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1224-Biosolids Conversion/Thermal Energy/2. 2-4 r ! BIOSOLIDS CONVERSION ... AND THERMAL ENERGY PURCHASE AGREEMENT THIS BIOSOLIDS CONVERSION AND THERMAL ENERGY PURCHASE AGREEMENT (this "Agreement "), dated as of44brtmry Z4 , 2008, and is by and between the following parties: art • MaxWest Envir ental Systems, Inc. ( "Seller ") or its assigns, and City of Sanford, Florida ( "Buyer "). BACKGROUND 1. Seller intends to develop, own and operate in conjunction with Buyer a biosolids waste gasification facility (the "Seller's Facility ") located at the Sanford South Water Resource Center (SSWRC) in Sanford, Florida capable of supplying thermal energy to a sludge dryer and other components of the Buyer's Plant. 2. Buyer wishes to provide to Seller all biosolids produced from its dryer or collected at the SSWRC and to purchase from Seller all thermal energy produced by Seller's Facility. AGREEMENT NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties agree as follows: Article 1 Definitions 1.1 Definitions As used in this Agreement, the following terms will have the meanings set out or referred to below, unless the context requires otherwise: "Affiliate" — with respect to any person or entity, any other person or entity that controls, is controlled by, or is under common control with that person or entity, and includes any officer or director of that person or entity. "Agreement" — this Agreement, including all Schedules and Exhibits, as any of them may be amended or supplemented from time to time. "Applicable Law" — all applicable provisions of any constitution, statute, law, ordinance, code, rule, regulation, decision, order, decree, judgment, release, license, permit, stipulation or other official pronouncement enacted, promulgated or issued by any Governmental Authority. w "Biosolids Waste" — the wastewater treatment material delivered by Buyer to Seller at the South Wastewater Reclamation Center Facility from Buyer's dryer system with the composition defined by attached Exhibit A. "British Thermal Unit (BTU)" - a BTU is defined as the amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit. "Business Day" — any day Monday through Friday that banks in Sanford, Florida and Houston, Texas are open for business. "Buyer Indemnified Parties" — see Section 14.1 "Change in Law" — after the date of this Agreement, the adoption, imposition, promulgation or modification by a Governmental Authority of any Applicable Law, or the issuance of an order, judgment, award or decree of a Governmental Authority having the effect of the foregoing. "Claiming Party" — see Section 15.1 "Claims" — any claims, demands, losses, liabilities, penalties (civil or criminal), fines and expenses (including reasonable attorneys' fees and expenses), including with respect to (i) personal injury or death to persons, damage to any property or facilities of any person or entity, (ii) environmental, health or safety matters or conditions (including on -Site or off -Site contamination), and (iii) financial responsibility for corrective or remedial action under any Environmental Law or fines or penalties imposed under any Environmental Law. "Commercial Operation Date" — see Section 3_1. "Commercially Reasonable Efforts" — the efforts that a prudent person desiring to achieve a result would use in similar circumstances to achieve that result as expeditiously as practicable; provided however that a person required to use Commercially Reasonable Efforts will not be required to undertake extraordinary or unreasonable measures or incur expenses in excess of normal and usual filing fees and processing fees, if any. "Confidential Information" — any written data or information (or an oral communication if the Party requesting confidentiality for such oral communication promptly confirms such communication in writing) that is privileged, confidential or proprietary that is identified and marked in accordance with Section 16.2 b , except information that (1) is a matter of public knowledge at the time of its disclosure or is thereafter published in or otherwise ascertainable from any source available to the public without breach of this Agreement, (2) is obtained from a third party (other than an Affiliate of one of the Parties) other than by or as a result of unauthorized disclosure, or (3) had been independently developed, prior to the time of disclosure, by the receiving Party or its Affiliates not utilizing improper means. "Consumer Price Index" — the Consumer Price Index for All Urban Consumers, U.S. City Average, designated "CPI -U ", as published by the United States Bureau of Labor Statistics. "Contract Year" — each twelve -month period during the Term of this Agreement that begins on the Commercial Operation Date or each anniversary thereof. 2 "Delay Damages" —see Section 11.3 "Delivery Points" — see Section 5_1. "Energy Payment" — see Section 8_1. "Environmental and Renewable Attributes" — the aggregate amount of environmental, or renewable energy credits or other benefits (including emissions allowances, offsets, credits and increments and renewable energy credits) arising from gasification of biosolids at the Facility. "Environmental Laws" — all applicable laws relating to pollution, protection, preservation or restoration of human health, the environment or natural resources. "Event of Default" — see Section 11.1. "Facility" — means Seller's biosolids waste gasification facility located at the City of Sanford Wastewater Reclamation Center Plant, the purpose of which is to gasify biosolids generated by or collected by the Buyer and deliver thermal energy to the Delivery Points, including all of the following: Seller's equipment, buildings, facilities necessary to connect to the Delivery Points, protective and associated equipment, gasifier, and all other tangible assets, contract rights, real property, easements, rights of way, surface use agreements and other interests or rights in real estate reasonably necessary for the construction, operation and maintenance of the gasification facility that is subject to this Agreement. "Force Majeure" — an event or circumstance that prevents one Party from performing its obligations under this Agreement, which event or circumstance was not anticipated as of the Effective Date, which is not within the reasonable control of, or the result of the negligence of, the Claiming Party, and which, by the exercise of due diligence, the Claiming Party is unable to overcome or avoid or cause to be avoided; provided however that in no event shall (1) a site - specific strike, lockout or labor dispute or (2) an inability to comply with Applicable Law in effect at the execution date of this Agreement be considered an event of Force Majeure. "Forced Outage" — a unit outage that requires the unit to be removed from service with no warning which is not a Planned Outage or Maintenance Outage, but may or not be the result of Force Majeure. "Governmental Authority" — any federal, state or local legislative, executive, judicial, quasi - judicial or other public authority, agency, department, bureau, division, unit, court, tribunal, or other public body, person or entity having jurisdiction over a Party, the Facility or this Agreement. "Maintenance Outage" — an outage that can be deferred beyond the next weekend, but does not require that the unit be removed from service immediately. A Maintenance Outage does not necessarily have to be deferred beyond the next weekend, but rather has the potential to be delayed past the next weekend. For the purposes of Maintenance Outage determination, the next weekend shall mean the period from 2400 on the next Friday until 2400 on Sunday, Eastern Prevailing Time. "Operating Representative" — see Section 9_7. "Party" — Buyer or Seller. "Permit" — any license, approval, order, permit or similar document or action issued or taken by any Governmental Authority. "Permit Limits" — limits on emissions established in any Permit issued for the Facility. "Project Energy" or "Thermal Energy" - measured in BTU'S, produced by Seller from the gasification of Biosolids Waste delivered by Buyer to Seller at SSWRCP with the composition as defined in attached Exhibit A. "Prudent Industry Practice" — any of the practices, methods, standards and acts (including practices, methods, standards and acts engaged in or adopted by a significant portion of the gasification industry in the United States during the applicable period) which, in the exercise of reasonable judgment in light of the facts known at the time, could be expected to accomplish the desired result consistent with reliability, economy, safety, and expedition. Prudent Industry Practice is not intended to be limited to any particular set of optimum practices, methods, standards or acts to the exclusion of all others, but rather is intended to include practices, methods, or acts generally accepted in the United States, having due regard for, among other things, manufacturers' recommendations and warranties, contractual obligations, Applicable Law and requirements or guidance of Governmental Authorities. "Representatives" — see Section 16.1 "Seller Indemnified Parties" — see Section 14.2 "Site" — the property to be leased by Buyer to Seller at SSWRCP "Site Lease Agreement" — an agreement providing for leasing of a site by Buyer to Seller for the construction, operation and maintenance of the Facility. "Specified Rate" — for each calendar month, the lower of (1) the highest "prime rate" as published in The Wall Street Journal under the heading "Money Rates" on the first day of such month that such rates are published, plus 2% per annum and (2) the maximum rate allowed by Applicable Law. "Stipulated Commercial Operation Date" — see Section 3_2. "Tax" or "Taxes" — all taxes, assessments, charges, duties, fees, levies or other governmental charges, including all federal, state, local, foreign or other income, profits, unitary, business, franchise, capital stock, real property, personal property, intangible, withholding, FICA, unemployment compensation, disability, transfer, sales, use, excise and other taxes, assessments, charges, duties, fees, or levies of any kind whatsoever (whether or not requiring the filing of returns) and all deficiency assessments, additions to tax, penalties and interest. "Term" — see Section 2.2. L, "Utilities and Services" — the services and utilities provided to Seller by Buyer for the operation and maintenance of Seller's Facility as defined on the attached Exhibit A. 1.2 Interpretation The headings of Articles and Sections in this Agreement are provided for convenience only and will not affect the construction or interpretation of this Agreement. All references to "Articles," "Sections," "Schedules" or "Exhibits" refer to the corresponding Articles, Sections, Schedules or Exhibits of or to this Agreement. All Schedules and Exhibits to this Agreement are hereby incorporated by reference. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms. Unless otherwise stated, any reference in this Agreement to any person shall include its permitted successors and assigns and, in the case of any Governmental Authority, any person succeeding to its functions and capacities. Article 2 Term and Conditions Precedent 2.1 Effective Date This Agreement will become effective upon the date of its execution and delivery by each of the Parties. 2.2 Term This Agreement will continue in effect until the 20 anniversary of the Commercial Operation Date. Article 3 Commercial Operation Date 3.1 Commercial Operation Date The respective rights and obligations of Seller and Buyer relating to the commercial operation of the Facility and the obligation of Buyer to make payments under Article 8 will commence on the Commercial Operation Date. The "Commercial Operation Date" for the Facility will be the date on which Seller notifies Buyer that each of the following has occurred: (a) Seller has obtained all permits and licenses required for the operation of the Facility and such permits and licenses are effective; (b) There are no suits, proceedings, judgments, rulings or orders by or before any Governmental Authority that could reasonably be expected to materially and adversely affect the ability of the Facility to operate and produce Thermal Energy; (c) The Facility construction, startup and commissioning has been completed by Seller and the Facility is available to accept Biosolids Waste from Buyer. 3.2 Stipulated Commercial Operation Date The Stipulated Commercial Operation Date subject to day- for -day extension due to any Force Majeure Event, shall be no later than y 31, 2008. Article 4 Purchase and Sale of Project Energy 4.1 Purchase of Project EnerEV 4.1.1 Buyer's Obligation. Buyer shall deliver Biosolid Waste to Seller at the inlet hopper to Buyer's gasifier. The composition, minimum volume and delivery rates of Project Energy and the composition, minimum volume and delivery rates of Biosolid Waste shall be as defined on the attached Exhibit A. 4.1.2 Seller's Obligation. Seller shall gasify biosolids received from Buyer and deliver thermal energy in the form of hot oil to Buyer at the hot oil system of Buyer's biosolids dryer in accordance with the standards set forth in Exhibit A. 4.1.3 Fuel Substitution. In the event Seller is unable to provide the needed heat energy described herein for reasons other than the failure of Buyer to deliver Biosolid Waste, the Buyer may utilize natural gas as a replacement energy source and any amount paid for natural gas will be reimbursed by MaxWest Environmental Systems, Inc to Buyer. In any event, the total reimbursement shall not exceed the total annual fee due from Buyer to Seller. In the event Buyer needs to utilize natural gas, Buyer shall provide 48 hour notice to Seller of its intent and provide Seller this 48 hour period to cure any heat delivery problems prior to switching to natural gas. Reimbursements shall be made within sixty days of notification from Buyer to MaxWest Environmental Systems, Inc of natural gas expenses incurred. 4.1.4 Agreement to Pay._Buyer agrees to fund and pay its obligation as stipulated in Section 8.1.1 free from counterclaim or offset of any nature save and except for fuel substitution provided for in paragraph 4.1.3 above. It is acknowledged that the payments received under this Agreement shall be used by Seller to amortize certain indebtedness and other costs incurred as a result of the development, installation and operation of Seller's facility. 4.1.5 Joint Marketing of Excess Capacity. Buyer and Seller may cooperate in marketing any available excess drying and gasification capacity to other entities and Buyer and Seller will split on a 50/50 basis any fees derived from treating additional biosolids of other entities after deducting additional expenses incurred by each party. 4.1.6 Environmental or Renewable Energy Attributes The Parties acknowledge that currently effective or future legislation, regulation or voluntary programs may create value in the ownership, use or allocation of Environmental and Renewable Attributes (Energy Credits) which are created by the gasification of the biosolids. Seller and Buyer shall divide equally on a cash basis any Environmental and Renewable Attributes to the extent such (Energy Credits) may accrue during the Term. 0 4.1.7 Other Covenants During and after the Term, to the extent applicable, Seller and Buyer shall reasonably cooperate in making any required filings with applicable Governmental Authorities to obtain any available Environmental and Renewable Attributes associated with the Facility. Article 5 Delivery Point; Delivery 5.1 Delivery Points The delivery point for the delivery by Seller to Buyer of the Thermal Energy will be at the hot oil system utilized for delivering Thermal Energy to the Buyer's dryer system, and the delivery point for delivery by Buyer of Biosolids Waste shall be the gasifier inlet feed hopper (each individually, a Delivery Point, and collectively, the "Delivery Points" as detailed in the attached Exhibit A). 5.2 Title Title to and risk of loss of Thermal Energy shall pass from Seller to Buyer at the applicable Delivery Point. Title to and risk of loss of Biosolids Waste shall pass from Buyer to Seller at the applicable Delivery Point. 5.3 Responsibility Seller shall be responsible for delivery of Thermal Energy to the applicable Delivery Point and, as between the Parties, shall be responsible for all costs, liabilities, taxes, losses, and charges of any kind imposed or assessed with respect to the delivery of Thermal Energy to the applicable Delivery Point. 5.4 Thermal Energy Thermal Energy supplied under this Agreement will be supplied as hot oil resulting from the gasification of Buyer's Biosolids Waste delivered by Buyer and described with particularity by attached Exhibit A. Article 6 This Article Intentionally Left Blank Article 7 This Article Intentionally Left Blank Article 8 Charges and Payments 8.1 Proiect Energy Payment Beginning the first month following the Commercial Operation Date, Buyer shall pay Seller, in accordance with Section 8. 1.1 and 8.2.1 below. 8.1.1 Monthly Fee. The Buyer will pay a minimum annual fee of $258,863 to Seller payable in monthly installments of $21,572 for the first year of operation; thereafter, this fee shall increase by 3% annually over original base amount ($7,766 /year) throughout the 20 year term of the agreement. 7 8.1.2 Renewal and Non - Appropriation. Buyer agrees that it will take all necessary steps and make timely requests for the appropriation of funds to make all Facilities Availability Fees called for in Section 8.1.1, above, and use its best efforts and take all steps to cause such appropriations to be made. In the event that (i) funds for the succeeding fiscal period cannot be obtained, (ii) Buyer has exhausted all legally available means for making payment called for under this Agreement, (iii) Buyer has invoked and diligently pursued all legal procedures by which payment called for under this agreement may be made, (iv) such failure to obtain funds has not resulted from any act or failure to act of Buyer, (v) Buyer has not acquired, and has no intent to acquire during the subsequent fiscal period, items of property having functions similar to those the Property or which provide similar benefits to Buyer, and (vi) no funds have been appropriated for the acquisition of such property, Buyer may terminate this Agreement at the end of any fiscal period during the payment schedule set forth in Paragraph 8. 1.1 by giving notice to Seller or its successors at least sixty (60) days prior to the first day of such fiscal period for which appropriations cannot be made. Such failure to obtain proper appropriation and approval of the full amount of funds necessary to make required payments hereunder during any fiscal period subsequent to the current fiscal period shall terminate all Buyer's right, title and interest in and obligations under this Agreement and to all the Property, effective on the last day of the last fiscal period for which appropriation or approval was properly obtained. 8.1.3 No Security Interest In order to comply with the law of the State, Buyer is not granted a security interest in the Property. However, Buyer agrees to cooperate in filing this Agreement, if requested, as notice of its existence and the retention of title by Seller in the Property, and Buyer agrees that it will not interfere with Seller's right and ability to promptly remove the components that collectively comprise the Seller's Facilities should Buyer not renew or re appropriation funds required to pay the Facilities Availability Fees, hereunder. It is agreed and understood that Seller's Facilities shall at all times be deemed and considered as personal property that is solely and exclusively owned by Seller, and Buyer agrees that it shall never assert any ownership claim or rights thereto. It is further agreed that Seller's Facilities shall never be deemed or considered as a fixture that has attached to any real property owned by Buyer. 8.2 Statements and Payment 8.2.1 Invoices By the tenth day of each month, Seller shall provide Buyer with an invoice setting forth the amount due Seller. Buyer shall remit the amount due, pursuant to Seller's invoice instructions, on or before thirty (30) calendar days after Buyer's receipt of Seller's invoice. 8.2.2 Next Business Day If the last calendar day for a payment due under this Agreement is not a Business Day, then such payment shall be due not later than the next Business Day following that calendar day. 8.2.3 Interest If Buyer fails to pay any amount payable under this Agreement when due, then Buyer also will pay interest at the Specified Rate on the amount that is not paid from the date that the amount was due to the date on which Seller receives payment. Article 9 Maintenance and Operation 9.1 Initial Operations Seller will use Reasonable Efforts to cause the Commercial Operation Date for the Facility to occur on or before the Stipulated Commercial Operation Date. 9.2 Operation and Maintenance Seller will at all times properly operate and maintain the Facility. 9.3 Permits and Compliance with Law 9.3.1 Permits. Seller will obtain and maintain in full force and effect all applicable Permits that are necessary for the ownership, development, construction, operation and maintenance of the Facility and the generation and delivery of Project Energy, except to the extent that failure to do so would not materially adversely affect the operation of the Facility. Buyer shall cooperate with Seller's efforts to obtain all such Permits. 9.3.2 Applicable Law Parties will, at all times during the Term, comply with all Applicable Law related to the operation and maintenance of the Facility and Parties performance of their obligations under this Agreement, including all applicable Environmental Laws in effect at any time during the Term, except to the extent the failure to do so would not have a material adverse effect on the construction, operation and maintenance of the Facility or Parties ability to perform its obligations hereunder. 9.4 Qualified Personnel Seller may employ or contract with qualified personnel for the purpose of operating and maintaining the Facility, including Buyer's staff with Buyer's approval. 9.5 Inspection Buyer will have the right reasonably to inspect the Meters and the Facility, upon reasonable prior notice to Seller, during normal business hours and subject to the safety rules and regulations of Seller. 9.6 Insurance Seller shall carry and maintain no less than the insurance coverage's listed below; applicable to all operations undertaken by Seller, in the minimum amounts indicated, and all such liability insurance shall name Buyer as an additional insured and shall contain no deductibles nor self insured retentions. Such minimum amount may be satisfied either by primary insurance or by any combination of primary and excess /umbrella insurance. All such insurance is to be placed with Florida admitted insurers rated B+ or better by A.M. Best Rating Service. The required insurance coverage's shall be maintained in effect throughout the Term. Seller will provide Buyer a Certificate of Insurance provided annually no less than 30 days prior to annual contract anniversary date. (a) Commercial General Liability insurance written on an occurrence basis, with a minimum limit of $ 3,000,000 per occurrence, $3,000,000 annual aggregate. (b) All Risk Property insurance, including Builder's Risk, covering the Facility against physical loss or damage, with a minimum limit sufficient to cover replacement of the 9 facility and with a maximum deductible of $1,000 per occurrence. City shall be named as loss payee on the Facility Property insurance. City must be satisfied with and shall have final approval on the property insurance limit on the Facility. (c) Automobile Liability, includes coverage for ANY auto; $3,000,000 Combined Single Limit (d) Workers Compensation with Employer Liability Limits of $1,000,000 /$1,000,000 /$1,000,000 9.7 Operating Representatives Each Party shall maintain one designated representative (the "Operating Representative "), who shall have authority to act for its principal in all technical, real -time or routine matters relating to operation of the Facility and performance of this Agreement and to attempt to resolve disputes or potential disputes; provided however that the Operating Representatives, in their capacity as representatives, shall not have the authority to amend or modify any provision of this Agreement. Article 10 This Article Intentionally Left Blank Article 11 Events of Default and Remedies 11.1 Termination Due to Event of Default If an event specified in Section 11.2 (an "Event of Default ") occurs with respect to either Seller or Buyer, then the other party may terminate this Agreement immediately upon written notice to the other Party. The terminating Party will be entitled to all available remedies at law or in equity, except as expressly limited by this Agreement (including Section 14.3 11.2 Events of Default The occurrence of any of the following events shall constitute an Event of Default: 11.2.1 Payment Default With respect to Buyer, if Buyer fails to make, when due, any payment required under this Agreement, if that failure is not remedied on or before fifteen (15) days after Seller notifies Buyer of the failure. 11.2.2 Bankruptcy and Insolvency With respect to a Party, if the Party: (a) Is dissolved (other than pursuant to a consolidation, amalgamation or merger); (b) Becomes insolvent or is unable to pay its debts or fails, or admits in writing its inability, generally to pay its debts as they become due; (c) Institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding -up or liquidation and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (1) results in a 10 judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding -up or liquidation or (2) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof, (d) Has a resolution passed for its winding -up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (e) Seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (f) Has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets; (g) Causes or is subject to any event with respect to it, which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (a) through (f ) (inclusive); or (h) Takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts. 11.3 Termination Due to Delay If the Commercial Operation Date does not occur within 180 days after the Stipulated Commercial Operation Date, subject to extension for Force Majeure, Buyer shall have the right to terminate this Agreement upon fifteen (15) days notice to Seller. Article 12 Taxes 12.1 Responsibility Seller will be responsible for all Taxes imposed or levied relating to the ownership or operation of the Facility. Buyer will be responsible for all Taxes imposed upon the sale of Project Energy from the Facility (including any applicable sales or use or similar Tax). If Seller is required to collect or remit any Tax on behalf of Buyer, Buyer will reimburse Seller for such Taxes (on an after -tax basis). 12.2 Tax Reporting Each of the Parties will be responsible for its own Tax reporting. For purposes of Tax reporting, the Parties will treat the transactions described in this Agreement in a manner consistent with the characterizations of such transactions in this Agreement. 12.3 Exemption A Party, on notice from the other, shall provide a certificate of exemption or other reasonably satisfactory evidence of exemption if either Party is exempt from Taxes, and shall use Commercially Reasonable Efforts to obtain, and cooperate with the other Party obtaining, any exemption from or reduction of Tax. 11 12.4 Income and Other Taxes Each party shall be responsible for its own liabilities for any other Taxes, including income taxes, attributable to amounts paid to it under this Agreement. Article 13 Representations and Warranties 13.1 Representations and Warranties of Seller Seller hereby represents and warrants to Buyer on the date of this Agreement: 13.1.1 Status Seller is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation. 13.1.2 Authorization, etc. The execution, delivery and performance by Seller of this Agreement have been duly authorized by all necessary action on the part of Seller, and do not and will not: (a) Violate the organizational documents of Seller or any Applicable Law; or (b) Contravene, breach or result in a default under any agreement or instrument to which Seller is a party or by which its assets may be bound. 13.1.3 Enforceability This Agreement is the legal, valid, and binding obligation of Seller and is enforceable against Seller in accordance with its terms. 13.1.4 Permits and Approvals As of the date of this Agreement, Seller has obtained any and all Permits necessary for it to enter into this Agreement and reasonably expects to have obtained all Permits necessary for operation of the Facility by the Commercial Operation Date. 13.1.5 Litigation There are no suits, proceedings, judgments, rulings or orders by or before any Governmental Authority or arbitrator or any pending or threatened action or proceeding affecting Seller before any Governmental Authority or arbitrator (i) that could reasonably be expected to materially and adversely affect the ability of Seller to perform its obligations under this Agreement or Seller's ability to operate the Facility, or (ii) which purports to affect the legality, validity or enforceability of this Agreement. 13.2 Representations and Warranties of Buyer Buyer hereby represents and warrants to Seller on the date of this Agreement and again on and as of the Commercial Operation Date: 13.2.1 Status Buyer is a political subdivision of the State of Florida validly existing and in good standing under the laws of Florida. 13.2.2 Authorization, etc. The execution, delivery and performance by Buyer of this Agreement have been duly authorized by all necessary action on the part of Buyer, and do not and will not: 12 (a) Violate the organizational documents of Buyer or any Applicable Law; or (b) Contravene, breach or result in a default under any agreement or instrument to which Buyer is a party or by which its assets may be bound. 13.2.3 Enforceability This Agreement is the legal, valid, and binding obligation of Buyer and is enforceable against Buyer in accordance with its terms. 13.2.4 Permits and Approvals Buyer has obtained any and all Permits necessary for it to enter into and perform its obligations under this Agreement. This agreement is subject to Buyer and Seller cooperating and obtaining all permits including FDEP permits. If the required permits are not obtained, agreement shall be null and void. 13.2.5 Litigation There are no suits, proceedings, judgments, rulings or orders by or before any Governmental Authority or arbitrator or any pending or threatened action or proceeding affecting Buyer before any Governmental Authority or arbitrator that (i) could reasonably be expected to materially and adversely affect the ability of Buyer to perform its obligations under this Agreement, or (ii) purports to affect the legality, validity or enforceability of this Agreement. 13.2.6 Additional Governmental Entity Representations (a) All acts necessary to the valid execution, delivery and performance of this Agreement, including without limitation, competitive bidding, public notice, election, referendum, prior appropriation or other required procedures has or will be taken and performed as required under Applicable Law and Buyer's ordinances, bylaws or other regulations; (b) All persons making up the governing body of Buyer are the duly elected or appointed incumbents in their positions and hold such positions in good standing in accordance with Applicable Law; (c) Entry into and performance of this Agreement by Buyer are for a proper public purpose within the meaning of Buyer's organizational documents and Applicable Law; (d) The term of this Agreement does not extend beyond any applicable limitation imposed by Buyer's organizational documents and Applicable Law; (e) Buyer's obligations to make payments hereunder will be treated as costs of operation and maintenance of its energy system and will be payable solely from revenues of that energy system; (f) Entry into and performance of this Agreement by Buyer will not adversely affect the exclusion from gross income for federal income tax purposes of interest on any obligation of Buyer otherwise entitled to such exclusion; and 13 (g) Obligations to make payments hereunder do not constitute any kind of indebtedness of Buyer or create any kind of lien on, or security interest in, any property or revenues of Buyer which, in either case, is proscribed by any provision of buyer's organizational documents or Applicable Law, or any contractual restriction binding on or affecting it or any of its assets. 13.3 No Other Warranties Except as explicitly set forth in this Agreement, neither Party makes any representation or warranty, and all implied warranties, including any warranty of merchantability or fitness for a particular purpose, are hereby expressly disclaimed. Each Party's decisions have been the result of arm's length negotiations between the Parties; and each Party is entering into this Agreement with a full understanding of all of the associated risks (economic and otherwise), and it is capable of assuming and willing to assume those risks. Article 14 Indemnification; Limitation of Liability 14.1 Indemnification by Seller Seller hereby agrees to indemnify and defend Buyer and its employees (collectively, the "Buyer Indemnified Parties ") against all Claims to the extent arising out of, resulting from or caused by: (a) Seller's ownership, operation or maintenance of the Facility; or (b) Project Energy or Biosolids Waste, when title to Project Energy or Biosolids Waste, as the case may be, is vested in Seller. 14.2 Indemnification by Buyer Subject to the limitations of this Article 14, Buyer hereby agrees to indemnify and defend Seller and each of its subsidiary companies and the directors, officers and employees of each of them (collectively, the "Seller Indemnified Parties "), and hold each of the Seller Indemnified Parties harmless, against all Claims to the extent arising out of, resulting from or caused by: (a) The ownership and operation of SSWRCP, insofar as Buyer's operation of such plant relates to the subject matter of this Agreement; or (b) Project Energy, when title to Project Energy, as the case may be, is vested in Buyer. 14.3 LIMITATION ON REMEDIES THE EXPRESS REMEDY, PAYMENT OBLIGATIONS, OR MEASURE OF DAMAGES SET FORTH IN ARTICLES 8 AND 11 OF THIS AGREEMENT WILL BE THE SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO SUCH SECTIONS IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF SUCH 14 SECTIONS. ACCORDINGLY, EACH PARTY'S LIABILITY WILL BE LIMITED AS SET FORTH IN SUCH SECTIONS AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY WHETHER SOUNDING IN TORT OR CONTRACT FOR THE SAME DAMAGE OR INJURY NOT PERMITTED BY SUCH SECTIONS ARE WAIVED. NEITHER PARTY WILL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR IN CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE (EXCEPT TO THE EXTENT THAT A PARTY IS REQUIRED TO INDEMNIFY THE OTHER PARTY UNDER THIS ARTICLE 14 FOR THIRD PARTY CLAIMS NOT ARISING OUT OF CONTRACTS WITH THE INDEMNIFIED PARTY). IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS IMPOSED ON SUCH REMEDIES AND THE MEASURE OF SUCH DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF A PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. 14.4 Survival The provisions of this Article 14 shall survive the termination of this Agreement. Article 15 Force Majeure 15.1 Force Majeure To the extent either Party is prevented by Force Majeure from carrying out, in whole or part, its obligations under this Agreement and such Party (the "Claiming Party") gives notice and details of the Force Majeure to the other Party as soon as practicable, then the Claiming Party shall be excused from the performance of its obligations for the duration of the Force Majeure. Force Majeure shall not excuse the obligation to pay amounts due or owing under this Agreement. The Claiming Party shall remedy the Force Majeure with all reasonable dispatch and shall notify the non - Claiming Party as soon as practicable of the termination of such Force Majeure event. 15.2 Termination for Extended Force Majeure In the event that a Force Majeure continues for more than six (6) consecutive calendar months and the Claiming Party is not, at the end of such six -month period, exercising due diligence to remedy the Force Majeure or such Force Majeure would not reasonably be expected to be remedied through the exercise of due diligence within three (3) additional months, the non - Claiming Party may terminate this Agreement upon notice to the Claiming Party. 15 Article 16 Miscellaneous 16.1 Notices All notices, demands, requests and other communications provided for under this Agreement, except for real -time or routine communications between the Operating Representatives concerning Facility operations, will be in writing addressed to the respective Party, as the case may be, at the following addresses. Either Party may change the address to which notices are sent or the designation of its Operating Representative by written notice to the other as required by this Section 16.1 Notice will be deemed to have been given (a) when presented personally, upon receipt, (b) when sent by a nationally recognized overnight courier service, on the date delivered to the addressee, (c) when sent by mail, postage prepaid, registered or certified, return receipt requested, on the date delivered to the addressee or (d) when sent by facsimile transmission, on the date of electronic confirmation of transmission (if sent on a Business Day before 5:00 p.m. Eastern Prevailing Time) or the first Business Day thereafter (if sent at any other time). The names and addresses for the service of notices referred to in this Section 16.1 and the designated Operating Representatives are: To Seller: Richard Heien, President MaxWest Environmental Systems, Inc. 1502 Augusta, Suite 120 Houston, TX 77057 To Buyer: Paul R. Moore, Director of Utilities City of Sanford, Florida 16 16.2 No Partnership This Agreement shall not be interpreted or construed to create an association, joint venture or partnership among the Parties, or to impose any partnership duty, obligation or liability on the Parties. No Party shall act as agent of the other, have the authority or hold itself out as having the authority to bind the other Party to any contract, obligation or commitment or take any other action on behalf of the other Party, in each case except as expressly set forth in this Agreement. 16.3 Assignment This Agreement may not be assigned by any Party without the other Party's prior written consent which consent may not be unreasonably withheld; provided, however, that Seller may assign, transfer, mortgage or pledge its interest in this Agreement as security (an "Assignment for Security ") for any obligation secured by any indenture, mortgage or similar lien on its assets, without limitation on the right of the secured party to further assign this Agreement, including the assignment to create a security interest for the benefit of the third party; and, provided further, that Buyer may assign this Agreement to a special purpose entity controlled by Buyer. Buyer will take such actions as Seller may reasonably request in connection with an Assignment for Security, including delivery of its written consent to such assignment and other documentation reasonably acceptable to lenders. No assignment will relieve the assigning Party of its obligations under this Agreement. 16.4 Further Assurances Each Party hereby undertakes to take or cause to be taken all actions, including the execution of additional instruments or documents, necessary to give full effect to the provisions of this Agreement. 16.5 Third Party Beneficiaries This Agreement is for the benefit of the Parties hereto and their respective successors and permitted assigns and the Buyer Indemnified Parties and the Seller Indemnified Parties, and this Agreement shall not otherwise be deemed to confer upon or give to any third party any remedy, claim, liability, reimbursement, cause of action or other right. 16.6 Governing Law This Agreement shall be governed by and shall be construed and interpreted in accordance with the laws of the State of Florida, venue shall be exclusively in Seminole County without reference to principles of conflicts of laws thereunder. 16.7 Entire Agreement This Agreement constitutes the entire agreement between the Parties and supersedes all prior agreements and undertakings, oral or written, between them with respect to the subject matter of this Agreement. 16.8 Amendment No amendment, modification, waiver, change or addition hereto shall be effective or binding on any of the Parties hereto unless the same is in writing and signed by each of the Parties hereto. 16.9 Waivers Any waiver, express or implied, by either Party of any right or of any failure to perform or breach of this Agreement by the other Party shall not constitute or be deemed as a waiver of any other right or of any other failure to perform or breach of this Agreement by such other Party, whether of a similar or dissimilar nature. 17 16.10 Severability In the event of the invalidity or unenforceability of any provision of this Agreement, the validity or enforceability of the other provisions hereof shall not be affected and the Parties shall substitute for such invalid or unenforceable provision a valid and enforceable provision that most closely approximates the intended effect of the invalid or unenforceable provision. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers or agents, all as of the day and year first above written. MAXWEST ENVIRONMENTAL SYSTEMS, INC. By: Name: 6AC HAIR Title: r y / e £N T CITY OF SANFORD B - Name: Lin a Kuhn Title: Mayor 18 Exhibit A To Biosolids Conversion And Thermal Energy Purchase Agreement Between MaxWest Environmental Systems, Inc. (Seller) And City of Sanford, Florida (Buyer) General Scope of Agreement — Buyer will deliver biosolids that have been dried in Buyer's drying equipment and Seller will gasify the dried biosolids in Sellers gasifier and deliver Thermal Energy to Buyer in the form of hot oil that will be utilized by Buyer in Buyer's dryer equipment for drying Buyer's biosolids. The Parties will agree on the specific detailed Delivery Points and interconnection points and services as generally described herein. Location of Gasification Facility — The gasification facility will be located as shown on the attached Exhibit Al. Delivery Points Biosolids Delivery Point to Seller — The inlet hopper of Seller's gasifier equipment as indicated on the attached Exhibit Al. Hot oil Delivery Point to Buyer — A flange on the hot oil system of Buyer's hot oil system for Buyer's dryer as shown on the attached Exhibit Al. Ash Delivery Point For Disposal - Ash produced by the gasification process shall be delivered to a storage bin provided by Buyer as shown on the attached Exhibit Al. Composition and quantity of Dried Biosolids From Buyer — Biosolids delivered to seller at the Delivery Point shall be consistent with the following specifications: Composition: The composition of the biosolids shall be as defined on the attached Biosolids Material Composition Analysis, Exhibit A2. Quantity: Minimum: 720 Lbs / Hr. Maximum: 1,440 Lbs / Hr. 19 Minimum Heating Value: 4,225 BTU per Lb. of biosolids BTU Calculation: The Heating Value shall be determined by measuring the moisture content of the material and multiplying the dry solids content of the material times heating value on a dry basis as determined by laboratory analysis for the Buyer's or third party biosolids and attached as Biosolids Material Composition Analysis, Exhibit A2. Utilities and Services Provided by Seller - Seller shall provide the following utilities and services for operation of Seller's Gasification System: Electricity: 480V / 3PH / 60 Hz AC up to a maximum of 30 KW Utilities and Services Provided by Buyer - Buyer shall provide Seller with the following utilities and services for operation of Seller's Gasification System: Water — Sufficient water for general wash down and other minor maintenance activities. Seller does not require water for the gasification process. Natural Gas (NG) — Seller will provide NG for startup fuel to Seller's Gasifier, anticipated not to exceed 30 mm BTU / Month, except as may be required for additional A ;i;t downs and startup as Buyer may require. # V SCADA — Dedicated connection for Buyer's SCADA system. Imported biosolids from third parties for disposal - The Buyer and Seller may work together to receive additional biosolids material from third parties to process in Buyer's wastewater reclamation plant and share in tipping fees as specified in Paragraph 4.1.2. K1] EXHIBIT A -1 a--1 Qi z W Z . W D J � Q m Sz�C m �a Zm� °m oaq 4w �m mrm a w Jm UJ Op I LL VIII III Q m �z1 J J J ON DO O? F Oa 7F 61 i i i i i i i i i O O i i i o Z wm O� O H O O O x m v . w 0 a�? mW O a ° 5m _ ra Q O qyW O EXHIBIT A -2 SG$ Analysis Report April 04, 2008 CPH ENGINEERING INC 500 WEST FULTON STREET Page 1 of 1 SANFORD FL 32771 ATTN: MICHAEL COOGON Client Sample ID: CPH Job No. S0628.10 (M13301 Sample ID By CPH Engineers Inc Date Sampled: Mar 24, 2008 Sample Taken At -- Date Received: Mar 24, 2008 Sample Taken By - -- Product Description: BIOMASS SGS Minerals Sample ID: 491 - 0825180 -001 As Received Dry MAF %b Total Moisture [ASTM D4442(METHOD A)] 7.68 %b Volatile Matter [ASTM D3175] 61.65 66.77 %Ash [ASTM D1102] 20.94 22.69 %b Fixed Carbon [ASTM D3172(Calc)] 9.73 10.54 % Sulfur [ASTM D4239(METHOD B)] 0.75 0.81 Gross Calorific Value (Btu/lb) [ASTM D3286] 7114 7705 9966 % Carbon [ASTM D53731 38.20 41.38 %b Hydrogen [ASTM D53731 5.31 5.76 % Nitrogen [ASTM D53731 6.34 6.87 %b Oxygen [ASTM D5373(Calc)] 20.78 22.49 /LL"..Z arXd�'Z" -+ VAN ESSA_CHAMBLISS Minerals Services Division SGS North America Inc. 16130 Van Drunen Road South Holland IL 60473 t (708) 331 -2900 f (708) 333 -3060 www.sgs.com /minerals Member of the SGS Group This document is issued by the Company under its General Conditions of Service accessible at hffp. w .sgs.comterms and conditions.htm. Attention is drawn to the limitation of liability, indemnification and jurisdiction issues defined therein. Any holder of this document is advised that information contained hereon reflects the Company's findings at the time of its intervention only and within the limits of Client's instructions, if any. The Company's sole responsibility is to its Client and this document does not exonerate parties to a transaction from exercising all their rights and obligations under the transaction documents. Any unauthorized alteration, forgery or falsification of the content or appearance of this document is unlawful and offenders maybe prosecuted to the fullest extent of the law