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2014-020ORDINANCE NO. 2014 -020 AN ORDINANCE APPROVING A LEASE AGREEMENT TO BE EXECUTED BY THE CITY MANAGER, BY AND BETWEEN THE CITY OF DENTON, TEXAS AND AMERICAN BIOSOURCE, LLC, A TEXAS DOMESTIC LIMITED LIABILITY COMPANY, FOR A CERTAIN APPROXIMATE 1.004 ACRE TRACT OF LAND SITUATED IN THE GIDEON WALKER SURVEY, ABSTRACT NUMBER 1330, IN THE CITY OF DENTON, DENTON COUNTY, TEXAS, LOCATED IN THE VICINITY OF 1527 MAYHILL ROAD, DENTON, DENTON COUNTY, TEXAS; PROVIDING AN EFFECTIVE DATE. WHEREAS, the City and American Biosource, LLC, a Texas Domestic Limited Liability Company ( "American ") have completed their negotiations which have culminated in the proposed Lease Agreement which is attached hereto as Exhibit "A;" and WHEREAS, on °��: �, 201 this item was presented to the Public Utilities Board, and the Board recommended approval of the same; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON, TEXAS HEREBY ORDAINS: SECTION 1. The recitations and statements contained in the Preamble hereto are incorporated herewith by reference for all purposes, and made a part of this ordinance. SECTION 2. The City Manager or his designee is hereby authorized to execute the "Lease Agreement" by and between the City of Denton, Texas and American Biosource, LLC, a Texas Domestic Limited Liability Corporation; which Lease Agreement is attached hereto as and is incorporated herewith by reference as Exhibit "A," in substantially the form of the "Lease Agreement" which is attached hereto and made a part of this ordinance for all purposes. SECTION 3. The City Manager is authorized to make any expenditures and to perform such duties as are set forth in the Lease Agreement. SECTION 4. This ordinance shall become effective immediately upon its passage and approval. ��.._.. Y ;;;m , 2014. 11 PASSED AND APPROVED this the day of -. w ATTEST: JENNIFER WALTERS, CITY SECRETARY �e m B APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY .a, By: ................... Page 2 STATE OF TEXAS COUNTY OF DENTON LEASE AGREEMENT This Lease Agreement (hereafter the "Lease Agreement ") is made and entered into effective as of the Effective Date, as set forth below, by and between THE CITY OF DENTON, TEXAS (hereinafter sometimes referred to as "LESSOR" and /or "the City "), a Texas municipal corporation and a home -rule City, and AMERICAN BIOSOURCE, LLC, a Texas Domestic Limited Liability Company ( "LESSEE "). WHEREAS, LESSOR owns the City's Solid Waste Services Site (the "Site "), located in the vicinity of 1527 Mayhill Road, City of Denton, Denton County, Texas and operates a landfill on the Site (the "Landfill "); and WHEREAS, the City desires to lease to LESSEE two tracts of land totaling approximately 1.004 acres of land located within the Site, which real property is more specifically set forth and described, by metes and bounds on Exhibit "Al" and "A2" (hereinafter the "Leased Premises "); and WHEREAS, LESSEE desires to lease the Leased Premises from the City for purposes of operating its waste grease recycling and rendering business and for the purpose of locate its waste oil collection vehicles, and optionally, a mobile office on the Leased Premises; and NOW, THEREFORE, for and in consideration of the mutual promises, covenants and agreements herein contained, and for $10.00 other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, LESSOR and LESSEE, intending to be legally bound, do hereby AGREE as follows: ARTICLE 1 PREMISES 1.1 Leased Premises. LESSOR hereby leases and lets unto LESSEE, and LESSEE hereby leases and lets from LESSOR the Leased Premises, which are two (2) certain tracts or parcels of real property totaling approximately 1.004 acres, more or less; Tract Al being a 0.514 acre tract of land and Tract A2 being a 0.490 acre tract of land, located at the Site, City of Denton, Denton County, Texas, as is more particularly described by metes and bounds attached hereto as Exhibits "Al" and "A2" and also as depicted by the field notes attached hereto as Exhibit `B 1" and B2," al four of which exhibits are attached hereto and incorporated by reference herein. -1- 1.2 Use of Premises. The Leased Premises are to be occupied and used by LESSEE solely for the operation of its waste grease recycling and rendering business, to maintain and store its waste oil collection vehicles, and to maintain a mobile office. LESSEE may operate a Bio- Diesel Plant ( "Plant ") on the Leased Premises. In the event LESSEE for any reason desires hereafter to substantially modify and /or substantially change its use of any of the Leased Premises, the nature and terms of such modification and change must be approved in writing by LESSOR and this Lease Agreement must be amended in writing to authorize the same. 1.3 Lessee Construction on Lease Premises. LESSEE shall have the right to construct improvements on the Leased Premises and this right shall continue in effect throughout the term of this Lease Agreement. LESSEE will, as a consideration for LESSOR's obligations set forth herein and this Lease Agreement, construct, at LESSEE's sole cost, any structure on the Leased Premises that is related to its business. Throughout the term of this Lease Agreement and any extension thereof, LESSEE shall have the right to alter, modify, remodel and demolish any improvements LESSEE has constructed on the Leased Premises. LESSEE agrees to provide to LESSOR a complete set of plans and specifications detailing each improvement which LESSEE proposes to construct on the Leased Premises prior to commencing any construction. The plans and specifications will be reviewed by LESSOR only for compliance with the municipal code of Denton, Texas as well as any applicable environmental laws and /or regulations that are applicable to the LESSEE's operations. LESSOR's Solid Waste Division must approve, within twenty (20) days, or must provide LESSEE a written statement advising why the construction plans are not approved. Such approval by the Solid Waste Division will not be unreasonably withheld or delayed. Provided however, the Solid Waste Division's approval does not apply to any other approval required from the City's Planning Department, Permitting or Building Permit Departments, or other City departments. No approval of LESSOR shall be required with respect to any modifications or alterations or remodeling of the interior of any of the improvements. All real property improvements or fixtures constructed or placed on the Leased Premises by LESSEE shall remain the property of LESSEE during the term of this Lease Agreement and any renewal or extension thereof. For real property fixtures, they shall revert to LESSOR, upon the termination of this Lease. The LESSEE is under a duty to promptly, within thirty (30) days following the date of expiration of the term of this Lease Agreement, or any extension thereof, to remove any and all personal property improvements installed or constructed or placed by LESSEE within or upon the Leased Premises, by LESSEE with no damage to the Leased Premises. LESSEE agrees to surrender the premises to LESSOR in broom -clean condition. The LESSEE covenants to LESSOR that upon termination of this Lease the subject real property shall be free and clear of any and all materials or waste that LESSEE abandons on the subject real property. Once the premises have been surrendered by LESSEE, and once both Phase I and Phase lI Environmental Studies, referenced below in Paragraph 1.5, have been conducted on the Leased Premises and provided to the LESSOR, then LESSOR shall determine within twenty (20) days the disposition of the $7,200 security deposit which LESSEE shall pay to LESSOR before taking possession of the above - described Leased Premises at the beginning of this Lease. LESSOR shall advise LESSEE in writing at its address, as shown herein, of any deductions made regarding any damages suffered by the LESSOR by reason of LESSEE'S default regarding LESSEE'S Spa covenant to surrender the leased premises in broom -clean condition, or by LESSEE'S failure to remove any personal property from the Leased Premises, or to remedy any environmental problems raised by the Environmental Studies. 1.4 Easements. LESSOR shall provide to LESSEE, when reasonably required by LESSEE in the conduct of its business on the Leased Premises, but in no event later than completion of construction, at no additional consideration, non - exclusive rights -of -way or easements that it has the right to grant over, across and through the Leased Premises; ingress and egress onto the Leased Premises which are necessary for the operation of LESSEE's facilities on the Leased Premises as follows: (a) For connection of water and sanitary sewer facilities to the boundary of the Leased Premises; (b) For connection of telephone, electric and gas lines, as approved by the appropriate utility companies, to those installed at or upon the Leased Premises; and (c) For connection of or reasonable access to on -site streets and /or roads for vehicular traffic, only to roads immediately adjacent to or near the Leased Premises. All rights -of -way or easements granted by LESSOR or to be granted shall be located in such a way as to not unreasonably interfere with the orderly utilization of the LESSOR'S Landfill operations. 1.5 Environmental Assessments Required by Lessor — Phase I and Phase II. Preliminarily, LESSOR shall arrange a Phase I Environmental Study which will assess whether there are any known environmental hazards regarding the Leased Premises. This Phase I study is for the protection of LESSOR and LESSEE in determining the environmental condition and status of the Leased Premises at the time of the commencement of this Lease. LESSOR shall select the firm which will conduct the Phase I study. LESSOR shall pay for one - half of the study. LESSEE shall pay for one -half of the study. LESSOR and LESSEE shall each receive a copy of the Phase I final report. Then, both a Phase I and Phase II final Environmental Study ( "Studies ") shall be conducted on the Leased Premises upon the termination of the Lease Agreement, by LESSEE's licensed professional consultant, with the cost of the Phase I study to be paid one -half by LESSOR and one -half by LESSEE; and the cost for the Phase II, if it is necessary, to be paid for solely by LESSEE. The final Phase I and Phase II (if necessary) Environmental Studies shall commence no later than fifteen (15) days following the termination date of this Lease Agreement. LESSEE agrees to provide LESSOR with exact copies of all such studies within five (5) days following LESSEE'S receipt of such Studies. The parties agree that the LESSEE shall be solely and exclusively responsible for the satisfactory cleanup of any environmental contamination disclosed by the final Studies. !gym 1.6 Signs. LESSEE shall be entitled to erect, install, and maintain on the Leased Premises identification and advertising signs appropriate to its business; provided, however, that all such signs at all times shall be subject to the prior written approval of LESSOR as to location, size, shape, color and content. Said approval is conditioned upon the signs meeting the requirements of the applicable City ordinances of the City of Denton, Texas. 1.7 Lien Claims. LESSEE hereby covenants to unconditionally indemnify LESSOR from and against, and hold LESSOR harmless from any and all lien claims of any nature whatsoever arising out of or in any manner connected with the construction, installation, erection, maintenance, repair, occupancy, use and /or operation of any improvements, facilities and /or equipment of LESSEE or any third person on or about the Leased Premises by or at the direction of or with the permission of LESSEE; and LESSEE further agrees that it shall, in the event any such liens are fled, forthwith effect their removal and /or satisfaction. Provided, however, LESSEE shall have the right, at its sole cost and expense, and after having given LESSOR prior written notice of its intent to do so, to promptly contest by appropriate legal proceedings diligently conducted in good faith, the amount, validity or application, in whole or in part, of any such lien or liens, provided (i) such proceedings shall suspend the collection of such lien(s); (ii) neither the Leased Premises nor any rent therefor, nor any portion of same, would be in danger of attachment, forfeiture, loss or similar consequence; and (iii) that LESSEE shall first furnish security to the City's reasonable satisfaction to bond said lien or liens off of the Leased Premises. 1.8 Inspection and /or Repair of Leased Premises. LESSEE shall at all times maintain the Leased Premises including all improvements thereon in good condition. LESSEE shall be responsible for all maintenance, repair and replacement of the Leased Premises and all improvements thereon except for repairs or replacements caused by the acts or negligence of LESSOR, its agents or employees. 1.9 Warranty. LESSOR represents and warrants that it owns the Leased Premises and that LESSOR is fully authorized to enter into this Lease Agreement with LESSEE. In addition, LESSOR represents and warrants that it has not granted any mortgages or pledges of the tract of real property leased hereunder. It is understood and agreed that any mortgage, pledge, or other encumbrance of the property leased hereunder shall be subordinate to this Lease Agreement and that any such mortgage, pledge, or other encumbrance shall contain specific provisions providing that all of LESSEE's improvements or appurtenances on the property leased hereunder, as well as any products or other contents in or on said improvements or appurtenances, are excluded from such mortgage, pledge or encumbrance, and that LESSEE hereunder retains the right to remove any and all such improvements or appurtenances, as well as any products or other contents in or on said improvements or appurtenances, in accordance with the terms of this Lease -4- Agreement, and that in the unlikely event of a foreclosure, LESSEE shall have the right to continue to occupy the Leased Premises pursuant to the terms of this Lease Agreement so long as LESSEE is not in default hereunder. ARTICLE 2 LEASE TERM 2.1 Primary Term. The Primary Term of this Lease Agreement shall be for a term of five (5) years from and after the Effective Date of this Lease Agreement, unless sooner terminated as provided for herein. The "Effective Date" of this Lease Agreement shall be the date on which LESSOR executes this Lease Agreement and has obtained an ordinance of the City Council approving same. 2.2 Renewal Terms. Provided that LESSEE is not in default under this Lease Agreement; and provided that this Lease Agreement is otherwise in full force and effect, this Lease Agreement may be extended for two (2) additional terms of five (5) years each. The decision to extend the Lease Agreement must be a mutual decision made by both LESSOR and LESSEE. Negotiations to extend this Lease Agreement are to begin approximately one (1) year before the end of the Primary Term or the First Renewal Term (as the case may be) of this Lease Agreement, provided that the Lease Agreement is not in default at the time negotiations for extension are entered into and at any time prior to the date of renewal.. 2.3 Assignment of Lease Agreement LESSEE shall not assign, sublet, mortgage or pledge this Lease Agreement or any interest herein or in the Leased Premises or any part thereof, nor shall any assignment, sublease or transfer of whatever kind of any interest of LESSEE herein by operation of law or by reason of LESSEE's bankruptcy become effective, without the prior written consent of LESSOR, which consent shall not be unreasonably withheld; provided however, that the City's refusal to give the City's consent to a potential assignee who is not as creditworthy as LESSEE, shall be deemed to be reasonable. Notwithstanding the foregoing, LESSEE shall have the right to assign this Lease Agreement or sublet the Lease Premises to an entity that is controlled by, or under common control with LESSEE, provided that LESSEE remains fully and primarily liable for all of its obligations under this Lease Agreement. ARTICLE 3 RENTALS 3.1 Monthly Rental. The Monthly Rental for the Leased Premises shall be ONE THOUSAND TWO HUNDRED DOLLARS ($1,200) per month for the first five (5) years of the Lease Term. For purposes of this Lease Agreement the "Certificate of Occupancy Date" is the date upon which -5- LESSOR issues the building occupancy permit. The first monthly rental payment due from LESSEE to LESSOR, is payable at the offices of LESSOR as set forth in Article 6.2 hereinbelow, on or before the first day of the second month following the issuance of a certificate of occupancy. No rental is being collected for only the first month following the issuance of the certificate of occupancy, as a concession, to allow LESSEE an opportunity to move -in and make -ready the Leased Premises, considering the condition of the Leased Premises as left by the previous tenant. Monthly rental is payable in advance, with equal payments of rental to be made on the first day of each month thereafter throughout the term of the Lease. 3.2 Monthly Rental Prior to the Issuance of the Certificate of Occupancy. LESSOR and LESSEE agree that from the Effective Date of this Lease to the date of issuance of the certificate of occupancy by the City, the rent shall be 50% of the Monthly Rental rate set forth above in Article 3.1 for the real property described in this Lease. LESSOR and LESSEE agree that but for the one month's free rent of $1,200, as set forth in 3.1. above, occurring after issuance of the Certificate of Occupancy, that the provisions of this Article shall apply and be 50% of the Monthly Rental rate. Further, the monthly rental for purposes of this Lease Agreement shall be prorated and is payable on the date that the first Monthly Rental payment is due. 3.3 Permitted Uses by Lessee Prior to Certificate of Occupancy Issuance. LESSOR understands that LESSEE, once this Lease Agreement is Effective, shall have the right to take whatever steps are necessary and appropriate in order to bring the Plant equipment back up and operational. LESSOR understands that once the Plant equipment is operational and all necessary licensing, in order for LESSEE to operate a Bio- Diesel Plant, has been obtained, then LESSEE shall be entitled to run the first one - hundred batches of biofuels as a test phase. 3.4 Monthly Rental for Lease Renewal Option Period(s). LESSOR and LESSEE agree that the rental amount is also subject however, to the terms of Rental Adjustment (indexing) that is reserved in this Article 3.3. The rental rate set forth hereinabove is for purposes of the Lease and shall be defined as the "Initial Base Rental Payment." Such Initial Base Rental Payment will be the rental due under the Lease for years one (1) through five (5) of the initial five year (5) year term of the Lease (the "Primary Term "). On the first day of the first term of Lease Renewal, ( "First Renewal Term ") the Monthly Rental to be paid by LESSEE to LESSOR under the Lease Agreement shall be subject to adjustment based upon adjustments in the Consumer Price Index, as hereinafter defined. The Monthly Rental of $1,200 established in Article 3.1 above, shall be adjusted upward, downward, or unchanged at the expiration of the five -year Primary Lease Term to conform to that certain United States Bureau of Labor Statistics "Producer Price Index" now known as Series ID# PCU531210531210602. That index is named: Real estate brokerage, nonresidential property leases including land leases. Its base date is December, 2009. The starting date, for purposes of this Rental Adjustment is January 1, 2019. The adjustment of rental at the commencement of the beginning of year six (6), the beginning of the First Renewal Term of the Lease Agreement will .6_ be accomplished by multiplying the initial base rental payment by a fraction, the numerator of which shall be such index as of the most recent date published prior to the date of adjustment and the denominator of which shall be the most recently published index as of the Commencement Date. The adjustment for each subsequent five (5) year Lease Renewal ( "Second Renewal Term ") period will be calculated in a similar manner; except that rather than using the initial base rental payment as the base rentals from which adjustments will be made, the rental figure for the then current year will be substituted for such initial base rental payment. Provided however, in no five (5) year period subsequent to the Effective Date of this Lease Agreement (i.e. the First Renewal Term and the Second Renewal Term), may the rental be increased or decreased more than twenty -five percent (25 %) of the rental applicable during the five (5) year period immediately preceding the five (5) year period for which an adjustment is to be made. If the index above referred to shall be discontinued, the parties hereto shall attempt to agree upon a substitute index or formula. In the event of dispute between the parties as to the amount of any adjustment, the rates shall be established through the dispute resolution procedures. 3.5 Taxes. LESSEE agrees to pay all sales and /or use taxes and any and all ad valorem assessments and /or taxes which may be legally exacted, made, and charged upon and /or levied and /or assessed against LESSEE's property on the Leased Premises, before the same shall become delinquent; provided, however, LESSEE shall have the right, at its sole cost and expense and after having given LESSOR prior written notice of its intention to do so, to contest by appropriate legal proceedings diligently conducted in good faith, the validity, amount or application, in whole or in part, of such taxes, levies and /or assessments provided (i) such proceedings will suspend the collection of the tax, levy, or assessment; and (ii) the Lease Premises, nor any rent therefrom, nor any portion of it is in danger of seizure, forfeiture, sale, loss or similar consequences. 3.6 Late Charges on Rentals. If any installment of rental due from LESSEE is not received by LESSOR within twenty (20) days of the date upon which it is due, without any notice or demand for payment to LESSEE being necessary, LESSEE will pay to LESSOR the additional sum of Fifty Dollars ($50.00) as a late charge for each late payment. The late charge represents the reasonable time and efforts of City staff expended in order to enforce and collect the rental obligation. Acceptance of any late charge shall not constitute a waiver of LESSEE's default with respect to the overdue amount, nor prevent LESSOR from exercising any other rights and remedies available to LESSOR. 3.7 No Additional Fees. There shall be no additional fees or assessments made by LESSOR for LESSEE's use or occupancy of the Lease Premises except for the Additional Rental payable by LESSEE to LESSOR pursuant to the terms of Article 3.8 herein. Provided however, LESSEE shall remain solely responsible for any impact fee, connection fee, tap fee, building fees, permits fees, any State regulatory fees, or any other municipal fees charged by the City of Denton, Texas that are applicable to the Leased Premises; and shall timely pay same. -7- 3.8 Additional Rental. LESSEE shall pay to LESSOR a payment of Additional Rental on a quarterly basis during the Primary Term of this Lease Agreement and any renewal thereof. The Additional Rental is based upon LESSEE'S sale of any biofuel sold by LESSEE to any third -party. The amount of the Additional Rental shall be $0.0085 per gallon sold. The Additional Rental shall be accounted for and determined by a Quarterly Report of Production and Sales (the "Quarterly Report"). The Quarters shall be: January 1 through March 31; April 1 through June 30; July 1 through September 30; and October 1 through December 31. The Quarterly Report shall be prepared by LESSEE and shall be delivered to LESSOR no later than the twentieth (20th) day of the month next following the quarter of each report (i.e. April 20 for the quarter beginning January 1 and ending March 31). The Quarterly Report shall state at a minimum, for that quarter, the following information: Number of days that the Plant was operational; the total production of biofuels in gallons; the total amount of biofuels sold to third - parties stated in gallons; the breakdown in gallons of the types of biofuel and any other fuel produced at the Leased Premises, 3.9 Late Charge for Late Filing of Quarterly Report of Production and Sales. If the Quarterly Report is not received by LESSOR from LESSEE within twenty (20) days of the date such report is due, then LESSEE, without any notice or demand for payment to LESSEE being necessary, LESSEE shall pay to LESSOR the additional sum of TWENTY FIVE DOLLARS ($25.00) as a late filing penalty for each late Quarterly Report. This charge represents the reasonable time and efforts of City staff expended in order to enforce the Additional Rental obligation of LESSEE and the City's ability to determine what amount of Additional Rent is due and owing under Article 3.8 above. 3.10 Requirement of Lessee's Maintenance of Detailed Accurate Financial Records. LESSEE is obligated to maintain full and detailed adequate accurate financial and tax accounting records at all times during the Term of this Lease Agreement and any extension thereof. LESSEE shall allow LESSOR reasonable access to all such records upon five (5) days written request. ARTICLE 4 OPERATIONS 4.1 Pollution Control. LESSEE agrees that it shall use its commercially reasonable best efforts to comply with all applicable federal, state and local laws, regulations and the common law, as they may exist currently, or as they may be amended in the future, pertaining to protection of the environment or human health and safety at the Leased Premises and /or in the vicinity of any of its operations or activities that may be permitted hereunder. -8- 4.2 Compliance with Environmental Laws and Indemnification. During the Term and any renewal of this Lease Agreement, LESSEE shall fully comply with all applicable federal, state and local laws, regulations and the common law, as they may exist currently or as they may be amended in the future, pertaining to protection of the environment or human health and safety at the leased premises. LESSOR warrants and represents that at the commencement of this Lease Agreement, that to the best of its knowledge and belief there is no Hazardous Substance (as defined hereinbelow) including any petroleum, petroleum product, or other types of hydrocarbons in or on the Leased Premises in contravention of any federal, state or local laws, regulations or the common law pertaining to protection of the environment or human health and safety. Notwithstanding any provision in this Lease Agreement to the contrary, it is expressly understood and agreed that the LESSOR hereby agrees to indemnify to the extent provided by applicable law, defend and hold harmless the LESSEE, only to the extent permitted by applicable law, its officers, employees, contractors, agents, customers, licensees, invitees and /or visitors and any other person for or on whose behalf LESSOR is liable, harmless from and against any and all claims, obligations, liabilities, costs, expenses (including attorney's fees), losses, suits, fines, penalties or demands, made or sought by or on behalf of any person, firms, corporation or government authority whomsoever, based upon or arising out of any obligation, liability, loss, damage or expense, of whatever nature or kind, contingent or otherwise, known or unknown, incurred under or imposed by any provision of federal, state or local law or regulation, or common law, pertaining to protection of the environment or human health and safety in or on the Leased Premises. Notwithstanding any other provision in this Lease Agreement to the contrary, it is expressly understood and agreed that the LESSOR does not assume or agree to be responsible for, and LESSEE hereby agrees to indemnify, defend and hold LESSOR, its officers, employees, contractors, agents, customers, licensees, invitees and /or visitors and any other person for or on whose behalf LESSOR is liable, harmless from and against any and all claims, obligations, liabilities, costs, expenses (including attorney's fees), losses, suits, fines, penalties, or demands, made or sought by or on behalf of any person, firm, corporation or government authority whomsoever, based upon or arising out of the handling, storage or disposal of Hazardous Substances by LESSEE, LESSEE's agent or anyone on or about the Leased Premises by or at the direction of LESSEE or with the permission of LESSEE during the term of this Lease Agreement. For purposes of this Lease Agreement, the term "Hazardous Substance" or "Hazardous Substances" means that term as defined in Section 9601(14) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ( "CERCLA "), but it also includes the term "Regulated Substance" as defined in Section 6991(2), and the term "Hazardous Waste" as defined in Section 6903(5), of the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901, et seq. ( "RCRA "), including all regulations issued pursuant to any of the above statutes, as well as any other contaminant, oil, petroleum, petroleum product or byproduct, radioactive material or -9- byproduct and any unsafe, noxious, toxic or hazardous substance or similar material regulated as a hazardous substance under any applicable state, federal or local law, and any other applicable environmental, land use or similar act, statute or regulation existing as of the date of this Lease Agreement or thereafter. The indemnifications provided by this Article shall specifically and reciprocally cover, without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision or other third party. The foregoing environmental indemnity provisions provided in this Article 4.2 shall survive for a period of five (5) years after the expiration or termination of this Lease Agreement and any renewals hereof. 4.3 Compliance with Laws and Regulations. LESSEE's exercise of such rights and /or privileges as may be extended it hereunder shall at all times be in full compliance with all applicable laws, rules, and regulations, including safety regulations, of the City of Denton, Texas, the State of Texas, the United States, and other governmental authorities now or hereafter having jurisdiction thereof and /or any of their duly empowered agencies and /or instrumentalities. A copy of all building permits, licenses, and similar authorizing documents will be promptly provided to the LESSOR. 4.4 Lessee Insurance. For the term of this Lease Agreement and any renewal thereof, LESSEE will maintain, at its own expense, the following insurance coverage: (a) Workers' Compensation providing statutory benefits, and Employers' Liability coverage with minimum limits of $1,000,000 per each occurrence; and (b) Comprehensive General Liability insurance coverage with minimum limits of $2,000,000 per occurrence, combined single limit, for bodily injury and property damage. Coverage shall include contractual liability; and (c) Automobile liability insurance coverage with minimum limits of $1,000,000 per occurrence, combined single limit; and (d) Casualty property insurance on any LESSEE - constructed facilities on Site in an appropriate amount reasonably determined by the agreement of LESSEE and LESSOR, which amount shall take into account the construction costs of the LESSEE's facilities and other relevant factors. LESSEE shall provide LESSOR with a certificate evidencing the insurance required hereunder together with written evidence of premium payment. All such policies of insurance shall require that LESSOR and LESSEE be given at least thirty (30) days prior written notice of any modification, termination and /or cancellation of coverage. The insurance policies described -10- in (b) and (c) above shall name LESSOR as an additional insured party. All insurance policies belonging to LESSEE shall be issued through companies that shall have a minimum A.M. Best Company rating of "A -" in addition to a minimum financial size category of "VI" or "VII," or alternatively, a Standard and Poor's rating of "BBB" or better. 4.5 Lessee's Provision of Discounted Fuel to Lessor. LESSOR agrees to accept from LESSEE during the Term of this Lease Agreement, subject to LESSEE'S Plant being licensed and operational, deliveries of biofuel which have been ordered by LESSOR, which deliveries shall be provided to City at a discounted rate of two (2 %) to two - and -a -half (2.5 %) percent below than the then current market rate for such biofuel. LESSEE shall certify to LESSOR the market rate of such fuel at the time of each such delivery of fuel to the City. LESSOR and LESSEE may re- negotiate this discount should market conditions change, but LESSOR shall be guaranteed at least a two (2 %) discount on biofuel by LESSEE at all times. 4.6 Termination. This Lease Agreement shall terminate pursuant upon the expiration of its Term, or extension of Term (if applicable), or upon the mutual written agreement of LESSOR and LESSEE. Upon termination, LESSEE shall be entitled to remove all of its personal property from the building(s) and any equipment, which is not characterized as a real property fixture, that LESSEE has installed in the building, and shall thereafter promptly quit and surrender the Leased Premises to LESSOR in broom -clean condition. LESSEE shall additionally remove all feedstock, recyclables and recycling materials, by- products, end - products, and chemical supplies from the Leased Premises, and shall thereafter quit and surrender the Leased Premises to LESSOR; subject to the provisions of Article 1.3 hereinabove. 4.7 Events of Default. The following shall be "Events of Default" under this Lease Agreement and the terms "Event of Default" or "Default" shall mean whenever they are used in this Lease Agreement, any one or more of the following events: (a) The insolvency, assignment for the benefit of creditors, adjudication as a bankrupt of LESSEE or the appointment of a receiver for substantially all of the LESSEE's property and /or LESSEE's interest in this Lease Agreement; or (b) The issuance of execution against LESSEE's interest in this Lease Agreement or any legal process which by operation of law would cause LESSEE's interest in this Lease Agreement to pass to any person other than LESSEE or its successor assignee or sublessee; or (c) The failure or refusal of LESSEE to pay or cause to be paid any lease rental payment, charge and /or assessment hereunder or any installment thereof when due and the continuance of such failure for a period of twenty (20) days after written notice -11- thereof has been sent by LESSOR to LESSEE at the address shown herein for LESSEE; or (d) The failure or refusal of LESSEE and /or LESSOR to perform any agreement, covenant, condition, obligation and /or undertaking herein contained or required by operation of law and /or to observe or comply with any of the terms provisions or conditions of this Lease Agreement, and the continuance of such for a period of thirty (30) days after written notice thereof has been sent by LESSOR to LESSEE at the address shown herein for LESSEE; or (e) The failure of LESSEE and /or LESSOR in the observance or performance of any material term, obligation or covenant required to be performed by LESSEE and /or LESSOR under this Lease Agreement or by operation of law, and the continuance of such for a period of thirty (30) days after written notice thereof has been sent by LESSOR to LESEE at the address shown herein for LESSEE. 4.8 Holding Over. If LESSEE shall, with or without the consent of LESSOR, hold over after the expiration or sooner termination of the term of this Lease Agreement, the resulting tenancy shall, unless otherwise mutually agreed upon in writing, shall be on a month -to -month basis only. During such month -to -month tenancy, LESSEE shall pay to LESSOR the same rentals, plus an additional payment of holdover rent of twenty (20) percent, per month, of the then applicable rent, payable monthly along with its other rental payments due hereunder, as set forth herein, unless a different rate(s) shall be agreed upon, and LESSEE shall be bound by all of the provisions of this Lease Agreement insofar as they may be pertinent. LESSOR shall have the right, after the expiration of the term and /or extension to provide LESSEE with a 30 -day notice letter notifying LESSEE that the holdover tenancy will end thirty (30) days thereafter and that LESSEE must therefore, vacate the Leased Premises. 4.9 Waiver of Breach of Default -- Cumulative Remedies. Waiver by any party of any breach or Default of this Lease Agreement shall not be deemed a waiver of similar or other breaches or Defaults, nor shall the failure of any party to take action by reason of any such breach or Default deprive such party of the right to take action at any time while such breach or Default continues. The rights and remedies created by this Lease Agreement shall be cumulative and nonexclusive of those to which the parties may be entitled pursuant to law. Right of exercise of all such rights and remedies is hereby reserved. The use and availability of one remedy shall not be taken to exclude or waive the right to use of another. In order to entitle any party to exercise any remedy reserved to it in this Lease Agreement, it shall not be necessary to give any notice, other than such notice as is herein expressly required. 5.1 Quiet Enjoyment. ARTICLE 5 MISCELLANEOUS -12- LESSOR covenants that during the term of this Lease Agreement and for so long as LESSEE shall make timely payment of rentals due hereunder, and LESSEE shall perform all covenants on its part to be performed, LESSEE shall and may peaceably and quietly have, hold and enjoy the Leased Premises. In the event of bankruptcy, insolvency, assignment for benefit of creditors, or foreclosure of any mortgage or other encumbrances, by entry or by sale, LESSEE, if it is not then in default, shall peaceably hold and enjoy the Leased Premises for the remainder of the unexpired term of the Lease Agreement upon the same terms, covenants, and conditions as in this Lease Agreement. 5.2 Notices. All notices and other communications required or permitted to be given by any provision of this Agreement shall be in writing and mailed (certified or registered mail, postage prepaid, return receipt requested) or sent by hand or overnight courier, and such notices shall also be sent by facsimile transmission (with acknowledgment received), charges prepaid and addressed to the intended recipient as follows, or to such other address or number as may be specified from time to time by like notice to the Parties. A courtesy copy of such notice or other communication shall also be sent electronically via e-mail to the e-mail addresses provided in the contact information below; provided, however, that such e-mail copies will not constitute Notice as defined in this Section 5.2: (a) If to the City: City of Denton, Texas 215 East McKinney Street Denton, TX 76201 Attention: City Manager Facsimile: 940 - 349 -8596 With a copy to: City of Denton, Texas 1527 South Mayhill Road Denton, TX 76208 Attention: General Manager of Solid Waste Services Telephone: 940 - 349 -8044 Email: Vance. Kemlergcityofdenton.com (b) If to Lessee: American BioSource, LLC Walter Dobson, President 624 West University Drive, Suite 359 Denton, Texas 76201 Telephone: (214) 280 -0112 -13- Email: WaltergAmericanBio.So „urce.,com Any Party may from time to time specify a different address for notices by like notice to the other Party. All notices and other communications given in accordance with the provisions of this Lease Agreement shall be effective upon receipt of the same. 5.3 Substitution of Performance by Lessor. If LESSEE shall fail to do anything required to be done by it under the terms of this Lease Agreement, except to pay rent and other charges, LESSOR may, after thirty (30) days written notice to LESSEE, at LESSOR's sole option, do such act or thing on behalf of LESSEE, and upon notification of the cost thereof to LESSOR, LESSEE shall promptly pay to LESSOR the amount of that cost. In case of emergency, LESSOR may perform, but is not obligated to perform, any act or do anything reasonably necessary on behalf of LESSEE and upon notification of the cost thereof to LESSEE, LESSEE shall pay said cost to LESSOR within thirty (30) days from the date of LESSOR'S written claim to LESSEE. 5.4 Eminent Domain. If all or a portion of the Leased Premises or all or any portion of LESSOR's other property comprising the Leased Property shall be taken or sold in any proceeding by public authorities, by means of condemnation, expropriation, appropriation or otherwise be acquired for public or quasi- public purposes, there shall be an equitable abatement or refund of the rental paid by LESSEE under Article 3.1 above from any date of award to LESSOR proportionate to the amount taken. Nothing herein shall affect or diminish LESSEE's right to seek compensation for any portion of the Leased Premises taken and LESSEE shall be entitled to all such compensation for its provable loss or damage. In the event the taking of the Leased Premises or all or a part of LESSOR's other property comprising the Leased Premises is total, this Lease Agreement shall terminate, and LESSEE shall be released from all obligations hereunder; except for any sums of money owed to LESSOR at the date of termination of this lease, which amounts shall be paid to LESSOR within thirty (30) days. In the event the taking of the Leased Premises or LESSOR's other property comprising the Landfill is less than total, then LESSEE shall have the option to terminate this Lease Agreement if continuation of its operations on the Lease Premises is substantially impaired and economically impractical. 5.5 Substitution of Performance by Lessee. If LESSOR shall fail to do anything required to be done by it under the terms of this Lease Agreement, LESSEE may, after sixty (60) days written notice to LESSOR, at LESSEE's sole option, do such act or thing on behalf of LESSOR, and upon notification of the reasonable cost thereof to LESSOR, may deduct said amount from any amount owed by LESSEE to LESSOR. In case of emergency, LESSEE may perform any act or do anything reasonably necessary on behalf of LESSOR and upon notification of the cost thereof to LESSOR, may -14- deduct said amount from the amount of rental then owed by LESSEE to LESSOR. If no amount is presently owed by LESSEE to LESSOR, then LESSOR shall pay such amount to LESSEE on demand. 5.6 Recordation. Neither LESSOR nor LESSEE shall record this Lease Agreement without the prior written consent of the other party. LESSOR and LESSEE may execute and acknowledge a "short form" memorandum of this Lease Agreement for recording purposes. 5.7 Entire Agreement. This Lease Agreement embodies the entire agreement between the parties with respect to the leasing and use of the Leased Premises. There are no representations, terms, conditions, covenants or agreements between the parties which are not mentioned or contained herein. This Lease Agreement shall completely and fully supersede all other prior agreements both written and oral, between the parties pertaining to the Leased Premises. No party to any such prior agreement hereafter will have any rights thereunder, but shall look solely to this Lease Agreement for definition and determination of its rights, liabilities, or responsibilities relating to the aforesaid matters set forth herein. 5.8 Captions. The article and the subsection headings and captions contained herein are included for convenience only and shall not be considered a part hereof or affect in any manner the construction or interpretation of this Lease Agreement. 5.9 Severability. The parties agree that if it should ever be held by a court of competent jurisdiction that any one or more articles, subsections, clauses or provisions of this Lease Agreement are invalid or ineffective for any reason, any such article, subsection, clause or provision shall be deemed separate from the remainder of this Lease Agreement and shall not affect the validity and enforceability of such remainder. 5.10 Successors and Assigns. The covenants, terms, conditions and obligations set forth and contained in this Lease Agreement shall be binding upon and inure to the benefit of LESSOR and LESSEE and their respective successors and assigns. 5.11 Disputes and Governing Law. This Lease Agreement shall be governed by and construed solely in accordance with the laws of the State of Texas. Exclusive venue for any claim or cause of action under this Agreement shall be, as the case may be, either in the District Courts of Denton County, Texas, or the Federal District Courts of the Eastern District of Texas, Plano or Sherman Division. - 15 - IN WITNESS WHEREOF, this Lease Agreement has been executed by the duly authorized City Manager of LESSOR; and by the duly- authorized officer of LESSEE, in multiple counterparts, each of which, for all purposes, shall be deemed an original and all of which shall evidence but one agreement. r la(I i IWNI on this," 1 clay . � :!L I .. (1q ., "LESSOR" THE CITY OF DENTON, TEXAS A Texas Municipal Corporation By. ATTEST: JENNIFER WALTERS, CITY SECRETARY B ". � APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY By f IN WITNESS WHEREOF, this Lease Agreement has been executed by LESSEE in the presence of the undersigned witness, in multiple copies, each of which, for all purposes, shall be deemed an original and all of which shall evidence but one agreement. mr,10 "LESSEE" AMERICAN BIOSOURCE, LLC. A Texas Limited Liability Company ._ Titled�... _`� _'J.........� _.....j...�G„ r�d�u.�c LLC : s-.vs. .�. �-ei° .1B11e WITNESS: APPROVED AS TO LEGAL FORM: ITS LEGAL COUNSEL mrm Date: / Z ° Z c7 , Ze-o /�