to be carried under the provisions of this
Lease.  The Tenant shall pay all costs,
expenses, claims, fines, penalties and damages that may in any manner arise out
of, or be imposed as a result of, the failure of the Tenant to comply with the
provisions of this Article.

Section 8.2.  Environmental Provisions.

(a)  The Tenant hereby covenants that it will not
cause or permit any Hazardous Substances (as defined herein) to be placed,
held, located or disposed of, on, under or at the Land or the Project, other
than in the ordinary course of business and in material compliance with all
applicable Environmental Laws.

(b)  In furtherance and not in limitation of any
indemnity elsewhere provided to the Issuer hereunder and in the Indenture, the
Tenant hereby agrees to indemnify and hold harmless the Issuer, the Trustee and
the Bondowner(s) from time to time from and against any and all losses,
liabilities, including strict liability, damages, injuries, expenses, including
reasonable attorneys’ fees, costs of any settlement or judgment, costs of
investigation, consultants, testing, sampling, cleanup, or defense, and claims
of any and every kind paid, incurred or suffered, with respect to, or as a
direct or indirect result of, the actual or alleged presence on or under, or
the escape, seepage, leakage, spillage, discharge, emission, discharging or
release from the Land or the Project of any Hazardous Substance (including,
without limitation, any losses, liabilities, reasonable attorneys’ fees, costs
of any settlement or judgment or claims asserted or arising under any federal,
state or local Environmental Law or so-called “Superfund” or “Super lien” law,
or any other applicable Environmental Law, rule, regulation, order or decree
regulating, relating to or imposing liability, including strict liability, or
standard of conduct concerning, any Hazardous Substance) regardless of whether
or not caused by or within the control of the Tenant.

(c)  If the Tenant receives any notice of (1) the
happening of any event involving the use, other than in the ordinary course of
business and in compliance with all applicable Environmental Laws, spill,
release, leak, seepage, discharge or cleanup of any Hazardous Substance on the
Land or the Project or in connection with the Tenant’s operations thereon or
(2) any complaint, order, citation or notice with regard to air emissions,
water discharges or any other environmental, health or safety matter affecting
the Tenant (an “Environmental Complaint”) from any person (including, without
limitation, the United States Environmental Protection Agency (the “EPA”), and
the Kansas Department of Health and Environment (“KDHE”) then the Tenant shall
immediately notify the Issuer and the Trustee in writing.  With respect to any such notice that relates
to a condition or conditions on the Project site, the Tenant shall promptly
initiate action to

 10
 

remediate the conditions cited in the notice, and
shall diligently pursue such remediation at its expense to the satisfaction of
the city authority.

(d)  If an Event of Default shall have occurred,
at the request of the Issuer or the Trustee, the Tenant shall periodically
perform (at the Tenant’s expense) an environmental audit and, if reasonably
deemed necessary by the Issuer or the Trustee, an Environmental Assessment,
(each of which must be reasonably satisfactory to the Issuer and the Trustee)
of the Project, or the hazardous waste management practices and/or hazardous
waste disposal sites used by the Tenant with respect to the Project.  Said audit and/or Environmental Assessment
shall be conducted by an environmental consultant satisfactory to the Issuer
and the Trustee.  Should the Tenant fail
to perform any environmental audit or risk assessment within 30 days of the
written request of the Issuer or the Trustee, either shall have the right, but
not the obligation, to retain an environmental consultant to perform any such
environmental audit or risk assessment. 
All costs and expenses incurred by the Issuer or the Trustee in the
exercise of such rights shall be payable by the Tenant as Additional Rent on
demand, and if not so paid, shall bear interest until paid at the average rate
of interest on the Bonds plus 200 basis points.

(e)  The Tenant shall not install nor permit to be
installed in the Project friable asbestos or any substance containing asbestos
and deemed hazardous by Environmental Law applicable to the Project and
respecting such material, and with respect to any such material currently
present in the Project, shall promptly either (1) remove any material which
such applicable regulations deem hazardous and require to be removed or (2)
otherwise comply with such applicable Environmental Law, at the Tenant’s
expense.  If the Tenant shall fail to so
remove or otherwise comply, the Issuer may declare an Event of Default and/or
do whatever is necessary to eliminate said substances from the Project or
otherwise comply with the applicable Environmental Law or order, and the costs
thereof shall be payable by the Tenant on demand, and if not so paid, shall
bear interest until paid at the average rate of interest on the Bonds plus 200
basis points.  The Tenant shall defend,
indemnify, and save the Issuer, the Trustee and the Bondowner(s) harmless from
all costs and expenses (including consequential damages) asserted or proven
against the Tenant, or incurred to comply with such regulations.

(f)  The provisions of Section
8.2(d) shall survive the termination of this Lease or exercise of
the Tenant’s option to purchase the Project, except with respect to obligations
which arise solely and exclusively as a result of the use, spill, release,
leak, seepage or discharge of Hazardous Substances on the Land or the Project
after the Project is no longer occupied by the Tenant.

ARTICLE IX

Section 9.1.  Sublease by
the Tenant.  The Tenant may
sublease the Project to a single party or entity.  In the event of any such subleasing, the
Tenant shall remain fully liable for the performance of its duties and
obligations hereunder, and no such subleasing and no dealings or transactions
between the Issuer or the Trustee and any such subtenant shall relieve the
Tenant of any of its duties and obligations hereunder.

 11

Any such sublease shall be subject and subordinate
in all respects to the provisions of this Lease.

Section 9.2.  Assignment
by the Tenant.  The Tenant may
assign, mortgage, sell, or otherwise transfer its interest in this Lease only
with the prior written consent of the Issuer. 
In the event of any such assignment, the Tenant shall remain fully
liable for the performance of its duties and obligations hereunder, except to
the extent hereinafter provided, and no such assignment and no dealings or
transactions between the Issuer or the Trustee and any such assignee shall
relieve the Tenant of any of its duties and obligations hereunder, except as
may be otherwise provided in the following Section.

Section 9.3.  Release of
the Tenant.  If, in connection
with an assignment by the Tenant of its interest in this Lease, (a) the Issuer
and the Owners of at least seventy-five percent (75%) in aggregate principal
amount of the Outstanding Bonds (including any Additional Bonds) shall file
with the Trustee and the Original Purchaser their prior written consent to such
assignment, and (b) the proposed assignee shall expressly assume and agree to
perform all of the obligations of the Tenant under this Lease; then the Tenant
shall be fully released from all obligations accruing hereunder after the date
of such assignment.

Section 9.4.  Mergers and
Consolidations. 
Notwithstanding the provisions of Sections 9.2
and 9.3 above, if the Tenant shall assign or
transfer, by operation of law or otherwise, its interests in this Lease in
connection with a transaction involving the merger or consolidation of the
Tenant with or into, or a sale, lease or other disposition of all or
substantially all of the property of the Tenant as an entirety to another
person, association, corporation or other entity, and (a) the proposed
assignee, transferee or surviving corporation shall expressly assume and agree
to perform all of the obligations of the Tenant under this Lease with regard to
the Bonds, and (b) if Tenant is not the sole owner of the Bonds, the Tenant
shall furnish the Trustee and the Issuer with evidence in the form of financial
statements accompanied by a proforma balance sheet prepared by an independent
certified public accountant of recognized standing showing that the net worth
of such proposed assignee, transferee or surviving entity immediately following
such assignment, transfer or merger will be at least equal to the net worth of
the Tenant as shown by the most recent financial statements of the Tenant
furnished to the Trustee pursuant to this Lease; then and in such event the
Tenant shall be fully released from all obligations accruing hereunder after
the date of such assignment, transfer or merger.

Section 9.5.  Covenant
Against Other Assignments. 
The Tenant will not assign or in any manner transfer its interests under
this Lease, nor will it suffer or permit any assignment thereof by operation of
law, except in accordance with the limitations, conditions and requirements
herein set forth.

ARTICLE X

Section 10.1.  Repairs and
Maintenance. The Tenant covenants and agrees that it will, during
the Term of this Lease, at its own expense, keep and maintain the Project and
all parts thereof in good condition and repair, including but not limited to
the furnishing of all parts,

 12
 

mechanisms and devices required to keep the machinery, equipment and
personal property constituting a part of the Project in good mechanical and
working order.

Section 10.2.  Removal, Disposition and Substitution of Machinery or Equipment.  The Tenant shall have the right, provided the
Tenant is not in Default, to remove and sell or otherwise dispose of any
machinery or equipment which constitutes a part of the Project and which is no
longer used by the Tenant or, in the opinion of the Tenant, is no longer useful
to the Tenant in its operations (whether by reason of changed processes,
changed techniques, obsolescence, depreciation or otherwise).

All machinery or equipment constituting a part of
the Project and removed by the Tenant shall become the absolute property of the
Tenant and may be sold or otherwise disposed of by the Tenant without otherwise
accounting to the Issuer.  In all cases,
the Tenant shall pay all the costs and expenses of any such removal and shall
immediately repair at its expense all damage caused thereby.  The Tenant’s rights under this Section to
remove machinery or equipment constituting a part of the Project is intended
only to permit the Tenant to maintain an efficient operation by the removal of
such machinery and equipment no longer suitable to the Tenant’s use for any of
the reasons set forth in this Section and such right is not to be construed to
permit a removal under any other circumstances and shall not be construed to
permit the wholesale removal of such machinery or equipment by the Tenant.

ARTICLE XI

Section 11.1.  Alteration
of Project.  The Tenant shall
have and is hereby given the right, at its sole cost and expense, to make such
additions, changes and alterations in and to any part of the Project as the
Tenant from time to time may deem necessary or advisable, provided however, the
Tenant shall not make any major addition, change or alteration which will
adversely affect the intended use or structural strength or value of any part
of the Improvements.  All additions,
changes and alterations made by the Tenant pursuant to the authority of this
Article shall (a) be made in a workmanlike manner and in strict compliance with
all laws and ordinances applicable thereto, (b) when commenced, be prosecuted
to completion with due diligence, and (c) when completed, shall be deemed a
part of the Project; provided, however, that additions of machinery, equipment
and/or personal property of the Tenant, not purchased or acquired from proceeds
of the Bonds and not constituting a part of the Project shall remain the
separate property of the Tenant and may be removed by the Tenant prior to or as
provided in Section 22.1 hereof.

ARTICLE XII

Section 12.1.  Additional Improvements. 
The Tenant shall have and is hereby given the right, at its sole cost and
expense, to construct on the Land or within areas occupied by the Improvements,
or in airspace above the Project, such additional buildings and improvements as
the Tenant from time to time may deem necessary or advisable.  All additional buildings and improvements
constructed by the Tenant pursuant to the authority of this Article shall,
during the Term, remain the property of the Tenant and may be added to, altered
or razed and removed by the Tenant at any time during the Term hereof.  The Tenant covenants and agrees (a) to make
all

 13
 

repairs and restorations, if any,
required to be made to the Project because of the construction of, addition to,
alteration or removal of, said additional buildings or improvements, (b) to
keep and maintain said additional buildings and improvements in good condition
and repair, ordinary wear and tear excepted, (c) to promptly and with due
diligence either raze and remove from the Land, in a good, workmanlike manner,
or repair, replace or restore such of said additional buildings or improvements
as may from time to time be damaged by fire or other casualty, and (d) that all
additional buildings and improvements constructed by the Tenant pursuant to
this Article which remain in place after the termination of this Lease for any
cause other than the purchase of the Project pursuant to Article XVII
hereof shall, upon and in the event of such termination, become the
separate and absolute property of the Issuer.

ARTICLE XIII

Section 13.1.  Securing of Permits and Authorizations.  The Tenant shall not do or permit others
under its control to do any work in or in connection with the Project or
related to any repair, rebuilding, restoration, replacement, alteration of or
addition to the Project, or any part thereof, unless all requisite municipal
and other governmental permits and authorizations shall have first been
procured and paid for.  All such work
shall be done in a good and workmanlike manner and in compliance with all
applicable building, zoning and other laws, ordinances, governmental
regulations and requirements and in accordance with the requirements, rules and
regulations of all insurers under the policies required to be carried under the
provisions of this Lease.

Section 13.2.  Mechanic’s
Liens.  The Tenant shall not
do or suffer anything to be done whereby the Project, or any part thereof, is
encumbered by any mechanic’s or other similar lien. Should any mechanic’s or
other similar lien ever be filed against the Project, or any part thereof, the
Tenant shall discharge the same of record within 30 days after the date of
filing.  Notice is hereby given that the
Issuer does not authorize or consent to and shall not be liable for any labor
or materials furnished to the Tenant or anyone claiming by, through or under
the Tenant upon credit, and that no mechanic’s or similar liens for any such
labor, services or materials shall attach to or affect the reversionary or
other estate of the Issuer in and to the Project, or any part thereof.

Section 13.3.  Contest of
Liens.  The Tenant, notwithstanding
the above, shall have the right to contest any such mechanic’s or other similar
lien if within said 30-day period stated above it (a) notifies the Issuer and
the Trustee in writing of its intention so to do, and if Tenant is not the sole
owner of Bonds and if requested by the Trustee, deposits with the Trustee a
surety bond issued by a surety company acceptable to the Issuer as surety, in
favor of the Issuer, or cash, in the amount of the lien claim so contested,
indemnifying and protecting the Issuer from and against any liability, loss,
damage, cost and expense of whatever kind or nature growing out of or in any
way connected with said asserted lien and the contest thereof, (b) diligently
prosecutes such contest, at all times effectively staying or preventing any
official or judicial sale of the Project or any part thereof or interest
therein, under execution or otherwise, and (c) promptly pays or otherwise
satisfies any final judgment adjudging or enforcing such contested lien claim
and thereafter promptly procures record release or satisfaction thereof.

 14
 

Section 13.4.  Utilities.  All utilities and utility services used by
the Tenant in, on or about the Project shall be contracted for by the Tenant in
the Tenant’s own name and the Tenant shall, at its sole cost and expense,
procure any and all permits, licenses or authorizations necessary in connection
therewith.

ARTICLE XIV

Section 14.1.  Indemnity.  The Tenant shall and hereby covenants and
agrees to indemnify, protect, defend and save the Issuer, the Trustee and the
Bondowners harmless from and against any and all claims, demands, liabilities
and costs, including attorneys’ fees, arising from damage or injury, actual or
claimed, of whatsoever kind or character, to property or persons, occurring or
allegedly occurring in, on or about the Project during the Term hereof, and
upon timely written notice from the Issuer or the Trustee, the Tenant shall
defend the Issuer and the Trustee in any action or proceeding brought thereon;
provided, however, that nothing contained in this Section shall be construed as
requiring the Tenant to indemnify the Issuer or the Trustee for any claim
resulting from any negligent, willful or malicious act or omission of the
Issuer or the Trustee, or their respective agents and employees.  The Tenant also covenants and agrees, at its
expense, to pay and to indemnify the Issuer, the Trustee and the Bondowners
from and against all costs, expenses and charges, including reasonable counsel
fees (to the extent permitted by law), incurred in obtaining possession of the
Project after default of the Tenant, or in enforcing any covenant or agreement
of the Tenant contained in this Lease or the Indenture.

ARTICLE XV

Section 15.1.  Access to Project. 
The Issuer, for itself and its duly authorized representatives and
agents, including the Trustee, reserves the right to enter the Project at all
reasonable times during usual business hours throughout the Term, upon
reasonable notice, for the purpose of (a) examining and inspecting the same,
(b) performing such work made necessary by reason of the Tenant’s default under
any of the provisions of this Lease, and (c) after an Event of Default, for the
purpose of exhibiting the Project to prospective purchasers, lessees or
mortgagees.  The Issuer may, during the
progress of said work mentioned in (b) above, keep and store on the Project all
necessary materials, supplies and equipment and shall not be liable for
inconvenience, annoyances, disturbances, loss of business or other damage
suffered by reason of the performance of any such work or the storage of such
materials, supplies and equipment.  Prior
to entry, Issuer will cause its representatives to enter a confidentiality
agreement customarily used by Tenant to protect its trade secrets and other
intellectual property.

ARTICLE XVI

Section 16.1.  Option to
Extend Basic Term.  The Tenant
shall have and is hereby given the right and option to extend the Basic Term of
this Lease for the Additional Term provided that (a) the Tenant shall give the
Issuer written notice of its intention to exercise the option at least 30 days
prior to the expiration of the Basic Term and (b) the Tenant is not in Default
hereunder at the

 15
 

time it gives the Issuer such notice or at the time the Additional Term
commences.  In the event the Tenant
exercises such option, the terms, covenants, conditions and provisions set
forth in this Lease shall be in full force and effect and binding upon the
Issuer and the Tenant during the Additional Term except that the Basic Rent during
any extended term herein provided for shall be the sum of $100.00 per year,
payable in advance on the first Business Day of such Additional Term.

ARTICLE XVII

Section 17.1.  Option to
Purchase Project.  Subject to
the provisions of this Article, the Tenant shall have the right and option to
purchase the Project at any time during the Term hereof and for 120 days
thereafter.  The Tenant shall exercise
its option by giving the Issuer written notice of the Tenant’s election to
exercise its option and specifying the date, time and place of closing, which
date (the “Purchase Date”), unless waived, shall neither be earlier than 30
days nor later than 180 days after the notice is given.  The Tenant may not, however, exercise such
option if the Tenant is in Default hereunder on the Purchase Date unless all
Defaults are cured upon payment of the purchase price specified in Section 17.2.

Section 17.2.  Quality of
Title and Purchase Price.  If
said notice of election to purchase is given, the Issuer shall sell and convey
all of its interests in the Project to the Tenant on the Purchase Date free and
clear of all liens and encumbrances except (a) Permitted Encumbrances, (b)
those to which title was subject on the date of conveyance to the Issuer of the
Land, or to which title became subject with the Tenant’s written consent, or
which resulted from any failure of the Tenant to perform any of its covenants
or obligations under this Lease, (c) taxes and assessments, general and
special, if any, and (d) the rights of any party having condemned or who is
attempting to condemn title to, or the use for a limited period of, all or any
part of the Project, for a price determined as follows (which the Tenant agrees
to pay in cash at the time of delivery of the Issuer’s deed or other instrument
or instruments of transfer of the Project to the Tenant as hereinafter
provided):

(1)  The full amount which is required
to provide the Issuer and the Trustee with funds sufficient, in accordance with
the provisions of the Indenture, to pay at maturity or to redeem and pay in
full (A) the principal of all of the Outstanding Bonds, (B) all interest due
thereon to date of maturity or redemption, whichever first occurs, and (C) all
costs, expenses and premiums incident to the redemption and payment of said
Bonds in full, plus

(2)  $100.00.

Nothing in this Article shall release or discharge the Tenant from its
duty or obligation under this Lease to make any payment of Basic Rent or
Additional Rent which, in accordance with the terms of this Lease, becomes due
and payable prior to the Purchase Date, or its duty and obligation to fully
perform and observe all covenants and conditions herein stated to be performed
and observed by the Tenant prior to the Purchase Date.

 16
 

Section 17.3.  Closing of
Purchase.  On the Purchase
Date the Issuer shall deliver to the Tenant its special warranty deed and/or
other appropriate instrument or instruments of conveyance or assignment,
properly executed and conveying the Project to the Tenant free and clear of all
liens and encumbrances except as set forth in the preceding section above, or
conveying such other title to the Project as may be acceptable to the Tenant,
and the Tenant shall pay the full purchase price for the Project as follows:  (a) the amount specified in clause (1) of Section 17.2 shall be paid to the Trustee for deposit in the
Debt Service Fund to be used to pay or redeem Bonds and the interest thereon as
provided in the Indenture, and (b) the amount specified in clause (2) of said Section 17.2 shall be paid to the Issuer; provided, however,
nothing herein shall require the Issuer to deliver its appropriate instrument
or instruments of assignment or conveyance to the Tenant until after all duties
and obligations of the Tenant under this Lease to the date of such delivery
have been fully performed and satisfied or adequate provision made for such
performance and satisfaction.  Upon the
delivery to the Tenant of the Issuer’s appropriate instrument or instruments of
assignment or conveyance, payment of the purchase price by the Tenant and legal
defeasance of the Bonds, this Lease shall ipso facto
terminate, subject to the provisions of Section 20.2
hereof.

Section 17.4.  Effect of
Failure to Complete Purchase. 
If, for any reason, the purchase of the Project by the Tenant pursuant
to valid notice of election to purchase is not effected on the Purchase Date,
this Lease shall be and remain in full force and effect according to its terms
the same as though no notice of election to purchase had been given, except
that if such purchase is not effected on the Purchase Date because the Issuer
does not have or is unable to convey to the Tenant such title to the Project as
the Tenant is required to accept, the Issuer shall use its best efforts to cure
any such defect in its title to the Project. 
In the event the Issuer is unable to cure such defect in its title to
the Project, or if the Issuer’s failure to close would be a breach of its
obligations hereunder, the Tenant shall have the right to cancel this Lease
forthwith if, but only if, the principal of and interest on the Bonds and all
costs incident to the redemption and payment of the Bonds have been paid in
full.  The Tenant shall also have the
right to exercise any legal or equitable remedies, in its own name or in the
name of the Issuer, to obtain acceptable title to the Project.

Section 17.5.  Application
of Condemnation Awards if the Tenant Purchases Project.  The right of the Tenant to exercise its
option to purchase the Project under the provisions of this Article shall
remain unimpaired notwithstanding any condemnation of title to, or the use for
a limited period of, all or any part of the Project.  If the Tenant shall exercise its said option
and pay the purchase price as provided in this Article, all of the condemnation
awards received by the Issuer after the payment of said purchase price, less
all attorneys’ fees and other expenses and costs incurred by the Issuer as the
owner of the Project in connection with such condemnation, shall belong and be
paid to the Tenant.

Section 17.6.  Option to
Purchase Unimproved Portions of Land.  The Tenant shall have the option to purchase
at any time and from time to time during the Term any vacant part or vacant
parts of the unimproved Land constituting a part of the Project; provided,
however, the Tenant shall furnish the Issuer and the Trustee with a certificate
of an Authorized Tenant Representative, dated not more than thirty (30) days
prior to the date of the purchase and stating that, in the opinion of the
Authorized Tenant Representative, (a) the portion of said Land with respect to
which the option is exercised is not needed for the operation of the Project
for the purposes herein stated, (b) the purchase will not impair the usefulness
or operating efficiency or

 17
 

materially impair the value of the Project and will not destroy or
materially impair the means of ingress thereto and egress therefrom, and (c)
the purchase will not materially adversely affect compliance of the remaining
Land and any Improvements with applicable zoning laws or regulations.  The Tenant shall exercise this option by
giving the Issuer and the Trustee written notice of the Tenant’s election to
exercise its option and specifying (i) the legal description, (ii) the date,
time and place of closing, which date shall neither be earlier than 45 days nor
later than 60 days after the notice is given, (iii) the appraised current fair
market value of the portions of the Land with respect to which the Tenant’s
option is exercised as determined by an independent, qualified appraiser whose
report shall be furnished to the Trustee together with the Tenant’s notice of
election to purchase, and (iv) a certificate signed by the chief executive or
chief financial officer of the Tenant stating that no event has occurred and is
continuing which, with notice or lapse of time or both, would constitute an
Event of Default; provided, however, that the Tenant may not exercise this
option if there has occurred and is continuing any event which, with notice or
lapse of time or both, would constitute an Event of Default at the time said
notice is given and may not purchase said real property on the specified
closing date if any such event has occurred and is continuing on said date
unless all defaults are cured.  The
option hereby given shall include the right to purchase a perpetual easement
for right-of-way to and from the public roadway and the right to
purchase such land as is necessary to assure that there will always be access
between the real property purchased pursuant to these Sections
17.6 through 17.10 and the
public roadway.

Section 17.7.  Quality of
Title - Purchase Price. 
If said notice of election to purchase is given as provided in Section 17.6 the Issuer shall convey the real property
described in the Tenant’s notice to the Tenant on the specified date free and
clear of all liens and encumbrances except (a) Permitted Encumbrances, (b)
those to which the title was subject on the date of conveyance to the Issuer of
the Land, or to which title became subject with the Tenant’s written consent,
or which resulted from any failure of the Tenant to perform any of its
covenants or obligations under this Lease, (c) taxes and assessments, general
and special, if any, and (d) the interests of any party having condemned or who
is attempting to condemn title to, or the use for a limited period of, all or
any part of the real property described in the Tenant’s notice.  The purchase price shall be an amount equal
to the then current fair market value thereof, as determined with reference to
the independent appraiser’s report furnished to the Trustee or the original
cost to the Tenant, whichever is less.

Section 17.8.  Closing of
Purchase.  If the Issuer has
title to such vacant real property free and clear of all liens and encumbrances
except as stated above or has such other title to the such real property as may
be acceptable to the Tenant, then on the specified date, the Issuer shall
deliver to the Tenant its special warranty deed, properly executed and
conveying such real property to the Tenant free and clear of all liens and
encumbrances except as stated above, and the Tenant shall pay the purchase
price for such real property, said purchase price to be paid to the Trustee for
the account of the Issuer and deposited by the Trustee in the Debt Service Fund
and shall be used to redeem Bonds on any date the Bonds are subject to optional
redemption as provided in the Indenture. 
Nothing herein shall require the Issuer to deliver its special warranty
deed to the Tenant until after all duties and obligations of the Tenant under
this Lease to the date of such delivery have been fully performed and
satisfied.

 18
 

Section 17.9.  Effect of
Purchase on Lease.  The
exercise by the Tenant of the option granted under these Sections
17.6 to 17.10 and the
purchase and sale and conveyance of a portion or portions of the Land
constituting a part of the Project pursuant hereto shall in no way whatsoever
affect this Lease, and all the terms and provisions hereof shall remain in full
force and effect the same as though no notice of election to purchase had been
given, and specifically, but not in limitation of the generality of the
foregoing, exercise of such option shall not affect, alter, diminish, reduce or
abate the Tenant’s obligations to pay all Basic Rent and Additional Rent
required hereunder.

Section 17.10.  Effect of Failure to Complete Purchase.  If, for any reason whatsoever, the purchase
by the Tenant of the real property described in said notice is not effected on
the specified date, this Lease shall be and remain in full force and effect
according to its terms the same as though no notice of election to purchase had
been given.

ARTICLE XVIII

Section 18.1.  Damage and
Destruction.

(a)  If, during the Term, any
Improvements are damaged or destroyed, in whole or in part, by fire or other
casualty, the Tenant shall promptly notify the Issuer and the Trustee in
writing as to the nature and extent of such damage or loss and whether it is
practicable and desirable to rebuild, repair, restore or replace such damage or
loss.

(b)  If the Tenant shall determine that
such rebuilding, repairing, restoring or replacing is practicable and
desirable, the Tenant shall forthwith proceed with and complete with reasonable
dispatch such rebuilding, repairing, restoring or replacing.  If Tenant is the sole owner of Bonds and Section 18.3 is not applicable, all Net
Proceeds shall be paid to Tenant.  If
Tenant is not the sole owner of Bonds, any Net Proceeds of property and/or
casualty insurance required by this Lease and received with respect to any such
damage or loss to the Improvements shall be paid to the Trustee and shall be
deposited in the Project Fund and shall be used and applied for the purpose of
paying the cost of such rebuilding, repairing, restoring or replacing such
damage or loss.  Any amount remaining in
the Project Fund after such rebuilding, repairing, restoring or replacing shall
be paid to the Tenant.

(c)  If the Tenant shall reasonably
determine that rebuilding, repairing, restoring or replacing the Improvements
is not practicable and desirable, any Net Proceeds of property and/or casualty
insurance required by this Lease and received with respect to any such damage
or loss to the Project shall be paid into the Debt Service Fund.  Such moneys shall be used to redeem Bonds at
their earliest optional redemption date. 
The Tenant agrees that it shall be reasonable in exercising its judgment
pursuant to this subsection (c).

(d)  The Tenant shall not, by reason of
its inability to use all or any part of the Improvements during any period in
which the Improvements are damaged or destroyed, or are being repaired,
rebuilt, restored or replaced nor by reason of the payment of the costs of such
rebuilding, repairing, restoring or replacing, be entitled to any reimbursement
or any abatement or

 19
 

diminution of the Basic Rent or Additional Rent payable by the Tenant
under this Lease nor of any other obligations of the Tenant under this Lease
except as expressly provided in this Section.

Section 18.2.  Condemnation.

(a)  If, during the
Term title to, or the temporary use of, all or any part of the Project shall be
condemned by any authority exercising the power of eminent domain (other than
the Issuer), the Tenant shall, within 30 days after the date of entry of a final
order in any eminent domain proceedings granting condemnation, notify the
Issuer and the Trustee in writing as to the nature and extent of such
condemnation and whether it is practicable and desirable to acquire substitute
land or construct substitute Improvements.

(b)  If the Tenant shall determine that
such substitution is practicable and desirable, the Tenant shall forthwith
proceed with and complete with reasonable dispatch the acquisition or
construction of such substitute Land or Improvements.  If Tenant is the sole owner of Bonds and Section 18.3 is not applicable, all Net
Proceeds shall be paid to Tenant.  If
Tenant is not the sole owner of Bonds, any Net Proceeds received from any award
or awards with respect to the Project or any part thereof made in such
condemnation or eminent domain proceedings shall be paid to the Trustee for the
account of the Tenant and shall be deposited in the Project Fund and shall be
used and applied for the purpose of paying the cost of such substitution.  Any amount remaining in the Project Fund
after such acquisition or construction shall be paid to Tenant.

(c)  If the Tenant shall reasonably
determine that it is not practicable and desirable to acquire or construct
substitute Improvements, any Net Proceeds of condemnation awards received by
the Tenant shall be paid into the Debt Service Fund.  Such moneys shall be used to redeem Bonds at
their earliest optional redemption date. 
The Tenant agrees that it shall be reasonable in exercising its judgment
pursuant to this subsection.

(d)  The Tenant shall not, by reason of
its inability to use all or any part of the Improvements during any such period
of restoration or acquisition nor by reason of the payment of the costs of such
restoration or acquisition, be entitled to any reimbursement or any abatement
or diminution of the Basic Rent or Additional Rent nor of any other obligations
hereunder payable by the Tenant under this Lease.

(e)  The Issuer shall cooperate fully
with the Tenant in the handling and conduct of any prospective or pending
condemnation proceedings with respect to the Project or any part thereof so
long as the Issuer is not the condemning authority.  In no event will the Issuer voluntarily
settle or consent to the settlement of any prospective or pending condemnation
proceedings with respect to the Project or any part thereof without the written
consent of the Tenant and the Trustee.

Section 18.3.  Effect of
Tenant’s Defaults.  Anything in this Article to the
contrary notwithstanding, the Issuer and the Trustee shall have the right at
any time and from time to time to withhold payment of all or any part of the
Net Proceeds from the Project Fund attributable to damage, destruction or
condemnation of the Project to the Tenant or any third party if an Event of
Default has occurred and is continuing, or the Issuer or the Trustee has given
notice to the Tenant

 20
 

of any Default which, with the passage of time, will become an Event of
Default.  In the event the Tenant shall
cure any Defaults specified herein, the Trustee shall make payments from the
Net Proceeds to the Tenant in accordance with the provisions of this
Article.  However, if this Lease is
terminated or the Issuer or the Trustee otherwise re-enters and takes
possession of the Project without terminating this Lease, the Trustee shall pay
all the Net Proceeds held by it into the Debt Service Fund and all rights of
the Tenant in and to such Net Proceeds shall cease.

ARTICLE XIX

Section 19.1.  Change of Circumstances. 
If at any time during the Basic Term, a Change of Circumstances occurs,
then the Tenant shall have the option to purchase the Project pursuant to Article XVII or the option to terminate this Lease by giving
the Issuer notice of such termination within 90 days after the Tenant has
actual knowledge of the event giving rise to such option.  Such termination shall become effective when
all of the Bonds Outstanding are paid or payment is provided for pursuant to
the Indenture.

ARTICLE XX

Section 20.1.  Remedies on
Default.  Whenever any Event
of Default shall have happened and be continuing, the Trustee (acting on behalf
of the Issuer, as assignee of the Issuer’s rights hereunder) may take any legal
action, including but not limited to, one or more of the following remedial
actions:

(a)  By written notice to the Tenant
upon acceleration of maturity of the Bonds as provided in the Indenture, the
Trustee acting on behalf of the Issuer may declare the aggregate amount of all
unpaid Basic Rent or Additional Rent then or thereafter required to be paid
under this Lease by the Tenant to be immediately due and payable as liquidated
damages from the Tenant, whereupon the same shall become immediately due and
payable by the Tenant.

(b)  The Trustee acting on behalf of the
Issuer may give the Tenant written notice of intention to terminate this Lease
on a date specified therein, which date shall not be earlier than 30 days after
such notice is given and, if all Defaults have not then been cured on the date
so specified, the Tenant’s rights to possession of the Project shall cease, and
this Lease shall thereupon terminate. 
The Trustee acting on behalf of the Issuer may thereafter re-enter
and take possession of the Project and pursue all its available remedies,
including sale of the Project and judgment against the Tenant for possession of
the Project and/or all Basic Rent and Additional Rent then owing, including
costs and attorney fees.

(c)  Without terminating the Term
hereof, or this Lease, the Trustee acting on behalf of the Issuer may conduct
inspections or an Environmental Assessment of the Project, and re-enter
the Project or take possession thereof pursuant to legal proceedings or any
notice provided for by law and this Lease. 
The Issuer or the Trustee acting on behalf of the Issuer may refuse to
re-enter or take possession of the Project if it has reasonable cause for
such refusal.  “Reasonable cause” shall
include the presence on the Project of conditions which are in violation of any

 21
 

Environmental Law or the existence or threat of a remedial action
against the Tenant under any Environmental Law resulting from conditions on the
Project.

(d)  Having elected to re-enter or take possession of the Project
pursuant to subsection 20.1(c), the Trustee acting on behalf of the Issuer may
relet the Project, or parts thereof, for such term or terms and at such rental
and upon such other terms and conditions as are deemed advisable, with the
right to make alterations and repairs to the Project, and no such re-entry
or taking of possession of the Project shall be construed as an election to
terminate this Lease, and no such re-entry or taking of possession shall
relieve the Tenant of its obligation to pay Basic Rent or Additional Rent (at
the time or times provided herein), or of any of its other obligations under
this Lease, all of which shall survive such re-entry or taking of
possession.  The Tenant shall continue to
pay the Basic Rent and Additional Rent provided for in this Lease until the end
of the Term, whether or not the Project shall have been relet, less the net proceeds,
if any, of reletting the Project.

(e)  Having elected to reenter or take
possession of the Project pursuant to subsection 20.1(c), the Trustee acting on
behalf of the Issuer may (subject, however, to any restrictions against
termination of this Lease in the Trust Indenture), by notice to the Tenant
given at any time thereafter while the Tenant is in Default in the payment of
Basic Rent or Additional Rent or in the performance of any other obligation
under this Lease, elect to terminate this Lease in accordance with subsection
20.1(b) and thereafter proceed to exercise any remedies lawfully available.

(f)  If, in accordance with any of the
foregoing provisions of this Article, the Issuer shall have the right to elect
to re-enter and take possession of the Project, the Issuer or the Trustee
acting on behalf of the Issuer, may enter and expel the Tenant and those
claiming through or under the Tenant and remove the property and effects of
both or either by all lawful means without being guilty of any manner of
trespass and without prejudice to any remedies for arrears of Basic Rent or
Additional Rent or preceding breach of contract by the Tenant.

(g)  Net proceeds of any reletting or
sale of the Project shall be deposited in the Debt Service Fund for application
to pay the Bonds and interest thereon.  “Net
proceeds” shall mean the receipts obtained from reletting or sale after
deducting all expenses incurred in connection with such reletting or sale,
including without limitation, all repossession costs, brokerage commissions,
legal fees and expenses, expenses of employees, alteration costs and expenses
of preparation of the Project for reletting or sale.

(h)  The Issuer may recover from the
Tenant any attorney fees incurred in exercising any of its remedies under this
Lease.

Section 20.2.  Survival of
Obligations.  The Tenant
covenants and agrees with the Issuer that until all Bonds and the interest
thereon and redemption premium, if any, are paid in full or provision is made
for the payment thereof in accordance with the Indenture, its obligations under
this Lease shall survive the cancellation and termination of this Lease for any
cause and/or sale of the Project, and that the Tenant shall be obligated to pay
Basic Rent and Additional Rent (reduced by any net income the Issuer or the
Trustee may receive from the Project after such termination)

 22
 

and perform all other obligations provided for in this Lease, all at the
time or times provided in this Lease. 
Notwithstanding any provision of this Lease (other than Section 8.2(f))or the Indenture, the
Tenant’s obligations under Sections 8.2(b) and 14.1 hereof shall survive any termination, release or
assignment of this Lease or the Indenture and payment or provision for payment
of the Bonds.

Section 20.3.  No Remedy
Exclusive.  No remedy herein
conferred upon or reserved to the Issuer is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Lease or now or hereafter existing at law or in equity or by statute, subject
to the provisions of the Indenture.  No
delay or omission to exercise any right or power accruing upon any Event of
Default shall impair any such right or power, or shall be construed to be a
waiver thereof, but any such right or power may be exercised from time to time
and as often as may be deemed expedient. 
In order to entitle the Issuer to exercise any remedy reserved to it in
this Article, it shall not be necessary to give any notice, other than notice
required herein.

ARTICLE XXI

Section 21.1.  Performance of the Tenant’s Obligations by the Issuer.  If the Tenant shall fail to keep or perform
any of its obligations as provided in this Lease, then the Issuer may (but
shall not be obligated to do so) upon the continuance of such failure on the
Tenant’s part for 90 days after notice of such failure is given the Tenant by
the Issuer or the Trustee and without waiving or releasing the Tenant from any
obligation hereunder, as an additional but not exclusive remedy, make any such
payment or perform any such obligation, and the Tenant shall reimburse the
Issuer for all sums so paid by the Issuer and all necessary or incidental costs
and expenses incurred by the Issuer in performing such obligations through
payment of Additional Rent.  If such
Additional Rent is not so paid by the Tenant within 10 days of demand, the
Issuer shall have the same rights and remedies provided for in Article XX in the case of Default by the Tenant in the payment
of Basic Rent.

ARTICLE XXII

Section 22.1.  Surrender of
Possession.  Upon accrual of
the Issuer’s right of reentry as the result of the Tenant’s Default hereunder
or upon the cancellation or termination of this Lease by lapse of time or
otherwise (other than as a result of the Tenant’s purchase of the Project), the
Tenant shall peacefully surrender possession of the Project to the Issuer in
good condition and repair, ordinary wear and tear excepted; provided, however,
the Tenant shall have the right, prior to or within 90 business days after the
termination of this Lease, to remove from on or about the Project the
buildings, improvements, machinery, equipment, personal property, furniture and
trade fixtures which the Tenant owns under the provisions of this Lease and are
not a part of the Project.  All repairs
to and restorations of the Project required to be made because of such removal
shall be made by and at the sole cost and expense of the Tenant.  All buildings, improvements, machinery,
equipment, personal property, furniture and trade fixtures owned by the Tenant
and which are not so removed from on or about the Project prior to or within 90
business days after such termination of this Lease shall become the separate
and absolute property of the Issuer.

 23

  
  ARTICLE
XXIII
  Section 23.1.  Notices.  All notices
required or desired to be given hereunder shall be in writing and shall be
delivered in person to the Notice Representative or mailed by restricted mail
to the Notice Address.  All notices given
by restricted mail as aforesaid shall be deemed duly given as of the date three
days after they are so mailed.  When
mailed notices are given, the party giving notice will use reasonable diligence
to contact the party being notified by telephone, electronic mail or facsimile
on or before the date such notice is mailed.
  ARTICLE XXIV
  Section 24.1.  Triple-Net Lease. The
parties hereto agree (a) that this Lease is intended to be a triple-net lease,
(b) that the payments of Basic Rent and Additional Rent are designed to provide
the Issuer and the Trustee with funds adequate in amount to pay all principal
of and interest on all Bonds as the same become due and payable and to pay and
discharge all of the other duties and requirements set forth herein, and (c)
that to the extent that the payments of Basic Rent and Additional Rent are not
adequate to provide the Issuer and the Trustee with funds sufficient for the
purposes aforesaid, the Tenant shall be obligated to pay, and it does hereby
covenant and agree to pay, upon demand therefor, as Additional Rent, such
further sums of money as may from time to time be required for such purposes.
  Section 24.2.  Funds Held
by the Trustee After Payment of Bonds.  If, after the principal of and interest on
all Bonds and all costs incident to the payment of Bonds have been paid in
full, the Trustee holds unexpended funds received in accordance with the terms
hereof, such unexpended funds shall, except as otherwise provided in this Lease
and the Indenture and after payment therefrom to the Issuer of any sums of
money then due and owing by the Tenant under the terms of this Lease, be the
absolute property of and be paid over forthwith to the Tenant.
  ARTICLE XXV
  Section 25.1.  Rights and Remedies.  The rights and remedies
reserved by the Issuer and the Tenant hereunder and those provided by law shall
be construed as cumulative and continuing rights.  No one of them shall be exhausted by the
exercise thereof on one or more occasions. 
The Issuer and the Tenant shall each be entitled to specific performance
and injunctive or other equitable relief for any breach or threatened breach of
any of the provisions of this Lease, notwithstanding the availability of an
adequate remedy at law, and each party hereby waives the right to raise such
defense in any proceeding in equity.
  Section 25.2.  Waiver of
Breach.  No waiver of any
breach of any covenant or agreement herein contained shall operate as a waiver
of any subsequent breach of the same covenant or agreement or as a waiver of
any breach of any other covenant or agreement, and in case of a breach by
either party of any covenant, agreement or undertaking, the nondefaulting party
may

 24
 

    nevertheless accept from the other any payment or payments or
performance hereunder without in any way waiving its right to exercise any of
its rights and remedies provided for herein or otherwise with respect to any
such Default or Defaults which were in existence at the time such payment or
payments or performance were accepted by it.
  Section 25.3.  The Issuer Shall Not Unreasonably
Withhold Consents and Approvals. 
Wherever in this Lease it is provided that the Issuer shall, may or must
give its approval or consent, or execute supplemental agreements, exhibits or
schedules, the Issuer shall not unreasonably or arbitrarily withhold or refuse
to give such approvals or consents or refuse to execute such supplemental
agreements, exhibits or schedules.
  ARTICLE XXVI
  Section 26.1.  The Issuer May Not Sell.  The Issuer covenants that unless an Event of
Default under this Lease has occurred and is continuing, and the remaining Term
of this Lease has been terminated, it will not, without the Tenant’s written
consent, unless required by law, sell or otherwise part with or encumber its
fee title interest in the Project at any time during the Term of this Lease.
  Section 26.2. 
Quiet Enjoyment and Possession.  The Tenant shall enjoy peaceable and quiet
possession of the Project as long as no Event of Default has occurred and is
continuing.
  ARTICLE XXVII
  Section 27.1.  Investment
Tax Credit; Depreciation.  The
Tenant shall be entitled to claim the full benefit of (l) any investment credit
against federal or state income tax allowable with respect to expenditures of
the character contemplated hereby under any federal or state income tax laws now
or from time to time hereafter in effect, and (2) any deduction for
depreciation with respect to the Project from federal or state income
taxes.  The Issuer agrees that it will
upon the Tenant’s request execute all such elections, returns or other documents
which may be reasonably necessary or required to more fully assure the
availability of such benefits to the Tenant.
  ARTICLE XXVIII
  Section 28.1.  Amendments.  This Lease may be amended, changed or
modified in writing in the following manner:
  (a)  With respect to an amendment,
change or modification which reduces the Basic Rent or Additional Rent, or any
amendment which reduces the percentage of Bondowners whose consent is required
for any such amendment, change or modification, by an agreement in writing
executed by the Issuer and the Tenant and consented to in writing by the
Trustee and by Bondowners owning at least 90% of the aggregate principal amount
of the Bonds then Outstanding;

 25
 

    (b)  With respect to any other
amendment, change or modification which will materially adversely affect the
security or rights of the Bondowners, by an agreement in writing executed by
the Issuer and the Tenant and consented to in writing by the Trustee and by
Bondowners owning at least 66-2/3% of the aggregate principal amount of
the Bonds then Outstanding; and
  (c)  With respect to all other
amendments, changes, or modifications, by an agreement in writing executed by
the Issuer and the Tenant.
  At least 15 days prior to the execution of any agreement pursuant to (c)
above, the Issuer and the Tenant shall furnish the Trustee and the Original
Purchaser of the Bonds with a copy of the amendment, change or modification
proposed to be made.
  Section 28.2.  Granting of
Easements.  If no Event of
Default under this Lease shall have happened and be continuing, the Tenant may,
at any time or times, (a) grant easements, licenses and other rights or
privileges in the nature of easements with respect to any property included in
the Project, free from any rights of the Issuer or the Bondowners, or (b)
release existing easements, licenses, rights-of-way and other
rights or privileges, all with or without consideration and upon such terms and
conditions as the Tenant shall determine, and the Issuer agrees, to the extent
that it may legally do so, that it will execute and deliver any instrument
necessary or appropriate to confirm and grant or release any such easement,
license, right-of-way or other right or privilege or any such
agreement or other arrangement, upon receipt by the Issuer of:  (1) a copy of the instrument of grant or
release or of the agreement or other arrangement, (2) a written application
signed by the Authorized Tenant Representative requesting such instrument, and
(3) a certificate executed by the Tenant stating (A) that such grant or release
is not detrimental to the proper conduct of the business of the Tenant, and (B)
that such grant or release will not impair the effective use or interfere with
the efficient and economical operation of the Project and will not materially
adversely affect the security of the Bondowners.  If the instrument of grant shall so provide,
any such easement or right and the rights of such other parties thereunder
shall be superior to the rights of the Issuer and the Bondowners and shall not
be affected by any termination of this Lease or default on the part of the
Tenant hereunder.
  Section 28.3.  Security
Interests.  (a)  The
Issuer and the Tenant agree to execute and deliver all instruments (including
financing statements and statements of continuation thereof) necessary for
perfection of and continuance of the security interest of the Issuer in and to
the Project.  The Tenant hereby
authorizes the Issuer to file or cause to be filed all such instruments required
to be so filed and the Trustee to continue or cause to be continued the filings
or liens of such instruments for so long as the Bonds shall be Outstanding.
  (b)  Under the Indenture, the Issuer
will, as additional security for the Bonds assign, transfer, pledge and grant a
security interest in its rights under this Lease to the Trustee.  The Issuer hereby authorizes the Trustee to
file financing statements or any other instruments necessary to perfect its
security interest.  The Trustee is hereby
given the right to enforce, either jointly with the Issuer or separately, the
performance of the obligations of the Tenant, and the Tenant hereby

 26
 

    consents to the same and agrees that the Trustee may enforce such rights
as provided in the Indenture and the Tenant will make payments required
hereunder directly to the Trustee.
  Section 28.4.  Construction
and Enforcement.  This Lease
shall be construed and enforced in accordance with the laws of the State.  The provisions of this Lease shall be applied
and interpreted in accordance with the rules of interpretation set forth in the
Indenture.  Wherever in this Lease it is
provided that either party shall or will make any payment or perform or refrain
from performing any act or obligation, each such provision shall, even though
not so expressed, be construed as an express covenant to make such payment or
to perform, or not to perform, as the case may be, such act or obligation.
  Section 28.5.  Invalidity
of Provisions of Lease.  If,
for any reason, any provision hereof shall be determined to be invalid or unenforceable,
the validity and effect of the other provisions hereof shall not be affected
thereby.
  Section 28.6.  Covenants
Binding on Successors and Assigns. 
The covenants, agreements and conditions herein contained shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
  Section 28.7.  Section
Headings.  The section
headings hereof are for the convenience of reference only and shall not be
treated as a part of this Lease or as affecting the true meaning of the
provisions hereof.  The reference to
section numbers herein or in the Indenture shall be deemed to refer to the
numbers preceding each section.
  Section 28.8.  Execution of
Counterparts.  This Lease may
be executed simultaneously in multiple counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one
instrument.

 27
 

    IN WITNESS WHEREOF, the Issuer has caused this Lease to be signed by
an authorized official, such signature to be attested by an authorized officer,
and its official seal to be applied, as of the date first above written.
  	  
  	  CITY OF ATCHISON, KANSAS
  
	   
  	   
  	   
  
	   
  	   
  	   
  
	   
  	  By: /s/
  	  Dan Garrity
  	   
  	   
  	   
  
	   
  	   
  	  Mayor
  	   
  	   
  
	  [SEAL]
  	   
  	   
  	   
  
	   
  	   
  	   
  	   
  
	  ATTEST:
  	   
  	   
  	   
  
	   
  	   
  	   
  	   
  
	   
  	   
  	   
  	   
  
	  By:/s/ Sheldon
  Hamilton
  	   
  	   
  	   
  	   
  
	   
  	  City Clerk
  	   
  	   
  	   
  
	   
  	   
  	   
  	   
  	   
  
	   
  	   
  	   
  	   
  	   
  
	   
  	   
  	   
  	  “ISSUER”
  
								

   
  ACKNOWLEDGMENT
  	  STATE OF KANSAS
  	  )
  
	   
  	  ) SS:
  
	  COUNTY OF
  ATCHISON
  	  )
  

   
  This instrument was acknowledged before me on the 27th
day of December 2006, by Dan Garrity, Mayor, and Sheldon Hamilton, City
Clerk, of the City of Atchison, Kansas, a municipal corporation.
  	  [SEAL]
  	   
  	   
  
	   
  	   
  	   
  
	   
  	   
  	   
  
	   
  	  Rona M. Downing
  	   
  	   
  
	   
  	  Notary Public
  	   
  	   
  
	   
  	   
  	   
  	   
  
	  My Appointment
  Expires:
  	   
  	   
  
	   
  	   
  	   
  
	  6/27/09
  	   
  	   
  

   

 28
 

    IN WITNESS WHEREOF, the Tenant has caused this Lease to be signed by
an authorized officer, as of the date first above written.
  	  
  	  MGP INGREDIENTS, INC.
  
	   
  	   
  
	   
  	   
  
	   
  	  By: /s/
  	  David E. Rindom
  	   
  
	   
  	  Title:
  	  Vice President
  
	   
  	   
  
	   
  	   
  
	   
  	   
  	   
  	  “TENANT”
  
	   
  	   
  	   
  	   
  
	   
  	   
  	   
  	   
  
	  ACKNOWLEDGMENT
  
	   
  
	  STATE OF KANSAS
  	  )
  	   
  	   
  
	   
  	  ) SS:
  	   
  	   
  
	  COUNTY OF
  ATCHISON
  	  )
  	   
  	   
  
							

   
  This instrument was acknowledged before me on the
27th day of December, 2006, by David Rindom, Vice President of MGP
Ingredients, Inc., a Kansas corporation.
  	  [SEAL]
  
	   
  
	   
  
	   
  	  Marta L. Myers
  
	   
  	  Notary Public
  
	   
  	   
  
	  My Appointment
  Expires:
  
	   
  
	  01/03/2010
  

   

 29

APPENDIX A

FORM OF REQUISITION FOR
PAYMENT OF PROJECT COSTS

CITY OF ATCHISON, KANSAS

Project Fund

(MGP Ingredients Project)

Payment Order No.              

Commerce
Bank, n.a.

Kansas
City, Missouri

Attn:  Corporate Trust Department

You are hereby authorized and directed by the
undersigned, the Authorized Tenant Representative, acting on behalf of MGP
Ingredients, Inc. (the “Tenant”) to disburse funds held by you as Trustee in
the above mentioned Project Fund for the purposes and in the amounts set forth
in the Payment Schedules attached hereto and incorporated herein by reference
(the “Payment Schedules”).

I hereby certify that the amounts requested in the
attached Payment Schedules have either been advanced by the Tenant or are
justly due to contractors, subcontractors, suppliers, vendors, materialmen,
engineers, architects or other persons named in the Payment Schedules who have
performed necessary and appropriate work in connection with any installation of
machinery, equipment or personal property, or have furnished necessary and
appropriate materials in the construction or acquisition of land, buildings and
improvements constituting a part of the Project.  I further certify that the fair value of such
work or materials, machinery and equipment, is not exceeded by the amount
requested, and such cost is one which may be capitalized for federal income tax
purposes.

I further certify that, except for the amounts set
forth in the Payment Schedules, there are no outstanding debts now due and
payable for labor, wages, materials, supplies or services in connection with
the construction of said buildings and improvements or the purchase and/or
installation of machinery, equipment and personal property which, if unpaid,
might become the basis of a vendor’s, mechanic’s, laborer’s or materialmen’s
statutory or other similar lien upon the Land, the Project or any part thereof.

I further certify that no part of the amounts set
forth in the Payment Schedules have been the basis for any previous withdrawal
of any moneys from the said Project Fund.

I further certify that each of the representations
and covenants on the part of the Tenant contained in the Lease dated as of the
Issue Date of the Bonds by and between City of Atchison, Kansas, as the Issuer,
and the Tenant are now true and correct in all material respects and are now
being materially complied with.

I further certify that the amounts set forth in
the Payment Schedules constitute Project Costs, as said term is defined in the
Lease, and that all insurance policies which are required to be in force as a
condition precedent to disbursement of funds from the Project Fund pursuant to
the provisions of Section 6.1 of the Lease are in
full force and effect.

DATED                                        ,
20    .

	
  

  	
   

  
	
   

  	
  Authorized Tenant Representative

  

 

 A-1
 

EXHIBIT A - Payment Order
No.                 

PAYMENT SCHEDULE

FOR BUILDINGS, IMPROVEMENTS AND

MISCELLANEOUS PROJECT COSTS

I hereby request payment of the amounts specified
below to the payees whose names and addresses are stated below, and I certify
that the description of the purchase or nature of each payment is reasonable,
accurate and complete:

PAYMENT SCHEDULE

 

	
  Payee Name

  	
   

  	
  Payee Address

  	
   

  	
  Purpose or Nature of Payment

  	
   

  	
  Amount

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

 

	
  

  	
  Initials

  

 

 A-2
 

EXHIBIT B - Payment Order
No.

PAYMENT SCHEDULE

FOR MACHINERY AND EQUIPMENT

I hereby request payment of the amounts specified
below to the payees whose names and addresses are stated below.  I certify that the description of the
purchase or nature of each payment is reasonable, accurate and complete.  I further certify that the items described
are free and clear of any liens or security interests.  I have attached to this schedule a copy of
the purchase order or seller’s invoice for each item, and, to the extent any
payment is a reimbursement to the Tenant, a copy of the check tendered in
payment for such item.

PAYMENT SCHEDULE

 

	
  Payee Name

  	
   

  	
  Description of Equipment

  	
   

  	
  Amount

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (include name and address of seller, manufacturer,
  descriptive name, technical description, capacity, serial number of model
  number as appropriate)

  	
   

  	
   

  

 

 

 

 

	
  

  	
   

  	
   

  	
   

  	
   

  	
  Initials

  

 

 A-3

APPENDIX B

FORM OF CERTIFICATE OF COMPLETION

CERTIFICATE OF COMPLETION

The undersigned, being the Authorized Tenant
Representative for MGP Ingredients, Inc. (the “Tenant”), as tenant under a
certain Lease dated as of the Issue Date of the Bonds (the “Lease”) between the
City of Atchison, Kansas, (the “Issuer”) and the Tenant, and as beneficiary of
the Issuer’s Taxable Industrial Revenue Bonds, Series 2006 (MGP Ingredients
Project) issued pursuant to a certain Trust Indenture dated as of the Issue
Date of the Bonds (the “Indenture”), hereby certifies:

1.                                       The Improvements purchased with Original Proceeds
(as defined in the Indenture) have been substantially completed in accordance
with the plans and specifications prepared at the Tenant’s direction.

2.                                       Such Improvements have been substantially
completed in a good and workmanlike manner.

3.                                       There are no mechanic’s, materialmen’s liens or
other statutory liens on file encumbering title to the Land (as defined in the
Indenture); all bills for labor and materials furnished for the Improvements
which could form the basis of a mechanic’s, materialmen’s or other statutory
lien against the Land have been paid in full, and within the past four months
no such labor or materials have been furnished which have not been paid for.

4.                                       All Improvements are located or installed upon the
Land.

5.                                       All material provisions of applicable building
codes have been complied with and, if applicable, a certificate of occupancy
has been issued with respect to the Project.

6.                                       All moneys remaining in the Project Fund being
held by the Trustee under the Indenture should be transferred to the Debt
Service Fund being held by the Trustee under the Indenture as required by Section 504 of the Indenture, to be applied as provided
therein.

IN WITNESS WHEREOF, the undersigned Authorized Tenant Representative
has signed this Certificate, and states, under penalty of perjury, that the
statements of fact made in this Certificate are true and correct.

	
  

  	
   

  
	
  STATE OF KANSAS

  	
  )

  	
   

  	
   

  
	
   

  	
  )

  	
  SS:

  	
   

  
	
  COUNTY OF ATCHISON

  	
  )

  	
   

  	
   

  
	
   

  
	
  Subscribed and sworn to or
  affirmed before me, a notary public, this     day of           ,
  20      .

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
   

  
	
  My Appointment
  Expires:

  	
   

  	
   

  
						

 

 B-1

APPENDIX C

GLOSSARY OF WORDS AND
TERMS

“Additional Rent” means all fees, charges, costs and expenses of
the Trustee (including reasonable attorney’s fees) payable under the Indenture,
all Impositions, all Default Administration Costs (as defined in the Indenture),
all other payments of whatever nature payable or to become payable pursuant to
the Indenture or which the Tenant has agreed to pay or assume under the
provisions of this Lease and any and all expenses (including reasonable
attorney’s fees) incurred by the Issuer or the Trustee in connection with the
issuance of the Bonds or the administration or enforcement of any rights under
this Lease or the Indenture. The fees, charges, costs and expenses of the
Trustee shall include all costs incurred in connection with the issuance,
transfer, exchange, registration, redemption or payment of the Bonds and the
administration or enforcement of any rights or obligations under this Lease or
the Indenture except (a) the reasonable fees and expenses in connection with
the replacement of a Bond or Bonds mutilated, stolen, lost or destroyed or (b)
any tax or other government charge imposed on the Trustee in relation to the
transfer, exchange, registration, redemption or payment of the Bonds.

“Additional Term” shall mean that term commencing on the last day
of the Basic Term and terminating 5 years thereafter.

“Bankruptcy Code” means Title 11 of the United States Code, as
amended.

“Basic Rent” means the annual amount which, when added to
Basic Rent Credits, will be sufficient to pay all principal of, redemption
premium, if any, and interest on all Outstanding Bonds (as defined in the
Indenture) which is due and payable on such Payment Date.  If for any reason on any Payment Date the Trustee
does not have on deposit in the Debt Service Fund sufficient moneys to pay all
principal and interest due on the Bonds on such Payment Date, then the Tenant
shall pay, as Basic Rent, on such Payment Date, the amount of such deficiency.

“Basic Rent Credits” means all funds on deposit in the Debt Service
Fund and available for the payment of principal of, redemption premium, if any,
and interest on the Bonds on any Basic Rent Payment Date.

“Basic Rent Payment Date” means December 1, 2007, and the first day of each
December thereafter until the principal of, redemption premium, if any, and
interest on all Outstanding Bonds have been fully paid or provision made for
their payment in accordance with the provisions of the Indenture.

“Basic Term” means that term commencing as of the date of this
Lease and ending on December 1, 2016, subject to prior termination as specified
in this Lease, but ending, in any event, when all of the principal of,
redemption premium, if any, and interest on all Outstanding Bonds shall have
been paid in full or provision made for their payment in accordance with the
provisions of the Indenture.

 C-1
 

“CERCLA” means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. §9601, et seq.

“Certificate of Completion” means a written certificate signed by the
Authorized Tenant Representative stating that (1) the Improvements have been
substantially completed in accordance with the plans and specifications
prepared or approved by the Issuer or the Tenant, as the case may be; (2) the
Improvements have been substantially completed in a good and workmanlike
manner; (3) no mechanic’s or materialmen’s liens have been filed, nor is there
any basis for the filing of such liens, with respect to the Project; (4) all
Improvements constituting a part of the Project are located or installed upon
the Land; and (5) if required by ordinances duly adopted by the Issuer or by
applicable building codes, that an appropriate certificate of occupancy has
been issued with respect to the Improvements. 
A form of Certificate of Completion is attached as Appendix B.

“Completion Date”
means the date on which the Improvements are certified as substantially
completed in accordance with Section 5.4 of
this Lease.

“Default” means any event or condition the occurrence of
which, with the lapse of time or the giving of notice or both, may constitute
an Event of Default.

“Environmental Assessment” means an environmental assessment with respect to
the Project conducted by an independent consultant satisfactory to the Issuer
and the Trustee which reflects the results of such inspections, records
reviews, soil tests, groundwater tests and other tests requested, which
assessment and results shall be satisfactory in scope, form and substance to
the Issuer and the Trustee.

“Environmental Law” means CERCLA, SARA, and any other federal, state
or local environmental statute, regulation or ordinance presently in effect or
coming into effect during the Term of this Lease.

“Event of Bankruptcy” means an event whereby the Tenant shall:  (i) admit in writing its inability to pay its
debts as they become due; or (ii) file a petition in bankruptcy or for
reorganization or for the adoption of an arrangement under the Bankruptcy Code
as now or in the future amended, or file a pleading asking for such relief; or
(iii) make an assignment for the benefit of creditors; or (iv) consent to the
appointment of a trustee or receiver for all or a major portion of its
property; or (v) be finally adjudicated as bankrupt or insolvent under any
federal or state law; or (vi) suffer the entry of a final and nonappealable
court order under any federal or state law appointing a receiver or trustee for
all or a major part of its property or ordering the winding-up or
liquidation of its affairs, or approving a petition filed against it under the
Bankruptcy Code, which order, if the Tenant has not consented thereto, shall
not be vacated, denied, set aside or stayed within 60 days after the day of
entry; or (vii) suffer a writ or warrant of attachment or any similar process
to be issued by any court against all or any substantial portion of its
property, and such writ or warrant of attachment or any similar process is not
contested, stayed, or is not released within 60 days after the final entry, or
levy or after any contest is finally adjudicated or any stay is vacated or set
aside.

 C-2
 

“Event of Default” means any one of the following events:

(a)  Failure of the
Tenant to make any payment of Basic Rent within 10 business days after written
notice from the Issuer or the Trustee to the Tenant of the time and the amounts
required hereunder; or

(b)  Failure of the Tenant to make any
payment of Additional Rent at the times and in the amounts required hereunder,
or failure to observe or perform any other covenant, agreement, obligation or
provision of this Lease on the Tenant’s part to be observed or performed, and
the same is not remedied within thirty (30) days after the Issuer or the
Trustee has given the Tenant written notice specifying such failure (or such
longer period as shall be reasonably required to correct such default; provided
that (i) the Tenant has commenced such correction within said 30-day
period, and (ii) the Tenant diligently prosecutes such correction to
completion); or

(c)  An Event of Bankruptcy; or

(d)  Abandonment of the Project by the
Tenant.

“Full Insurable Value” means full actual replacement cost less physical
depreciation.

“Hazardous Substances” shall mean “hazardous substances” as defined in
CERCLA.

“Impositions” means all taxes and assessments, general and
special, which may be lawfully taxed, charged, levied, assessed or imposed upon
or against or payable for or in respect of the Project or any part thereof, or
any improvements at any time thereon or the Tenant’s interest therein,
including any new lawful taxes and assessments not of the kind enumerated above
to the extent that the same are lawfully made, levied or assessed in lieu of or
in addition to taxes or assessments now customarily levied against real or
personal property, and further including all water and sewer charges,
assessments and other governmental charges and impositions whatsoever, foreseen
or unforeseen, which, if not paid when due, would encumber the Issuer’s title
to the Project.

“Improvements” shall have the meaning defined in the Indenture.

“Indenture” means the Trust Indenture delivered concurrently
with this Lease, as from time to time amended and supplemented by Supplemental
Indentures in accordance with the provisions of Article XI of
the Indenture.

“Land” means the real property described in Schedule I.

“Lease” means this Lease between the Issuer and the
Tenant, as from time to time supplemented and amended in accordance with the
provisions hereof and of the Indenture.

“Net Proceeds” means, when used with respect to any insurance or
condemnation award with respect to the Project, the proceeds from the insurance
or condemnation award remaining after the payment of all expenses (including
the Tenant’s attorneys’ fees and any extraordinary expenses

 C-3
 

of the Trustee occasioned by such casualty or condemnation) incurred in
the collection of such proceeds.

	
  The term “Notice Address” shall mean:

  
	
   

  
	
  (1) With respect to the Tenant:

  
	
   

  
	
  MGP Ingredients, Inc.

  
	
  1300 Main Street

  
	
  Atchinson, Kansas 66002-0130

  
	
  Attn: Chief Financial Officer

  
	
   

  
	
  (2) With respect to the Issuer:

  
	
   

  
	
  City of Atchison

  
	
  515 Kansas Avenue

  
	
  Atchison, Kansas 66002

  
	
  Attn: City Clerk

  
	
   

  
	
  (3) With respect to the Trustee:

  
	
   

  
	
  Commerce Bank, n.a.

  
	
  922 N. Walnut, 10th Floor

  
	
  Kansas City, Missouri 64141

  
	
  Attn: Corporate Trust Department

  

“Project Contracts”
means a contract or contracts with respect to the acquisition and/or
construction of the Improvements entered into by the Tenant or the Issuer.

“SARA” means the Superfund Amendments and
Reauthorization Act of 1986, as now in effect and as hereafter amended.

“State” means the State of Kansas.

“Term” means, collectively, the Basic Term and any
Additional Term of the Lease.

 C-4

SCHEDULE I

DESCRIPTION OF PROPERTY

The following property acquired by the City of
Atchison, Kansas (the “Issuer”) in connection with the issuance by the City of
its Taxable Industrial Revenue Bonds, Series 2006 (MGP Ingredients Project)
(the “Series 2006 Bonds”):

(a)  The following described real estate
in Atchison County, Kansas:

Tract
1:  Beginning at the Northeast corner of
Lot Fourteen (14), Block Twenty (20); Thence North 90°00’00” East 90.16 feet
along the South line of Commercial Street to a point 24.84 feet West of the
Northeast corner of Lot One (1), in Block Twenty (20); Thence South 00°11’50”
West 135.0 feet to a point 25.19 feet West of the Southeast corner of Lot Three
(3) in Block Twenty (20); Thence South 90°00’00” West 189.81 feet to the Southwest
corner of Lot Twelve (12) in said Block; Thence North 00°03’00” East 67.50 feet
along the East line of Second Street to the North one-half of Lot Thirteen (13)
in said Block; Thence North 90°00’00” East 100.0 feet along the North one-half
of Lot Thirteen (13) to the East line of Lot Thirteen (13); Thence North 00°03’00”
East 67.50 feet along the East line of the North one-half of Lot Thirteen (13)
and all of Lot Fourteen (14) to the point of beginning, all lying in Block
Twenty (20) in that part of the City of Atchison known and designated as “Old
Atchison.”

Tract
2:  The North One-half (N 1/2) of Lot
Thirteen (13), and all of Lot Fourteen (14), in Block Twenty (20), in that part
of the City of Atchison usually known and designated as “Old Atchison.”

Tract
3:  Lots One (1), Two (2) and Three (3),
in Block Nineteen (19), in that part of the City of Atchison usually known and
designated as “Old Atchison.”

said real property constituting the “Land” as defined in the Lease
entered into by the Issuer concurrently with the issuance of the Series 2006
Bonds (the “Lease”), subject to the following (“Permitted Encumbrances”):

(1)                                  2006 real estate taxes due but not yet payable;

(2)                                  Assessments, if any, attributable to watershed
district;

(3)                                  Any other general or special assessments,
any and all recorded easements, reservations, restrictions, agreements,
encroachments and encumbrances, matters which would be shown by an accurate
survey, underground and overhead cables, lines and utility services, and all
existing zoning ordinances, laws, codes, statutes and subdivision regulations
and other governmental laws, rules, codes, statutes and regulations limiting or
restricting the use to which the property may be put.

(b)  All buildings, building additions,
improvements, machinery and equipment constructed, located or installed on the
Land, all or any portion of the costs of which were paid from the proceeds of
the Series 2006 Bonds, and which constitute Improvements as referred to in the
Lease, together with any substitutions or replacements therefor, the property
described in paragraphs (a) and (b) of this Schedule I together constituting
the “Project” as referred to in the Lease.

 S-1Exhibit 10.7

BEFORE THE ILLINOIS POLLUTION CONTROL BOARD

	
  PEOPLE OF THE STATE OF ILLINOIS,

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
  Complainant,

  	
   

  	
  )

  	
  PCB
  97-179

  
	
   

  	
  )

  	
  (Enforcement)

  
	
  v.

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
  MIDWEST
  GRAIN PRODUCTS OF

  	
  )

  	
   

  
	
  ILLINOIS,
  INC.

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
  Respondent.

  	
   

  	
  )

  	
   

  

 

 

STIPULATION AND PROPOSAL FOR SETTLEMENT

Complainant, PEOPLE OF THE STATE OF ILLINOIS, by LISA MADIGAN, Attorney
General of the State of Illinois, the Illinois Environmental Protection Agency
(“Illinois EPA”), and MGP Ingredients of Illinois Inc., f/k/a Midwest Grain
Products of Illinois, Inc. (“Respondent” or “MGP”), have agreed to the making
of this Stipulation and Proposal for Settlement (“Stipulation”) and submit it
to the Illinois Pollution Control Board (“Board”) for approval.  The parties agree that the statement of facts
contained herein represents a fair summary of the evidence and testimony which
would be introduced by the parties if a hearing were held.  The parties further stipulate that this
statement of facts is made and agreed upon for purposes of settlement only and
that neither the fact that a party has entered into this Stipulation, nor any
of the facts stipulated herein, shall be introduced into evidence in any other
proceeding regarding the claims asserted in the Complaint except as otherwise
provided herein.  If the Board approves
and enters this Stipulation, Respondent agrees to be bound by the Stipulation
and Board Order and not to contest their validity in any subsequent proceeding
to implement or enforce their terms.

I.  JURISDICTION

The Board has jurisdiction of the subject matter herein and of the
parties consenting hereto pursuant to the Illinois Environmental Protection Act
(“Act”), 415 ILCS 5/1 et seq. (2002).

II. 
AUTHORIZATION

The undersigned representatives for each party certify that they are
fully authorized by the party whom they represent to enter into the terms and
conditions of this Stipulation and to legally bind them to it.

III.  STATEMENT
OF FACTS

A.            Parties

1.             On April 7, 1997, a
Complaint was filed on behalf of the People of the State of Illinois by Jim
Ryan, then Attorney General of the State of Illinois, on his own motion and
upon the request of the Illinois EPA, pursuant to Section 31 of the Act, 415
ILCS 5/31(2002), against the Respondent.

2.             The Illinois EPA is
an administrative agency of the State of Illinois, created pursuant to Section
4 of the Act, 415 ILCS 5/4 (2002).

3.             At all times
relevant to the Complaint, Respondent was and is an Illinois corporation that
is authorized to transact business in the State of Illinois.  In the course of the pendency of this matter,
the company was reorganized and the name was changed to MGP Ingredients of
Illinois, Inc.

B.            Site
Description

1.             At all times
relevant to the Complaint, Respondent owned and operated a facility, located at
1301 South Front Street, Pekin, Tazewell County, Illinois (“facility”), that
produces ethyl alcohol for beverages and industrial purposes, anhydrous fuel
alcohol, wheat gluton and distiller’s feed.

 2
 

2.             In 1993, Respondent
submitted to the Illinois EPA an application for a construction permit to
replace two existing feed dryers with two new feed dryers each controlled by
cyclones in series with two new scrubbers in series.

3.             The Illinois EPA
issued to the Respondent Construction Permit #93020061 (originally issued May
11, 1993 and revised on May 3, 1995) and Construction Permit #93080045 (issued
December 30, 1993 and revised December 6, 1995) allowing, in part, the
construction of feed dryers 651 and 661.

4.             Permit Condition
#1b(I) of Construction Permit #93020061 limited particulate matter (“PM”)
emissions from dryer #651 to 1.1. pounds per hour.  Permit Condition #2a Table 1A of Construction
Permit #93080045 limits PM emissions from dryer #651 and dryer #661 combined to
3.2 pounds per hour.

5.             Both Construction
Permits #93080045 and #93020061 require PM emissions be controlled utilizing
secondary scrubbers during the operation of both feed dryers.

6.             Respondent contends
dryers #651 and #661 and their related components were designed and constructed
with the intent to meet the required conditions described in preceeding
paragraphs four and five of this section.

7.             In May 1995,
Respondent conducted a stack test of grain dryer #661.  The test data demonstrated actual PM
emissions generated during feed dryer operations total 17.1 pounds per hour.

8.             Despite making
modifications to the dryers after the initial stack tests, Respondent could not
repair, reconstruct or modify the dryers so as to comply with permitted PM
emission limitations and state permit requirements.  In addition, PM emissions resulting from feed
dryer operations exceeded PM threshold limits prescribed by federal Prevention
of Significant Deterioration (“PSD”) requirements.

 3
 

C.            Allegations
of Non-Compliance

Complainant contends that the Respondent has violated the following
provisions of the Act and Board regulations:

Count I:

1.             By failing to
conduct the requisite best available control technology (“BACT”) analysis,
install BACT level control, and apply for and obtain a construction permit granting
PSD approval prior to constructing two feed dryers resulting in a major
modification at a major stationary source, Respondent violated Section 165 of
the Clean Air Act, 40 CFR 52.21(j) and Section 9.1 (d) of the Act, 415 ILCS
5/9.1(d)(1996).

Count II:

2.             Respondent
discharged into the environment PM emissions in excess of permitted emission
limitations contained within Construction Permit #93020061 and #93080045, so as
to cause or tend to cause air pollution in Illinois in violation of Section
9(a) of the Act, 415 ILCS 5/9(a)(1996), and 35 III. Adm. Code 201.141 of the
Board regulations.

Count III:

3.             Respondent failed
to operate the secondary scrubbers and failed to modify the construction
permit, in violation of Standard Construction Permit Condition 3, and thereby
violated Section 9(b) of the Act, 415 ILCS 5/9(b) (1996).

4.             By continuing to
operate feed dryers #651 and #661 in excess of permitted PM emission
limitations, and by continuing to operate the same dryers without secondary
scrubbers, Respondent violated Section 9(b) of the Act, 415 ILCS 5/9(b)(1996),
and Permit Condition 1 b(I) of Construction Permit #93020061 and Standard
Condition 3 of both Construction Permit #93020061 and Construction Permit
#93080045.

 4
 

Count IV:

5.             By operating dryer
#651 and dryer #661 without first obtaining an operating permit issued by the
Illinois EPA, Respondent violated Section 9(b) of the Act, 415 ILCS 5/9(b)
(1996), and 35 III. Adm. Code 201.143 of the Board’s regulations.

D.            Non-Admission
of Violations

The Respondent represents that it has entered into this Stipulation for
the purpose of settling and compromising disputed claims without having to
incur the expense of contested litigation. 
By entering into this Stipulation and complying with its terms, the Respondent
does not affirmatively admit the allegations of violation within the Complaint
and referenced within Section III.C herein, and this Stipulation shall not be
interpreted as including such admission.

E.             Compliance
Activities to Date

1.             On June 2, 2004,
the Illinois EPA received from MGP a PSD permit application to construct feed
dryer system number D6500 (“Swiss-Combi system”) controlled by cyclones and
thermal combustion, containing a BACT demonstration. Based upon information
contained within the permit application, the Illinois EPA issued to MGP, on
January 25, 2006, construction permit number 04060009 granting PSD approval to
construct equipment mentioned above.

2.             Respondent has
agreed to remove from service existing feed dryers #661 and #651 and replace
both dryers with the Swiss-Combi system consistent with the compliance plan set
forth within Section VIII.C, contained herein, and thereafter conduct feed
dryer operations in compliance with PSD requirements, the Act and the Board’s
regulations.

F.             Value ofSettlement
and Resulting Benefits

                1.             Respondent has agreed to permanently disable feed dryers
651 and 661 consistent with Section VIII.C. 
Dryers 651 and 661 shall be replaced with a Swiss Combi system.  The  

 5
 

Swiss
Combi system will be put into service by the Respondent in an effort to ensure
Respondent’s compliance with the Clean Air Act, the Illinois Environmental
Protection Act, and related permits.

2.             Defendant Midwest
Grain projects the costs of these improvements to be greater than $1 million.  After the new Swiss-Combi dryer operations
commence, the PM and PM10 emissions will be limited to 8.8 and 17.1 tons
per year, respectively.

IV. 
APPLICABILITY

This Stipulation shall apply to and be binding upon the Complainant and
the Respondent, and any officer, director, agent, or employee of the
Respondent, as well as any successors or assigns of the Respondent.  The Respondent shall not raise as a defense
to any enforcement action taken pursuant to this Stipulation the failure of any
of its officers, directors, agents, employees or successors or assigns to take
such action as shall be required to comply with the provisions of this
Stipulation.

1.             No change in ownership, corporate
status or operator of the facility shall in any way alter the responsibilities
of the Respondent under this Stipulation and Proposal for Settlement.  In the event of any conveyance of title,
easement or other interest in the facility, the Respondent shall continue to be
bound by and remain liable for performance of all obligations under this
Stipulation.

2.             In the event that the Respondent
proposes to sell or transfer any real property or operations subject to any
Order accepting and adopting the terms of this Stipulation and Proposal for
Settlement, the Respondent shall notify the Complainant 30 days prior to the
conveyance of title, ownership or other interest, including a leasehold
interest in the facility or a portion thereof. 
The Respondent shall make the prospective purchaser or successor’s
compliance with any Order accepting and adopting the terms of this Stipulation
a condition of 

 6
 

any
such sale or transfer and shall provide a copy of this Stipulation and any
Order accepting and adopting the terms of this Stipulation to any such
successor in interest.  This provision
does not relieve the Respondent from compliance with any regulatory requirement
regarding notice and transfer of applicable facility permits.

3.             The Respondent shall notify each
prime contractor to be retained of the existence and content of this Stipulation
if its work is being performed pursuant to this Stipulation.  Further, Respondent shall provide such prime
contractor(s) with a copy of the compliance schedule set forth in Section
VIII.C at the time of that notification. 
Respondent will provide a copy of this Stipulation upon the request of
any prime contractor performing work pursuant to this Stipulation.

V.  COMPLIANCE
WITH OTHER LAWS AND REGULATIONS

This Stipulation in no way affects the responsibilities of the
Respondent to comply with any other federal, state or local laws or regulations
including, but not limited to, the Act and the Board regulations, 35 III. Adm.
Code, Subparts A through H.

VI.  IMPACT ON
THE PUBLIC RESULTING FROM ALLEGED NON-COMPLIANCE

Section 33(c) of the Act, 415 ILCS 5/33(c)(2002), provides as follows:

In making its orders and determinations, the Board shall take into
consideration all the facts and circumstances bearing upon the reasonableness
of the emissions, discharges, or deposits involved including, but not limited
to:

1.                                       the character and degree of injury to, or
interference with the protection of the health, general welfare and physical
property of the people;

2.             the social and
economic value of the pollution source;

3.                                       the suitability or unsuitability of the
pollution source to the area in which it is located, including the question of
priority of location in the area involved;

 7
 

4.                                       the technical practicability and economic
reasonableness of reducing or eliminating the emissions, discharges or deposits
resulting from such pollution source; and

5.             any subsequent
compliance.

In response to these factors, the parties state the following:

1.             The construction
and operation of feed dryers #651 and #661 without first conducting the
requisite pre-construction review to determine BACT, and without first
installing BACT, resulted in the discharge of PM in excess of federal PSD and
State permit emission limits causing a threat to public health and the
environment.  MGP did not apply for and obtain
the requisite construction permit granting PSD approval prior to constructing a
major modification at a major stationary source resulting in the Illinois EPA’s
inability to monitor and ensure compliance with federal PSD and state permit
requirements.

2.             There is social and
economic benefit to the facility.

3.             Operation of the
facility is suitable in the area in which it exists.

4.             The construction
and operation of feed dryers and air pollution control equipment to ensure
compliance with federal PSD and state permit requirements, the Act and the
Board’s regulations was both technically practicable and economically
reasonable.

5.             Respondent has
implemented measures to ensure feed dryer operations are performed in
compliance with federal PSD and state permit requirements, in the future,
including obtaining the requisite construction permit granting PSD approval to
construct feed dryer system D6500, the purchase of said equipment, and the
removal of existing feed dryers #651 and #661 from service consistent with the
Compliance Plan contained herein.

 8
 

VII.  CONSIDERATION OF SECTION 42(h) FACTORS

Section 42(h)of the Act,
415 ILCS 5/42(h)(2002), provides as follows:

In determining the appropriate civil penalty to be imposed under . . .
this Section, the Board is authorized to consider any matters of record in
mitigation or aggravation of penalty, including but not limited to the
following factors:

1.             the duration and
gravity of the violation;

2.                                       the presence or absence of due diligence on
the part of the respondent in attempting to comply with requirements of this
Act and regulations thereunder or to secure relief therefrom as provided by
this Act;

3.                                       any economic benefits accrued by the
respondent because of delay in compliance with requirements, in which case the
economic benefits shall be determined by the lowest cost alternative for
achieving compliance;

4.                                       the amount of monetary penalty which will
serve to deter further violations by the respondent and to otherwise aid in
enhancing voluntary compliance with this Act by the respondent and other persons
similarly subject to the Act;

5.                                       the number, proximity in time, and gravity of
previously adjudicated violations of this Act by the respondent;

6.                                       whether the respondent voluntarily
self-disclosed, in accordance with subsection i of this Section, the
non-compliance to the Agency; and

7.                                       whether
the respondent has agreed to undertake a “supplemental environmental project,”
which means an environmentally beneficial project that a respondent agrees to
undertake in settlement of an enforcement action brought under this Act, but
which the respondent is not otherwise legally required to perform.

In response to
these factors, the parties state as follows:

1.             The Respondent did not conduct a
BACT analysis, install BACT level control, apply for and obtain a construction
permit granting PSD approval prior to constructing two feed dryers resulting in
a major modification at a major stationary source, and comply with permit
requirements.  The violations began on
the date the Respondent commenced construction of feed dryers #651 and #661, a
date better known to the Respondent. 
Subsequent emission testing performed by Respondent during feed dryer
operations, in May 1995, demonstrated the emission of PM in excess of
applicable PSD and state permit limits.

 9
 

On June 2, 2004,
the Illinois EPA received from Respondent a permit application for PSD approval
to construct the Swiss-Combi system that will replace feed dryers #651 and
#661.  The permit was issued on January
25, 2006.  The new equipment has not yet
been installed as of the date of entry of this Consent Order, but pursuant to
the terms and conditions of this Order will be installed consistent with the
compliance schedule set forth in Section VIII.C.

2.             After receiving from the Illinois
EPA notice that PM emissions generated during the operation of feed dryers #651
and #661 violated Clean Air Act requirements, the Act and Board regulations,
Respondent disputed violations of PSD requirements existed.  Subsequently, Respondent worked cooperatively
with the Illinois EPA to assemble and review information and emissions data
necessary to conduct the requisite National Ambient Air Quality Standards (“NAAQS”)
and air quality impact analyses specified by PSD requirements.  Given the level of complexity associated with
NAAQS and air quality modeling, in addition to conflicting and/or incomplete
emissions data, the time required to complete the PSD approval and permitting
process was significant.

3.             The Complainant maintains a
settlement amount totaling $500,000.00 reflects the duration of non-compliance
and lowest cost alternative for achieving compliance associated with economic
benefits derived by Respondent.  The
Respondent disagrees any economic benefit was received resulting from its failure
to operate in compliance with the Clean Air Act, the Act, and Board’s
regulations.

4.             Complainant has determined, based
upon the specific facts of this matter, that a settlement amount totaling
$500,000.00 will serve to deter further violations by Respondent and aid in
future voluntary compliance with the Act and Board regulations.

 10
 

5.             A previous enforcement matter was
resolved by a Board order approving settlement, PCB 95-5, which resolved two
alleged violations against Respondent relating to a fluidized bed boiler.  In that matter, Complainant alleged that the
Respondent violated PSD and state permit requirements resulting from the
emission of sulfur dioxide (“SO2”) in excess of applicable PSD and state
permit emission limits.  Compliance was
achieved by Respondent in the resolution of the matter, in part, by removing
the non-compliant emissions source from service.

6.             Self-disclosure is not at issue in
this matter.

7.             As described above, settlement of
this matter includes a $300,000.00 contribution to Illinois EPA special
projects.

VIII.  TERMS OF SETTLEMENT

A.            Settlement Amount

1.             The Respondent shall pay the sum of
Two Hundred Thousand Dollars ($200,000.00) within thirty (30) days from the
date the Board adopts and accepts this Stipulation.  The Respondent stipulates that payment will be
made directly to Illinois EPA within thirty (30) days from the date the Board
adopts and accepts this Stipulation, in a manner prescribed below.  The amount described in this Stipulation
shall be paid by certified check, money order or electronic funds transfer
payable to the Illinois EPA, designated to the Illinois Environmental
Protection Trust Fund and submitted to: 

Illinois
Environmental Protection Agency

Fiscal Services
Section

1021 North Grand
Avenue East

P.O. Box 19276

Springfield, IL
62794-9276

 11
 

 

The name and
number of the case and Respondent’s Federal Employer Identification Number
(FEIN), 480911013, shall appear on the check. 
A copy of the certified check, money order or record of electronic funds
transfer and any transmittal letter shall be sent to:

Jane E. McBride

Assistant Attorney
General

Environmental
Bureau

500 South Second
Street

Springfield,
Illinois 62702

Dennis Brown

Assistant Counsel

Illinois
Environmental Protection Agency

1021 North Grand
Avenue East

P.O. Box 19276

Springfield, Illinois
62794-9276

2.             Pursuant to Section 42(g) of the
Act, 415 ILCS 5/42(g) (2002), interest shall accrue on any payment not paid
within the time period prescribed above at the maximum rate allowable under
Section 1003(a) of the Illinois Income Tax Act, 35 ILCS 5/1003 (2002).  Interest on any unpaid payment shall begin to
accrue from the date the payment is due and continue to accrue until the date
payment is received.  When partial
payment(s) are made, such partial payment shall be first applied to any interest
on unpaid payment then due and owing. 
All interest on payment owed shall be paid by certified check, money
order or electronic funds transfer, payable to the Illinois EPA, designated to
the Illinois Environmental Protection Trust Fund and delivered to the address
and in the manner described above.

 12
 

3.             For purposes of payment and
collection, Respondent may be reached at the following address:

MGP Ingredients of
Illinois

1301 South Front
Street

Pekin, IL  61554

4.             In the event of default of this
Section VIII.A, the Complainant shall be entitled to all available relief
including, but not limited to, reasonable costs of collection and reasonable
attorney’s fees.

B.            Special Projects Fund Payment

1.             The Respondent shall make a payment
to the Illinois EPA’s Special Projects Fund in the sum of Three Hundred
Thousand Dollars ($300,000.00) within thirty (30) days from the date the Board
adopts and accepts this Stipulation.  The
Respondent stipulates that the payment will be made directly to Illinois EPA
within thirty (30) days from the date the Board adopts and accepts this
Stipulation, in a manner prescribed below. 
The payment described in this Stipulation shall be made by certified
check, money order or electronic funds transfer payable to the Illinois EPA,
designated to the Illinois EPA Special Projects Fund and submitted to:

Illinois
Environmental Protection Agency

Fiscal Services
Section

1021 North Grand
Avenue East

P.O. Box 19276

Springfield, IL
62794-9276

The name and
number of the case and Respondent’s Federal Employer Identification Number
(FEIN), 480911013, shall appear on the check. 
A copy of the certified check, money order or record of electronic funds
transfer and any transmittal letter shall be sent to:

 13
 

Jane E. McBride

Assistant Attorney
General

Environmental
Bureau

500 South Second
Street

Springfield,
Illinois 62702

Dennis Brown

Assistant Counsel

Illinois
Environmental Protection Agency

1021 North Grand
Avenue East

P.O. Box 19276

Springfield,
Illinois 62794-9276

C.            Future Compliance

Respondent shall
complete the following compliance activities by the deadlines set forth below:

	
  Compliance action

  	
   

  	
  Deadline

  	
   

  
	
   

  	
   

  
	
  Commence on-site
  construction

  	
   

  
	
  of Swiss Combi
  system to replace

  	
  On or before January 26, 2007. 

  
	
  dryers 651 and
  661.

  	
   

  
	
   

  	
   

  
	
  Commence
  start-up of

  	
  On or before December 26, 2007. Swiss 

  
	
  Combi system.

  	
   

  
	
   

  	
   

  
	
  Conduct
  emissions testing consistent

  	
  Within 180 days after initial

  
	
  with testing
  requirements prescribed by

  	
  start-up of feed dryer system D6500 

  
	
  PSD permit
  number 04060009.

  	
   

  
	
   

  	
   

  
	
  Physically
  disable feed dryers 651 and 661

  	
  Within one year of start-up of

  
	
  by removing the
  fuel and preventing

  	
  feed dryer system D6500.

  
	
  wet feed supply
  to the dryers.

  	
   

  
	
   

  	
   

  
	
  Dryers 651 and
  661 permanently disabled

  	
  Within 18 months after initial start-

  
	
  up removing the
  fuel and preventing wet

  	
  of feed dryer system D6500.

  
	
  feed supply to
  the dryers.

  	
   

  

 

 14
 

D.            Stipulated Penalties

1.             If the Respondent fails to complete
any activity or fails to comply with any response or reporting requirement by
the date specified in Section VIII.C (“Compliance Plan”) of this Stipulation,
the Respondent shall provide notice to the Complainant of each failure to
comply with this Stipulation.  In
addition, the Respondent shall pay to the Complainant, for payment into the
EPTF, stipulated penalties per violation for each day of violation in the
amount of $250.00 per day until such time that compliance is achieved.

2.             Following the Complainant’s
determination that the Respondent has failed to complete performance of any
task or other portion of work, failed to provide a required submittal,
including any report or notification, Complainant may make a demand for
stipulated penalties upon Respondent for its noncompliance with this
Stipulation.  Failure by the Complainant
to make this demand shall not relieve the Respondent of the obligation to pay
stipulated penalties.

3.             All penalties owed the Complainant
under this section of this Stipulation that have not been paid shall be payable
within thirty (30) days of the date the Respondent knows or should have known
of its noncompliance with any provision of this Stipulation.

4.             a.             All
stipulated penalties shall be paid by certified check, money order or
electronic funds transfer, payable to the Illinois EPA for deposit into the
EPTF and shall be sent by first class mail, unless submitted by electronic
funds transfer, and delivered to:

Illinois
Environmental Protection Agency

Fiscal Services

1021 North Grand
Avenue East

P.O. Box 19276

Springfield,
Illinois 62794-9276

 15
 

b.             The name and number of the case and
the Respondent’s FEIN shall appear on the face of the check.  A copy of the certified check, money order or
record of electronic funds transfer and any transmittal letter shall be sent
to:

Jane E. McBride

Assistant Attorney
General

Environmental
Bureau

500 South Second
Street

Springfield,
Illinois 62702

5.             The stipulated penalties shall be
enforceable by the Complainant and shall be in addition to, and shall not
preclude the use of, any other remedies or sanctions arising from the failure to
comply with this Stipulation.

E.             Future Use

Notwithstanding
any other language in this Stipulation to the contrary, and in consideration of
the mutual promises and conditions contained in this Stipulation, including the
Release from Liability contained in Section VIII.G, below, the Respondent
hereby agrees that this Stipulation may be used against the Respondent in any
subsequent enforcement action or permit proceeding pursuant to Section 39(a)
and (i) and/or 42(h) of the Act, 415 ILCS 5/39(a) and (i) and/or 5/42(h)(2002)
as proof of a past adjudication of violation of the Act and the Board
Regulations promulgated thereunder for all violations alleged in the Complaint
in this matter.  Further, Respondent
agrees to waive any rights to contest, in any subsequent enforcement action or
permit proceeding, any allegations that these alleged violations were
adjudicated.

F.             Cease and Desist

The Respondent
shall cease and desist from future violations of the Act and Board Regulations
that were the subject matter of the Complaint as outlined in Section IIl.C (“Allegations
of Non-Compliance”) of this Stipulation.

 16
 

G.            Release from Liability

In consideration
of the Respondent’s $200,000 payment to the Environmental Protection Trust
Fund, $300,000.00 payment to the Special Projects Fund, and any specified costs
and accrued interest, completion of all activities required hereunder, to Cease
and Desist as contained in Section VIII.F and upon the Pollution Control Board’s
acceptance and approval of the terms of this Stipulation and Proposal for
Settlement, the Complainant releases, waives and discharges the Respondent from
any further liability or penalties for violations of the Act and Board
Regulations that were the subject matter of the Complaint herein.  The release set forth above does not extend
to any matters other than those expressly specified in Complainant’s Complaint
filed on April 7, 1997.  The Complainant
reserves, and this Stipulation is without prejudice to, all rights of the State
of Illinois against the Respondent with respect to all other matters, including
but not limited to, the following:

a.             criminal liability;

b.             liability for future violation of
state, federal, local, and common laws and/or regulations;

c.             liability for natural resources
damage arising out of the alleged violations; and

d.             liability or claims based on the
Respondent’s failure to satisfy the requirements of this Stipulation.

Nothing in this
Stipulation is intended as a waiver, discharge, release, or covenant not to sue
for any claim or cause of action, administrative or judicial, civil or
criminal, past or future, in law or in equity, which the State of Illinois or
the Illinois EPA may have against any person, as 

 17
 

defined by Section
3.315 of the Act, 415 ILCS 5/3.315 (2002), or entity other than the Respondent.

H.            Right
of Entry

In addition to any
other authority, the Illinois EPA, its employees and representatives, and the
Attorney General, her agents and representatives, shall have the right of entry
into and upon the Respondent’s facility which is the subject of this
Stipulation, at all reasonable times for the purposes of carrying out
inspections.  In conducting such
inspections, the Illinois EPA, its employees and representatives, and the
Attorney General, her employees and representatives may take photographs,
samples, and collect information, as they deem necessary.

I.              Correspondence, Reports and Other
Documents

Any and all
correspondence, reports and any other documents required under this
Stipulation, except for payments pursuant to Sections VIII.A (“Penalty Payment”)
and C (“Stipulated Penalties”) of this Stipulation shall be submitted as
follows:

As to the
Complainant

Jane E. McBride

Assistant Attorney
General

Environmental
Bureau

500 South Second
Street

Springfield,
Illinois 62702

Dennis Brown

Assistant Counsel

Illinois EPA

1021 North Grand
Avenue East

P.O. Box 19276

Springfield,
Illinois 62794-9276

 

 18
 

As to the
Respondent

Patrick Flachs

Husch &
Eppenberger, LLC

190 Carondelet
Plaza, Suite 600

St. Louis, MO  63105

MGP Ingredients of
Illinois, Inc.

Attn: Robert
Taphorn

1301 South Front
Street

Pekin, IL  61554

J.             Modification of Stipulation

The parties may,
by mutual written consent, agree to extend any compliance dates or modify the
terms of this Stipulation.  A request for
any modification shall be made in writing and submitted to the contact persons
identified in Section VIII.I.  Any such
request shall be made by separate document, and shall not be submitted within
any other report or submittal required by this Stipulation.  Any such agreed modification shall be in
writing, signed by authorized representatives of each party, and then accompany
a joint motion to the Illinois Pollution Control Board seeking a modification
of the prior order approving and accepting the Stipulation to approve and
accept the Stipulation as amended.

K.            Enforcement of Board Order

1.             Upon the entry of the Board’s Order
approving and accepting this Stipulation and Proposal for Settlement, that
Order is a binding and enforceable order of the Illinois Pollution Control
Board and may be enforced as such through any and all available means.

2.             Respondent agrees that notice of
any subsequent proceeding to enforce the Board Order approving and accepting
this Stipulation and Proposal for Settlement may be made by certified mail.

 19
 

3.             The parties agree that, if the
Board does not approve and accept this Stipulation and Proposal for Settlement,
then neither party is bound by the terms herein.

4.             It is the intent of the Complainant
and Respondent that the provisions of this Stipulation and Proposal for
Settlement and any Board Order accepting and approving such shall be severable,
and should any provision be declared by a court of competent jurisdiction to be
inconsistent with state or federal law, and therefore unenforceable, the
remaining clauses shall remain in full force and effect.

 20
 

WHEREFORE,
Complainant and Respondent request that the Board adopt and accept the
foregoing Stipulation and Proposal for Settlement as written.

PEOPLE OF THE
STATE OF ILLINOIS

LISA MADIGAN

Attorney General

State of Illinois

MATTHEW J. DUNN,
Chief

Environmental
Enforcement/

Asbestos
Litigation Division

 

	
  BY:

  	
  /s/Thomas Davis

  	
  DATE: 10/23/06

  
	
   

  	
  THOMAS DAVIS,
  Chief

  	
   

  
	
   

  	
  Environmental
  Bureau

  	
   

  
	
   

  	
  Assistant Attorney
  General

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ILLINOIS
  ENVIRONMENTAL

  	
   

  
	
  PROTECTION
  AGENCY

  	
   

  
	
   

  	
   

  
	
  BY:

  	
  /s/ Robert A.
  Messina

  	
  DATE:10/18/06

  
	
   

  	
  ROBERT A.
  MESSINA

  	
   

  
	
   

  	
  Chief Legal
  Counsel

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  MGP INGREDIENTS
  OF ILLINOIS, INC.

  	
   

  
	
   

  	
   

  
	
  BY:

  	
   /s/ Asif Malik

  	
  DATE: 11/10/06

  
	
   

  	
  ASIF MALIK

  	
   

  
	
   

  	
  General Manager

  	
   

  

 

 21

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