HomeMy WebLinkAboutPR 24285: GROUND LEASE WITH DILIGENCE OFFSHORE SERVICES LLC P.R. NO. 24285
04/17/2025 RPC
RESOLUTION NO.
A RESOLUTION OF THE CITY OF PORT ARTHUR,TEXAS TO AUTHORIZE THE
MAYOR TO ENTER INTO A GROUND LEASE AGREEMENT BETWEEN THE
CITY OF PORT ARTHUR,TEXAS AND DILIGENCE OFFSHORE SERVICES LLC
FOR APPROXIMATELY 2,274 ACRES OF CITY-OWNED LAND ON OR NEAR
PLEASURE ISLAND FOR THE DEVELOPMENT, CONSTRUCTION, AND
OPERATION OF WIND AND SOLAR ENERGY FACILITIES, A SUBSTATION,
DATA CENTER, OFFSHORE ENERGY HUB AND OTHER NECESSARY
APPURTENANT FACILITIES
WHEREAS,the City of Port Arthur,Texas,is a home-rule municipality and is a"Council-Manager"
form of government in the State of Texas; and
WHEREAS, Diligence Offshore Services LLC("Diligence")has requested that the City enter into a
ground lease agreement for the proposed construction of a wind power facility and/or solar power
facility,including one or more energy generation,storage,and/or transmission facilities,which may
include batteries, buildings, substations, related underground and aboveground utility lines,
interconnected transmission lines and other related facilities ("Project") to be located on or near
Pleasure Island using approximately 2,274 acres of City-owned land ("Site"), which is more
specifically and legally described in the ground lease agreement attached as Exhibit 1; and
WHEREAS,on March 18,2025,and pursuant to Resolution No.25-096,the City Council approved a
ground lease agreement with Diligence for the Project.See Exhibit 2; and
WHEREAS,on April 8,2025,Diligence notified the City Council that they did not agree to the City's
approved lease terms in Resolution No.25-096 and sought to renegotiate it.The City Council agreed
to reopen negotiations for the ground lease and instructed City staff and its outside legal counsel to
renegotiate a ground lease agreement for an under 40-year term with Diligence for the Project on the
Site with certain terms and conditions; and
WHEREAS,on April 21,2025,under PR 24284,the City Council rescinded Resolution No.25-096,
which rescinds the Pt City approved ground lease for the Project; and
WHEREAS,City Council finds that the Project promotes economic development,stimulates business
and commercial activities and further finds that its in the best interest of the City and seeks to enter
into a renegotiated ground lease. See Exhibit 1
Now THEREFORE,BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PORT ARTHUR,TEXAS:
Resolution No. Page 1
SECTION 1. The facts and above-recitals in the preamble are true and correct and incorporate for
all purposes.
SECTION 2. That the Mayor is authorized to enter into a ground lease agreement with a term less
than 40 years with Diligence Offshore Services LLC (or its permitted assigns) in substantially the
same form attached hereto as Exhibit 1.
SECTION 3. That a copy of the caption of this Resolution shall be spread upon the Minutes of the
City Council.
READ,ADOPTED AND APPROVED,this 21st day of April,2025 AD,at a Meeting of the City Council
of the City of Port Arthur, Texas by the following vote: AYES:
Mayor:
Councilmembers:
NOES:
CITY OF PORT ARTHUR, TEXAS
Thurman"Bill" Bartie, Mayor
ATTEST:
Sherri Bellard, City Secretary
Resolution No. Page 2
EXHIBIT 1
GROUND LEASE BETWEEN
THE CITY OF PORT ARTHUR, TEXAS AND
DILIGENCE OFFSHORE SERVICES, LLC
[TO BE PRODUCED @ 4/21/2025 EXECUTIVE SESSION]
EXHIBIT 2
RESOLUTION No. 25-096
P.R.NO. 24226
03/13/2025 RPC
RESOLUTION No. -9 .496
A RESOLUTION OF THE CITY OF PORT ARTHUR, TEXAS TO ENTER INTO A
GROUND LEASE AGREEMENT BETWEEN THE CITY OF PORT ARTHUR,
TEXAS AND DILIGENCE OFFSHORE SERVICES LLC FOR APPROXIMATELY
2,274 ACRES OF CITY-OWNED LAND ON OR NEAR PLEASURE ISLAND FOR
THE DEVELOPMENT, CONSTRUCTION, AND OPERATION OF WIND AND
SOLAR ENERGY FACILITIES, A SUBSTATION, DATA CENTER, OFFSHORE
ENERGY HUB AND OTHER NECESSARY APPURTENANT FACILITIES
WHEREAS,the City of Port Arthur,Texas,is a home-rule municipality and is a"Council-Manager"
form of government in the State of Texas; and
WHEREAS, Diligence Offshore Services LLC("Diligence")has requested that the City enter into a
ground lease agreement for the proposed construction of a wind power facility and/or solar power
facility,including one or more energy generation,storage,and/or transmission facilities,which may
include batteries, buildings, substations, related underground and aboveground utility lines,
interconnected transmission lines and other related facilities ("Project") to be located on or near
Pleasure Island using approximately 2,274 acres of City-owned land ("Site"), which is more
specifically and legally described in the ground lease agreement attached as Exhibit A; and
WHEREAS,City Council instructed City staff and its outside legal counsel to negotiate a ground lease
agreement for an under 40 year term with Diligence for the Project on the Site with certain terms and
conditions; and
WHEREAS,City Council finds that the Project promotes economic development,stimulates business
and commercial activities and further finds that its in the best interest of the City.
Now THEREFORE,BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PORT ARTHUR,TEXAS:
SECTION 1. The facts and above-recitals in the preamble are true and correct.
SECTION 2. That the Mayor and City Manager are authorized to enter into a ground lease
agreement with a term less than 40 years with Diligence Offshore Services LLC (or its permitted
assigns)in substantially the same form attached hereto as Exhibit A
SECTION 3. That a copy of the caption of this Resolution shall be spread upon the Minutes of the
City Council.
Resolution No. Page/
READ,ADOPTED AND APPROVED,this 18th day of March,2025 AD,at a Meeting of the City Council
of the City of Port Arthur,Texas by the following vote: AYES: `"
Mayor:
Councilmembers: ���-z� 2 -/
NOES: oI ', )T� �.� -�, r� �'fs� .
CITY OF POR THUR,TEXAS
Thu `Bil Bartie,Mayor
ATTEST.
Sh Bellard, City Secretary
Resolution No. Page 2
ExHmrr A
GROUND LEASE BETWEEN
THE CITY OF PORT ARTHUR, TEXAS AND DILIGENCE OFFSHORE SERVICES, LLC
Resolution No. Page 3
GROUND LEASE
between
THE CITY OF PORT ARTHUR, TEXAS
and
DILIGENCE OFFSHORE SERVICES, LLC
March_, 2025
•
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS
1.01 Definitions 1
ARTICLE 2
PREMISES;EASEMENTS
2.01 Premises 2
2.02 Easements 2
2.03 Reservation of Rights 2
ARTICLE 3
TERM
3.01 Term 2
3.02 Optional Termination Rights 3
ARTICLE 4
RENT;PRODUCTION ROYALTY PAYMENT
4.01 Base Rent 3
4.02 Production Royalty Payment 4
4.03 Additional Rent 5
4.04 No Abatement 5
ARTICLE 5
IMPOSITIONS; UTILITIES;NET LEASE
5.01 Impositions Defined 5
5.02 Lessee's Obligation 6
5.03 Tax Contest 7
5.04 Evidence Concerning Impositions 7
5.05 Rendition 7
5.06 Utilities 7
5.07 Net Lease 7
5.08 Right to Perform Lessee's Obligation as to Impositions 7
ARTICLE 6
CONDITION OF DEMISED PREMISES; IMPROVEMENTS
6.01 Condition of Demised Premises 8
6.02 Construction;Alterations; Demolition 9
6.03 Construction Standards and Liens 9
6.04 Ownership of Improvements 11
6.05 Decommissioning Security; Removal of Project Improvements 12
6.06 Approvals; Permits;Non-Interference. 13
6.07 Tax Credits 14
ARTICLE 7
USE, MAINTENANCE, AND REPAIRS
7.01 Use. 14
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7,02 Title Policy; Escrow and Closing. 18
7.03 Maintenance and Repairs, 19
7.04 No Further Encumbrance. 20
ARTICLE 8
INSURANCE AND INDEMNITY
8.01 Insurance 20
8.02 Policies 21
8.03 Lessee's Indemnity 22
8.04 Subrogation 23
ARTICLE 9
CASUALTY; CONDEMNATION
9.01 Casualty 23
9.02 Condemnation 24
ARTICLE 10
TRANSFER;ASSIGNMENT AND SUBLETTING;DIVISION OF LEASE
10.01 Lessee's Right to Assign 26
10,03 Operator 27
ARTICLE 11
LESSEE'S FINANCING
11.01 Lessee's Right to Encumber 27
11.02 Lessor Mortgages 30
ARTICLE 12
QUIET ENJOYMENT
12.01 Quiet Enjoyment 31
ARTICLE 13
EVENT OF DEFAULT AND REMEDIES
13.01 Event of Default 31
13.02 Remedies 32
13.03 Time is of the Essence 33
ARTICLE 14
MISCELLANEOUS
14.01 Notices 33
14.02 Performance of Obligations 34
14.03 Modification and Non-Waiver 34
14.04 Governing Law 34
14.05 Number and Gender 34
14.06 Estoppel Certificate 34
14.07 Severability 35
14.08 Attorney Fees 35
14.09 Surrender of Premises;Holding Over 36
14.10 Relation of Parties 36
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14.11 Force Majeure 36
14.12 Non-Merger 37
14.13 Entireties 37
14.14 Lessor Default; Limitation on Lessor's Liability 37
14.15 Recordation 38
14.16 Successors and Assigns 38
14.17 Inspection 38
14.18 No Third Parties Benefited 38
14.19 Survival 38
14.20 Use of Lessor's Name 38
14.21 Interest 38
14.22 Limit on Damages 39
14.23 Broker 39
ARTICLE 15
HAZARDOUS SUBSTANCES
15.01 Lessor's Covenants 39
15.02 Lessee's Covenants for Hazardous Substances 39
15.03 Environmental Indemnity 40
15.04 Notice of Hazardous Substance Matters 41
ARTICLE 16
REPRESENTATIONS AND WARRANTIES
16.01 By Lessor 41
16.02 By Lessee 41
16.03 Authority of Signatories 42
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Schedules:
Schedule 1.01 — Definitions; Terminology
Exhibits:
Exhibit A-1 — The Substation Premises
Exhibit A-2 — The Data Center Premises
Exhibit A-3 — The Lake Premises
Exhibit B — Site Plan
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GROUND LEASE
THIS GROUND LEASE(this"Lease")is entered into as of March 2025(the"Effective
Date"),by and between the CITY OF PORT ARTHUR, a Home Rule municipality of the State of
Texas ("Lessor"), and DILIGENCE OFFSHORE SERVICES LLC, a Texas limited liability
company("Lessee").
RECITALS
A. Lessor owns certain real property in Jefferson County,Texas, commonly known as
Pleasure Island(also the"Land"),which encompasses the approximately 13.79 acre tract described
on Exhibit A-1 (the"Substation Premises");the approximately 900 acre tract described on Exhibit
A=2 (the"Data Center Premises"); and the approximately 1360.5 acres of land(excluding any and
all submerged land or other coastal or tideland owned by the State of Texas) adjacent to the Land
described on Exhibit A-3 (the "Lake Premises"; and together with the Substation Premises and
Data Center Premises, and together, to the extent Lessor has any rights therein, with all rights,
benefits, privileges, casements, tenements, hereditaments, and appurtenances thereon or
appertaining thereto, the "Demised Premises"). A site plan depicting the Demised Premises (the
"Site Plan")is attached hereto as Exhibit B.
B. Lessee wishes to lease the Demised Premises for the Term and to construct, own,
and operate (i) on the Lake Premises, facilities for renewable wind and solar energy generation,
(ii) on the Data Center Premises, a data center, a battery storage facility, and an offshore energy
hub, and (iii) on the Substation Premises, an electrical substation and appurtenant facilities (the
foregoing facilities collectively, together with any other improvements from time to time located
on the Demised Premises and any improvements constructed in any Easement Area,being herein
called the"Project Improvements").
C. Lessor is willing to lease the Demised Premises to Lessee upon the terms and
conditions hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, for and in consideration of the agreements set forth herein, Lessor
and Lessee(collectively, the"Parties" and individually, a"Party")hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.01 Definitions. Each capitalized term used in this Lease shall have the meaning set
forth or referred to in Schedule 1.01 hereto. In addition, Schedule 1.01 sets forth certain rules for
the interpretation of this Lease.
ARTICLE 2
PREMISES;EASEMENTS
2.01 Premises. Lessor hereby does lease, let, and demise unto Lessee, and Lessee
hereby does lease and rent from Lessor, upon and subject to the provisions of this Lease, the
Demised Premises. Lessee acknowledges this Lease is subject to all Title Exceptions encumbering
the Demised Premises as of the Effective Date (the "Existing Encumbrances") and agrees that
Lessee, at its sole cost and expense, is responsible for obtaining any and all necessary consents or
approvals from any parties holding rights to the Demised Premises under the Existing
Encumbrances to permit the proposed use and the development and construction of Project
Improvements, subject to Section 7.02. Lessee acknowledges the State of Texas is the owner of
submerged land or other coastal or tideland and agrees that Lessee, at its sole cost and expense, is
responsible for obtaining any and all necessary consents or approvals from the State of Texas and
the General Land Office to permit the proposed use and the development and construction of
Project Improvements.
2.02 Easements. From time to time during the Term, upon Lessee's request, Lessor
shall execute, acknowledge and deliver easement agreements in recordable form granting such
other easements(the"Easements")as Lessee,in its reasonable judgment,determines are necessary
in order to develop, operate, maintain, repair or replace the Project on, over, across, below and
above, as necessary, other property owned by Lessor, including, as applicable, easements
providing vehicular and pedestrian access to the Premises from nearby public rights-of-way,utility
and similar easements for the provision of services supporting the operation of the Project and
electrical transmission and distribution easements. Lessor and Lessee will work together
reasonably and in good faith to identify suitable locations for, and to negotiate the terms and
provisions of, any such Easements. All reasonable out-of-pocket costs incurred by Lessor
associated with preparation of such Easements (including surveying costs and reasonable
attorneys' fees) shall be borne by Lessee.
2.03 Reservation of Rights. Subject to the terms hereof, Lessor reserves to itself the
right to grant to others in the future nonexclusive easements(the"Future Easements")over,under,
upon, through, across, or on the Demised Premises in locations reasonably acceptable to Lessee,
which consent must not be unreasonably withheld, conditioned, or delayed. Any such Future
Easements shall be expressly subject and subordinate to the rights of Lessee under this Lease.
Lessor shall ensure that any such Future Easements include an obligation on the grantee
thereunder,at its cost, to relocate any Future Easements which may interfere with Lessee's use of
the Demised Premises.
ARTICLE 3
TERM
3.01 Term. The term of this Lease(the"Term") shall commence on the Effective Date
and expire on the Expiration Date, as follows:
(a) Initial Term. The initial term of the Lease (the "Initial Term") shall
commence on the Effective Date and shall end on the last day of the calendar month in which the
third (3"d) anniversary of the Effective Date occurs; provided, however, (i) Lessee shall have the
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right to extend the Initial Term for one additional period of six (6) months by delivering written
notice to Lessor not less than thirty(30)days prior to the scheduled expiration of the Initial Term,
and (ii) the Initial Term shall be extended on a day for day basis to the extent commencement of
construction of the Project Improvements is delayed as a result of Force Majeure. Lessee
acknowledges that construction of the Project Improvements must commence prior to the
expiration of the Initial Term. For the avoidance of doubt, grading and clearing of the land and
other preconstruction activities shall not be deemed to constitute commencement of construction.
(b) Construction Term. The"Construction Term" shall commence on the day
immediately following the expiration of the Initial Term(the"Construction Term Commencement
Date") and shall end on the day immediately preceding the fifth (5{1') anniversary of the
Construction Term Commencement Date;provided,however,Lessee shall have the right to extend
the Construction Term for one additional period of six (6)months by delivering written notice to
Lessor not less than thirty(30) days prior to the scheduled expiration of the Construction Term,
and (ii) the Construction Term shall be extended on a day for day basis as a result of delays in
completion of construction as a result of Force Majeure. Lessee must have substantially completed
construction and commenced commercial operation of the Project Improvements within the
Construction Term.
(c) Operating Term. The "Operating Term" shall commence on the date
immediately following the expiration of the Construction Term (the "Operating Term
Commencement Date") and shall expire on the day immediately preceding the thirtieth (30a1)
anniversary of the Operating Term Commencement Date.
3.02 Optional Termination Rights. During the Initial Term,Lessee may terminate this
Lease upon thirty(30) days' written notice to Lessor, subject to the decommissioning obligations
and requirements of Section 6.05.
ARTICLE 4
RENT; PRODUCTION ROYALTY PAYMENT
4.01 Base Rent. Commencing on the Effective Date,Lessee shall pay to Lessor annual
base rent("Base Rent")as follows:
(a) Initial Term. For each Lease Year of the Initial Term, Lessee shall pay
annual Base Rent in the amount of$1.00 per acre per month(approximately$27,291.48).The full
amount of the Base Rent for the first Lease Year of the Initial Term (the"First Rental Payment")
shall be due and payable in full concurrently with execution of this Lease. For each subsequent
Lease Year that occurs during the Initial Term, Lessee shall pay annual Base Rent, prorated for
any partial Lease Year occurring during the Initial Term,upon the commencement of such Lease
Year. Notwithstanding the foregoing, if Lessee commences construction of the Project
Improvements during the Initial Tenu, then from and after the date of such commencement of
construction, Lessee shall pay Base Rent in accordance with Section 4.01(b)below.
(b) Construction Term and Operating Term. For each Lease Year of the
Construction Term and Operating Term, Lessee shall pay annual Base Rent in an amount equal to
$2.00 per acre per month (approximately $54,582.96), prorated for any partial Lease Year
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occurring during the Term, which payment shall be due and payable upon the commencement of
such Lease Year.
4.02 Production Royalty Payment.
(a) During the Operating Term, Lessee shall pay Lessor an annual production
royalty payment in an amount equal to the greater of(i)$180,000.00 or(ii) 1.5% of annual Gross
Revenues from operations of the Demised Premises (the"Production Royalty Payment"). Lessee
shall provide Lessor with a statement of the Gross Revenues for a given calendar year during the
Operating Term within sixty(60)days after the close of such calendar year(the"Annual Revenue
Statement")(or,if the last calendar year of the Operating Term expires on any date other than the
last day of such calendar year, within sixty(60) days after the expiration of the Operating Term),
in a form reasonably acceptable to Lessor.
(b) "Gross Revenues,"as used in this Lease,means the sum of all gross receipts
received by Lessee from the sale of electricity generated by Lessee from the Generating Facilities,
net of all expenses of collection, including, without limitation, attorneys' fees and court costs.
Gross revenues shall not include any tax or other credits received by, or paid to, Lessee by any
governmental or quasi - governmental authority, including, without limitation, any renewable
energy credits,carbon dioxide credits or other federal income tax credits or any property tax credits
or abatements. For purposes of determining payments in accordance with the foregoing, when
electricity from the Generating Facilities is delivered to a common meter, the number of kilowatt
hours of electricity generated from the Generating Facilities shall be determined for each quarterly
period in accordance with the following formula:
(CM) (PT)=TKW
where (i) CM is the total number of kilowatt hours available for sale at such common meter, (ii)
PT is the total number of wind turbine and solar generating nameplate capacity of all turbines and
solar panels constituting the Generating Facilities, as measured by individual meters for each such
Generating Facilities, and (iii) TKW is the total number of kilowatt hours generated by Lessee
from the Generating Facilities for use in determining the payments due to Lessor in accordance
with this Section 4.02(a).
(c) Audits. Lessor, at any time within one (1) year after the receipt of the
Annual Revenue Statement and upon not less than thirty(30) days prior written notice to Lessee,
may cause an audit to be made of Lessee's Gross Revenues with respect to the calendar year (or
partial calendar year) covered in such Annual Revenue Statement and all of Lessee's records and
books relating to same; provided that neither Lessor nor its agents may take copies of any such
information unless agreed to in writing by Lessee,in its sole and absolute discretion;and provided
further that all records, books and other information made available to Lessor and its agents for
such audit shall be deemed to be strictly confidential and proprietary and shall not,to the maximum
extent permitted by Applicable Law,be disclosed without the express written consent of Lessee,
in its sole discretion. This audit may be conducted only by persons who are independent auditors
experienced in the audit of energy generating facilities and who are not engaged on a contingent
fee basis. Lessee shall make available for the audit at the Demised Premises or at another location
reasonably agreed by the Parties all such books and records. Lessor shall deliver a copy of the
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final audit report to Lessee promptly upon its conclusions, and Lessee shall have the right, within
thirty (30) days after receipt thereof, to deliver written notice disputing any findings set forth
therein. If Lessee timely delivers such notice,then the Parties will work together(with the auditor,
as applicable) to finalize the audit report. If the audit report, as finalized as provided above,
discloses an underpayment of the Production Royalty Payment,Lessee shall,within ten(10) days
after receipt of such audit,pay Lessor the amount of the underpayment,with interest at the Interest
Rate from the date the payment should have been made through and including the date of payment.
If the audit discloses an under-reporting of Gross Revenues that resulted in an underpayment of
the Production Royalty Payment in excess of three percent(3%),then Lessee shall also promptly
reimburse Lessor all reasonable out-of-pocket costs and expenses incurred in conducting the audit.
4.03 Additional Rent. All amounts required to be paid by Lessee under the terms of
this Lease other than Base Rent and the Production Royalty Payment are herein from time to time
collectively referred to as "Additional Rent". Base Rent and Additional Rent are herein
collectively referred to as"Rent".
4.04 No Abatement; Rent during Restoration Period. Except after a permitted
transfer to the extent provided in Article 10, no happening, event, occurrence or situation during
the Term, whether foreseen or unforeseen, and however extraordinary, shall relieve Lessee from
its obligations hereunder to pay Rent, or entitle Lessee to any abatement, diminution, reduction,
offset or suspension of Rent whatsoever; and Lessee waives any rights now or hereafter conferred
upon it by statute or other Applicable Law, to any abatement, diminution, reduction, offset or
suspension of Rent because of any event, happening, occurrence or situation whatsoever.
Notwithstanding anything in this Lease to the contrary, Lessee's obligation to pay Rent shall
continue during the Restoration Period until the Generating Improvements have been removed
from the Demised Premises. Promptly following the decommissioning of the Generating Facilities
(and, if and to the extent required hereunder, the other Project Improvements), Lessee shall cause
a Phase II ESA to be performed,and if the Phase II ESA identifies any violations of Environmental
Law with respect to the Demised Premises that are the obligation of Lessee under this Lease,then
the obligation of Lessee to pay Base Rent shall resume until any and all remediation required by
Environmental Law is completed.After expiration of this Lease and during the Restoration Period,
so long as the Generating Improvements have ceased operations (and operations are not resumed
at any time), Lessee shall have no obligation to pay the Production Royalty Payment.
ARTICLE 5
IMPOSITIONS; UTILITIES; NET LEASE
5.01 Impositions Defined. The term "Impositions" shall mean all taxes, assessments,
use and occupancy taxes, water and sewer charges, rates and rents, charges for public utilities,
excises, levies, license and permit fees, and other charges by any public authority, general and
special,ordinary and extraordinary, foreseen and unforeseen, of any kind and nature whatsoever,
which shall or may during the Term be assessed, levied, charged, confirmed or imposed by any
public authority upon or accrued or become a lien on(i)the Demised Premises(whether applicable
to the fee or leasehold estate, but excluding matters arising by, through or under Lessor) or any
part thereof and on all Project Improvements; (ii)the rent and income received by or for the
account of Lessee from any sublessees or for any use or occupancy of the Demised Premises;
(iii) such franchises, licenses, and permits as may be pertinent to the use of the Demised Premises;
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or (iv) any documents to which the Lessee is a party creating or transferring an interest or estate
in the Demised Premises or any parking rights or appurtenances to the Demised Premises.
Impositions shall not include any income tax, capital levy, estate, succession, inheritance or
transfer taxes,or similar tax of Lessor; any franchise tax imposed upon any owner of the fee of the
Demised Premises; or any income, profits, or revenue tax, assessment, or charge imposed upon
the rent or other benefit received by Lessor under this Lease by any municipality, county, state,
the United States of America, or any other governmental body, subdivision, agency, or authority
(each a"Governmental Authority" and collectively, "Governmental Authorities"). However,if at
any time during the Term the present method of taxation shall be so changed that the whole or any
part of the taxes, assessments, levies, impositions or charges now levied, assessed or imposed on
real estate and improvements thereon shall be discontinued and in whole or partial substitution
therefor, taxes of the type described in the immediately preceding sentence or taxes, assessments,
levies, impositions, or charges shall be levied, assessed, and/or imposed wholly or partially as a
capital levy or otherwise on the rents received from said real estate or the rents reserved herein or
any part thereof, then such substitute taxes, assessments, levies, impositions, or charges, to the
extent so levied,assessed,or imposed,shall be deemed to be included within the term Impositions.
5.02 Lessee's Obligation. During the Term, Lessee shall pay as and when the same
shall become due all Impositions directly to the Governmental Authority or other person entitled
to receive payment thereof and, upon Lessor's written request, shall provide Lessor with
reasonable evidence that such Impositions have been paid in a timely manner. Impositions that are
payable by Lessee for the tax year in which the Term commences as well as during the tax year in
which the Term ends shall be apportioned so that Lessee shall pay its proportionate share of the
Impositions for such periods of time. Where any Imposition that Lessee is obligated to pay may
be paid pursuant to Applicable Law in installments, Lessee may pay such Imposition in
installments as and when such installments become due. Lessee shall, if requested, deliver to
Lessor evidence of due payment of all Impositions Lessee is obligated to pay hereunder,
concurrently with the making of such payment. As soon as practicable after the Effective Date,
but in any event prior to the first anniversary of the Effective Date, Lessor shall cause,at Lessee's
sole cost, each component of the Demised Premises to be subdivided as a separate legal and tax
parcel and assessed separately from the remaining land of Lessor. If at any time during the Term
the Demised Premises are not separately assessed from the remaining property of Lessor, then
Lessee shall pay a share of the Impositions properly allocable to the Demised Premises. Upon
receipt of any ad valorem tax statements for the property that includes the Demised Premises,
Lessor shall deliver to Lessee copies of such statements and an invoice setting forth Lessor's
calculation of the portion of the ad valorem taxes properly allocable to the Demised Premises,and
the Parties shall thereafter work together reasonably and in good faith to determine the proper
allocation of such taxes.Lessee shall pay such portion properly allocable to the Demised Premises
on the earlier to occur of(i)the due date for such property tax or(ii) within thirty(30) days after
the Parties' determination. Lessor shall, in accordance with the laws of the State of Texas,
reasonably cooperate with Lessee's efforts to mitigate Lessee's tax obligations in relation to this
Lease and the operations of the Project Improvements (including sales tax,property tax and other
tax obligations)and shall,in accordance with the laws of the State of Texas and solely in Lessor's
capacity as lessor under this Lease,reasonably consent to Lessee's efforts to qualify for any current
or subsequently available state or local tax exemption or mitigation programs.
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5.03 Tax Contest. Lessee may, at its sole cost and expense, contest the validity or
amount of any Imposition for which it is responsible, in which event the payment thereof may, to
the extent permitted by Applicable Law, be deferred during the pendency of such contest, if
diligently prosecuted. Lessee shall give Lessor prior written notice of Lessee's intent to contest.
Nothing herein contained, however, shall be construed to allow any Imposition to remain unpaid
for such length of time as would permit the Demised Premises, or any part thereof, or Lessee's
interest in the Easements, or the Project Improvements or Easement Area Improvements, to be
sold or seized by any Governmental Authority for the nonpayment of the same, and when the
contest is resolved, Lessee must pay all sums determined to be due in connection with such
Impositions (including, if applicable, any penalties). Lessee shall promptly furnish Lessor with
copies of all proceedings and documents with regard to the contest of any Imposition, and Lessor
shall have the right, at its expense, to participate therein. Lessee shall reimburse Lessor for any
out-of-pocket costs reasonably incurred by Lessor in connection with Lessee's exercise of its right
to contest in connection with this section.
5.04 Evidence Concerning Impositions. The certificate, advice, bill, or statement
issued or given by the appropriate officials authorized by Applicable Law to issue the same or to
receive payment of any Imposition of the existence, nonpayment, or amount of such Imposition
shall be prima facie evidence for all purposes of the existence, nonpayment, or amount of such
Imposition.
5.05 Rendition. For each tax year commencing after the Effective Date, Lessee shall
render the Demised Premises for each Governmental Authority imposing Impositions thereon and
may,if Lessee shall so desire, endeavor at any time or times to obtain a lowering of the valuation
of the Premises for any year for the purpose of reducing ad valorem taxes thereon, and in such
event, Lessor will, at the request of Lessee, cooperate in effecting such a reduction,provided that
Lessor shall not be required to incur any expense in connection therewith without its prior consent.
5.06 Utilities. Lessee shall be responsible for any and all costs associated with the
installation or extension of utilities to the Premises which are necessary for Lessee's operations on
the Premises. Lessee shall pay all charges for gas, electricity, light,heat, air conditioning,power,
telephone, cable, interne service and other communication services, and all other utilities and
similar services rendered or supplied to the Demised Premises, and all water fees, water rents,
sewer/septic service charges, or other similar charges levied or charged against, or in connection
with,the Demised Premises.
5.07 Net Lease. Except as expressly provided in this Lease(including Article 8 hereof),
Lessor shall not be required to make any expenditure, incur any obligation, or incur any liability
of any kind whatsoever in connection with this Lease or the financing, ownership, construction,
maintenance, operation, or repair of the Premises. It is expressly understood and agreed that this
is a completely net lease intended to assure Lessor the rentals herein reserved on an absolute net
basis.
5.08 Right to Perform Lessee's Obligation as to Impositions. If Lessee fails to timely
pay any Imposition for which it is responsible hereunder, or fails to timely notify Lessor of its
intention to contest the same, or fails to pay contested Impositions as provided in Section 5.03,
Lessor may, at its election (but without obligation), pay such Imposition with any interest and
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penalties due thereon, and the amount so paid shall be reimbursed by Lessee on demand together
with interest thereon at the Interest Rate from the date of such payment until repaid.
ARTICLE 6
CONDITION OF DEMISED PREMISES; IMPROVEMENTS
6.01 Condition of Demised Premises. SUBJECT TO,AND EXCEPT AS PROVIDED
IN, SECTIONS 7.02, 7.04, 15.01, 15.03 AND 16.01 (THE "QUALIFICATIONS"), LESSEE
ACKNOWLEDGES THAT IT IS LEASING THE DEMISED PREMISES AND ANY
IMPROVEMENTS LOCATED THEREON "AS IS, WHERE IS, WITH ALL FAULTS" AND
THAT SUBJECT TO THE QUALIFICATIONS,NEITHER LESSOR,NOR ANY EMPLOYEE,
AGENT, OR OTHER REPRESENTATIVE OF LESSOR,HAS MADE AND IS NOT MAKING
ANY, AND EXPRESSLY NEGATES AND DISCLAIMS ANY AND ALL,
REPRESENTATIONS OR WARRANTIES OF ANY KIND, CHARACTER, OR NATURE,
EXPRESS OR IMPLIED,WRITTEN OR ORAL,CONCERNING THE DEMISED PREMISES
OR ANY IMPROVEMENTS THEREON, INCLUDING, WITHOUT LIMITATION, ANY
REPRESENTATION OR WARRANTY CONCERNING(I) THE NATURE OR CONDITION,
PHYSICAL OR OTHERWISE, OF THE DEMISED PREMISES OR ANY SUCH
IMPROVEMENTS OR OTHER ASPECT OF THE DEMISED PREMISES, (II)THE
HABITABILITY, MERCHANTABILITY, PROFITABILITY, MARKETABILITY,
SUITABILITY, OR FITNESS FOR A PARTICULAR USE OR PURPOSE OF THE DEMISED
PREMISES OR ANY IMPROVEMENTS THEREON FOR ANY AND ALL ACTIVITIES AND
USES, (III) THE SOIL CONDITIONS, DRAINAGE CONDITIONS, TOPOGRAPHICAL
FEATURES, ACCESS TO PUBLIC RIGHTS-OF-WAY, AVAILABILITY OF UTILITIES OR
OTHER CONDITIONS OR CIRCUMSTANCES THAT AFFECT OR MAY AFFECT THE
DEMISED PREMISES OR ANY USE TO WHICH LESSEE MAY PUT THE DEMISED
PREMISES; (IV) ANY CONDITIONS AT OR THAT AFFECT OR MAY AFFECT THE
DEMISED PREMISES WITH RESPECT TO ANY PARTICULAR PURPOSE, USE,
DEVELOPMENT POTENTIAL, OR OTHERWISE; (V)ANY ENVIRONMENTAL,
GEOLOGICAL, METEOROLOGICAL, STRUCTURAL, OR OTHER CONDITION OR
HAZARD OR THE PRESENCE OR ABSENCE THEREOF, HERETOFORE, NOW, OR
HEREAFTER AFFECTING IN ANY MANNER THE DEMISED PREMISES, INCLUDING,
BUT NOT LIMITED TO,THE ENVIRONMENTAL CONDITION OF THE DEMISED PREMI
OR ITS COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION OR
LAND USE LAWS, RULES, REGULATIONS, ORDERS, OR REQUIREMENTS,
INCLUDING, WITHOUT LIMITATION, ALL ENVIRONMENTAL LAWS;
(VI) COMPLIANCE OF THE DEMISED PREMISES OR ANY SUCH IMPROVEMENTS OR
THE OPERATION OR USE OF THE DEMISED PREMISES WITH ANY APPLICABLE
RESTRICTIVE COVENANTS OR APPLICABLE LAW (INCLUDING, WITHOUT
LIMITATION, ZONING LAWS OR REGULATIONS, BUILDING CODES,
ENVIRONMENTAL LAWS, AND DISABILITY ACCESS LAWS); OR (VII) ANY OTHER
MATTER WITH RESPECT TO THE DEMISED PREMISES. SUBJECT TO THE
QUALIFICATIONS, LESSEE AGREES IT SHALL RELY SOLELY ON ITS OWN
INVESTIGATION AND NOT ON ANY INFORMATION PROVIDED BY OR TO BE
PROVIDED BY LESSOR OR ITS OFFICIALS, MANAGERS, EMPLOYEES,
CONTRACTORS, AGENTS, OR REPRESENTATIVES,AND LESSE AGREES IT HAS HAD
ADEQUATE OPPORTUNITY TO INSPECT, CONDUCT TESTS, AND PERFORM OTHER
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DUE DILIGENCE AND OTHERWISE EVALUATE THE DEMISED PREMISES,
INCLUDING, WITHOUT LIMITATION, TO ANALYZE LESSEE'S ANTICIPATED USE.
SUBJECT TO THE EXPRESS COVENANTS,REPRESENTATIONS AND WARRANTIES OF
LESSOR IN THIS LEASE, INCLUDING THE QUALIFICATIONS,LESSEE RELEASES THE
LESSOR FROM, AND WAIVES ANY AND ALL LIABILITY, CLAIMS, DEMANDS,
DAMAGES, AND COSTS (INCLUDING, WITHOUT LIMITATION, REASONABLE
ATTORNEYS' FEES AND EXPENSES) OF ANY AND EVERY KIND OR CHARACTER,
KNOWN OR UNKNOWN, FOR OR ATTRIBUTABLE TO ANY LATENT OR PATENT
ISSUE OR CONDITION AT THE PREMISES. IT IS THE INTENTION OF THE PARTIES
THAT THE FOREGOING RELEASE SHALL BE EFFECTIVE WITH RESPECT TO ALL
MATTERS, PAST AND PRESENT, KNOWN AND UNKNOWN, SUSPECTED AND
UNSUSPECTED, SUBJECT TO THE QUALIFICATIONS.
6.02 Construction; Alterations;Demolition.
(a) At any time and from time to time during the Term, Lessee may demolish
and remove any existing improvements, construct such new project Improvements, and perform
such alteration, renovation, repair, refurbishment, and other work with regard to the Project
Improvements, as Lessee may elect,without Lessor's consent or approval,provided that the same
is done in accordance with the terms and provisions of this Lease and in compliance with all
Applicable Law. Without limiting the foregoing, the Parties acknowledge that power generation
technologies are improving at a rapid rate and that Lessee may from time to time replace existing
Generating Improvements on the Lake Premises with new models,without approval from or notice
to Lessor,provided such work is done in compliance with Section 6.03 and all Applicable Law.
(b) Except as otherwise provided in Sections 6.04 and 6.05 or as required by
Applicable Law,Lessee shall have no obligation to demolish or remove the Project Improvements.
6.03 Construction Standards and Liens
(a) The Project Improvements shall be constructed, and any and all alteration,
renovation, repair, restoration, refurbishment, or other work with regard thereto shall be
performed, in accordance with the following requirements:
(i) Lessee shall cause its general contractor to obtain and maintain
payment and performance bonds for one hundred percent(100%)of
the cost of the Project Improvements issued by a financially viable,
nationally recognized bonding company reasonably acceptable to
Lessor, and in a form reasonably acceptable to Lessor, naming
Lessor as a dual obligee or payee and in compliance with all
Applicable Law, including, without limitation, Chapter 2253 of the
Texas Government Code. Notwithstanding the foregoing, such
performance and payment bonds may instead be provided at each
phase of construction for 100% of the amount of such phase
pursuant to a construction and operations plan, provided such
construction and operations plan (which must include (a) the
minimum megawatts to be generated by the Project Improvements,
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(b) the estimated amount of the Decommissioning Security and
performance of decommissioning and restoration obligations, and
(c) a security plan for the Demised Premises that provides for the
securing of the Generating Improvements,and other portions of the
Project Improvements that could foreseeably cause harm to a
member of the public,from public access,including,but not limited,
to fencing, gates,barriers, and other security features and providing
for reasonable public access to any portions of the Lake Premises to
remain accessible to the public)has been provided to Lessor. Lessor
acknowledges that the construction and operations plan will be
provided to Lessor solely for information purposes, except that the
City Council of the City of Port Arthur must approve the security
plan set forth therein and shall have the approval rights set forth in
Section 6.06(a). Lessee shall promptly notify Lessor of any claims
made under the bonds.
(ii) With respect to any construction,installation,alteration,renovation,
repair,refurbishment and other work reasonably expected to exceed
$1,000,000 in cost,with regard to the Project Improvements,Lessee
shall have delivered not less than ninety (90) days' notice prior to
commencement of such work to Lessor,
(iii) All construction or work shall be performed in a good and
workmanlike manner in accordance with good industry practice for
the type of work in question;
(iv) All such construction or work shall be done in material compliance
with all Applicable Law,including,as applicable, Section 2252.909
of the Texas Government Code;
(v) No such construction shall be commenced until Lessee shall have
obtained all licenses, permits, and authorizations required for the
commencement of such work by all Governmental Authorities
having jurisdiction,including Lessor;
(vi) No such construction or work shall be commenced until Lessee shall
have obtained, and Lessee shall maintain in force and effect, the
insurance coverage required in Article 8 with respect to the type of
construction or work in question;
(vii) Lessee shall obtain, at its sole cost and expense, consent(s) to
encroachment from any parties holding rights to the Premises under
Existing Encumbrances, permitting such construction or work, to
the extent such consent or approval is required, prior to
commencement of construction which impacts such easement
holder;
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(viii) After commencement, such construction or work shall be
prosecuted with due diligence to its completion (subject to Force
Majeure); and
(ix) After completion of initial construction or substantial alteration of
the Project Improvements, Lessee shall provide a complete set of
as-built drawings to Lessor.
(b) Lessee shall have no right,authority,or power to bind Lessor or any interest
of Lessor in the Demised Premises or the Land or any improvements located on the Land for any
claim for labor or for material or for any other charge or expense incurred in construction of the
Project Improvements or performing any alteration,renovation,repair,restoration,refurbishment,
or other work with regard thereto, nor to render Lessor's interest in the Demised Premises or the
Land or any improvements located on the Land liable for any lien or right of lien for any labor,
materials,or other charge or expense incurred in connection therewith,and Lessee shall in no way
be considered to be the agent of Lessor with respect to,or general contractor for,the construction,
erection, or operation of any such Project Improvements, alterations, renovations, repairs,
restorations,refurbishments, or other work. If any liens or claims for labor or materials supplied
or claimed to have been supplied to the Demised Premises or the Land shall be filed, Lessee shall,
within thirty(30)days following the imposition of any such lien,pay and release the same or bond
such liens in accordance with Applicable Law or otherwise obtain the release or discharge thereof.
If Lessee fails to promptly pay and release or bond such lien to Lessor's reasonable satisfaction,
Lessor shall have the right,but not the obligation,to pay,release or obtain a bond to protect against
such liens and claims following written notice to Lessee, and Lessee shall promptly reimburse
Lessor on demand for any such amounts paid together with interest thereon at the Interest Rate
from the date of such payment until paid, and Lessee shall indemnify each and all of the Lessor
Indemnified Parties(hereinafter defined)against any damages,losses or costs actually incurred by
the Indemnified Parties arising out of any such claim. Lessee's indemnification of Lessor
contained in this section shall survive the expiration or earlier termination of this Lease, and such
rights of Lessor shall be in addition to all other remedies provided herein or by law or in equity.
6.04 Ownership of Improvements.
(a) During the Term, all Project Improvements (including Generating
Improvements)and all personalty,trade fixtures,equipment,and other personal property of Lessee
("Personalty"), shall be solely the property of Lessee.Lessee shall have the right to remove any or
all of the Project Improvements (including Generating Improvements, subject to the
decommissioning requirements of this Lease and Applicable Law) at any time and from time to
time. For the avoidance of doubt, to the extent permitted by law, no part of the Generating
Improvements shall be considered part of the Property or an improvement to real property,and the
same shall at all times be considered tangible Personalty owned exclusively by Lessee. Upon the
expiration or termination of this Lease and the expiration of the Restoration Period, subject in all
events to this Section 6.04 and Section 6.05 below, any Project Improvements remaining on the
Demised Premises shall automatically vest in, revert to, and become the property of Lessor, in
their then existing AS-IS,WHERE-IS condition and without representation or warranty(including
as to merchantability or fitness for purpose)whatsoever,express or implied,all of which are hereby
disclaimed, without compensation to, or requirement of consent or other act of, Lessee, and
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without the necessity of deed, bill of sale, conveyance or other act or agreement of Lessee, and
without any payment of any kind or nature by Lessor to Lessee or to any other person, free and
clear of all claims of Lessee or any third party. Lessee's obligation to remove any Project
Improvements from the Premises is subject to Sections 6.05 and 9.01.
(b) Except as provided in Section 6.05(c), Lessee shall remove its Personalty
(however, except as otherwise required by Section 6.05(a) or (b), Lessee may abandon in place
any piping,conduits,lines and similar items that may otherwise be classified as personal property)
at its own expense prior to the expiration of the Restoration Period, provided that any resulting
damage to the Premises is repaired at the expense of the Lessee during the Restoration Period.Any
Personalty that remains on the Demised Premises after the deadline for removal shall be deemed
abandoned and, at Lessor's election,may be retained by Lessor as Lessor's property, disposed of
by Lessor, without accountability, in such manner as Lessor deems fit (including having such
property stored at the risk and expense of Lessee),or required by Lessor's written notice to Lessee
to be removed by Lessee.
6.05 Decommissioning Security;Removal of Project Improvements.
(a) Lessee shall obtain and deliver evidence of financial assurance in
compliance with the requirements of Chapters 301 and 302 of the Texas Utility Code (the
"Decommissioning Security") for proper decommissioning and restoration of the Generating
Improvements. Acceptable forms of financial assurance include a guaranty with a minimum
investment grade credit rating issued by a major domestic credit rating agency, a letter of credit, a
bond, or another form of financial assurance acceptable to Lessor. If any such guaranty, surety,or
other financial assurance fails to meet the requirements set forth herein at any time during the Term
or the Restoration Period,the Decommissioning Security shall, as soon as reasonably practicable,
be transferred to another entity meeting the requirements hereunder. The Decommissioning
Security is in addition to, and shall in no way diminish or decrease, any bonding, security, or
insurance requirements applicable to the construction of the Project Improvements as required
under this Lease or Applicable Law.
In connection such Decommissioning Security,Lessee must prepare,at its cost,and submit
to the City Council of the City of Port Arthur for review a construction and operations plan prior
to the commencement of construction of any Generating Improvements. Estimated restoration
costs for the Demised Premises and estimated salvage value of the Generating Improvements must
be included in Lessee's construction and operations plan and must be determined by an
independent, third-party professional engineer licensed in Texas. The amount of the
Decommissioning Security shall in no event be less than the amount by which the estimated cost
of removing the Generating Improvements and restoring the Demised Premises to, as near as
reasonably possible, the condition of the Premises as of the Effective Date exceeds the salvage
value of the Generating Improvements, less any portion of the value of the Generating
Improvements pledged, to the extent permitted under this Lease, to secure outstanding debt.
Lessee, at its cost, must provide updated estimates prepared by an independent, third-party
professional engineer licensed in Texas(i)no later than the tenth(10th) anniversary of the date on
which the solar or wind power facilities of the Generating Improvements, as applicable, were
approved for participation in market operations by a regional transmission organization, and (ii)
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I
I
thereafter, every fifth (5th) anniversary of such date for the solar or wind power facilities, as
applicable.
Lessee must provide Lessor with evidence of the Decommissioning Security by the earlier
of (a) the termination of this Lease or (b) (i) as to the wind facilities of the Generating
Improvements, the 10th anniversary of the date on which such facilities were approved for
participation in market operations by a regional transmission organization, or (ii) as to the solar
facilities of the Generating Improvements, the 20th anniversary of the date on which such facilities
were approved for participation in market operations by a regional transmission organization. The
Decommissioning Security must be maintained until Lessee has properly decommissioned the
Generating Improvements in compliance with Applicable Law. Lessor shall have the option, at
Lessor's cost, to engage a third-party inspector to verify completion of the decommissioning
activities at the Demised Premises.
(b) Lessor and Lessee acknowledge that Chapters 301 and 302 of the Texas
Utilities Code impose certain requirements on lessees operating wind power facilities and solar
power facilities, such as the Generating Improvements, to remove such facilities upon the
expiration or termination of the applicable lease.Notwithstanding anything herein to the contrary,
to the extent applicable to the Demised Premises, Lessee must remove the Generating
Improvements to the extent required by,and in compliance with,the requirements of such Chapters
301 and 302 of the Texas Utilities Code,which are hereby incorporated herein by reference.Lessee
shall have a period of up to twelve(12) months after the date of expiration or termination of this
Lease (the "Restoration Period") during which Lessee shall have the right to enter upon the
Premises to perform said decommissioning and restoration work and to remove and dispose of the
Generating Improvements and any Personalty from the Premises.
(c) Notwithstanding anything herein to the contrary, Lessee shall not be
obligated to remove, and may abandon in place, any Project Improvements not constituting
Generating Improvements together with any Personalty therein. In the event of any such
abandonment, without limiting the provisions of Section 6.04(a), Lessee shall promptly upon
request of Lessor execute, acknowledge, and deliver to Lessor a deed, bill of sale, and other
instruments requested by Lessor that(i) evidence the conveyance all of Lessee's right, title, and
interest in and to the abandoned Project Improvements and Personalty and(ii)assign all contracts
or other instruments designated by Lessor relating to the construction,operation,and maintenance
of the abandoned Project Improvements and Personalty; and deliver to Lessor the originals (if
originals are not available, copies)of all plans,records,registers,permits, and all other papers and
documents in Lessee's possession,relating to the construction, operation, and maintenance of the
Project Improvements.
6.06 Approvals; Permits; Non-Interference.
(a) Approvals and Permits. Lessee is solely responsible, at its cost, for
obtaining, maintaining, and renewing all permits, consents, approval, licenses, studies,
assessments, evaluations, reports, and similar required for the construction and operation of the
Project Improvements,including,but not limited to,as applicable,a 404 permit,viewshed analysis,
assessments for endangered species, wetlands, and migratory birds, and all other required
environmental evaluations. Lessor, in its capacity as fee owner of the Premises, will reasonably
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cooperate with Lessee, at no cost to Lessor, and consent to or support any permit application
submitted by Lessee for the construction and operation of the Project Improvements; provided,
however, Lessor will not sign any permit application as applicant, co-applicant, or permit holder
unless (i) such permit is specifically included in the construction and operations plan provided to
Lessor and the City Council of the City of Port Arthur has approved the execution of such permit
by the Lessor, or(ii) the City Council of the City of Port Arthur, in its sole discretion, approves
Lessor executing or joining in the execution of such permit in such capacity.
(b) Non-Interference. During the Tenn,Lessor,solely in its capacity as lessor,
shall not take,permit,or authorize any action, except as otherwise provided under this Lease, that
would unreasonably impede or hinder Lessee's use, development, or operation of the Demised
Premises.The foregoing sentence shall not be deemed to prevent Lessor from exercising any rights
or remedies that Lessor may have under this Lease, at law,or in equity.Notwithstanding anything
to the contrary in this Lease, any action taken by the City of Port Arthur in its capacity as a
regulatory entity shall not be deemed to "unreasonably impede or hinder" Lessee's use,
development, or operation of the Demised Premises and shall not be a default or beach of this
Lease. Subject to the Existing Encumbrances, without limiting the foregoing, neither Lessor, in
its capacity as lessor, any Lessor Indemnified Party, nor any other contractor, agent, lessee or
grantee of Lessor shall (A) interfere with or impair (1) the free, unobstructed and natural
availability, accessibility, flow, frequency or direction of the sun or of wind over and across the
Lake Premises or with wind speed or wind direction over the Lake Premises or(2) the lateral or
subjacent support for the Generating Improvements or(B)engage in any other activity on or about
the Lake Premises that might cause a decrease in the output or efficiency of the Generating
Improvements. Lessor shall not grant or purport to grant to any Person any right in or to the
Demised Premises (including any right in the subsurface thereof or the air space thereover) that
might breach the covenants set forth in this Section.
6.07 Tax Credits. If,under Applicable Law, Lessee(or any other holder of an interest
in the leasehold estate created hereunder, direct or indirect) becomes ineligible for any tax credit,
benefit, or incentive for alternative energy expenditure established by any local, state, or federal
Governmental Authority,then,upon request of Lessee, Lessor and Lessee shall negotiate in good
faith a mutually agreeable amendment to or replacement with a different instrument of this Lease
to make Lessee eligible for such tax credit,benefit, or incentive; provided,however, that nothing
in this section shall entitle Lessee to a fee interest in the Land, diminish Lessee's payment
obligations under this Lease,or extend the Term.For the avoidance of doubt, and notwithstanding
anything herein to the contrary, any renewable energy credits or pollution credits that result from
generation of electrical energy from the Generating Improvements on the Lake Premises,including
any tax credits, benefits, or other incentives, shall be solely for the benefit of Lessee, and Lessor
shall have no claim or interest therein.
ARTICLE 7
USE,MAINTENANCE,AND REPAIRS
7.01 Use.
(a) Initial Term. Throughout the Term, including the Initial Term,Lessee(and
its contractors, consultants, agents, and representatives) shall have the right to enter upon the
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Premises for the purpose of conducting investigations, inspections and studies of the Premises to
confirm the suitability of the Premises for the uses contemplated herein, including but not limited
to:
(i) preparation of surveys of the Premises;
(ii) conducting such physical due diligence,soil analysis,environmental
studies, biological and cultural studies, and other investigations,
tests and inspections of the Premises as Lessee may deem necessary
or appropriate, including a Phase I environmental site assessment
and wetlands and navigation studies (collectively, the
"Investigations"); and
(iii) determining the feasibility of solar and wind energy conversion on
the Lake Premises, including studies of solar and wind resources,
temperature, relative humidity, barometric pressure and other
meteorological data.
Notwithstanding the foregoing:
A. Lessee shall have the right to conduct geotechnical studies
of the load bearing capacity and consistency of the soil
(which studies shall include core drilling in representative
locations on the Demised Premises),provided that following
the completion of such studies, the surface of the Demised
Premises shall be restored to substantially its condition prior
to the conducting of such studies;and
B. Except as required in connection with decommissioning,the
Lessee Parties may not conduct any invasive testing of the
Demised Premises(including, without limitation, a Phase II
environmental assessment) without the prior written
approval of the Lessor, which shall not be unreasonably
withheld, conditioned,or delayed.
C. Subject to satisfaction of all requirements for the
commencement of construction set forth herein, including
Section 7.01(b)(ii),Lessee shall have the right to commence
construction of the Project Improvements during the Initial
Term in accordance with Section 7.01(b).
(b) Construction Term and Operating Term.
(i) Subject to Section 7.01(b)(ii),and without limiting the provisions of
Section 7.02,from and after the commencement of the Construction
Term, Lessee shall have the right to occupy, use, and enjoy the
Premises for the following uses:
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A. with respect to the Lake Premises, for the construction,
operation, maintenance, repair, monitoring and removal of
solar and wind energy production equipment and
appurtenant facilities (including (1) overhead and
underground electrical distribution and transmission lines,
(2) meteorological towers and wind measurement
equipment, (3) overhead and underground communication
lines and (4) other above and below ground improvements,
facilities, appliances, machinery, and equipment related to
the foregoing, and including facilities required to construct,
maintain, and protect improvements on submerged land,
including levees) and to otherwise develop and conduct
renewable energy activities, convert solar and wind energy
into electrical energy, and otherwise construct, operate,
maintain, repair, monitor and remove equipment and
facilities to collect, transmit, distribute, market, utilize, and
sell electrical energy (whether produced on the Demised
Premises or otherwise) (collectively, "Generating
Improvements"), as well as the right to harvest, plant and
monitor oysters, fish, shrimp and other aquatic fauna in the
Lake Premises in compliance with any permits required for
the construction and operation of the Generating
Improvements;
B. with respect to the Substation Premises,for the construction,
operation, maintenance, repair, and removal of an electrical
substation and appurtenant facilities, including
improvements related to the electrical interface with the
Generating Improvements and other electrical infrastructure,
components and equipment connecting such substation to
the Data Center Premises (collectively, the "Substation
Improvements"),
C. with respect to the Data Center Premises, for the
construction,operation,maintenance,repair,and removal of
a data center, battery storage facilities, a substation, and an
offshore energy hub, and other improvements and facilities
appurtenant to or in support of the foregoing, including
generators and tanks for the provision of backup power to
the Project Improvements (the "Data Center
Improvements"); and
D. with respect to the Demised Premises generally, for
undertaking any other activities incidental to, or that Lessee
reasonably determines are necessary to accomplish or in
support of, any of the foregoing purposes.
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(ii) Notwithstanding anything herein to the contrary,Lessee shall not be
entitled to commence construction of any given Project
Improvements unless and until the following conditions have been
satisfied:
A. Lessee shall have obtained all discretionary planning and
zoning land use entitlements and approvals required for the
current phase of construction, as well as for any on-site or
off-site improvements associated therewith,required by any
Governmental Authority having jurisdiction over the
Premises(excluding Construction Permits)(collectively,the
"Entitlements"), and both (a) the Entitlements shall not be
subject to further appeal and(b)there shall be no proceeding
or litigation pending to appeal the issuance of the
Entitlements or to enjoin or restrain the performance of the
Project Improvements, or if such a proceeding or litigation
has been pending, then a dismissal, decision, or judgment
shall not be subject to further appeal. Lessee shall bear all
responsibility for all costs and expenses associated with
issuing or securing, as applicable,the Entitlements.
B. Lessee shall have obtained or received all permits, licenses,
consents, or similar approvals, required by Governmental
Authorities to commence construction for the current phase
of such Project Improvements ("Construction Permits").
Lessee shall thereafter obtain as and when required in
accordance with Lessee's construction schedule all
necessary Construction Permits required for the construction
of the Project Improvements, including, without limitation,
for activities relating to dredging, submerged lands,
wetlands, and any applicable permits issued by the U.S.
Army Corps of Engineers, U.S. Department of Energy,
Texas Public Utilities Commission, Jefferson County, and
the City of Port Arthur for the development and construction
of the Project Improvements.
C. Lessee has submitted a construction and operations plan(as
described in Section 6.03(a)(i) and otherwise satisfying the
requirements set forth herein)to the City Council of the City
of Port Arthur, and the City has otherwise approved the
security plan therein(in accordance with Section 6.03(a)(i))
and the execution by the City of any permits requiring the
City's approval (in accordance with Section 6.06(a));
D. If the construction of such Project Improvements will impact
any parties holding rights in the Premises under any Existing
Encumbrances, Lessee shall have, at its sole cost and
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expense,obtained consent(s)to encroachment from any such
parties permitting the development and construction of such
Project Improvements, to the extent such consent or
approval is required.
E. Lessee has, at its sole cost and expense, obtained payment
and performance bonds for 100% of the cost of the Project
Improvements, or applicable phase of the Project
Improvements, as set forth under Section 6.03(a)(i)above.
F. Lessee acknowledges that Section 2252.909 of the Texas
Government Code imposes certain requirements related to
construction of improvements on public property.
Accordingly, Lessee shall provide to Lessor (1) evidence
that each construction contract executed by Lessee with
respect to the Premises satisfies the requirements of Section
2252.909(b)of the Texas Government Code,and(2)not less
than 90 days before commencement of construction, notice
of commencement satisfying the requirements of Section
2252.909(c)of the Texas Government Code.
(c) Lessee shall not use or occupy the Demised Premises,permit the Demised
Premises to be used or occupied, nor do or permit anything to be done in or on the Demised
Premises in a manner which would(i) void any insurance coverage held by Lessee then in force
with respect thereto, (ii)make it impossible to obtain the insurance required to be furnished by
Lessee hereunder, or(iii)violate any Applicable Law. Lessee shall not use or allow the Demised
Premises to be used for any unlawful purpose.
(d) Notwithstanding the demise of the Lake Premises and the grant of the
Easements to Lessee hereunder, Lessor understands and has been informed by Lessee that by this
Lease,Lessee has the right to cause on,over, across and under the Lake Premises or as an indirect
or direct result of Lessee's activities on the Lake Premises in connection with the Generating
Improvements, such audio, visual, view, light or weather created hazards (collectively, the
"Consequences") transmitted by or from the presence and operations of the Generating
Improvements(the"Effects"). Lessor, for itself and the Lessor Indemnified Parties, does hereby
waive,remise, and release any right, claim or cause of action which it may now have or which it
may have in the future against Lessee as a direct or indirect result of said Consequences and
Effects.
7.02 Title Policy; Escrow and Closing.
(a) During the Initial Term, Lessee shall obtain and deliver to Lessor a
commitment for a fee owner's title insurance policy issued by the Title Company covering the
Demised Premises (the "Commitment") and disclosing all lease, lien, easement, reservation,
restriction, or other encumbrance ("Title Exceptions") affecting the Demised Premises. If the
Commitment discloses any Title Exception to Lessor's title to the Demised Premises that, in
Lessee's good faith determination, may materially interfere with the construction or operation of
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the Project Improvements(each,an"Objection"),then Lessee may so notify Lessor. In such env�rzt,
Lessor and Lessee will reasonably cooperate to remedy such Objection,provided that Lessor shall
not be obligated to incur any out-of-pocket costs not reimbursed by Lessee or any other liability
in connection with such cure. Notwithstanding the foregoing, Lessor shall be obligated to rerri cs �
and discharge, or otherwise cure to Lessee's reasonable satisfaction, (i) liens, collateral
assignments and security interests securing any loan to or other monetary indebtedrie=ss cot-
obligation binding on the Demised Premises, (ii) tax liens, (iii) judgment, mechariics ',
materialmen's and other monetary liens affecting the Demised Premises or part thereof; and ' r)
any title encumbrance created by, or arising out of the acts or omissions of, Lessor on or aft r the
Effective Date (other than this Lease); provided, however, Lessor shall not be obligated to-
any liens or encumbrances created by, or arising out of work performed on or materials deli-v
to the Demised Premises by, through or under, Lessee. As used herein, "Permitted Exceptic xis"
means any Title Exceptions affecting the Premises as of the Effective Date and any "T—itle
Exceptions entered into after the Effective Date with the prior written consent of Lessee, but
excluding Must Cure Matters and matters that Lessor and Lessee cure as provided abc, _
Notwithstanding the foregoing or anything herein to the contrary, Lessor shall be obligate€ t to
remove and discharge, or otherwise cure to Lessee's reasonable satisfaction, any Title Exct�j i is ,ri
created by, or arising out of the acts or omissions of, Lessor on or after the Effective Date (vthr
than this Lease).
(b) Lessee shall be responsible for all costs of any title policies, includira 4i) a
title policy insuring Lessor's fee estate in the Demised Premises, if required by Lessor, <i r) a
leasehold title policy for Lessee,and(iii)any lender's leasehold title policy in connection with
permitted leasehold financing. Lessor will reasonably cooperate,at no cost to Lessor, with Less
in obtaining any such policies. Lessor will reasonably cooperate with Lessee, at no out-.of--p c,clot
cost to Lessor,in connection with the issuance of the leasehold title policy and for Lessee to co-b.-Lair-1
any endorsements to the leasehold title policy as Lessee may request. In connection with tle
foregoing,Lessor shall execute and deliver to the title company issuing any such policy (the
Company") such affidavits, estoppels or indemnities as may be required by the Title Company to
issue any leasehold or loan policy of title insurance, including a owner's affidavit and/or a bills
paid affidavit in form reasonably acceptable to Lessor and the Title Company.
(c) Lessee shall be responsible for all escrow and closing costs, fees, expri
and taxes associated with the Parties execution of and entering into this Lease;provided, hovwrowr,
each Party shall be responsible for the fees of any counsel representing such Party.
7.03 Maintenance and Repairs.
(a) Lessee shall take good care of the Demised Premises,normal wear and t ar
and damage from casualty and condemnation excepted; make all necessary repairs thereto,
structural and nonstructural, ordinary and extraordinary, foreseen and unforeseen; and shall
maintain and keep the Premises in good repair and condition at all times and in cornpliance —with
all Applicable Law, including, without limitation, the City of Port Arthur's adopted prop arty
maintenance standards. Lessee shall ensure any and all asphalt, concrete, landscaping, utility
systems, irrigation systems, drainage facilities or systems, grading, retaining walls or sizri lair
support structures, foundations, signage, fencing or barriers, ornamentation, and all other
improvements are properly maintained and presentable and the Demised Premises are fr-e at-
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refuse. Lessee shall not do,permit,or suffer any waste to or upon the Premises or any part thereof.
However,the foregoing provisions of this Section 7.03 shall not prohibit Lessee from undertaking
the initial construction of the Project Improvements or any subsequent repairs, remodeling,
renovation, or reconstruction (whether resulting from casually, condemnation, or otherwise) in
accordance with the terms of this Lease.
(b) Lessee shall secure and protect the Demised Premises in a commercially
reasonable manner against casualty events that Lessee has received notice of or should reasonably
be aware may occur, such as hurricanes or other severe weather events.
(c) Notwithstanding anything to the contrary in this Lease, Lessor shall have
no obligation to maintain or repair the Demised Premises.
7.04 No Further Encumbrance.. Except as expressly contemplated herein or as
permitted under Section 11.02,Lessor shall not,without the prior written consent of Lessee,which
may be granted or withheld in Lessee's sole and absolute discretion, during the Term, grant, or
suffer or permit any other person or entity to, enter into any covenant, restriction, easement, or
condition on,or otherwise further encumber,the Demised Premises,in each case without the prior
written approval of Lessee and any Permitted Mortgagee, each in its sole discretion.
ARTICLE 8
INSURANCE AND INDEMNITY
8.01 Insurance. Lessee shall, at its cost and expense, keep and maintain in force the
following policies of insurance:
(a) During the Term,Lessee shall obtain and maintain the following insurance
coverages:
(i) Workers Compensation — In the minimum coverage limits
established by Applicable Law;
(ii) Employers' Liability-$1,000,000.00 each accident;
(iii) Commercial General - $1,000,000.00 per occurrence &
$2,000,000.00 in the aggregate;
(iv) Automobile Liability-$1,000,000.00 per occurrence.
(b) In addition to the requirements above,after commencement of construction
of the Project Improvements and at all times during the Construction Term and Operating Term,
Lessee shall obtain and maintain the following insurance coverages, as applicable:
(i) Property Insurance—Insurance on the Project Improvements against
loss or damage by fire and against loss or damage by any other risk
now and from time to time insured against by "special form"
(formerly "all risk") property insurance. The property insurance
must be written on an "all risk" policy form and in amounts
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sufficient to provide coverage for the full insurable value of the
Project Improvements; the policy for such insurance shall have a
replacement cost endorsement or similar provision. "Full insurable
value" shall mean actual replacement value (exclusive of cost of
excavation, foundations, and footings below the surface of the
ground or below the lowest basement level), and such full insurable
value shall be confirmed from time to time at the request of Lessor
by one of the insurers. During any period of construction, Lessee
shall obtain and maintain for the duration of the construction project
all risk builder's risk insurance in the total amount of the value of
the construction project and shall include, but not be limited to,
theft,vandalism,soft costs,business interruption and extra expense,
delay in start-up, flood, earthquake, windstorm, property-in-transit,
and off-site storage.
(ii) Commercial General - $3,000,000.00 per occurrence &
$5,000,000.00 in the aggregate.
(iii) Excess/Umbrella Liability—$10,000,000 per occurrence.
(iv) Pollution—$10,000,000 per occurrence.
Lessor may, from time to time during the Term (but no more frequently than once every five(5)
years) increase the liability insurance coverages required under Section 8.01(b) by an amount
which may be commercially reasonable at the time, taking into account the size and type of the
Project Improvements, their construction, location, use and occupancy.
8.02 Policies.
(a) All insurance maintained in accordance with the provisions of this Article 8
shall be issued by insurance companies with an AM Best's rating of A- (or equivalent) and a
financial rating of not less than Class "VIII" or better and licensed in the State of Texas, (b) be
written as primary policies not contributing with and not in excess of coverage that Lessor may
carry, and (c) contain an endorsement providing that such coverage may not be cancelled with .
respect to Lessor except after thirty (30) days' prior written notice from insurance company to
Lessor. All liability insurance policies shall name Lessor and its officials,employees, contractors,
agents, and representatives as additional insureds and shall include contractual liability
endorsements.All such policies of insurance may be provided on either an occurrence or claims-
made basis. If such coverage is provided on a claims made basis, such insurance shall continue
throughout the Term and Restoration Period, and upon the termination of this Lease or expiration
of the Restoration Period,or the expiration or cancellation of the insurance, Lessee shall purchase
or arrange for the purchase of either an unlimited reporting endorsement ("tail" coverage), or
"Prior Acts" coverage from the subsequent insurer, with a retroactive date on or prior to the
effective date of this Lease and for a period of not less than ten(10)years following the expiration
of the Restoration Period or the period of the applicable statute of repose.
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(b) Lessee shall furnish Lessor with certificates of insurance evidencing the
coverages required (i) under Section 8.01(a) prior to any entry by any Lessee Parties on the
Premises, and(ii)under Section 8.01(b)prior to the commencement of the Construction Term,in
each case with new certificates of insurance or other evidence of insurance to be delivered within
ten (10) days prior to the expiration of the current policies. In addition, if requested by Lessor,
Lessee shall deliver to Lessor duplicate originals or copies certified as being true and correct of
any such insurance policies. If Lessee fails to maintain any insurance required to be maintained by
Lessee pursuant to this Lease, Lessor may, at its election (without obligation), procure such
insurance as may be necessary to comply with these requirements, and Lessee shall reimburse
Lessor,promptly on demand,with interest thereon at the Interest Rate from the date of expenditure
until fully reimbursed.Any and all property insurance policies required to be maintained pursuant
to this Agreement shall, if they do not automatically permit the waivers of subrogation contained
herein,be endorsed to reflect the waivers of subrogation provided for herein.
8.03 Lessee's Indemnity. Subject in all cases to Section 8.04 and Article 15, LESSEE
SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS LESSOR AND ITS OFFICIALS,
OFFICERS, MANAGERS, EMPLOYEES, CONTRACTORS, CONSULTANTS, AGENTS,
AND REPRESENTATIVES (THE "LESSOR INDEMNIFIED PARTIES") FROM AND
AGAINST ANY AND ALL LIABILITIES, SUITS,CLAIMS,LOSSES,CAUSES OF ACTION,
LIENS, FINES, PENALTIES, COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, COURT COSTS AND REASONABLE ATTORNEY'S FEES, BUT
EXCLUDING CONSEQUENTIAL,PUNITIVE,SPECIAL,EXEMPLARY OR SPECULATIVE
DAMAGES EXCEPT TO THE EXTENT ACTUALLY REQUIRED TO BE PAID TO A THIRD
PARTY) (COLLECTIVELY, "CLAIMS") SUSTAINED BY OR ASSERTED AGAINST ANY
LESSOR INDEMNIFIED PARTY ARISING OUT OF PERSONAL INJURY (INCLUDING
BODILY INJURY OR DEATH) OR DAMAGE TO, OR LOSS OR DESTRUCTION OF,
PROPERTY ARISING OUT OF THE ACTS OR OMISSIONS OF THE LESSEE OR ITS
AGENTS, REPRESENTATIVES, CONTRACTORS, OR OTHER PARTIES ENGAGED ON
ITS BEHALF DURING ANY ENTRY ON THE DEMISED PREMISES OR IN THE COURSE
OF PERFORMING ANY INVESTIGATIONS THEREON OR RELATING TO THE USE,
OPERATION, OR OCCUPANCY OF THE DEMISED PREMISES, INCLUDING THE
CONSTRUCTION, ALTERATION, REPAIR, OR MAINTENANCE OF ANY PROJECT
IMPROVEMENTS OR FAILURE TO PERFORM ALL DECOMMISSIONING OBLIGATIONS
UNDER THIS LEASE OR APPLICABLE LAW,EVEN IF ANY SUCH CLAIM ARISES OUT
OF THE JOINT NEGLIGENCE OF A LESSOR INDEMNIFIED PARTY, BUT EXCLUDING
CLAIMS ARISING OUT OF THE SOLE NEGLIGENCE, GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF ANY OF THE LESSOR INDEMNIFIED PARTIES.
NOTWITHSTANDING THE FOREGOING, LESSEE SHALL NOT BE RESPONSIBLE FOR,
AND THE FOREGOING INDEMNIFICATION SHALL NOT APPLY TO, CLAIMS OF ANY
NATURE INCURRED BY ANY LESSOR INDEMNIFIED PARTY ARISING FROM THE
DISCOVERY OR EXISTENCE OF ANY CONDITION AT THE DEMISED PREMISES
EXISTING AS OF THE EFFECTIVE DATE OR THEREAFTER CREATED OR CAUSED BY
ANY LESSOR INDEMNIFIED PARTY OR ANY THIRD PARTY, INCLUDING THE
EXISTENCE OR RELEASE OF ANY HAZARDOUS SUBSTANCE ON THE DEMISED
PREMISES PRIOR TO LESSEE'S ENTRY THEREON. MAINTENANCE OF THE
INSURANCE REFERRED TO IN THIS ARTICLE 8 SHALL NOT AFFECT LESSEE'S
OBLIGATIONS UNDER THIS SECTION 8.03.
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8.04 Subrogation. ANYTHING IN THIS LEASE TO THE CONTRARY
NOTWITHSTANDING, LESSOR AND LESSEE HEREBY EACH WAIVE ANY AND ALL
RIGHTS OF RECOVERY, CLAIM, ACTION OR CAUSE OF ACTION AGAINST THE
OTHER PARTY AND, AS APPLICABLE, ITS AGENTS, EMPLOYEES, OFFICERS,
OFFICIALS,PARTNERS,EQUITY OWNERS,SERVANTS OR SHAREHOLDERS FOR ANY
LOSS OR DAMAGE THAT MAY OCCUR TO THE PROPERTY OF SUCH WAIVING
PARTY (INCLUDING, AS TO LESSEE, THE PROJECT IMPROVEMENTS) OR ANY
PERSONAL PROPERTY OF SUCH WAIVING PARTY THEREIN, BY REASON OF FIRE,
THE ELEMENTS OR ANY OTHER CAUSE WHICH COULD BE INSURED AGAINST
UNDER THE TERMS OF A CUSTOMARY ALL RISKS PROPERTY INSURANCE POLICY,
WHETHER OR NOT ACTUALLY INSURED AND REGARDLESS OF CAUSE OR ORIGIN,
INCLUDING NEGLIGENCE OF THE OTHER PARTY HERETO, ITS AGENTS,
EMPLOYEES, OFFICERS, PARTNERS, SERVANTS, SHAREHOLDERS OR
REPRESENTATIVES. The insurance policies obtained by Lessee pursuant to this Lease shall
contain endorsements waiving any right of subrogation that the insurer may otherwise have against
the Lessor.
ARTICLE 9
CASUALTY; CONDEMNATION
9.01 Casualty
(a) Lessee shall give prompt written notice to Lessor of any material damage
or destruction to the Project Improvements by fire or other casualty(a"Casualty"). In such
event,the following shall apply:
(i) Promptly after the occurrence of such Casualty, Lessee shall
commence and thereafter diligently pursue all steps necessary to
secure the Project Improvements and otherwise make the Project
Improvements safe so as not to result in further damage to the
Project Improvements or risk of injury to persons or damage to other
property on the Land, including, without limitation, constructing a
fence around the Project Improvements(if necessary for security or
safety).The work described in this Section 9.01(a)(i)is herein called
the"Immediate Work".
(ii) If the cost of repairing or reconstructing the applicable Project
Improvements to substantially the condition prior to such Casualty
is not in excess of twenty percent(20%)of the then new replacement
cost of the Project Improvements,and such repairs or reconstruction
of any such damage or destruction can be made under existing
Applicable Law or regulations of any Governmental Authorities
applicable thereto (or can be so made with minor and nonmaterial
changes to the former condition and form of property damaged or
destroyed), and the Permitted Mortgagee (if any) permits such
restoration and the application of insurance proceeds therefor,
Lessee shall commence promptly after the insurance settlement, and
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thereafter diligently continue to repair and reconstruct, in
compliance with Section 6.03(a), the Project Improvements so
damaged or destroyed to substantially the condition such
improvements were in prior to said damage or destruction with such
alterations thereto as Lessee shall reasonably determine prudent or
valuable under the circumstances,including any changes required to
comply with Applicable Law(the "Restoration Work") and Lessee
shall be entitled to use any applicable insurance proceeds for such
purpose.
(iii) If the cost of repairing or reconstructing said damage or destruction
to substantially its former condition and form is in excess of the
twenty percent (20%) of such new replacement cost specified in
subsection(a),or if the Permitted Mortgagee(if any)does not permit
such restoration and/or the application of insurance proceeds in
connection therewith, or if such reconstruction or rebuilding cannot
be made under then Applicable Law or regulations of any
Governmental Authority applicable thereto (and cannot be so made
with minor and nonmaterial changes to the former condition and
form of the property damaged or destroyed; or with such other
changes as may be proposed by Lessee), or (provided Lessee has
maintained the insurance coverages required to be maintained by
Lessee hereunder, including all-risk and builder's property
insurance) the casualty is an uninsured casualty, then Lessee shall
not be obligated to'restore the same, but may instead at its option,
subject to the decommissioning requirements of Section 6.05,
demolish and remove the remaining affected Project Improvements
and upon completion of such work,terminate this Agreement.
(iv) Notwithstanding the foregoing, Lessee may also elect to proceed
under clause (iii) above if(A) any customer, subtenant or licensee
of Lessee terminates its agreement with Lessee in accordance with
the terms thereof as a result of a Casualty and such termination
would materially adversely affect the financial viability of the
Project Improvements, or(B) less than ten(10) years remain in the
Term.
All proceeds payable as a result of any casualty from any insurance policies maintained by
or for the benefit of Lessee shall be,as between Lessor and Lessee and subject to ARTICLE
11, solely for the benefit of Lessee and shall be distributed and paid directly to Lessee.
9.02 Condemnation
(a) Notice. Lessee shall promptly notify Lessor and any Permitted Mortgagee
upon becoming aware of the commencement of any eminent domain, condemnation, or other
similar proceedings with regard to Premises. Lessor and Lessee covenant and agree to fully
cooperate in any condemnation, eminent domain, or similar proceeding in order to maximize the
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total award receivable in respect thereof.The full amount of any award or compensation(excluding
only any award or compensation awarded for the value of or severance damages for the land taken
(considered as unimproved but encumbered by the Lease), which shall belong solely to Lessor)
whether pro tanto or final for any taking shall be paid to Lessee or, if applicable, the most senior
Permitted Mortgagee. •
(b) Total Taking. Should all or substantially all of the Demised Premises,or so
much of the Demised Premises that the, portion remaining cannot, in Lessee's reasonable
discretion, be economically restored to a condition that would permit each component of the
Project Improvements to be operated on a commercial basis, shall be taken or condemned by or
on behalf of any governmental authority or any other person or entity pursuant to a power of
eminent domain (a "Taking"), or if the condemnation award actually received by Lessee is
insufficient, in Lessee's sole judgment, to restore and operate the Project Improvements, or if the
Permitted Mortgagee (if any) does not permit such restoration and/or the application of the
condemnation award in connection therewith, or if such restoration cannot be made under then
existing Applicable Law or regulations of any Governmental Authority applicable thereto (and
cannot be so made with minor and nonmaterial changes to the former condition and form of the
property damaged or destroyed; or with such other changes as may be proposed by Lessee) (any
Taking described in this paragraph,a"Total Taking"),or if by reason of such Taking any customer,
subtenant or licensee of Lessee terminates its agreement with Lessee in accordance with the terms
thereof and such termination would materially adversely affect the financial viability of the Project
Improvements, then Lessee shall not be obligated to perform such restoration, but may instead,
subject to Section 6.05, at its option terminate this Lease as of the date the condemning party takes
lawful possession of the Demised Premises. Upon any such termination, Base Rent shall be
apportioned and paid to such date of termination.
(c) Partial Taking. If a Taking occurs that is not a Total Taking, then (i) this
Agreement shall continue in effect as to the portion of the Demised Premises not Taken, and (ii)
Lessee shall restore or relocate the Project Improvements to the extent necessary, in Lessee's
reasonable judgment,for the commercial operation of the Project Improvements. In the event of a
partial taking where this Lease is not terminated, the Base Rent payable during the remainder of
the Term after taking of possession by the condemning authority shall be reduced on a just and
proportionate basis having due regard to the relative value and acreage of the portion of the
Demised Premises thus taken as compared to the remainder thereof.
(d) Temporary Taking. If the whole or any portion of the Demised Premises
shall be Taken for temporary use or occupancy, the Term shall not be reduced or affected and
Lessee shall continue to pay the Rent in full. Except to the extent Lessee is prevented from so
doing pursuant to the terms of the order of the condemning authority, Lessee shall continue to
perform and observe all of the other covenants, agreements, terms, and provisions of this Lease.
In the event of any temporary taking, Lessee shall be entitled to receive the entire amount of any
award directly awarded to Lessee therefor.
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ARTICLE 10
TRANSFER; ASSIGNMENT AND SUBLETTING; DIVISION OF LEASE
10.01 Lessee's Right to Assign
(a) During the Term, Lessee may freely assign or transfer its interest in,to and
under this Lease, in whole or in part (each, a "Transfer") without the prior written consent of
Lessor,provided that,in the case of any Transfer, the following conditions are satisfied:
i. Lessee provides Lessor prior written notice of such Transfer and the identity of the
proposed transferee and a description of any relationship between Lessee and
proposed transferee,together with reasonable evidence that the conditions set forth
in clauses ii, iii, iv, v, and vi are satisfied;
ii. The transferee, directly or through its affiliates, has, or will have as of the date of
assignment and assumption, a net worth and financial standing at least equal to
Lessee's and that is sufficient to satisfy the obligations of Lessee under the Lease;
iii. The transferee either (A) directly or through its affiliates, has demonstrated
experience in the construction and/or operation,as applicable,of projects similar to
the Facilities, or (B) engages a third-party contractor or operator reasonably
satisfactory to Lessor with such experience;
iv. The transfer would not result in the violation of any terrorism or similar laws,rules,
or regulations(including CFIUS)or any other applicable laws,rules,or regulations;
v. The transfer will not violate, and transferee agrees to remain in compliance with,
the obligations of Lessee with respect to the Decommissioning Security;
vi. The transferee provides proof of all required insurance coverage to Lessor; and
vii. The transferee assumes of all of Lessee's obligations under the lease in writing,and
Lessee or the transferee delivers to Lessor a copy of such assignment and
assumption within five(5) days after the effective date of any such assignment and
assumption.
Any dispute between the Parties as to the satisfaction of the foregoing conditions shall be
resolved through expedited arbitration with the American Arbitration Association ("AAA") in
Houston,Texas,in accordance with the then-current rules and procedures for expedited arbitration
of AAA; provided, however, that with respect to any such arbitration, (i)the notification of the
hearing referred to in Section E-7 of the Rules shall be four(4) Business Days in advance of the
hearing; (ii)the hearing, if any, shall be held within ten (10)Business Days after the appointment
of the arbitrator; (iii)the arbitrator's decision shall be limited to a determination of whether the
conditions to Transfer set forth in clauses ii. through v. above are satisfied; (iv)the decision of the
arbitrator shall be a written and reasoned decision rendered within a period of ten(10) days after
the conclusion of the hearing and shall be final and binding on the parties and not subject to further
appeal. Each party will use its best efforts to expedite selection of an arbitrator and will reply to
any request to select or strike an arbitrator within five(5)Business Days.
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10.02 Sale by Lessor. Lessor shall have the right,at any time during the Term,to sell its
fee interest in all or any portion of the Demised Premises,provided that such sale shall be subject
and subordinate to the terms and provisions of this Lease. At Lessor's request, Lessee will execute
and deliver an attormnent agreement in favor of the transferee in a form reasonably acceptable to
Lessee.
10.03 Operator. The Parties acknowledge that Lessee may, at its option, engage one or
more Affiliates or third Persons to operate any or all of the Project Improvements. Such
engagement shall not require the consent of, or notice to, Lessor, but no such engagement shall
relieve Lessee of its obligations hereunder.
ARTICLE 11
LESSEE'S FINANCING
11.01 Lessee's Right to Encumber
(a) Right to Mortgage.Lessee may,upon notice to Lessor,but without Lessor's
consent or approval, mortgage, collaterally assign, or otherwise encumber and grant liens and
security interests in all or any part of its interest during the Term in the Lease, the Project
Improvements or in other property owned by Lessee (which may include its leasehold interest in
the Land) (the"Mortgaged Assets");provided, however,that no cost is imposed on Lessor, the fee
estate is not encumbered,the mortgagee agrees to use reasonable efforts to deliver a duplicate copy
to Lessor of any written notice of default delivered to Lessee thereunder, and Lessor's,rights with
respect to the Decommissioning Security are not impaired. Any mortgage, deed of trust, or other
security instrument so granted by Lessee are collectively referred to as a"Permitted Mortgage"and
each holder of a Permitted Mortgage and any financing parties, including any equity investor of
Lessee,is referred to as"Permitted Mortgagee". Whenever Lessee has mortgaged an interest under
this Section 10,it shall endeavor to give notice of the Permitted Mortgage(including the address of
the Permitted Mortgagee for notice purposes) to Lessor; provided that failure to give this notice
shall not constitute a default under this Lease, but rather shall only have the effect of not binding
Lessor with respect to such Permitted Mortgage until notice is given.
(b) Notice of Default and Opportunity to Cure. Upon delivery to Lessor of
written notice of a Permitted Mortgage (or any assignment thereof) and Permitted Mortgagee's
name and address, the Permitted Mortgagee shall be entitled to the following protections:
(i) Lessor shall provide all Permitted Mortgagees with copies of any
and all written notices delivered to Lessee under this Lease alleging
any default or non-compliance by Lessee under this Lease (each, a
"Default Notice"). Lessor agrees that(A)the cure periods specified
in Section 13.01 of this Lease will not start until such Default Notice
is delivered to Permitted Mortgagee at the address for such
Permitted Mortgagee last delivered to Lessor, and (B) Permitted
Mortgagee shall have(1)a period of thirty(30)days beyond the time
available to Lessee under this Lease in which to cure a monetary
breach or default by Lessee, and (2) a period of sixty (60) days
beyond the time available to Lessee under this Lease in which to
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cure a non-monetary breach or default by Lessee, plus such
additional time as may be reasonably necessary to cure such default
so long as Permitted Mortgagee gives Lessor notice of its intent to
cure during, and commences efforts to cure within,such initial sixty
(60) day period and thereafter is diligently prosecuting such cure to
completion. The Permitted Mortgagee shall have the absolute right
to substitute itself for Lessee and perform the duties of Lessee
hereunder for purposes of curing such default. Lessor expressly
consents to such substitution, agrees to accept such performance,
and authorizes the Permitted Mortgagee (or its employees, agents,
representatives or contractors) to enter upon the Premises to
complete such performance with all the rights, privileges and
obligations of the Lessee hereunder. Lessor shall not take any action
to terminate this Lease in law or equity prior to the expiration of the
cure periods available to a Permitted Mortgagee as set forth above.
(ii) Notwithstanding Section 11.01(b)(i) or anything herein to the
contrary, if any default identified in a Default Notice cannot
reasonably be cured by Permitted Mortgagee without Permitted
Mortgagee obtaining possession of or acquiring the Permitted
Mortgaged Assets,then the cure period shall be deemed extended as
long as Permitted Mortgagee shall be diligently prosecuting legal
proceedings to gain possession of or acquire(directly or indirectly)
the Permitted Mortgaged Assets and thereafter as long as Permitted
Mortgagee diligently proceeds to cure such defaults as are curable
by Permitted Mortgagee under this Lease. If a Permitted Mortgagee
is prohibited by any process or injunction issued by any court,or by
any other action by a court having jurisdiction over any bankruptcy
or insolvency proceeding involving Lessee (or any other person or
entity), from commencing or prosecuting the proceedings necessary
to obtain possession or ownership of the Permitted Mortgaged
Assets, Permitted Mortgagee's cure period shall be tolled and
extended for the period of such prohibition.
(iii) Notwithstanding anything herein to the contrary, a Permitted
Mortgagee shall have the right, without Lessor's consent, to (i)
assign its Permitted Mortgage; (ii) take possession of and operate
the Permitted Mortgaged Assets in accordance with the terms and
provisions of this Lease and perform all obligations to be performed
by Lessee or cause a receiver to be appointed to do so, (iii) exercise
its remedies under its Permitted Mortgage, including selling the
Permitted Mortgaged Assets at a foreclosure sale, and (iv) acquire
(or cause its designee to acquire) the Permitted Mortgaged Assets
by foreclosure or by an assignment in lieu of foreclosure or
otherwise, provided Permitted Mortgagee (or such designee) has
assumed all remaining rights and obligations of Lessee under this
Lease, and thereafter to assign or transfer the Permitted Mortgaged
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Assets to a third party;provided such transferee or assignee shall be
an entity(i) that has assumed all of the obligations of Lessee under
this Lease, and(ii) otherwise satisfies the requirements set forth in
clauses(i)through (iii)of Section 10.01(a).
(iv) Following notice by a Permitted Mortgagee that the Permitted
Mortgagee (or its designee) has (x) acquired the Permitted
Mortgaged Assets, whether by foreclosure or deed or assignment in
lieu thereof, in accordance with Section 11.01(b)(iii); (y) acquired
Lessee; or (z) sold, assigned, transferred or otherwise disposed of
this Lease to a third party in accordance with Section 11.01(b)(iii),
Lessor shall recognize Permitted Mortgagee or such other third
party as Lessee's successor under this Lease with the right to make
all demands, give all notices,take all actions and exercise all rights
of Lessee hereunder, and this Lease shall continue in full force and
effect;provided, however, that any successor under this Lease shall
not be required to cure defaults that are not reasonably susceptible
of being cured or performed by the successor (but shall, for the
avoidance of doubt,be obligated to cure any then-existing monetary
defaults),and any such non-curable defaults shall be deemed waived
by Lessor upon completion of foreclosure proceedings or other
acquisition of the Permitted Mortgaged Assets.
(v) A Permitted Mortgagee shall have no obligation or liability under
this Lease or otherwise to Lessor unless and until Permitted
Mortgagee succeeds to title to Lessee's interest in the Permitted
Mortgaged Assets. If a Permitted Mortgagee (or its designee)
succeeds to Lessee's rights and interests under this Lease, whether
by foreclosure,assignment in lieu of foreclosure or otherwise, such
entity shall only have liability from and after it succeeds to absolute
title to Lessee's interest in the Permitted Mortgaged Assets, and
upon such Permitted Mortgagee's assigning such rights and interests
to another party or upon relinquishment of such possession, as the
case may be, such Permitted Mortgagee shall have no further such
liability.
(vi) If this Lease terminates for any reason, including because it is
rejected or disaffirmed under bankruptcy law or any other law
affecting creditors' rights,then, so long as a Permitted Mortgagee is
making commercially reasonable efforts to cure any curable
defaults, Lessor shall, upon written request from Permitted
Mortgagee received within ninety (90) days after the termination,
rejection or disaffirmance of this Lease, without additional
consideration, enter into a new lease in favor of Permitted
Mortgagee or its designee, for a term to commence on the date of
the aforementioned termination and to expire on the same date as
this Lease would have expired if it had otherwise continued
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uninterrupted until its scheduled date of termination,and containing
the same covenants, agreements, terms, provisions and limitations
as are contained in this Lease,and the new lease shall have the same
priority as this Lease over any lien or encumbrance created or
assumed by Lessor.
(vii) Notwithstanding any provision of this Lease to the contrary, no
modification or amendment of this Lease, no termination of this
Lease and no surrender of the estate created by this Lease shall be
effective without the prior written consent of Permitted Mortgagee.
(c) Amendments. Lessor and Lessee shall reasonably cooperate in including in
this Lease by suitable amendment from time to time any reasonable and customary provision
which may reasonably be requested by a Permitted Mortgagee for the sole purpose of
implementing the mortgagee protection provisions contained in this Lease and allowing such
Permitted Mortgagee reasonable means to protect or preserve the liens of the Permitted Mortgage
upon the occurrence of a default under the terms of this Lease. Lessor and Lessee each agree to
execute and deliver (and to acknowledge, if necessary, for recording purposes) any reasonable
form of agreement reasonably necessary to effect any such amendment, all at no cost to Lessor.
(d) Waiver of Landlord's Lien. During the Term, Lessor shall have no
ownership,lien,security or other interest in any of the Project Improvements or Personalty,or any
profits derived therefrom. To the maximum extent permitted by Applicable Laws, Lessor hereby
expressly waives any liens, including, landlord's liens (statutory, contractual or otherwise) or
security interest in favor of Lessor,upon any Personalty or the Project Improvements that Lessor
otherwise possesses. Nothing in this section shall limit or impair Lessor's rights with respect to
the Decommissioning Security.
(e) Nothing contained in this Section 11.01 shall prevent Lessor's pursuing
monetary damages or injunctive relief relating to Lessee's default.
11.02 Lessor Mortgages
(a) Lessor represents and warrants to Lessee that as of the Effective Date there
are no existing mortgages, deeds of trust, or other similar liens encumbering Lessor's title to the
Land.
(b) Lessor shall have the right to mortgage, collaterally assign, or otherwise
encumber and grant security interests in all or any part of its interest in the Land during the Term
in the Premises, including its reversionary interest under this Lease in any Project Improvements
(each a"Fee Mortgage"), provided that any such Fee Mortgage shall be subject and subordinate
to the terms and conditions of this Lease. In the event Lessor shall grant a Fee Mortgage, Lessor
shall endeavor to notify Lessee in writing thereof, which notice include the name and address of
the mortgagee under such Fee Mortgage (the "Fee Mortgagee"). In the event of any foreclosure
under any Fee Mortgage, Lessee, and at Lessor's request, will execute and deliver an attornment
agreement in favor of the mortgagee and in a form reasonably acceptable to Lessee, provided the
transferee assumes all obligations of Lessor under the Lease.
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ARTICLE 12
QUIET ENJOYMENT
12.01 Quiet Enjoyment. For the avoidance of doubt, the lease of the Demised Premises
to Lessee hereunder is a grant of an exclusive right of possession,subject to the terms of this Lease,
including Section 2.03, and the Existing Exceptions. Lessor covenants that Lessee, prior to the
occurrence of an Event of Default, shall and may peaceably and quietly have,hold, occupy, use,
and enjoy the Premises during the Term,and may exercise all of its rights hereunder, subject only
to the provisions of this Lease,the Existing Exceptions, and Applicable Law. Except as otherwise
provided in this Lease,nothing in this Lease shall be deemed to impose on Lessor any liability on
account of any act or failure to act by any Person other than Lessor.
ARTICLE 13
EVENT OF DEFAULT AND REMEDIES
13.01 Event of Default. Each of the following shall be deemed an"Event of Default"by
Lessee hereunder and a material breach of this Lease:
(a) Whenever Lessee shall fail to pay any installment of Rent, Production
Royalty Payment,or any other sum payable by Lessee to Lessor under this Lease,on the date upon
which the same is due to be paid, and such default shall continue for five(5)business days after
Lessee shall have been given a written notice specifying such default;
(b) Whenever Lessee shall fail to promptly commence and thereafter diligently
pursue performance of the Immediate Work and Lessee shall fail to remedy the same (by
commencing and thereafter diligently pursuing such work) within fifteen (15) days after Lessee
shall have been given a written notice specifying such default;
(c) Failure to timely commence or complete construction or operation, as
applicable, of the Project Improvements;
(d) Failure to maintain the Demised Premises, subject to a 30-day notice and
cure period(for items that are not capable of being cured within such period, with such additional
time as may be reasonably necessary to complete cure provided curative action is commenced
within such 30-day period and diligently pursued to completion);
(e) Failure to continuously operate the Facilities for a period of 12 months,
consecutively or cumulatively,within any 24 month period,subject to Force Majeure and periods
of replacement, upgrade, refurbishment, and renovation of the Project Improvements as
contemplated in Section 6.02, and periods of restoration following any Casualty or Taking;
(f) Whenever Lessee shall fail to keep, perform, or observe any of the
covenants, agreements,terms, or provisions contained in this Lease that are to be kept,performed
or observed by Lessee(including the covenants,agreements,terms or provisions contained herein
that are to be kept or performed by the owner or lessee of the Premises) other than with respect to
payment of Rent or other liquidated sums of money and as provided in Section 13.01(b) above,
and Lessee shall fail to remedy the same within thirty(30)days after Lessee shall have been given
a written notice specifying such default;provided,however, that if a non-monetary default can be
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cured but by its nature cannot be cured within such thirty(30)day time period, and if Lessee has
commenced curing such default within such time period and thereafter diligently pursues such cure
to completion,such thirty(30) day cure period shall be extended for the period of time necessary
for Lessee to cure such default;
(g) Whenever an involuntary petition shall be filed against Lessee under any
bankruptcy or insolvency law or under the reorganization provisions of any law of like import or
whenever a receiver of Lessee, or of all or substantially all of the property of Lessee, shall be
appointed without acquiescence, and such petition or appointment is not discharged or stayed
within sixty(60)days after the happening of such event;or
(h) Whenever Lessee shall make an assignment of its property for the benefit
of creditors or shall file a voluntary petition under any bankruptcy or insolvency law or seek relief
under any other law for the benefit of debtors.
13.02 Remedies. If an Event of Default occurs,then subject to the rights of any Permitted
Mortgagee as provided in Section 11.01, Lessor may at any time thereafter,prior to Lessee's cure
thereof, and without waiving any other remedies hereunder or available to Lessor at law or in
equity(Lessor's remedies being cumulative), do any one or more of the following:
(a) Lessor may terminate this Lease by giving Lessee written notice thereof,in
which event this Lease and the Leasehold Estate and all interest of Lessee and all parties claiming
by, through, or under Lessee shall automatically terminate upon the effective date of such notice;
and Lessor,its agents or representatives, shall have the right, without further demand or notice,to
reenter and take possession of the Premises and remove all persons and property therefrom with
or without process of law, without being deemed guilty of any manner of trespass and without
prejudice to any remedies for arrears of Rent or existing breaches hereof. In the event of such
termination, Lessee shall be liable to Lessor for all Rent accrued to the date of termination and
damages, including, without limitation, all expenses incurred by Lessor in enforcing its rights
hereunder,including but not limited to attorneys' fees, court costs, and other such expenses.
(b) Lessor may terminate Lessee's right to possession of the Premises and
enjoyment of the rents, issues, and profits therefrom without terminating this Lease or the
Leasehold Estate, and reenter and take possession of the Premises and remove all persons and
property therefrom with or without process of law, without being deemed guilty of any manner of
trespass and without prejudice to any remedies for arrears of Rent or existing breaches hereof,and
lease,manage,and operate the Premises and collect the rents, issues, and profits therefrom all for
the account of Lessee, and credit to the satisfaction of Lessee's obligations hereunder the net rental
thus received(after deducting therefrom all reasonable costs and expenses of repossessing,leasing,
managing, and operating the Premises). If the net rental so received by Lessor is less than the
amount necessary to satisfy all of Lessee's obligations under this Lease,Lessee shall pay to Lessor
on demand the amount of such deficiency together with interest at the Interest Rate, and Lessor
may bring suit from time to time to collect such deficiency. If the net rental so received by Lessor
exceeds the amounts necessary to satisfy all of Lessee's obligations under this Lease,nevertheless
Lessor shall retain such excess. In no event shall Lessor be liable for failure to so lease, manage,
or operate the Premises or collect the rentals due under any subleases and any such failure shall
not reduce Lessee's liability hereunder. Lessor may, while taking possession of the Premises
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pursuant to this Section 13.02(b), make any necessary repairs upon the Demised Premises, and
store therein any and all necessary materials,tools and equipment in connection with such repairs.
If Lessor elects to proceed under this Section 13.02(b), Lessor may at any time thereafter elect to
terminate this Lease as provided in Section 13.02(a).
(c) Notwithstanding anything to the contrary herein, if the Event of Default is
due to Lessee's failure to commence construction prior to the expiration of the Initial Term(subject
to extension for Force Majeure), Lessor's sole remedy shall be termination of this Lease in
accordance with subsection(a)above.
13.03 Time is of the Essence. Whenever in this Lease a date,time period,or other similar
requirement or limitation is provided, time is of the essence.
ARTICLE 14
MISCELLANEOUS
14.01 Notices. All notices and other communications provided for herein shall be in
writing and shall be sent to the address set forth below (or such other address as a party may
hereafter designate for itself by notice to the other parties as required hereby)of the party for whom
such notice or communication is intended:
Lessor: The City of Port Arthur,Texas
444 4th Street
Port Arthur,-T-X-77641-1089- -- - —. ——
•
Attn: City Manager
Email: Ronald.burton@portarthurtx.gov
With a copy to: City of Port Arthur
444 4th Street
Port Arthur,TX 77640
Attention: City Attorney
Email: roxann.cotroneo@portarthurtx.gov
Lessee: Diligence Offshore Services, LLC
6464 Savoy Dr., Ste. 777
Houston,TX 77036
Attn: Harry C Crawford III
Email: Harry@diligenceoffshore.com
With a copy to: Baker Botts L.L.P.
910 Louisiana Street
Houston,TX 77002-4995
Attn: C. Christopher Wilson
Email: chris.wilson@bakerbotts.com
Such notice or communication shall be sufficient if sent by registered or certified mail, return
receipt requested,postage prepaid; by hand delivery,by overnight courier service or by electronic
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mail, provided a contemporaneous copy is sent by regular mail or overnight delivery. Any such
notice or communication shall be effective upon delivery to the addressee; or if by email, upon
receipt of written notification of successful transmission, if prior to 5:00 p.m. (Central Time) of
any given Business Day (or prior to 12:00 p.m. (Central Time) on any Friday), otherwise such
facsimile shall be deemed received the following Business Day.
14.02 Performance of Obligations. If a party fails to perform or observe any of its
covenants, agreements, or obligations hereunder for the period specified under this Lease, or, if
none, a period of thirty(30) days after notice of such failure is given by the non-defaulting party,
then the non-defaulting party shall have the right, but not the obligation, at its sole election (but
not as its exclusive remedy),to perform or observe the covenants,agreements,or obligations which
are asserted to have not been performed or observed at the expense of the defaulting party, and to
recover from the defaulting party all reasonable costs and expenses incurred in connection with
attempting to do so,together with interest thereon at the Interest Rate from the date expended until
repaid.Notwithstanding the foregoing,if Lessor determines,in its reasonable good faith judgment,
that an emergency,involving imminent danger of injury or death to persons or damage to property
outside of the Demised Premises (an "Emergency") exists due to Lessee's failure to observe or
perform its covenants, agreements, and obligations, then Lessor may immediately perform or
observe the covenants,agreements,and obligations that give rise to such emergency at the expense
of Lessee and recover from Lessee all costs and expenses incurred in connection with attempting
to do so, together with interest thereon at the Interest Rate from the date expended until repaid,
and Lessor may, while so performing, store in the Demised Premises any and all necessary
materials,tools and equipment. Any performance or observance by the non-defaulting pursuant to
this Section 14.02 shall not constitute a waiver of the defaulting party's failure to perform or
observe. In exercising its self-help rights under this section, each Party shall perform in a
commercially reasonable manner.
14.03 Modification and Non-Waiver. No variations, modifications, or changes herein
or hereof shall be binding upon any Party hereto unless set forth in a writing executed by it. No
waiver by either Party of any breach or default of any term, condition, or provision hereof,
including, without limitation, the acceptance by Lessor of any Rent at any time or in any manner
other than as herein provided, shall be deemed a waiver of any other or subsequent breaches or
defaults of any kind,character,or description under any circumstance.No waiver of any breach or
default of any term,condition, or provision hereof shall be implied from any action of any Party,
and any such waiver,to be effective, shall be set out in a written instrument signed by the waiving
Party.
14.04 Governing Law. This Lease shall be construed and enforced in accordance with
the laws of the State of Texas,without regard to conflicts of law principles.
14.05 Number and Gender. Pronouns, wherever used herein, and of whatever gender,
shall include natural persons and corporations and associations of every kind and character, and
the singular shall include the plural wherever and as often as may be appropriate.
14.06 Estoppel Certificate. Lessor and Lessee shall execute and deliver to each other,
promptly upon written request therefor by the other Party, but in no event more often than three
(3) times in any twelve (12) consecutive month period, a certificate addressed to requesting Party
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and any lender or any party with a direct or indirect interest in the Lease or the Demised Premises
(including, but not limited to, equity investors, tenants and/or subtenants) indicated by the
requesting Party, and stating:
(a) whether or not this Lease, as may be changed or amended, is in full force
and effect;
(b) whether or not this Lease has been modified or amended in any respect,and
submitting copies of such modifications or amendments;
(c) whether or not there are any existing Events of Default of Lessee or
hereunder known to the Party executing the certificate, and specifying the nature thereof and
whether notice has been provided to Lessee;
(d) that there are not any uncured defaults, nor has any event occurred that,
following notice or the passage of time or both, will result in a default, on the part of Lessor or
claims against Lessor under the Lease,or,if there are any,specifying the nature of any such default
or claims;
(e) the date through which the Rent and other monetary obligations under this
Lease,including any then existing charges or offsets,have been paid; and
(f) such other matters as may be reasonably requested by the requesting party.
If Lessee fails to timely execute and deliver such estoppel within fifteen (15) days after request,
and such failure continues for an additional period of five(5)days after notice of such failure from
the Lessor, then at Lessor's option, Lessee's failure to deliver such estoppel shall be an Event of
Default by Lessee,without any further notice by Lessor,and Lessor shall have all of the rights and
remedies provided under this Lease, and it shall be conclusive upon Lessee that(i)this Lease is in
full force and effect, without modification except as may be represented by Lessor, (ii) there are
no uncured Events of Default in Lessor's performance or claims thereunder against Lessor, nor
has any event taken place that will result in a default by the Lessor,and(iii)not more than one(1)
month's Base Rent has been paid in advance. If Lessor fails to timely execute and deliver such
estoppel within forty-five (45) days after request, and such failure continues for an additional
period of fifteen(15)days after notice of such failure from Lessee,then Rent and Production Rent
shall thereafter abate until such estoppel is received.
14.07 Severability. If any provision of this Lease or the application thereof to any Person
or circumstance shall, at any time or to any extent, be invalid or unenforceable, and the basis of
the bargain between the Parties hereto is not destroyed or rendered ineffective thereby, the
remainder of this Lease, or the application of such provision to Persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be affected thereby.
14.08 Attorney Fees. If litigation is ever instituted by either Party to enforce,or to seek
damages for the breach of, any provision hereof, the prevailing Party therein shall be promptly
reimbursed by the other Party for all attorneys' fees reasonably incurred by the prevailing Party in
connection with such litigation.
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14.09 Surrender of Premises; Holding Over, Upon termination or expiration of this
Lease,subject to Section 6.05, Lessee shall peaceably quit,deliver up, and surrender the Demised
Premises, except as otherwise specifically provided in Section 9.01, in good order, repair, and
condition.Subject to Section 6.05,upon such termination or expiration Lessor may,without further
notice, enter upon, reenter, possess, and repossess itself of the Demised Premises by force,
summary proceedings, ejectment, or otherwise, and may dispossess and remove Lessee from the
Demised Premises and may have, hold, and enjoy the Demised Premises and all rental and other
income therefrom, free of any claim by Lessee with respect thereto. If Lessee does not surrender
possession of the Demised Premises at the end of the Term, subject to Lessee's rights to occupy
the Demised Premises for decommissioning, restoration and removal activities contemplated
herein during the Restoration Period in accordance with Section 6.04 and 6.05, such action shall
not extend the Term and shall not constitute a renewal or extension of this Lease or give Lessee
any rights under this Lease. Nothing in this Lease shall be deemed in any way to permit Lessee to
use or occupy the Demised Premises after the expiration of the Term or any earlier termination of
this Lease except for decommissioning, restoration and removal activities contemplated herein
during the Restoration Period. Lessor may agree, in its sole discretion, in writing in a form
satisfactory to Lessor, to deem Lessee's occupation a month-to-month tenancy, subject to all of
the other terms and conditions in this Lease, except that(i)either Party may terminate upon thirty
(30)days' written notice and(ii)Base Rent shall be an amount equal to twice the amount of Base
Rent that was being paid immediately prior to the end of the Term.
14.10 Relation of Parties. It is the intention of Lessor and Lessee to hereby create the
relationship of Lessor and Lessee,and no other relationship whatsoever is hereby created.Nothing
in this Lease shall be construed to make Lessor and Lessee partners or joint venturers or to render
either Party hereto liable for any obligation of the other.
14.11 Force Majeure
(a) As used herein,"Force Majeure"shall mean, with respect to the applicable
Force Majeure Party, the occurrence of any of the following: (i) strikes, lockouts or picketing
(legal or illegal); (ii) a Temporary Taking as provided in Section 9.02(d); (iii) riot, civil
commotion,insurrection,war,hostilities,interferences of public enemies or belligerents,rebellion,
civil or commotion; (iv) fires, explosions or other casualty, floods, earthquakes, lightning,
hurricanes, tornadoes, landslides, explosions, unusually severe storms, accidents, acts of God or
public enemy; (iii) natural disaster directly impacting the Land and/or Premises; (iv) sabotage,
vandalism, or malicious mischief; interruptions of fuel supply, water or other utilities due to
breakage of pipeline, transmission line or related machinery operated by third Persons; (v)
curtailment of fuel supply, water or other utilities; boycotts, embargoes or blockades; (vi)
application of any Applicable Law to the extent that such application was not reasonably
foreseeable by the Party claiming the right to an extension of time as a result of an event of Force
Majeure (the "Force Majeure Party"), or actions (including unreasonable delay or failure to act,
and including Talcing proceedings) of a court or other governmental authority; (vii) epidemics,
pandemics, pestilence or quarantine; (viii) labor or equipment shortages or failures, including
failure or shortages of available transportation; (ix) the default or bankruptcy of any contractor
(including construction contractor) performing services for the Force Majeure Party; (x) with
respect to Lessee, any unreasonable delay by Lessor in performing its obligations hereunder; or
(xi) any other event which prevents or delays the performance by the Force Majeure Party of any
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of its obligations imposed upon it hereunder and the prevention or cessation of which event is
beyond the reasonable control of the Force Majeure Party, including, without limitation, appeals
of, or litigation or other proceedings (administrative or otherwise) contesting,the issuance of any
Entitlements, permits, licenses, consents or other authorizations or otherwise challenging the
construction or operation of the Project Improvements. However, in no event shall any of the
following be deemed to constitute Force Majeure: (A) failure to obtain financing for, failure to
refinance, or cessation of disbursements under financing for, the purchase, construction,
demolition, repair or ownership of the Project Improvements; (B) lawsuits among parties
comprising Lessee;or(C)inability to pay when due monetary sums.
(b) If a Force Majeure Party shall be delayed, hindered or prevented from
performance of any of its obligations hereunder(other than to pay Rent or other monetary sum)by
reason of Force Majeure,the time for performance of such obligation shall be extended on a day-
for-day basis for each day of actual delay,provided that the following requirements are complied
with by the Force Majeure Party: (y) the Force Majeure Party shall give prompt written notice of
such occurrence to the other Party, and (z) the Force Majeure Party shall diligently attempt to
remove, resolve or otherwise eliminate such event, and minimize the cost and time delay
associated with such event, keep the other Party advised with respect thereto, and commence
performance of its obligations hereunder immediately upon such removal, resolution or
elimination. Anything contained in or inferable from this Lease to the contrary notwithstanding,
neither Party shall be relieved by any event of Force Majeure from its obligation to pay Rent or
other monetary sum hereunder.
14.12 Non-Merger. Notwithstanding the fact that title to the Demised Premises and to
the Leasehold Estate may,at any time,be held by the same Person,there shall be no merger of the
Leasehold Estate and fee estate unless the owner of both estates and each Permitted Mortgagee
executes and files for record in the Office of the County Clerk of Jefferson County, Texas a
document expressly providing for the merger of such estates.
14.13 Entireties. This Lease constitutes the entire agreement of the Parties hereto with
respect to its subject matter,and all prior agreements, negotiations,or understandings with respect
thereto are merged herein.
14.14 Lessor Default; Limitation on Lessor's Liability. Lessor shall be deemed in
default of its obligations under this Lease if Lessor shall fail to perform, in a reasonably timely
manner in accordance with the terms of this Lease, any obligation under this Lease required to be
performed by Lessor(each a"Lessor Event of Default")and such failure continues for a period of
sixty(60) days (or such additional period as may be reasonably required if such failure cannot be
cured within sixty (60) days) after Lessor's receipt of written notice of such failure from Lessee.
In the event of a Lessor Event of Default, notwithstanding anything to the contrary contained in
this Lease, without limiting Lessor's rights under Section 14.02,commencing upon the expiration
of Lessor's cure period described above, Lessee's remedies shall include(i) an abatement of Rent
on a day-for-day basis for each one (1) full day in the period during which a Lessor Event of
Default remains uncured, (ii) termination of this Lease, or(iii) injunctive relief. Lessee agrees no
attachment, execution, or other writ or process shall be sought, issued, or levied upon any other
assets or properties of Lessor. No provision contained in this Lease shall be interpreted in any
manner as a waiver of any rights or protections against suit and/or liability, including, without
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limitation, any sovereign immunity protection that Lessor may possess or enjoy by virtue of its
status and existence as a governmental entity in the State of Texas.
14.15 Recordation. This Lease shall not be recorded by either Party, however, Lessor
and Lessee shall, at the request of either Party,promptly execute an instrument in recordable form
constituting a memorandum of this Lease,in a form satisfactory to Lessor,which shall be filed for
record at the cost and expense of the requesting Party in the Office of the County Clerk of Jefferson
County, Texas, solely to give record notice of the existence of this Lease. No such memorandum
shall in any way vary, modify or supersede this Lease. Upon the expiration or termination of this
Lease, Lessee agrees to execute, acknowledge, and deliver to Lessor, in recordable form
satisfactory to Lessor, any documents or instruments necessary to remove the effect of the
memorandum from title to the Demised Premises.
14.16 Successors and Assigns. This Lease shall constitute a real right and covenant
running with the Demised Premises, and, subject to the provisions hereof pertaining to Lessee's
rights to Transfer, sublet, or encumber, this Lease shall be binding upon and inure to the benefit
of the Parties hereto and their respective permitted successors and assigns. Whenever a reference
is made herein to either Party, such reference shall include the party's permitted successors and
assigns. •
14.17 Inspection. Lessor shall have the right, but not the obligation, to enter upon the
Premises at all reasonable times to inspect same. For purposes of this section, except in the case
of an Emergency, "reasonable times" means during normal business hours or upon five(5) days
advance notice to Lessee.Except in the case of an Emergency under Section 14.02 or where Lessor
enters upon the Premises in an emergency services capacity and not in its capacity as a lessor,
Lessor shall use commercially reasonable efforts to minimize any disturbance to Lessee's use or
operation of the Premises during such inspections.
14.18 No Third Parties Benefited. The terms and provisions of this Lease are for the
sole benefit of,and may be enforced only by,Lessor and Lessee,and no other Persons whatsoever
(including,without limitation,any direct or indirect equity owner in Lessee)is intended to benefit
herefrom or shall have any right to enforce this Lease.
14.19 Survival. Any terms and provisions of this Lease pertaining to rights, duties, or
liabilities extending beyond the expiration or termination of this Lease,including indemnification
obligations relating to events or conditions that occur or exist prior to such expiration or
termination,or any term or provision that,expressly or by its plain meaning,is intended to survive,
shall survive the expiration or termination of this Lease. If an ambiguity exists as to survival, the
provision shall be deemed to survive.
14.20 Use of Lessor's Name. Lessee shall not use Lessor's name in any advertising or
promotional material relating to the Premises without Lessor's prior written consent.
14.21 Interest. Except where another rate of interest is specifically provided for in this
Lease, if any Rent or other amount required to be paid by one Party to the other Party pursuant to
this Lease is not paid when due, such amount shall bear interest at the Interest Rate from the date
due until the date paid in full.
-38-
14.22 Limit on Damages. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
IN THIS SECTION 14.22, NOTWITHSTANDING ANYTHING IN THIS LEASE OR
UNDER LAW OR EQUITY TO THE CONTRARY, EXCEPT FOR INTEREST
CHARGEABLE HEREUNDER NEITHER PARTY HERETO SHALL BE LIABLE TO
THE OTHER FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL OR PUNITIVE
DAMAGES OR FOR ANY LOST REVENUES OR PROFITS ARISING OUT OF THIS
LEASE OR RELATING TO THE PREMISES, INCLUDING THE NEGLIGENCE OF
THE PARTY AGAINST WHOM THE CLAIM WOULD BE MADE.
14.23 Broker. Lessor and Lessee represent and warrant each to the other that such Party
has not dealt with any broker, agent, finder, or similar in connection with this Lease and that,
insofar as such Party knows, no broker negotiated this Lease or is entitled to any commission or
fee in connection herewith. Lessor and Lessee each agree to indemnify and defend the other Party
for any losses,costs,or damages(including reasonable attorneys' fees)incurred by the other Party
as a consequence of the breach or falsity of the representations and warranties of such Party under
this Section 14.22.
HAZARDOUS SUBSTANCES
15.01 Lessor's Covenants. Lessor represents and warrants that Lessor has not received
written notice from any Governmental Authority alleging that (a) the.Demised Premises is in
violation of any Environmental Laws, which violation remains, to Lessor's knowledge, uncured
or(b)Hazardous Substances are present on,or emanating from,the Demised Premises in violation
of Environmental Laws. Lessor represents and warrants that, to Lessor's actual knowledge,
without duty of inquiry, during Lessor's ownership of the Land, (i) Lessor is not aware of any
underground storage tanks and Hazardous Substances that are or were located on the Demised
Premises in violation of Environmental Laws, and (ii) Lessor has not caused any Hazardous
Substances to have been generated, manufactured, transported, produced, used, treated, stored,
Released, disposed of or otherwise deposited in or on or allowed to emanate from the Premises or
any portion thereof other than as permitted by applicable law. Lessor releases Lessee from all
liability for, and shall at Lessor's sole cost and expense promptly remediate, in accordance with
and to the extent required by Environmental Law,any violation of any Environmental Law arising
out of any Hazardous Substances (a)existing on the Demised Premises prior to the Effective Date
or(b)brought or Released onto the Demised Premises by Lessor or any Lessor Indemnified Party
after the Effective Date(collectively,"Lessor Environmental Conditions").Lessee shall cooperate
with Lessor regarding any scheduling or access to the Premises in connection with any action
required hereunder.
15.02 Lessee's Covenants for Hazardous Substances.
(a) Lessee shall not directly or indirectly cause or permit any Hazardous
Substances to exist or otherwise be brought, kept, used, or released from, in, under, on, or about
the Premises in violation of Environmental Laws by Lessee,its agents,representatives,employees,
contractors of any tier, invitees, or any third party(collectively, the"Lessee Parties"), and Lessee
Parties shall not use,generate,produce, store,Release or otherwise cause or permit the occurrence
or continued existence of any Hazardous Substances in, on,under, or about the Premises or to be
transported to or from the Premises, except in compliance with Environmental Laws and any
-39-
applicable industry standards. Lessee shall be solely responsible for at its own expense procure,
maintain in effect, and comply with all conditions of all permits, licenses, registrations,
exemptions,and other governmental and regulatory approvals required under Envirorunental Laws
for any Hazardous Substances in, on, under, to or from or about the Premises, including the
discharge of appropriately treated and approved wastes into or through any sanitary sewer serving
the Demised Premises.
(b) Lessee shall, at Lessee's sole cost and expense, promptly remediate, in
compliance with and to the extent required by applicable Environmental Law and as required by
and Governmental Authority with jurisdiction,any contamination of the Premises that was caused
or contributed to by Lessee Parties or pertaining to or involving any Hazardous Substances brought
or Released onto the Land by any Lessee Parties ("Lessee Environmental Conditions"). Lessee
shall immediately notify Lessor if Lessee becomes aware of any Release of Hazardous Substances
in,on,under or about the Premises at any time during the Term.
(c) If Lessor reasonably believes that a Lessee Environmental Condition has
occurred,or if Lessor has received a notice from a Governmental Authority alleging any violation
of any Environmental Law, Lessor shall have the right to make such inspections as Lessor shall
reasonably require. Any such inspection, and the repair of any damage to the Premises caused by
any such inspection, shall be at Lessee's cost and expense.
(d) Lessee shall promptly deliver to Lessor copies of all hazardous waste
manifests, and otherwise deliver such information and supporting documentation to Lessor as
Lessor may reasonably require,to evidence the proper management, transport,and disposal of all
Hazardous Substances removed from the Premises,the Land or any improvements thereon as part
of Lessee's remediation of any Lessee Environmental Conditions.
(e) Lessee must complete any cleanup, removal or other remediation of
Hazardous Substances in its entirety at or before the expiration of the Restoration Period;provided,
however, in the event that the Phase II ESA required to be delivered upon completion of
decommissioning identifies conditions violating Environmental Laws that are required to be
remediated by Lessee and such remediation efforts cannot reasonably be completed prior to the
expiration of the Restoration Period, then Lessee shall have such time as may be reasonably
necessary to remediate such conditions in accordance with Environmental Laws(subject to Section
4.04).
15.03 Environmental Indemnity.
(a) Lessee Indemnity. Lessee hereby indemnifies and holds Lessor and the
Lessor Indemnified Parties harmless from and against any and all Claims to the extent resulting
from or arising out of any Lessee Environmental Conditions, including any failure by Lessee to
make any filings required under applicable Environmental Laws. For the avoidance of doubt,
Lessee shall not be responsible to Lessor or any third party for any Liabilities attributable to any
violations of Applicable Law existing prior to the Effective Date or any other Lessor
Environmental Conditions.
-40-
15.04 Notice of Hazardous Substance Matters, Each Party (herein the "Notifying
Party") shall immediately notify the other Party("Recipient") in writing of(a) any enforcement,
cleanup, removal, or other governmental or regulatory action instituted, contemplated or
threatened concerning the Demised Premises pursuant to any Environmental Law; (b) any claim
made or threatened by any Person against the Notifying Party or the Demised Premises relating to
damage contribution, cost recovery, compensation, loss or injury resulting from or claimed to
result from any Hazardous Substances resulting from operations or activities on or about the
Demised Premises; and (c)any report made to any Governmental Authority arising out of or in
connection with any Hazardous Substances in,on,under,Released,or removed from the Demised
Premises, including any complaints, notices, warnings or asserted violations in connection
therewith,all on receipt by the Notifying Party of actual knowledge of any of the foregoing matters.
The Notifying Party shall deliver to the Recipient as promptly as possible, and in any event within
ten(10)days after the Notifying Party first receives or sends the same,copies of all claims,reports,
complaints, notices,warnings or asserted violations relating in any way to the Demised Premises
or Lessee's use thereof.
ARTICLE 16
REPRESENTATIONS AND WARRANTIES
16.01 By Lessor. Lessor represents and warrants to Lessee as follows:
(a) Authority. To City's knowledge, without inquiry, subject to and in
accordance with rules applicable to a home rule municipality in the State of Texas, City has the
power and authority to enter into and perform all of City's obligations pursuant to this Lease.
(b) Pending or Threatened Actions. As of the Effective Date, there are no
pending or, to Lessor's actual knowledge, threatened actions, suits, arbitrations, claims, or
proceedings,at law,in equity,or otherwise,that would adversely affect Lessor's ability to perform
its obligations under this Lease.
16.02 By Lessee. Lessee represents and warrants to Lessor as follows:
(a) Organization, Lessee is duly organized, validly existing, and in good
standing under the laws of the state of its formation and is authorized to do business in the State
of Texas.
(b) Authority. Lessee has the power and authority to enter into and perform all
of its obligations pursuant to this Lease. No consent of any third party is required in order for
Lessee to perform any of its obligations hereunder, other than any consent that has been obtained
prior to or concurrently with the execution of this Lease by Lessee.
(c) No Conflict. This Lease does not violate any material terms or provisions
of any contract to which Lessee is a party.
(d) Pending or Threatened Actions. There are no pending or, to Lessee's
knowledge, threatened actions, suits, arbitrations, claims, or proceedings, at law, in equity, or
otherwise,that would adversely affect Lessee's ability to perform its obligations under this Lease.
-41-
(e) Developer covenants from the Loan Agreement — intend to complete the
project,have financial and technical capability to complete the project
16.03 Authority of Signatories. Each person signing this Lease on behalf of a Party
hereto represents that he or she has full power and authority to sign and deliver this Lease on behalf
of such Party.
[Signature Page Follows]
-42-
EXECUTED as of the date and year first above written.
LESSOR:
THE CITY OF PORT ARTHUR, TEXAS,
a home rule municipality
By:
urm ill ie,Mayor
ATTEST:
By:
Sherri Bellard, City Secretary
Signature Page to Ground Lease
LESSEE:
DILIGENCE OFFSHORE SERVICES LLC,
a Texas limited liability company
By:
Harry C. Crawford III,
Managing Member
Signature Page to Ground Lease
SCHEDULE 1.01
DEFINITIONS; TERMINOLOGY
1.01 Definitions. As used in the Lease, each of the following terms shall have the following
meaning:
"AAA"has the meaning set forth in Section 10.01(a).
"Additional Rent"has the meaning set forth in Section 4.03.
"Affiliate"means,when used with reference to a specified Person,any Person who directly
or indirectly Controls, is Controlled by or is under common Control with, the specified Person.
Notwithstanding the foregoing however, the officers,directors,trustees and individuals in similar
capacities with respect to any Person shall not be considered "Affiliates" of such Person merely
on account of such Person's status as an officer, director, trustee or other similar position or
capacity; and further, a stockholder shall not be considered an"Affiliate"merely on account of its
status as a stockholder.
"Annual Revenue Statement"has the meaning set forth in Section 4.02(a).
"Applicable Law" means, collectively, all applicable federal, state and local statutes,
ordinances, codes, rules, regulations and administrative or judicial precedents or authorities,
including the interpretation or administration thereof by any Governmental Authority having
jurisdiction over, as applicable, Lessor, Lessee, the Premises. Applicable Law includes
Environmental Laws.
"Base Rent"has the meaning set forth in Section 4.01.
"Business Days" shall mean any day other than Saturday, Sunday and any other day on
which commercial banking institutions are required by law or authorized to close in the State of
Texas.
"Casualty"has the meaning set forth in Section 9.01(a).
"Claims"has the meaning set forth in Section 8.03.
"Commencement Month"means the calendar month in which the Effective Date occurs.
"Commitment"has the meaning set forth in Section 7.02(a).
"Construction Permits"has the meaning set forth in Section 7.01(b)(ii)B.
"Control" (including the correlates of "Controlled" and "Controlling") means the
possession, directly or indirectly(including through one or more intermediaries), of the power to
direct or cause the direction of the management and policies of the specified Person, through the
ownership or control of voting securities, partnership interests or other equity interests or
otherwise.
"Data Center Improvements"has the meaning set forth in Section 7.01(b)(i).
"Data Center Premises"has the meaning set forth in the Recitals.
"Default Notice"has the meaning set forth in Section 11,01(b)(i).
"Demised Premises"has the meaning set forth in the Recitals.
"Easements"has the meaning set forth in Section 2.02.
"Effective Date"has the meaning set forth in the Preamble.
"Emergency"has the meaning set forth in Section 14.02.
"Entitlements"has the meaning set forth in Section 7.01(b)(ii)A.
"Environmental Laws"means all past and presently effective federal, state and local laws,
statutes,codes, ordinances, orders, interpretations, and rules applicable to the Premises relating to
environmental matters,including the Resource Conservation and Recovery Act of 1976,42 U.S.C.
Section 6901 et seq. ("RCRA");the Comprehensive Environmental Response,Compensation,and
Liability Act of 1980, 42 USC Section 9601 et seq. ("CERCLA"), the Toxic Substances Control
Act, 15 U.S.C. Section 2601, et seq., the Federal Hazardous Materials Transportation Law, 49
U.S.C. Section 5101 et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., the Clean Air
Act,42 U.S.C. Section 7401 et seq., and the Texas Solid Waste Disposal Act, Chapter 361 of the
Texas Health & Safety Code, all as now or hereafter amended, as well as all regulations
promulgated thereunder and any common law or any other rule of law of any Governmental
Authority applicable to the Premises and relating to environmental matters.
"Event of Default"has the meaning set forth in Section 13.01.
"Existing Exceptions"has the meaning set forth in Section 1.01.
"Expiration Date"means the earlier of the last day of the Operating Term or the date this
Lease is terminated in accordance with the provisions hereof.
"Fee Mortgage"has the meaning assigned to such term in Section 11.02(b).
"Fee Mortgagee"has the meaning assigned to such term in Section 11.02(b).
"Full insurable value"has the meaning set forth in Section 8.01(b)(i).
"Generating Improvements"or"Generating Facilities"has the meaning set forth in Section
7.01(b)(i), and shall be deemed to include any equipment or facilities constituting a"wind power
facility"as defined in Chapter 301 of the Texas Utility Code or a"solar power facility"as defined
in Chapter 302 of the Texas Utility Code.
"Governmental Authorities"has the meaning set forth in Section 5.01.
"Governmental Authority" has the meaning set forth in Section 5.01.
soh. 1.01 -2
"Hazardous Substances" means any of the following: (i)any chemicals, materials, or
substances defined as or included in the definition of"hazardous waste,""solid waste,""hazardous
material," "hazardous substance," "toxic substance," "pollutant," or "contaminant" or similar
terms under any Environmental Laws; (ii) any petroleum or petroleum products, radioactive
materials, asbestos, urea formaldehyde foam insulation, transformers or other equipment that
contains dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; (iii) any
other substance the presence of which on the Premises is prohibited by any Environmental Laws;
and (iv) any other substance which by any Environmental Laws requires special handling or
notification of any Governmental Authority in its collection,storage, treatment,or disposal.
"Impositions"has the meaning set forth in Section 5.01.
"Indemnified Parties"has the meaning set forth in Section 8.03.
"Initial Easements"has the meaning set forth in Section 2.02.
"Initial Term"has the meaning set forth in Section 3.01(a).
"Interest Rate" means an annual rate of interest equal to the lesser of(i)five percent(5%)
above the "Prime Rate" as announced from time to time by The Wall Street Journal, or if such
publication ceases to exist or report a"Prime Rate", five percent(5%)per annum above the prime
rate or reference rate announced from time to time by JPMorgan Chase Bank, N.A. (or any
successor thereto) or such other major national banking institution selected,by Lessor, or(ii)the
maximum contract rate of interest then permitted by Applicable Law.
"Investigations"has the meaning set forth in Section 7.01(a).
"Lake Premises"has the meaning set forth in the Recitals.
"Land"has the meaning set forth in the Recitals.
"Lessee" has the meaning set forth in the Preamble. Upon an assignment of this Lease
permitted in accordance with the terms of this Lease, the assignee ("Transferee") will thereupon
succeed to the rights and obligations of, and become,the"Lessee" for purposes of this Lease.
"Lessee Endorsements"has the meaning set forth in Section 7.02(a).
"Lessee Parties"has the meaning set forth in Section 15.02(a).
"Lessee Release Party"has the meaning set forth in Section 8.04.
"Lessee Environmental Condition"has the meaning set forth in Section 15.02.
"Lessor"has the meaning set forth in the Preamble.
"Lessor Environmental Condition"has the meaning set forth in Section 15.01.
"Lessor Indemnified Parties"has the meaning set forth in Section 8.03.
Sc1,.1.01-3
"Lessor Release Party"has the meaning set forth in Section 8.04,
"Lessor's Interest"means Lessor's fee title to the Demised Premises, Lessor's interest in
the Easements,Lessor's reversionary interest in the Demised Premises and Project Improvements,
Lessor's right to receive payment of Rent and Lessor's other rights under this Lease.
"Lease"has the meaning set forth in the Preamble.
"Lease Year"means each period of twelve(12)full calendar months;provided,that,if the
Effective Date occurs on any day other than the first day of a calendar month,the first Lease Year
shall include the period of time between the Effective Date and the end of the Commencement
Month.
"Leasehold Title Policy"has the meaning set forth in Section 7.02(a).
"Leasehold Estate"means(i)the leasehold estate and Lessee's other rights created by this
Lease, including Lessee's interest in the Easements, and (ii) Lessee's ownership interest in the
Project Improvements during the Term.
"Mortgaged Assets"has the meaning set forth in Section 11.01(a).
"Notifying Party"has the meaning set forth in Section 15.04,
"Objection"has the meaning set forth in Section 7.02(a).
"Operating Term"has the meaning set forth in Section 3.01(c).
"Operating Term Commencement Date"has the meaning set forth in Section 3.01(c).
"Option Premises"has the meaning set forth in the Recitals.
"Party"or"Parties"has the meaning set forth in the Preamble.
"Permitted Exceptions"has the meaning set forth in Section7.02(a).
"Permitted Mortgage"has the meaning set forth in Section 11.01(a).
"Permitted Mortgagee"has the meaning set forth in Section 11.01(a).
"Person"means any individual,corporation,partnership,limited liability company or other
entity of any kind.
"Personalty"has the meaning set forth in Section 6.04(a).
"Premises"means the Demised Premises and Project Improvements.
"Project Improvements"has the meaning set forth in the Recitals.
"Qualifications"has the meaning set forth in Section 6.01.
set,.LA1-4
"Recipient"has the meaning set forth in Section 15.04.
"Release" means any depositing, spilling, leaking, pumping, pouring, placing, emitting,
discarding,abandoning,emptying,discharging,migrating,injecting,escaping,leaching,dumping,
or disposing.
"Rent"has the meaning set forth in Section 4.03.
"Restoration Period"has the meaning set forth in Section 6.05.
"Restoration Work"has the meaning set forth in Section 9.01(a)(ii).
"Schedules"has the meaning set forth in Section 1.02 of Schedule 1.01.
"Site Plan"has the meaning set forth in the Recitals.
"Substation Improvements"has the meaning set forth in Section 7.01(b)(i).
"Substation Premises"has the meaning set forth in the Recitals.
"Taking"has the meaning set forth in Section 9.02(b).
"Term"has the meaning set forth in Section 3.01.
"Termination Period"has the meaning set forth in Section 3.01.
"Title Company"has the meaning set forth in Section 7.02(b).
"Title Exceptions"has the meaning set forth in Section 7.02(a).
"Total Taking"has the meaning set forth in Section 9.02(b).
"Transfer"has the meaning set forth in Sections 10.01(a).
"Transferee"has the meaning set forth in the definition of"Lessee".
1.02 Terminology. The terms defined in this Schedule 1.01 shall apply throughout the Lease.
All references in the Lease to"Section"or"Article"shall refer to the section or article of the Lease
in which such reference appears,unless otherwise expressly stated. All references to"Schedules"
shall mean the schedules attached to the Lease.All references to"Exhibits"shall mean the exhibits
attached to the Lease. All such Schedules and Exhibits are incorporate in the Lease by this
reference. All references to herein,hereof, hereto, hereunder or similar terms shall be deemed to
refer to the entire Lease. As used in this Lease,the term"including"shall mean"including but not
limited to." The headings of Articles and Sections in and Exhibits to the Lease shall be for
convenience only and shall not affect the interpretation hereof. If Lessor or Lessee ceases to be a
partnership, all references herein to Lessor's or Lessee's partners shall thereafter be deemed to be
references to Lessor's or Lessee's other equity owners.
sate.1.01-5
1.03 Interpretation. Words used in the singular number shall include the plural, and vice-versa,
and any gender shall be deemed to include each other gender. Reference to any agreement means
such agreement as amended or modified and in effect from time to time in accordance with the
terms thereof. This Lease was negotiated between Lessor and Lessee with the benefit of legal
representation, and any rule of construction or interpretation otherwise requiring this Lease to be
construed or interpreted against either Party shall not apply to any construction or interpretation
hereof.
Sch. 1.01 -6
EXHIBIT A-1
The Substation Premises
TBPB Firm No,F-5795
! ThO
All' JTFX
1> 3T37 Dadors Drlue
Port Arthur,Team 77942
t, SURVEYORS&ENGINEERS `-' Office( )aea coat
Fax(409)9812005
TRACT HI
PROPOSED TRANSFER SIGHT
IT
13.79 ACRES OF LAND OUT OF ABSTRACT NO.930
CITY OF PORT ARTIIt It
JEFFERSON COUNTY,TEXAS
BEING 13.79 acres of land out of and a part of Abstract No.930,City of Pun Arthur,Jefferson County,
Texas,being part of Tract 7 of several tracts of land described in a deed to The City of Port Arthur.
recorded in File No.9733311,Official Public Records.Jefferson County.Texas;said 13.79 acre tract
being mom fully described by metes and bounds as follows,to wit
Nate:Bearings,coordinates distances and acreage are based an the Texas Coordinate System of 1983,
South Central Zone. US Surrey Feet,and are referenced to S)narlNet,North;tnrerica.
COMMENCING at a i" steel rod found in concrete marked "USA C1 on the intetse Lion of the
Southwest right-of-way line of a dedicated road named Pleasure Pier Boulevard and the Northwest right-
of-way line of a dedicated road named T.B.Ellison Parkway;said I"steel rod having a Texas Coordinate
of N 13897926.80 R:3575210.96
THENCE,South 36 deg..26 min.,It see,Nast,on the Northwest right-of-way line of said T.D.Ellison
Parkwa),a distance of 1654.24',to a point;
THENCE,South 53 deg..33 min..59sec..Fast,crossing said T.B.Ellison Parkway,a distance of 160.00'
to a Wz'steel rod,found in concrete for the most Northerly corner ofa(Called 16.0515)acre tract of land,
shown on a survey made by Soutex Surveyors dated 1-222-1985;said b 'steel rod being the most Northerly
corner on what is commonly known as Logan Park;from uitich a Si"steel rad in concrete,found on the
intersection oldie Easterly right of way line of said T.B.Ellison Parkway and the apparent Northeasterly
right of way line of a public used roadway named South Levee Road,same being the most Westerly,corner
of said Logan Park,bears South 36 dep,..26 min..34 sec.,West,a distance of 1000.13';
THENCE,E,North 36 de,.26 min..OI sec.. East. on the Easterly right of way line said T.B. Ellison
Parkway,a distance of 147.63'.to a point for corner being.the POINT OP BEGINNING and most
Westerly corner of the herein described tract, having a Texas Coordinate of N: 13896629,69 E:
3571144.85;
THENCE,North 36 deg.,26 min.,01 see..East,continuing en the Easterly right of way line of said T.B.
Ellison Parkway,a distance of 61721'.to a point for corner being the most Northerly corner of the herein
described tract;
THENCE,South 53 deg.,00 min.,28 sec,.East.a distance of 636.67`.to a point foreorner,for an interior
corner of the herein described tract;
Exhibit A-1
THENCE,North 36 deg..26 min.,01 sec.,East a distance of 295.28',to a point for corner being an
interior corner of the herein described tract;
THENCE,North 52 deg.,42 min.42 see.,West,a distance of 636.71',to point for corner on the Southeast
right-of-way line of T.B.Ellison Parkway.
THENCE,North 36 deg.,26 min.,01 sec..East on the Southeast right-of-way lint of said T.B.Ellison
Parkway,a distance of 118.85'.to a point for corner; front which a'/:"steel rod round for the most
Northerly Northwest corner of a Plat of Pleasure Island Tract I bears North 36 deg.,26 min.,01 sec.,East,
a distance of 227.93';
TIII'LNCE,South 52 deg.,42 mitt„42 sec,East,a distance of 765.1 I',to a point for corner being the '
most Easterly corner of the herein described tract;
THENCE,South 36 dog.,26 min.01 sec.,West,a distance of 1030.67'.to a point for corner being the
most Southerly corner of the herein described tract:
THENCE,North 53 deg..00 min.,28 sec..West,a distance of 763.06'to the POINT OF BEGINNING
and containing 13.79 acres of land.more or less.
This description is based on prior surveys made by SOUTEX,map and deed information,and does not
reptant a current on the ground field survey.August 07.2024.
DILIGENCE OFFSHORE SERVICES
24-0243-3A sa
Arrli { aJ G[p•
Exhibit A-1
EXHIBIT A-2
THE DATA CENTER PREMISES
Exhibit A-2
•
a,.,,. TBPE Firm No.F-5755
tr # TBPLS Firm No.10123800
' LA EF.0005711
— b.--7-: yl -a 3737 Doctors Drive
a Port Arthur,Texas 77642
if _ SURVEYORS&ENGINEERS Office(409)9632004
Fax(409)9832005
TRACT I
PROPOSED MANUFACTURING FACILITY
900 ACRES OF LAND OUT OF ABSTRACT 954
CITY OF PORT ARTHUR
JEFFERSON COUNTY,TEXAS
BEING 900 acres of land,out of'and a part of a(Called 3230.7)acre tract of land recorded as Tract 7,of
several tracts of land described in a deed to The City of Port Arthur,recorded in File No.9733311,Official
Public Records,Jefferson County,Texas; said 900 acre tract being more fully described by metes and
bounds as follows,to wit:
Note:Bearings. coordinates. distances and acreage are based on the Texas Coordinate System of 1983.
South Central Zone. US Survey Feet,and are referenced to SmartWet.North America.
COMMENCING at a'/z"steel rod found for the Northeast corner of a(Called 37.99)acre tract of land
described in a deed to Shore Marine Services, LTD, recorded in File No.2006012346, Official Public
Records,Jefferson County,Texas; said 'V."steel rod being on the West right-of-way line of a dedicated
road named US Highway 82,having a Texas Coordinate of N: 13880198.66 E:3568131.77;
THENCE,South 78 deg.,09 nun., 14 sec.,East,crossing said US Highway 82,a distance of 201.75',to
a point for corner being the POINT OF BEGINNING;said point being on East right-of-way line of said
US Highway 82 and the Northwest corner of the herein described tract having a Texas Coordinate of
N: 13880157.08 E: 3568329.19;
THENCE,South 78 deg.,06 min., 24 see., East,a distance of 7677,41',to a point for corner being the
Northeast corner of the herein described tract;
THENCE,South 10 deg.,07 min., 12 sec., West,a distance of 5450.44',to a point for corner being the
Southeast corner of the herein described tract;
THENCE,North 78 deg.,06 min.,24 sec..West,a distance of 5881 2 1',to a point for corner on the East
right-of-way line of said US Highway 82;said point for corner being the Southwest corner of the herein
described tract;
THENCE,North 20 deg.,00 min.,08 sec.,West,on the East right of way line of said US Highway 82,a
distance of 2379.52' to a point for corner; from which a Ys'steel rod with a yellow cap, found on the
Northeast line of the(Called 37.99)acre tract,bears North 22 deg..29 min.,25 sec..West,a distance of
1368.07'
Exhibit A-2
F
THENCE, continuing to point for corners on the East right-of-way line of said US Highway 82, to
following bearings and distances:
North 14 deg.,06 min.,09 sec.,West. 1417.82'
North 09 deg.,29 min.,30 sec..West, 329.03'
North 01 deg.,49 min.,54 sec..West, 321.35'
North 07 deg.,05 min..00 sec.,East,320.09'
North 15 deg., 16 min., 14 sec.,East,328.65'
THENCE, North 19 deg., 26 min.. 13 sec.. East. continuing on the East right-of-way line of said US
Highway 82.a distance of 895.37'.to the POINT OF BEGINNING and containing 900 acres of Iand-
more or less.
This description is based on prior surveys made by SOU1'EX, map and deed information,and does not
represent a current on the around field survey.August 07,2024.
Diligence Offshore Services,LLC
24-0243
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Exhibit A-2
EXHIBIT A-3
THE LAKE PREMISES
TBPE Fern No.F-3755
y,J' MKS Firm No.t8123804
` LA EF.000srn
OUTS
:.i '737 Doctors Drive
Port Arthur,Texas 77642
SURVEYORS&ENGINEERS Office(409)9e3.2004
.4 Fax(409)983.2005
TRACT II
PROPOSED WIND TURBINE FARM
1360.5 ACRES OF LAND OCT OF ABSTRACT NO.930&931
CITY OF PORT ARTHUR
JEFFERSON COUNTY,TEXAS
BEING 13605 acres of land out of and a part of Abstract Nos.930&931 being part of two tracts of land
and several tracts of land described in a deed to The City of Port Arthur,recorded in File No.9733311,
Official Public Records.Jefferson County.Texas;said 1360.5 acre tract being more fully described by
metes and bounds as follows,to wit:
Note.Bearings.coordinates.distances and acreage are based on the Texas Coordinate System of 1983,
South Central Zone.US Survey Feet,and are referenced tc SmartNet North America.
BEGINNING at a point for corner being the Southeast corner of a(Called 1.6452)acre tract of land
described in a deed to Island Recreational Development Corporation,recorded in Film Code 103-41-0326;
said point for corner being the Northwest corner of the herein described tract,having a Texas Coordinate
of N: 1389708825 E:3577007.99;from which a 1"steel rod found in concrete marked"USA CE"found
on the intersection of the Southwest right-of-way line of a dedicated road named Pleasure Pier Boulevard
and the Westerly right-of-way line of a dedicated road named TB Ellison Parkway,bears North 65 deg.,
32 min., 26 sec., West, a distance of 2001.71`, having a Texas Coordinate of N: 13897936.83 E:
3575210.87;
THENCE,South 52 deg.,48 min.,06 see.,East,a distance of 11136.55',to a point for comer on the
Texas/Louisiana state line,Court Ruling No.36.dedicated May 16, 1977;said point for corner being in
the waters of Sabine Lake and the Northeast corner of the herein described tract;
THENCE,South 44 deg.,56 min.,08 sec„West,on the Tex-as/Louisiana state line,a distance of 3957.13',
to a point for corner in the waters of Sabine Lake;
THENCE,South 39 deg.,19 min.,18 see.,Nest,continuing on the Texas/Louisiana state line,a distance
o f 2782.15',to point for corner,in the waters of Sabine Lake being the most Southerly corner of the herein
described tract;
THENCE,North 53 deg_,03 min.,38 sec.,West,a distance of 4860.15',to a point for corner on the
apparent Northeasterly right-of-way tine of a public used roadway named South Levee Road;said point
for corner being the Southwest corner of the herein described tract;
THENCE,on the apparent Northeasterly right-of-way line of a public used roadway named South Levee
Road,on an arc of a curve to the left,having a radius 9000.00',an arc length of 4569.11',a chord bearing
of North 14 deg.,04 min.,00 sec.,West.a chord distance of 4520.20',to a point for corner;
Exhibit A-4
THENCE,North 28 deg.,57 min.,56 sec.,West,continuing on the apparent Northeasterly line of said
South Levee Road,a distance of2276.98',to a point for corner being the most Westerly Southwest corner
oldie herein described track
THENCE,North 36 deg.,35 min.,03 sec„East,a distance of 2932.12',passing a disc found in concrete
for a reference point continuing for a total distance of 2974,90' to the POINT OF BEGINNING and
containing 1360.5 acres of land,more or less.
This description is based on prior surveys made by SOLJIEX,map and deed information,and does not
represent a current on the ground field survey.August 07,2024.
DILLIGENCE OFFSHORE SERVICES,LLC
24-0243-2 . - - /
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Exhibit A-4
EXHIBIT B
SITE PLAN
[see attached]
Exhibit B
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