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HomeMy WebLinkAboutRES 15-046RESOLUTION NO. 15-046 WHEREAS, on December 18, 2012, City Council of the City of Beaumont, Texas approved Resolution No. 12-296 authorizing the City Manager to execute a twenty (20) year Agreement with Fair Energy Operations -Beaumont, LLC to purchase and process municipal solid waste into diesel fuel and other recyclables; and, WHEREAS, Fair Energy Operations -Beaumont, LLC has requested an Amended and Restated Feedstock Supply and Processing Agreement to reflect certain changes in the processes and byproducts to be produced; and, WHEREAS, in order to secure financing of its operation, Fair Energy Operations - Beaumont, LLC is requesting the City to grant consent to the terms of a Collateral Assignment of the Beaumont Supply Agreement as amended assigning a continuing security interest in all rights, title, interest and claims of Fair Energy in the Amended and Restated Feedstock Supply and Processing Agreement to Wilmington Trust, National Association, as trustee; and, NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF BEAUMONT: THAT the statements and findings set out in the preamble to this resolution are hereby, in all things, approved and adopted; and, THAT the City Manager be and he is hereby authorized to execute an Amended and Restated Feedstock Supply and Fuel Processing Agreement between Fair Energy Operations -Beaumont, LLC and the City of Beaumont to purchase municipal solid waste from the City of Beaumont. The Amended and Restated Feedstock Supply and Fuel Processing Agreement is substantially in the form attached hereto as Exhibit "A" and made a part hereof for all purposes; and, BE IT FURTHER RESOLVED THAT the City Manager be and he is hereby authorized to execute a Collateral Assignment of Beaumont Supply Contract between Fair Energy Operations -Beaumont, LLC and the City of Beaumont assigning a continuing security interest in all rights, title, interest and claims of Fair Energy in the Amended and Restated Feedstock Supply and Processing Agreement to Wilmington Trust, National Association, as trustee. The Collateral Assignment of Beaumont Supply Contract is substantially in the form attached hereto as Exhibit "B" and made a part hereof for all purposes. PASSED BY THE CITY COUNCIL of the City of Beaumont this the 17th day of March, 2015. LU AMENDED AND RESTATED FEEDSTOCK SUPPLY AND FUEL PROCESSING AGREEMENT THIS AMENDED AND RESTATED FEEDSTOCK SUPPLY AND FUEL PROCESSING AGREEMENT (the "Agreement") is made effective as of the day of , 2015 by and between the City of Beaumont, Texas a home rule municipality ("Supplier"), and Fair Energy Operations -Beaumont, LLC, a Texas limited liability company (the "Company"). RECITALS: WHEREAS, the Supplier and the Company entered into that certain Feedstock Supply and Fuel Processing Agreement, dated effective as of January 7, 2013 (the "Original Agreement"); WHEREAS, the Supplier and the Company desire to amend, restate and replace the Original Agreement to effectuate certain changes as enumerated herein; WHEREAS, Company and its affiliates are engaged in certain business activities, including the obtaining and contracting for municipal solid waste, including any and all solid wastes and other carbonaceous materials (including but not limited to garbage, rubbish, trash, refuse, paper, glass, plastic, cardboard, plant and grass clippings and leaves) collected or received from residential, commercial, industrial or other sources (the "Feedstock"); and WHEREAS., the Company and its affiliates have the right to install and operate improvements and equipment that generate renewable and alternative energy and byproducts thereof, as described below, which requires a dependable source of Feedstock in connection with such business activities; and WHEREAS, the Company desires to obtain Feedstock from Supplier, and Supplier desires to supply the Feedstock to the Company, which the Company will process into diesel and/or Bio -Oil (as defined below) and other products and by-products, and the recycling and sale of bio -char, plastics, aluminum, ferrous and non-ferrous metals, cardboard and other related products and by-products and subject to the terms and conditions set forth herein; and NOW THEREFORE, for and in consideration of the mutual covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows: 1. Sup_plyAgreement. Subject to the terms and conditions of this Agreement, Supplier covenants and agrees to deliver to or cause to be delivered -to the Company not less than 1,100 tons of Feedstock per week (on average), as long as it is available to the Supplier, at the designated location within the Company's processing facility to be located at or in the immediate proximity of 4900 Lafin Rd., Beaumont, Texas 77705 (the "Company Facility"), and the Company agrees to accept the Feedstock from Supplier on a daily basis, Monday through Thursday, during Supplier's normal hours of operation, during the term of this Agreement. All the Feedstock will be delivered by Supplier or its subcontractors, as the case may be, to the AMENDED AND RESTATED FEEDSTOCK SUPPLY AND FUEL PROCESSING AGREEMENT — Paae 1 EXHIBIT "A" Company Facility located near Supplier's landfill. The Company intends to operate the facility a minimum of two hundred fifty (250) and a maximum of three hundred forty (340) days per year. Supplier agrees to supply the Feedstock to the Company at the Company Facility in accordance with the terms and conditions set forth in this Agreement. Any Feedstock that the Company is unable to process, unless it is deemed to be a hazardous substance, shall be landfilled at the Supplier's landfill if permitted by the Supplier's permit as mutually agreed upon by the Company and Supplier. In the event hazardous substances contained in the Feedstock, and not produced by the Company, are not permitted to be delivered from the Company Facility to Supplier's landfill, then the Company shall be responsible for disposing of' such unacceptable substances in accordance with all applicable laws, rules and regulations. Feedstock not processable by the Company, and that is not hazardous substances, will be delivered by the Company to the Supplier's landfill in accordance with all applicable laws, rules and regulations. (a) The Company is responsible for obtaining all required State and Federal permits and licenses to operate the facility contemplated hereunder and for sorting and processing any recyclable material in accordance with all applicable laws, rules, regulations and ordinances, including environmental and clean air laws governing the waste to energy processing under this Agreement. (b) The Company shall use reasonable commercial efforts to operate the waste to energy facilities in accordance with the processes generally described on Exhibit "A" attached hereto. (c) The volume of Feedstock may be increased upon mutual written agreement of the parties hereto. (d) The Company may use portions of the Feedstock for production organic fertilizer and mulch and process and sell scrap metals and other products and byproducts referenced above. 2. Non -Exclusivity. Provided that Supplier is fully and timely satisfying its Feedstock delivery obligations pursuant to Section 1 hereunder, the parties acknowledge and agree that nothing in this Agreement shall prevent Supplier from selling or supplying Feedstock to any other operator or party which desires to contract with Supplier for the disposal of said Feedstock. Subject to the delivery obligations set forth herein, Supplier is also allowed to process its buried waste into methane gas making use of other technologies. Notwithstanding any other provision in this Agreement, nothing in this Agreement shall limit Company's right to solicit, seek to obtain or obtain Feedstock from other sources for any shortfall in the amount of Feedstock delivered by Supplier hereunder or to the extent the Company desires to acquire additional Feedstock. 3. Facilities. All facilities constructed will require approval of Supplier in order to assure compliance with any applicable regulations of all local, state and/or federal environmental agencies, which approval will not be unreasonably withheld, conditioned or delayed. 4. Pricing and Payment Terms. Supplier agrees to provide and supply the Feedstock to the Company at the Company Facility, Monday through Thursday during Supplier's normal AMENDED AND RESTATED FEEDSTOCK SUPPLY AND FUEL PROCESSING AGREEMENT — Page 2 hours of business at no additional cost to the Company except as provided in Section 7. The Company shall be responsible for storage of Feedstock during the days and times when Supplier is not operating. Supplier agrees to pay the Company no tipping fee (disposal). During Supplier's normal hours of operation, or more often as mutually agreed upon by the parties, Supplier will use Supplier's current infrastructure, including trucks and personnel, to deliver the Feedstock to the Company's facility to be weighed and processed in accordance with the terms and conditions set forth herein and further written procedures to be established and agreed upon by the parties hereto in the form attached hereto as Exhibit "B." The garbage trucks operated by the Supplier or their subcontractors, as the case may be, shall go directly from their respective routes to the Company's site rather than the landfill. No Feedstock shall be presorted by the Supplier but shall be directly delivered to the Company's facility. In the event the Company is overloaded and unable to receive Feedstock, the Company will notify Supplier as soon as it is aware of its inability to receive Feedstock. S. Term of Agreement. The initial term of this Agreement shall be twenty (20) years from the date of commencement of operations. For purposes hereof, "commencement of operations" means the date upon which the Company opens the Company facility for commercial operations and accepts Feedstock from Supplier for processing in accordance with the terms and conditions set forth herein. Provided that there is no current event of default by the Company hereunder; this Agreement may be renewed by the Company for two (2) additional periods of ten (10) years each upon delivery of one hundred eighty (180) days prior written notice to Supplier. Each option requires the prior approval of the governing body of Supplier before the Agreement is renewed. The governing body of Supplier reserves the right to exercise the right of prior approval in a reasonable and prudent manner in the best interest of the City of Beaumont. 6. Additional Obligations of Supplier. (a) Supplier will assist the Company in obtaining economic incentives and obtaining all required governmental permits (Building, Waste, Water, Air and Wetlands) relating to the construction, operation, environment and maintenance of the facility contemplated herein. Supplier does not guarantee the success in securing any incentives or permits. (b) The Company will be entitled to all carbon credits, RINs (Renewable Identification Numbers) and the like arising from the production and/or blending of renewable fuel into diesel and other fuel derived from the Company Facility. Supplier shall use reasonable commercial efforts to assist the Company in this regard. (c) The Company shall be entitled to any and all diversion credits arising out of the diversion of Feedstock from landfills into Feedstock, consistent with state and federal law. (d) The Company shall be entitled to receive and retain all revenues derived from the sale or use of all outputs from the Company Facility, including, without limitation, Bio -Oil, bio -char, syn -gas, metals, papers and other organic or inorganic materials, except only as may be specifically otherwise provided herein. AMENDED AND RESTATED FEEDSTOCK SUPPLY AND FUEL PROCESSING AGREEMENT — Page 3 7. Payment. In consideration for the delivery of Feedstock and support of the Company's business, including waste -to -energy technology, the Company will make a bi-annual payment of $162,500.00 to the Supplier. Such payments will start at the end of the sixth month after the commencement of operations and will continue through the term of the Agreement. For bi-annual periods (January 1 -June 30 and July I -July 31 in which the price (NYMEX) of West Texas Intermediate (WTI) Crude Oil, as set forth in The Wall Street Journal, is over $80.00 per barrel for the entire, bi-annual period, such bi-annual payment shall be increased to $200,000.00. Commencing with the bi-annual payment following the fourth anniversary from the first payment made under this Section 7, the bi-annual payment shall be increased by three percent (3%) per annum based upon a $162,500.00 bi-annual payment. 8. Force Majeure. The obligations of each party shall be subject to force majeure, including without limitation, severe weather, floods, earthquakes and other natural disasters, strikes, work stoppages and slowdowns, riots and other civil disturbances, shortages, rationing or unavailability of supplies and raw materials, terrorism, and other unforeseeable matters outside the control of the party claiming such intervention. The party suffering from such force majeure shall notify the other party within thirty (30) days of the onset of the force majeure event. Upon any claim of force majeure, the time for performance of the obligation interfered with shall be extended without additional charges and the parties will cooperate to mitigate the effect of the force majeure event. In the event of a force majeure event which prevents Supplier from supplying the Feedstock in accordance with the terms hereof, the Company shall be relieved of its minimum annual processing obligation, on a proportionate and equitable basis, for so long as the force majeure event exists. 9. Indemnification. Subject to the Supplier's obligations enumerated in Section 1, the Company shall indemnify, defend, and hold harmless Supplier, its affiliates, and their respective members, managers, officers, employees, and agents, from and against any and all claims, demands, suits, losses and damages, including, but not limited to, claims, demands, suits, losses and damages for bodily injury, illness, disease or death and expenses, including reasonable attorneys' fees (collectively "Claims") that may be brought against them, individually or jointly, or in which they may be named a party defendant, in any way arising out of or relating to the operations of the Company Facility hereunder, including without limitation the obligations set forth in Sections 1, 2 or 3 hereof. The obligations of the Company pursuant to this Section 9 shall survive any termination of this Agreement. 10. Miscellaneous. (a) Complete Agreement. This Agreement, together with the written procedures, constitutes and contains the entire and only agreements between the parties respecting the subject matter hereof This Agreement supersedes and cancels all pre- existing agreements and understandings between the parties as to the subject matter hereof. (b) Severability. If any provision of this Agreement is held to be unenforceable, invalid, or void to any extent for any reason by a court of competent jurisdiction, the remaining provisions of this Agreement shall not be affected thereby and shall continue in effect as though such invalid provisions were deleted. AMENDED AND RESTATED FEEDSTOCK SUPPLY AND FUEL PROCESSING AGREEMENT — Page 4 (c) Governing Law. This Agreement shall for all purposes be governed by and construed in accordance with the laws of the State of Texas. (d) Assi nment. This Agreement may not be assigned by either party, nor any duty hereunder be delegated by a party, without the prior written consent of the other party in the event of a proposed sale by Company of all or substantially all of its assets or capital stock to an operator that has a net worth and similar operating experience of a facility of this type greater or equal to that of the Company as of the effective date of this Agreement. The governing body of Supplier does, however, in the best interest of the citizens of Beaumont, reserve the right to exercise its right to withhold consent should it reasonably determine that a prospective operator does not satisfy the requirements established herein. (e) Confidentiality_. The parties hereto covenant and agree to keep proprietary information (i.e. technology, waste management process, etc.) of this Agreement confidential and will not disclose the same to any third party, except as required by law or as relates to the sale or financing of either party's business. Notwithstanding the foregoing, a. copy of this Agreement shall be included in the offering materials pertaining to the issuance by the Mission Economic Development Corporation of its Solid Waste Disposal Revenue Bonds (Fair Energy Operations, LLC Project) (the "Bonds") and thereby provided to prospective investors in the Bonds. (f) Company Non -Performance. This Agreement shall terminate in the event the Company is in default under the terms of this Agreement, but only following receipt by the Company and its lender of ninety (90) days prior written notice, which period shall be reasonably extended in the event the Company (or any assignee of the Company) commences curative action within said 90 -day period and continues to diligently pursue the completion of same. (g) Insurance. (i) The Company, at the Company's sole cost and expense, agrees to keep the Company's trade fixtures, equipment, and improvements on the site insured against loss or damage by fire and such other risks as are from time to time included in broad form extended coverage endorsements. (ii) The Company agrees to maintain a commercial general liability insurance policy covering the Company's operations, including, without limitation, the Company possession, use and operations on the property that is used for the Company's operation. The general liability insurance policy shall provide for (1) bodily injury and property damage coverage of at least $1,000,000 for any one occurrence, (2) automobile liability coverage of at least $1,000,000, and (3) general aggregate coverage of at least $2,000,000. The Company shall also carry an umbrella excess liability insurance policy of at least $11,000,000. A duplicate original or a certificate of each policy shall be delivered to Supplier within ten (10) days before the commencement of operations on the site, and thereafter at the request of Supplier. Each policy shall (a) contain an environmental endorsement AMENDED AND RESTATED FEEDSTOCK SUPPLY AND FUEL PROCESSING AGREEMENT— Page 5 for a maximum of $1,000,000 covering any corrective action necessitated by accidental releases of hazardous materials on the properly by the Company or its agents, employees, contractors, or invitees, (b) contain a provision that the underwriter will give Supplier at least thirty (30) days prior written notice of any cancellation or lapse of the insurance, and (c) name Supplier as an additional insured. (h) Notices and Requests. Any notice shall be deemed to have been given hereunder if and when given by hand delivery or sent by telex, telecopy, telefax or other telecommunications device capable of creating a written record (confirmed by registered or certified mnail or by overnight courier) or sent by United States certified mail, return receipt requested, with proper postage prepaid, addressed as follows, or as set forth in any notice of change of address previously given in writing by the addressee to the addresser: If to Supplier: City Manager City of Beaumont,Texas 801 Main Street, Suite 300 Beaumont, Texas 77701 Telephone: (409) 880-3708 Fax: (409) 880-3112 With copy to: Office of the City Attorney City of Beaumont, Texas 801 Main Street, Suite 300 Beaumont, Texas 77701 Telephone: (409) 880-3715 Fax: (409) 880 3121 If to Company: Attn: Kyle Fair 5609 Cradlerock Plano, TX 75093 Telephone: (972) 867-5904 Fax: (972) 867-5410 With copy to: Sussman & Moore, LLP Attn: Ronald L. Sussman 4645 N. Central Expressway, Suite 300 Dallas, Texas 75205 Telephone: (214) 378-8270 Fax: (21.4) 378-8290 A copy of each notice given hereunder by one party to the other shall be provided to the Company's lender, Wilmington Trust, N.A., as Trustee, 15950 North Dallas Parkway, Suite 550, Dallas, Texas 75248: Attention: Corporate Trust A notice delivered by regular or certified U.S. Mail will be deemed to have been delivered on the third business day after the post -mark, if affixed by the U.S. Postal AMENDED AND RESTATED FEEDSTOCK SUPPLY AND FUEL PROCESSING AGREEMENT — Page 6 Service. Any other notice will be deemed to have been received on the date and time of the signed receipt or confirmation of delivery or transmission thereof, unless that receipt or confirmation date and time is not a business day or is after 5:00 p.m. local time on a business day, in which case such notice will be deemed to have been received on the next succeeding business day. [Signature page.follows] AMENDED AND RESTATED FEEDSTOCK SUPPLY AND FUEL PROCESSING AGREEMENT -- Page 7 IN WITNESS WHEREOF, the parties have executed this Supply Agreement as of the day and year first above written. FAIR ENERGY OPERATIONS-BEAUMONI', LLC, a Texas limited liability company By: _— Name: Title: SUPPLIER: CITY OF BEAUMONT, TEXAS By: --- Name: Title: AMENDED AND RESTATED FEEDSTOCK SUPPLY AND FUEL PROCESSING AGREEMENT — Page 8 Exhibit "A" ANNEX- COMPANY PLANT TECHNOLOGY AND OPL<'I3ATIONS Plants will receive, pre -treat, and transform the municipal solid waste from the collection operation into Bio. -Oil and other products and by-products, and the recycling and sale of hio- char, plastics, aluminum, ferrous and non-ferrous metals, cardboard and other related products and by-products and subject to the terms and conditions set forth herein. The process for the transformation of waste into energy is as follows: [PROCESS BELOW TO BE UPDATED] Receive MSW. Process consistency starts with weighing the inbound municipal solid waste ("MSW" or "Feedstock"). Recorded weights will be used over time in the creation of a waste characterization that will enable the facility to predict seasonal volumes and production values. The manual sorting removes everything from hazards such as old propane cylinders to automobile wheels and tires, etc. Size sorting will remove other items physically too large to process. These items will undergo further sorts to determine if they will be retained for recycling or moved back to the landfill. The Company's strong preference is to recycle or process to oil as much waste as is practical. There will be no charge for sending anything back to the Beaumont landfill as the City of Beaumont will have received payment in the form of tipping fees for the waste. Separate Recyclables and Processable Fractions. Recyclable materials have value and capturing that value makes up a small portion of the overall economies of the Facility. To capture those economies, the Company will employ several automated tools that are typically found in recycling facilities. Ferrous materials or steel will be removed with a combination of magnetic separators. Typically there is a separator suspended over the material conveyor and another drum type magnet built into the conveyor itself. Non-ferrous materials such as aluminum and brass or copper are removed or sorted using eddy current separators. Glass and other ceramic materials will be removed with optical separation equipment. Small portions of these do find their way into the process stream and end up in the bio -char material. The actual arrangement and order of the equipment is subject to the characterization of the waste brought into the facility and will be further detailed during front end engineering design. Plastic waste makes up a high Btu value portion of the waste to oil equation. Resin Identification Codes found on most plastic materials determine what -will be used and what must be discarded. For example, used PVC pipes and fittings (typically a 3 within the recycle emblem) will not be sent to the pyrolysis step. All other plastics will convert effectively to the bio -crude product. Paper and cardboard typically remain with the plastics in the waste stream. These will be combined proportionately and moved into the next processing step. There is a possibility that the Company might need to purchase plastics or other inputs to affect the quality of the feedstock. The pyrolysis units may also run wood waste, tires and a variety of other combustible materials. The yield for these other materials may not be as high in terms of bio -oil output but this material is essentially free. Therefore purchasing feedstock materials would only be considered if necessary and economics were to justify such a purchase. AMENDED AND RESTATED FEEDSTOCK SUPPLY AND FUEL PROCESSING AGREEMENT — Page 9 The Company hope to commercialize the value of the recyclable products generated from the feedstock introduced into the process. These products may include plastics, aluminum, ferrous metals and cardboard. The recycling operations will remove saleable materials as described above. The Company expects that several companies in the area will place roll off dumpsters on site and regularly trade out full dumpsters for empties. The full dumpsters will run across the scales where the weight is recorded and a ticket for the weight transported is provided to the purchaser and to the business office. Payment will be made to the Company based on the contracted value of the items and the weight transported. Process Paper and Plastics. "I'he mixed paper and plastics are moved through a shredder process to reduce the size, create uniformity and to enhance the effectiveness of the drying operation. The shredded waste is conveyed into a forced air- dryer to reduce the moisture content down to a range acceptable to the pyrolysis process. This is typically in the 8 to 10% range. `Phis range may be modified slightly as actual oil production values are established. The size requirements are driven by the pelletization equipment. The end goal is to create uniformity in the feedstock that will enable the Company to tune the production process around known values for the various types of waste we may run in the future. Pelletize Processed Paper and Plastics. Process consistency is the key to efficiency in handling, storing and converting the processed paper and plastics. In the pelletizing operation, the processed paper and plastics materials are compressed or pressed through small holes or extruded and then cut into small uniform cylinders or pellets. The benefits to pelletizing are greater than process consistency alone. The pellets enable fairly precise measurement of volumes, weights; storage and production metrics. These metrics are important as the Company establishes continuous flow in the production operations. Convert Processed Paper and Plastics Pellets into Bio -Crude Oil and Bio -Char. The conversion technology to be employed in the Facility is pyrolysis and, specifically, Auger type slow pyrolysis. Pyrolysis involves thermochemical conversion or heating of the processed paper and plastic pellets (sometimes referred to as refused derived fuel or "RDF") in the absence of oxygen, which produces bio -char, liquid bio -oil and syn -gas. This thermochemical transformation changes the product's structure by applying heat in a totally controlled atmosphere, breaking the carbon chain into those elements. Pyrolysis typically operates between 400°C and 900°C, but the upper limit of the process that the Company will employ is approximately 600°C; this reduces the energy consumed in the conversion process. The energy so consumed is sometimes referred to as the parasitic load. High temperature pyrolysis also produces high quantities of high calorific value with methane (CH4) concentration up to 50% depending on the composition of the processed paper and plastics. The Company believes that the simplicity of this process will result in high reliability combined with low maintenance and operating costs as well as energy efficiency ratios up to 91%. The specifications for the feedstock going into the pyrolysis process fall into several categories: The desired feedstock is a blend of plastics (already a petrochemical product) and paper. The range of values for this feedstock is fairly forgiving and the goal is a btu value between 10,000 and 14,000 btu's. Confirming the values requires a simple lab test that yields AMENDED AND RESTATED FEEDSTOCK SUPPLY AND FUEL PROCESSING AGREEMENT — Page 10 data including btu and caloric values. Measuring the mix of plastics and papers at the blending and shredding operation creates the consistency and uniformity required. The process produces three products: bio -oil, bio -char and syn -gas. The bio -oil will be sold to refiners or in the spot market. Bio -char may be sold for use as fuel, carbon black, or a soil enhancer. The bio -char has similar characteristics to coal and may also be sold for use as a coal substitute in the firing of kilns and in the purification of frac water. If the bio -char can't be sold, bio -char is a non -hazardous substance and can be returned to the landfill if allowed by the Supplier's landfill permit. The process is a closed-loop process with respect to syn -gas in that the syn -gas produced during the pyrolysis is largely consumed as the internal temperatures exceed the flash point of the combustible gases within the pyrolyzer and any syn -gas that is not consumed during the pyrolysis process is pumped back into the pyrolyzer to be used as fuel for maintaining the auger operating temperature. The Company anticipates that the process will not generate any gas emissions. Disposition of Water. The quantities of wastewater produced in the process are very small as there is no process water required by any of the recycling or conversion operations. The water that is produced by either the drying or the condenser operations must meet the local limits of the Public Owned Treatment Works (POTW) prior to discharge into the wastewater collection system. AMENDED AND RESTATED FEEDSTOCK SUPPLY AND FUEL PROCESSING AGREEMENT — Page 11 Exhibit "I3" Feedstock Quality and Delivery Procedures HAFaiAr-air Energy\Beaumont\Am.Res1. Supp.Agr 031215.doex AMENDED AND RESTATED FEEDSTOCK SUPPLY AND FUEL PROCESSING AGREEMENT — Page 12 COLLATERAL ASSIGNMENT Or BEAUMON'r SUPPLY CONTRACT THE undersigned, FAIR ENERGY OPERAT'IONs-BEAUMONT, LLC, a Texas limited liability company ("Assignor"), in consideration of the issuance of the Solid Waste Disposal Revenue Bonds (Fair Energy Operations Project) Series 2015 (the "Bonds") issued by the Mission Economic Development Corporation (the "Issuer ") pursuant to an Indenture of Trust dated as of Januai-y 1, 2015 (the "Indenture") between the Issuer and Wilmington "Must, National Association, as Trustee (together with any successor Trustee under the Indenture, the "Assignee"), the proceeds of which are being loaned to Assignor pursuant to a Loan Agreement dated as of January 1, 2015 (the "Loan Agreement ") between the Issuer and Assignor (and Fair Energy Operations- Angleton, LLC), does hereby collaterally assign, transfer and set over unto Assignee and grant to the Assignee, a continuing security interest in all right, title, interest and claim of Assignor in, the Amended and Restated Feedstock Supply and Fuel Processing Agreement dated as of (the "Supply Agreement"), between Assignor and the City of Beaumont, Texas ("Beaumont") and all amendments, supplements and additions thereto, (all of the foregoing right, title and interest hereby assigned and in which a security interest is hereby granted being hereinafter collectively referred to as the "Collateral"). The assignment and security interest herein granted and provided for are made and given to secure and shall secure (i) the payment in full of all principal of, premium, if any, and interest under the Loan Agreement and under the $ Promissory Note dated January , 2015 (the "Note") issued by the Assignor and Fair Energy Operations -Angleton, LLC under the Loan Agreement payable to the order of the Issuer and assigned to the Assignee, in the original principal amount equal to the principal amount of the Bonds, and any notes issued in extension or renewal thereof or in substitution therefor (collectively, the "Debt Service Obligations"), (ii) the payment in full of all principal of, premium, if any, and interest on the Bonds, (iii) the performance of all obligations, covenants, promises and agreements contained herein or in that certain Deed of Trust _(with Security Agreement, Assigiunent of Proceeds and Contracts and Financing Statement) bearing even date herewith from Assignor to the Assignee, as amended, supplemented and restated from time to time (the "Deed of Trust "), conveying and mortgaging the Mortgaged Property (as defined therein) as security for the Debt Service Obligations and the Bonds and any and all other indebtedness intended to be secured thereby, (iv) the performance of all obligations, covenants, promises and agreements of Assignor under the Loan Agreement and the Deed of Trust, and (v) the payment of all expenses and charges, legal or otherwise, paid or incurred by the Assignee in realizing upon or protecting the indebtedness referred to in the foregoing clauses (i), (ii), (iii) and (iv) or any security therefor, including this Assignment (all of the foregoing being hereinafter collectively referred to as the "indebtedness hereby secured "). 1. Assignor represents and warrants that (a) a true, correct and complete copy of the Supply Agreement has been delivered to the Assignee (or will so immediately upon execution thereof) as of the date hereof, and is attached hereto as Exhibit A; (b) Assignor's interest therein is not subject to any claim, defense, counter -claim, lien, consent, set-off or encumbrance of any nature except as provided in the Supply Agreement; (c) the Supply Agreement has not been modified, amended or otherwise changed; (d) the Supply Agreement is in full force and effect and free from default; (e) Assignor has all necessary right, power and authority to enter into the Supply Agreement and perform its obligations thereunder; (f) Assignor is in compliance with all CHI 65437186v! EXHIBIT "B" of the terms and conditions of the Supply Agreement; and (g) Assignor shall promptly provide the Assignee with a copy of all amendments, modifications, additions and waivers of any provisions of the Supply Agreement. 2. Assignor hereby irrevocably constitutes and appoints Assignee its true and lawful attorney in fact, such power of attorney coupled with an interest, with full power of substitution for it and in its name, place and stead to ask, demand, collect, receive, enforce, receipt for, sue for, compound and give acquittance for any and all sums, payments and distributions which may be or become due or payable to Assignor, its successors and assigns, under the Supply Agreement or on account of the Collateral and/or which constitute a part of the Collateral with full power to settle, adjust or compromise any claim thereunder or therefor as fully as Assignor could itself do and to endorse the name of Assignor on all commercial paper given in payment or part payment of such sums and, in the discretion of the Assignee, to cure any default of Assignor under the Supply Agreement, to file any claim or to take any other action or proceeding, either in its own name or in the name of Assignor, or otherwise, which the Assignee may deem necessary or reasonably appropriate to collect any and all sums, payments and distributions which may be or become due or payable to Assignor under the Supply Agreement and/or in respect or on account of the Collateral and/or which constitute a part of the Collateral or which the Assignee may deem necessary or reasonably appropriate to protect and preserve the right, title and interest of Assignor or Assignee in and to the Collateral and the security intended to be afforded thereby; provided, that the Assignee agrees, not as a limitation or condition hereon, but as a personal covenant available only to Assignor, that it will not exercise any of the aforesaid rights under this paragraph prior to the occurrence of an Event of Default under the Loan Agreement, the Indenture or the Deed of Trust. 3. Assignor hereby further covenants that it will upon request of the Assignee execute and deliver such further instruments and do and perform such other acts and things as the Assignee may deem necessary or reasonably desirable to more effectively vest in and secure to the Assignee the Collateral, including but not limited to obtaining an acknowledgment of this assignment from Beaumont. 4. Assignor hereby authorizes any party at any time holding sums, payments or distributions due Assignor and constituting part of the Collateral to pay all such sums, payments and distributions directly to the Assignee and Assignor agrees that such payments to the Assignee as aforesaid shall be a good receipt and acquittance against Assignor to the extent so made. Notwithstanding the foregoing, the Assignee agrees with Assignor, not as a limitation or condition hereon, but as a personal covenant available only to Assignor, that except during the continuance of an Event of Default, Assignor may collect all sums due or to become due in respect of the Collateral and use the same in a manner which is not inconsistent with the requirements of the Loan Agreement, provided that any party to the Supply Agreement shall have'no obligation to determine whether or not the Assignee has complied with the foregoing covenant and shall be fully protected in paying sums due in respect of the Collateral directly to the Assignee upon its written demand therefor. 5. Assignor agrees that without the written consent of the Assignee, (i) it will not consent or agree to any amendment, modification, addition to or termination of the Supply 2 Agreement which shall decrease the quantities of Feedstock to be delivered by Beaumont thereunder, the entitlement of Assignor to carbon credits or the commercial use of the output, increase the amount payable by Assignor under Section 3.1 of impose any charges or fees payable by Assignor for the Feedstock, shorten the term of the Agreement, limit the ability of Assignor to collaterally assign the Agreement to its lender, or provide for any other amendment which materially increases the obligations of the Assignor thereunder, and (ii) it will not assign, transfer or grant liens on any of the Collateral. Assignor agrees to perform all of its obligations under the Supply Agreement within the time limitations therein provided for. In the event Assignor fails to pay or perform any of its obligations under the Supply Agreement within any applicable period of mace, the Assignee may, but need not, pay or perforin such obligation at the expense and for the account of Assignor (and the Assignee will send Assignor a notice of its election to so pay or perform describing the obligation of Assignor which the Assignee intends to perform) and all funds expended for such purposes shall constitute so much additional indebtedness hereby secured which Assignor promises to pay upon demand together with interest thereon at a rate per annum equal at all times to the highest rate per annum then applicable pursuant to the Loan Agreement (the "Default Rate "). 6. Upon the occurrence of any Event of Default under the Indenture, the Deed of Trust or the Loan Agreement and unless and until the same shall be cured, the Assignee may (i) exercise all remedies available to it under applicable law, (ii) enforce the rights of Assignor under the Supply Agreement or any of them, (iii) collect and receive all sums due or to become due with respect of the Collateral and apply same to the indebtedness hereby secured in such order and manner as it may elect, and (iv) have all the rights and remedies of a secured party upon default as provided for in the Uniform Commercial Code (the "Code"). Subject to the notice requirements set forth in the indenture, the Deed of Trust or the Loan Agreement, any requirement of said Code for reasonable notice shall be satisfied if such notice is personally served or mailed (certified mail, return receipt requested) to Assignor at the address set forth above, at least ten (10) days before the time of the sale, disposition or other event or thing giving rise to the requirement for such notice. The reasonable expenses of collecting all sums due or to become due in respect to the Collateral and/or in connection with protecting, preserving or realizing upon the rights of the Assignee in and to the Collateral, including, without limitation, court costs and reasonable attorneys' fees, shall constitute so much additional indebtedness hereby secured which Assignor hereby promises to pay upon demand with interest thereon at the Default Rate from the date of expenditure. 7. This instrument is given as additional security for the obligations of Assignor incurred and to be incurred under the Deed of Trust, the Debt Service Obligations, the Loan Agreement and related documents and Assignor may continue to receive and exercise all of the rights, benefits and privileges under the Supply Agreement so long as an Event of Default is not in existence under the Deed of Trust, the Loan Agreement or the Indenture. This instrument constitutes an assignment of rights only and not an assignment of any of the duties and obligations of Assignor under the Supply Agreement and by its acceptance hereof the Assignee undertakes to perform any of such duties and responsibilities and shall incur no liability for any action taken or omitted to be taken by it or on its behalf Assignor shall continue to be liable for all its obligations under the Supply Agreement. 3 8. All provisions hereof are intended to be severable and if any term, condition and provision hereof shall be held invalid or unenforceable, the validity and enforceability of the remaining terms, conditions or provisions hereof shall in no way be affected thereby. This instrument may only be amended or modified by an agreement in writing signed by the party against whom enforcement of the amendment or modification is sought. This instrument, including matters of interpretation and construction, and the rights of the Assignee and the duties and obligations of Assignor hereunder, shall be determined in accordance with the internal laws of the State of Texas without regard to principles of conflicts of law. This instrument shall be of no further force and effect at such time as Assignor shall have fulfilled or caused to have been fulfilled each and every of the covenants, agreements and obligations contained in the Loan Agreement, the Deed of Trust and the related documents. 9. Assignor hereby agrees, upon request of the Assignee, that Assignor shall promptly provide to the Assignee a copy of all amendments, modifications, additions or waivers of any provision of the Supply Agreement. Assignor shall not terminate, cancel, or amend or waive any provisions of, suffer or permit the termination, cancellation, or waiver of any provision of, or expiration of any of the Supply Agreement to which Assignor is a party, or in or to which Assignor has rights, except as expressly permitted by and in accordance with the terms of the Loan Agreement; provided, however, that the foregoing shall not operate to prevent Assignor from terminating the Supply Agreement if the contractor thereunder is in default of its obligations thereunder and, in Assignor's sound business judgment, such termination is in Assignor's best interest and if the Assignee has consented in writing to such termination. 10. This instrument shall inure to the benefit of the Assignee and its successors and assigns, and be binding upon Assignor and its successors and assigns. Assignor hereby acknowledges that all obligations of Assignor and all payments under the Supply Agreement are subordinated in all respects to Assignor's obligations owed to the Assignee under the Loan Agreement. El Executed and delivered as of this __ day of January, 201 S. FAIR ENERGY OPERATIONS-BEAUMONT, LLC, a Texas limited liability company By: lair Energy Operations, LLC, a Texas limited liability company, its Manager By: Kyle T. lair EXIIIi3IT A COPY Or SUPPLY AGREEMENT -2- ExinBIT B CONSENT OF CITY OF BEAUMONT, TEXAS Wilmington Trust, National Association, as Trustee Dallas, Texas Re: Amended and Restated Feedstock Supply and Fuely Processing Agreement dated as of (the "Supply Agreement") between Fair Energy Operations -Beaumont, LLC (the "Assignor ") and the City of Beaumont, Texas, ("Beaumont"). Ladies and Gentlemen: We hereby consent to the provisions of that certain Collateral Assignment of Beaumont Supply Agreement dated as of , 2015 (the "Assignment") between the Assignor and Wilmington Trust, National Association, as Trustee (the "Assignee"), providing for the collateral assignment of the Supply Agreement to the Trustee. All initially capitalized terms used herein which are not otherwise defined shall have the meanings set forth in the Assignment. We acknowledge that the Assignment shall not, in the absence of an affirmative assumption in writing by the Assignee of Assignor's obligations thereunder, be deemed to impose any Iiability or obligation upon the Assignee. We agree that we shall give to the Assignee a copy of all notices of default by the Assignor under the Supply Agreement simultaneously with the delivery of any such notice to the Assignor, and the Assignee shall have the right, but not the obligation, during any cure period provided for in the Supply Agreement (but in no event less than 30 days) to cure such default. We agree that upon the occurrence of an Event of Default (as defined in the Assigrunent), we shall at your written request continue performance on your behalf or on behalf of your designee under the Supply Agreement in accordance with the terms thereof, provided we are paid and you perform in accordance with the Supply Agreement; provided, further, that any designee of the Assignee shall have the exact same rights as the Assignee hereunder and under the Agreement. We hereby represent to the Assignee that the Supply Agreement constitutes our obligation, and is enforceable against us in accordance with its terms. We hereby represent to the Assignee that all covenants, conditions and agreements pertaining to us contained in the Supply Agreement have been performed as required therein except for those which are not due to be performed until after the date of this letter and further confirm that no breach by Assignor under the Supply Agreement has occurred and is continuing as of the date of this letter. -3- This Consent shall inure to the benefit of the respective successors and assigns of the Assignee and shall bind our successors, assigns, heirs and personal representatives. This Consent shall be governed by and construed under the laws of the State of Texas. Very truly yours, CITY OF BEAUMONT, TEXAS By Printed Name: Its: 51